JF White Engineering Corp. v. General Ins. Co. of America, 7743

• Decision Date: 10 September 1965
• Docket Number: No. 7743,7744.,7743
• Citation: 351 F.2d 231
• Parties: J. F. WHITE ENGINEERING CORPORATION, Joseph F. White, Sr., Orcelia K. White, and Joseph F. White, Jr., Appellants, v. GENERAL INSURANCE COMPANY OF AMERICA, Appellee. GENERAL INSURANCE COMPANY OF AMERICA, Cross-Appellant, v. J. F. WHITE ENGINEERING CORPORATION, Joseph F. White, Sr., Orcelia K. White, and Joseph F. White, Jr., Cross-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

351 F.2d 231 (1965)

J. F. WHITE ENGINEERING CORPORATION, Joseph F. White, Sr., Orcelia K. White, and Joseph F. White, Jr., Appellants, v. GENERAL INSURANCE COMPANY OF AMERICA, Appellee.

GENERAL INSURANCE COMPANY OF AMERICA, Cross-Appellant, v. J. F. WHITE ENGINEERING CORPORATION, Joseph F. White, Sr., Orcelia K. White, and Joseph F. White, Jr., Cross-Appellees.

Nos. 7743, 7744.

United States Court of Appeals Tenth Circuit.

September 10, 1965.

William R. Young, Denver, Colo., for appellants and cross-appellees.

John R. Hickisch, Denver Colo. (H. Gayle Weller and W. Robert Ward, Denver, Colo., on brief), for appellee and cross-appellant.

Before MURRAH, Chief Judge, and PICKETT and SETH, Circuit Judges.

MURRAH, Chief Judge.

This diversity action was brought by the appellee-bonding company to recover its losses as surety on performance bonds written for the appellant-White Corporation on two construction contracts, one with the Kennecott Copper Corporation and the other with the Air Force Department. The appeal is from judgment on jury verdicts for the appellee on four of the six claims of the complaint. The other two claims were not submitted to the jury and are not involved here.

The first claim stated the execution of a conventional indemnity agreement by which White Corporation agreed to indemnify appellee for all losses sustained by it on bonds written for the corporation on the Kennecott contract. It then stated that by reason of the corporation's default on the construction contract, the appellee had been or would be required to pay a total of $142,000 which it is entitled to recover from the corporation under the indemnity contract. The next or fourth claim submitted to the jury sounded in fraud. It sought relief against Joseph White as director and officer of the corporation for furnishing false balance sheets to the appellee purporting to represent the assets of the corporation as an inducement for the surety bonds on the Kennecott project. His wife, Orcelia White, was joined in this claim as director and secretary of the corporation for negligently allowing her husband to furnish the balance sheets. The claim was for damages of $95,399.70 for debts paid under the bonds, $4,675.22 for accrued expenses, and other additional expenses which would be incurred in the adjustment of unpaid claims.

The fifth claim like the fourth sounded in fraud and sought the same relief against Joseph White only based on the same false balance sheets. It further alleged that White and his Certified Public Accountant conspired to fabricate and submit the balance sheets to induce the appellee to execute the performance bonds on the Kennecott project. As the Court properly told the jury, these claims were "overlapping", and the alleged conspiracy added nothing to the weight of the claim, but only stated it a "little bit differently".

The sixth and last claim stated that the corporation, Joseph White, Orcelia White and their son, Joseph White, Jr., executed a general indemnity agreement with the appellee in 1950, and that in consideration and reliance thereon the appellee executed a performance bond for the Air Force Construction Contract. It further stated that judgment had been rendered in favor of the Pittsburg Plate Glass Company for money owed it by the corporation for work on the project; and that appellants are consequently liable to appellee for payment of this judgment.

Appellants do not deny the execution of the indemnity agreement or their liability thereon for the losses. They do specifically plead failure of the duty to mitigate the losses.

As to the fourth and fifth claims, appellant Joseph White specifically denied the alleged fraud and conspiracy. He asserted that the financial reports were prepared by one Norman Nevins, an independent contractor, C.P.A., and that he, White, was in no way responsible for the errors or omissions, if any, in these statements. As a further defense, he denied that the bonding company relied upon the financial statements; that reliance, if any, for the execution of the bonds was on a previous course of dealings between the principal and surety. The defendant-appellant also pleaded the Colorado three year statute of limitations on relief for fraud after discovery. See 87-1-9, Colo.Rev.Stat., 1963.

As to the sixth claim, all appellants took the position that the claim which ripened into a judgment could have been settled for $2,200, and that the corporation should, therefore, be liable for only that sum.

The trial court directed a verdict for Orcelia White on the fourth claim and appellee has cross-appealed. The jury returned a verdict for the full amount claimed on the first count, and for reasons not material here the Court reduced the verdict and gave judgment thereon. The jury returned a verdict for $137,000 against Joseph White on claims four and five and for the full amount on claim six, i. e. $2,931.81.

On the issue of mitigation in the first claim, Joseph White testified that when he was forced to discontinue work on the Kennecott project because "* * * we ran out of money here * * *", he requested appellee to finance the completion of the project claiming that the remaining funds due under the contract were sufficient to complete the job. He estimated it would cost only about $40,000. He testified that the bonding company demanded personal indemnity from Mrs. White and him with the contract funds in a joint bank account "* * * so both of us could sign"; but that he and his wife were already personally obligated and did not have sufficient liquid assets.

There was proof to the effect that after consideration of all factors, the bonding company declined to utilize White's organization and equipment to complete the job. The remainder of the work was recontracted and completed at a cost of $141,765. The jury was told that while the bonding company was not required to permit the contractor to complete the contract, if it believed that in the exercise of reasonable diligence and precaution the contractor and his organization should have been employed to complete the project, the jury should reduce or deny recovery in the amount which it believed could have been saved by so doing. This instruction is undoubtedly a correct statement of the law on the issue. See Lynch v. Call, 10 Cir., 261 F.2d 130, and authorities cited. Appellants say that it was unreasonable as a matter of law for the bonding company not to finance appellants and permit them to finish the job. But, the issue of reasonableness in circumstances like these is usually for the trier of the facts. See Valley Development Co. v. Weeks, 147 Colo. 591, 364 P.2d 730. Under the proof here the trial court was clearly right and properly submitted the issue to the jury.

Appellants complain of the qualifications of a witness to testify concerning the cost of completion of the project as it related to the duty to mitigate....