Kansas City N.O. Nelson Co. v. Mid-Western Const. Co. of Missouri, Inc.

• Decision Date: 07 November 1989
• Docket Number: MID-WESTERN,No. WD,WD
• Citation: Kansas City N.O. Nelson Co. v. Mid-Western Const. Co. of Missouri, Inc., 782 S.W.2d 672 (Mo. App. 1989)
• Parties: KANSAS CITY N.O. NELSON CO., Appellant, v.CONSTRUCTION COMPANY OF MO., INC., and The Western Casualty and Surety Company, Respondents. 41570.
• Court: Missouri Court of Appeals

Page 672

782 S.W.2d 672

KANSAS CITY N.O. NELSON CO., Appellant, v. MID-WESTERN CONSTRUCTION COMPANY OF MO., INC., and The Western Casualty and Surety Company, Respondents.

No. WD 41570.

Missouri Court of Appeals Western District.

Nov. 7, 1989.

Motion for Rehearing and/or Transfer to Supreme Court

Denied Jan. 2, 1990.

Application to Transfer Denied Feb. 13, 1990.

Robert O. Jester, Duane E. Butler of Ensz and Jester, Kansas City, for appellant.

Stephen B. Sutton and Mark E. Kelly of Gage & Tucker, Kansas City, for respondents.

Before MANFORD, P.J., and SHANGLER and CLARK, JJ.

MANFORD, Presiding Judge.

This is a suit for the cost of plumbing materials supplied by appellant, Kansas City N.O. Nelson Co., to a United States Department of the Army, Corps of Engineers project at the Harry S. Truman Dam and Reservoir in Missouri.

The general contractor on the project was C.L. Fairley Company (Fairley). Fairley subcontracted with respondent, Mid-Western Construction Company of Missouri, Inc. (Mid-Western), for the construction of two Public Use Areas within the Truman project. Mid-Western in turn subcontracted with Tanner-Hamilton Mechanical (Tanner-Hamilton) for construction of the plumbing portions within the Public Use Areas. Hence, Tanner-Hamilton is considered a sub-subcontractor for the project. Appellant is a wholesale plumbing supplier who contracted with Tanner-Hamilton to supply specialized plumbing fixtures which met the project's specifications.

The subcontract between Fairley and Mid-western provides "that the materials to be furnished and/or work to be done by the subcontractor are as follows: to provide all labor, materials and equipment to construct" the bid items, specifically the shower, wash house, change house, entrance station and well house buildings. Fairley agreed to pay Mid-Western $361,000 for performance of the subcontract. The subcontract also provides in Section 8(c) that:

The Subcontractor [Mid-Western] further specifically obligates himself to the Contractor [Fairley] in the following respects, to-wit: ...

(c) To pay for all materials furnished and work and labor performed under this Subcontract and to satisfy the Contractor [Fairley] thereupon whenever demand is made and to indemnify the Contractor [Fairley] and the owner against and save them and the premises harmless from any and all claims, suits, or liens therefor, by others than the Subcontractor.

The subcontract contains an Additional Provision number 10 which requires Mid-Western to provide a performance and payment bond for the amount of the subcontract.

As a result of the Additional Provision, Mid-Western subsequently purchased from respondent, Western Casualty and Surety Company (Western Casualty), a Subcontract Labor and Material Payment Bond. The subcontract is made part of the bond by reference. Mid-Western, as the Principal, and Western Casualty, as the Surety, are bound to Fairley as the Obligee. The bond provides that if Mid-Western promptly pays all claimants for all labor and material used or reasonably required for use in the performance of the subcontract, then the obligation becomes void. The bond further provides conditions for Western Casualty's obligations; Section (1) states, in part, that a claimant is defined as one having a direct contract with the Principal [Mid-Western] for labor, material or both, used or reasonably required for use in the performance of the contract.

The contract between Mid-Western and Tanner-Hamilton requires Tanner-Hamilton to construct the shower house and wash house for a sum of $61,000. It also provides in Section III that Tanner-Hamilton agrees:

To pay for all materials, skill, labor and instrumentalities used in. (sic) or in connection with the performance of this Subcontract, when and as bills or claims therefore become due, and to save and protect the Project, the Owner, and the Contractor from all claims and mechanics' liens on account thereof, and to furnish satisfactory evidence to the Contractor, when and if required, that he has complied with the above requirements.

