Hoover, Inc. v. McCullough Industries, Inc.

• Decision Date: 13 July 1967
• Docket Number: No. 23204.,23204.
• Citation: 380 F.2d 798
• Parties: HOOVER, INC., Appellant, v. McCULLOUGH INDUSTRIES, INC., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

380 F.2d 798 (1967)

HOOVER, INC., Appellant, v. McCULLOUGH INDUSTRIES, INC., Appellee.

No. 23204.

United States Court of Appeals Fifth Circuit.

July 13, 1967.

Judson Harwood, Nashville, Tenn., Sam W. Pipes, III, Mobile, Ala., for appellant.

J. Edward Thornton, Mobile, Ala., Robert McD. Smith, Birmingham, Ala., for appellee, Lange, Simpson, Robinson & Somerville, Birmingham, Ala., of counsel.

Before BROWN, MOORE^* and BELL, Circuit Judges.

GRIFFIN B. BELL, Circuit Judge:

This is an appeal from a judgment entered in a breach of contract suit. McCullough filed suit against Hoover, alleging a breach of contract and seeking damages therefor. Hoover filed an answer and cross-complaint, claiming that McCullough breached the contract and that Hoover was entitled to damages. Utilizing a split trial procedure, the District Court submitted the breach of contract question to a jury and reserved the question of damages for a Special Master. The jury, on special interrogatories, found that Hoover breached the contract and judgment was entered for McCullough. Damages and costs were then assessed against Hoover by the Special Master and the report of the Master was made the judgment of the court. Hoover appeals from both judgments. We affirm except as to one item of damages.

The Alabama Highway Department awarded a contract to Wright Contracting Company for construction of a section of Interstate Highway 65 in Conecuh County, Alabama. Wright ordered the road aggregates, including base stone, needed to perform the contract from McCullough and the purchase order required that the aggregates meet the Alabama Highway Department specifications. McCullough, in turn, contracted with Hoover to quarry and supply the base stone.

The contract between McCullough and Hoover was negotiated without benefit of counsel and, in pertinent part, provided as follows:

"Hoover agrees to assume the following responsibilities:

"1. To quarry and crush approximately 131,000 yds. of base stone meeting Alabama Highway Specification #3 and/or #5, each size to constitute approximately one-half (½) the total. Hoover shall only be responsible for the stone meeting the above specifications in respect to gradation only.

* * * * * *

"3. To load into McCullough trucks or to stockpile all stone crushed which meets the above specifications and to weigh all stone so loaded or stockpiled.

"4. To remove by-products from the crushed stone, as is necessary in order that the remaining stone shall meet state specifications, to a place agreeable to McCullough and Hoover. All by-products or waste materials are to be the property of McCullough."

McCullough provided the quarry, stockpile site, and obtained the State Highway Department's approval of the quarry. It turned out that the bid had been awarded to Wright on the idea that no quarry was available in the area and that the base stone would be purchased in the normal channels of supply. The quarry was marginal at best in the sense of the quality of the rock and it developed that an extra step in production — washing — was necessary. The rock, however, had been tested at the instance of McCullough prior to taking the contract from Wright and prior to contracting with Hoover. The samples met the specifications. Hoover visited the quarry prior to entering into the contract with McCullough and was experienced in the operation of quarries.

The essence of the dispute between the parties is to be found in paragraphs 1 and 4 of the agreement, supra. Section 801.03 of the specifications provided that "Crushed stone shall consist of clean, tough, durable fragments of rock conforming with the class and gradation specified." These specifications set out certain tests for determining durability. It was Hoover's position that it was responsible for gradation (size) only. Mr. Hoover had this in mind when the contract, which was prepared by him, was negotiated with Mr. McCullough at the Birmingham Airport. On the other hand, Hoover admits in its brief (p. 13), that under paragraph 4 of the contract it was "* * * obligated to remove the by-products as was necessary to make the remaining stone meet the State specifications with respect to gradation only."