The plumbing fixtures which are the subject of this action were supplied by appellant to Tanner-Hamilton between March, 1984 and August, 1985. The fixtures were not commonly available and were designed to meet the specifications of the Truman project. The fixtures were ordered, then stored in appellant's warehouse until needed for installation. Tanner-Hamilton was allowed to take delivery of the fixtures as needed without prior payment. Kent Best, President and Manager of appellant, testified that he had done business with Ray Hamilton of Tanner-Hamilton for many years. Best delivered the fixtures based on assurances that Best would receive payment for the fixtures after Tanner-Hamilton received payment for its work on the project. Hamilton told Best the project was bonded.

The project eventually developed problems in August, 1985. As a result, Mid-Western retained Mr. C.E. Anderson to supervise completion of the work. At this time, Mid-Western was financially unable to complete the work under the subcontract and funds for the completion of the project were supplied by Western Casualty. Mid-Western admitted that Anderson had authority to act on behalf of Mid-Western.

Appellant was informed in August or September, 1985 that Tanner-Hamilton would not be completing its work on the project. Tanner-Hamilton had not paid appellant for plumbing fixtures previously delivered, which were valued on the invoices at $24,236.97. However, Tanner-Hamilton is not a party to this suit. The appellant supplier chose to name as parties Mid-Western (the subcontractor) and Western Casualty (the surety).

A central issue in this suit is whether Anderson, as an agent of either or both Mid-Western and Western Casualty, ratified and assumed the obligations of Tanner-Hamilton to pay for the previously delivered fixtures. Best testified that Anderson telephoned him to locate the remaining plumbing fixtures designated for the project and to notify him that Maxwell-Gable Mechanical (Maxwell-Gable) was employed by Mid-Western to complete the work started by Tanner-Hamilton. Best initially voiced concern over the unpaid invoices of Tanner-Hamilton. Best's testimony was as follows:

Q. Did you talk with Mr. Anderson about your unpaid invoices totaling over some twenty-four thousand dollars?

A. I told him I had over twenty-four thousand dollars worth of invoices and that I didn't know if we were going to furnish those fixtures and that is the way it was. He said Mid-Western is a very good company. There is no problem with them. I said, well, there may not be a problem with them, but I am not being paid so there is a problem somewhere. He said it is probably with your plumbing contractor.

Well, at that point it is all surmising and then we get into I knew we were really going nowhere in that conversation and I asked where, who do I contact or who should I be getting ahold (sic) of? He said Maxwell Gable will be able to help you with this.

Best further testified as follows:

Q. What if anything did Mr. Anderson indicate to you about the unpaid invoices and their satisfaction?

A. He assured me that it was a Corp (sic) of Engineers job and that if we would get our information together and get them to the proper people that we would be paid.

Best stated that Anderson never indicated the project was bonded. Best also testified that his company would not have continued to supply materials to the project without the contact from Anderson.

With respect to any agreement to deliver fixtures following this conversation with Anderson, Best testified that he told Anderson he "would cooperate with Maxwell-Gable." However, Best also stated that at that point in time he was not going to ship any fixtures. Best also testified as follows:

Q. So as I understand it, when, after you had your conversation with Anderson, you weren't satisfied with anything he told you and you weren't going to ship anything?

A. I didn't like his attitude.

Q. Yes.

A. I am owed twenty-four thousand dollars and somebody is asking me when I am going to do something. At that point maybe I would like to ask who, when someone is going to do something.

Q. You don't know who he was and who Mid-Western was?

A. I still don't, don't know who he is.

Q. And so you didn't agree to ship any materials after your conversation with him?

A. With Anderson?

Q. Right.

A. Right.

Best testified that he first met with Bill Gable of Maxwell-Gable in October, 1985 regarding the plumbing fixtures needed to complete the project. They discussed the unpaid invoices from Tanner-Hamilton. Gable said he would give Best information on who to contact for payment. Best testified that at this point, he agreed to "move forward" with Maxwell-Gable. Thereafter, Best verified the credit references of Maxwell-Gable and began supplying the remaining fixtures. ¹ When asked why he continued to supply materials to the project after the contact by Anderson, Best explained:

A. Actually, after talking with Bill Gable, I agreed to move forward. With Mr. Anderson if it had only been that contact and Bill Gable hadn't contacted me, as far as I am concerned the job would still be sitting there because my reaction and the conversation with Mr. Anderson was not positive. Bill Gable called and tried to smooth over evidently and I think Anderson realized that his conversation didn't go positive with me, especially in the light of my opinion of where we stood in money and Gable called me and that is when I agreed to go down and meet with him and that we could iron out that situation.

Q. And you then supplied the remaining materials?

A. Yes.

At trial, Anderson did not recall telephoning or contacting Best or the appellant company regarding plumbing fixtures needed to complete the project. Anderson believed that any such contact would have been made by Maxwell-Gable.

Anderson testified that he...