The stone produced by Hoover was not acceptable to the Highway Department for the reason that it contained clay and mud fragments. Section 801.02 of the Highway Department's specifications allowed for certain deleterious substances in crushed stone, including clay lumps, but not to exceed, in the case of clay lumps, a limit of 0.25 per cent. The stone in question failed to meet this standard. McCullough refused to pay Hoover for the stone produced because it did not pass inspection and the dispute as to the meaning of the contract then arose.

After a conference concerning the matter, Hoover agreed to install a washing process which included the use of a log washer but the agreement was without prejudice to its rights under the original contract. McCullough agreed to, and in fact installed a similar washing process on its own for reprocessing the stockpile of stone on hand. This solved the problem with respect to the specifications. The operation went forward for about a month but Hoover then abandoned the contract. A fair inference from the record is that the contract was already unprofitable or that the washing process made it so. In addition, McCullough had made only nominal payments to Hoover.

After a long trial the breach of contract issue was submitted to the jury on the following special interrogatories:

"(1) Under the contract, was Hoover to produce aggregate, which met all state specifications, namely, as to hardness, durability, gradation and cleanness;

"(2) Under the contract was Hoover to produce aggregate, which met state specifications only as to gradation."

The jury answered the first interrogatory in the affirmative and the second in the negative. At the close of the evidence McCullough moved for a directed verdict, and also objected to the court submitting the question of the meaning of the contract to the jury, taking the position that the question was one of law to be resolved by the court. McCullough also objected to the form of the interrogatories. Hoover offered no objection to the charge or to the form of the interrogatories nor did it make a motion for a directed verdict.

Hoover, nevertheless, now contends that the District Court erred in denying its motion for new trial on the ground that the evidence was insufficent to warrant the verdict. It also contends that the court erred in submitting the meaning of the contract to the jury. This is on the reasoning that the contract was not ambiguous. Ancillary to this contention Hoover urges that the court erred in permitting the introduction of oral evidence to contradict the clear terms of the contract.

It is McCullough's position that Hoover has no standing to assert these errors in view of its failure to move for a directed verdict and to object. We have held that a litigant is bound by a jury verdict based on conflicting evidence where no motion for directed verdict was made. Thomas v. Akin Equipment, Inc., 5 Cir., 1962, 309 F.2d 331; Stokes v. Continental Assurance Co., 5 Cir., 1957, 242 F.2d 893; and Baten v. Kirby Lumber Corp., 5 Cir., 1939, 103 F.2d 272. We have also held that an appellant is bound by instructions given, absent plain error, where no objection was made. See Pruett v. Marshall, 5 Cir., 1960, 283 F.2d 436; and Western Fire Insurance Company, etc. v. Word, 5 Cir., 1942, 131 F.2d 541. See also Rule 51, F.R.Civ.P. Hoover relies for standing on Stewart v. Gilmore, 5 Cir., 1963, 323 F.2d 389, where we said that a Court of Appeals has the power and duty to set aside a jury verdict where the ends of justice require it. This statement rested on a clear holding that the verdict was without evidentiary basis. It does not appear that a motion for directed verdict was made in the case. The statement is in line with a previous ruling of this court that a denial of a new trial is subject to appellate review where there is an absolute absence of evidence to support the verdict even when no motion for directed verdict was made. Indamer Corporation v. Crandon, 5 Cir., 1954, 217 F.2d 391.

These decisions indicate that we should review the record to ascertain whether there was an absence of evidence to support the verdict. They also indicate that we should determine whether the court committed plain error in submitting the meaning of the contract to the jury. Cf. Nichols v. Hartford Accident & Indemnity Company, 5 Cir., 1962, 310 F.2d 704; Ford v. United Gas Corporation, 5 Cir., 1951, 254 F.2d 817; and Maryland Casualty Co. v. Reid, 5 Cir., 1935, 76 F.2d 30.

In our review of this diversity case we take the applicable contract law from Alabama. The Alabama decisions hold that it is for the court, in the first instance, to ascertain...