Maryland Casualty Co. v. United States

• Decision Date: 03 August 1948
• Docket Number: No. 13640.,13640.
• Citation: 169 F.2d 102
• Parties: MARYLAND CASUALTY CO. et al. v. UNITED STATES for Use of GREEN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

169 F.2d 102 (1948)

MARYLAND CASUALTY CO. et al. v. UNITED STATES for Use of GREEN et al.

No. 13640.

Circuit Court of Appeals, Eighth Circuit.

August 3, 1948.

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Roman L. Hruska, of Omaha, Neb. (Raymond M. Crossman, John L. Barton, Ralph M. West, Richard E. Robinson, and Edward G. Garvey, all of Omaha, Neb., on the brief), for appellants.

Francis S. Gaines, of Omaha, Neb. (Edward J. Shoemaker and Bryce Crawford, Jr., both of Omaha, Neb., on the brief), for appellees.

Before SANBORN, THOMAS, and RIDDICK, Circuit Judges.

RIDDICK, Circuit Judge.

This is an appeal from a judgment on a directed jury verdict in an action under the Act of August 24, 1935, 40 U.S.C.A. § 270a and 270b, brought by the appellees against the appellants to recover for labor done in the construction of an Army airbase near Ainsworth, Nebraska. Appellees, sub-contractors on the project, are Ralph Green and William L. Groesbeck. Appellants are J. W. and N. L. Terteling, comprising the partnership of J. A. Terteling & Sons, contractors with the United States for the work at the airbase; and the Maryland Casualty Company, surety on the payment bond given by J. A. Terteling & Sons to the United States as required by the Act.

The Pleadings

In their complaint the appellees alleged that the Tertelings were indebted to them for work done, in the construction of the airbase, under the following contract:

"We, Ralph Green and W. L. Groesbeck propose to and will do necessary excavation, compaction and rough grading necessary for the addition to the existing apron now at the Ainsworth Army Airbase, Ainsworth, Nebraska. We agree to furnish all necessary equipment and incidentals thereto and personnel for the supervision and execution thereof.

"Said excavation and compaction shall be started on or before May 8, 1943, and shall be prosecuted diligently until its completion.

"This work shall be paid for at the unit price of thirty-nine and six-tenths cents (39.6) per cubic yard as according to the Engineers estimates.

"With regard to the compacted sub-base, which we will call the top nine (9") inches of the sub-grade, it shall be paid for as a sub-base at the rate of seventy-two (72¢) cents per cubic yard as according to the Engineers estimates.

"This proposal made by us on the 6th day of May, 1943.

"Ralph Green & W. L. Groesbeck. "By L. A. Briggs.

"Accepted this 7 day of May, 1943 by J. A. Terteling & Sons. By Roy M. King."

They asked for judgment against the Maryland Casualty Company, surety on the Tertelings' payment bond. On motion of the Casualty Company the Tertelings were made parties defendant.

The Tertelings and the Casualty Company filed separate but identical answers, admitting the execution of the contract sued on and the full performance of the work called for by it, but denying that it constituted or was intended to constitute the real agreement between the parties. They allege that the fourth paragraph of the contract sued on was intended to mean and did mean to all parties concerned to apply only to such portions of the sub-base of the project under construction as consisted of "select material" as defined by the Tertelings' contract with the United States and the specifications forming a part of that contract; that by mutual mistake or mistake accompanied by inequitable conduct on the part of appellees, the contract failed expressly to refer to such "select material," although such was the intent, meaning, and purpose of both parties.

Appellants charged that at the time the contract sued on was reduced to writing and signed by the parties, it was agreed between them that "the terms and conditions defining the scope of work to be done, and the respective rights and obligations of the parties thereto, would be reduced to proper written form," and that this formal contract when written would embrace all work which appellees agreed to do under the contract sued on; that pursuant to this understanding between the parties the Tertelings prepared a formal contract, copy of which was made a part of the answers, and, after the execution of the contract sued on, submitted the formal contract to appellees for signature, and that thereupon it became and was the real contract between the parties.

By way of affirmative relief appellants asked the decree of the District Court reforming the contract sued on and establishing the formal contract prepared by the Tertelings as the contract between the parties. The grounds for this relief, as indicated above, were the alleged mutual mistake in the execution of the contract sued on, or mistake accompanied by inequitable conduct on the part of appellees estopping the appellees from denying that the later formal contract was the real contract between the parties. The alleged inequitable acts of appellees were representations by them to the Tertelings that the language of the fourth paragraph of the contract sued on was intended to mean that the 72 cents a cubic yard rate for the 9 inch sub-base was to apply only in the event "select material" was used in its construction; conduct of appellees inducing appellants to believe that the formal contract was the real contract between the parties, this conduct being the retention by appellees of the formal contract without signing it or returning it or expressing any objections to its terms or provisions, the acceptance by appellees of partial payments during the progress of the work, alleged to have been computed and based on the terms of the formal contract, the failure of appellees to present to the Tertelings objections to the final estimate for work done, or to make known to the Tertelings any objection to the estimate of work done until after the Tertelings had made a final settlement with the United States. And, throughout the trial, the appellants insisted that the contract sued on was ambiguous; that extrinsic evidence was admissible to explain the phrase "as according to the Engineers estimates" as used in the contract; and that evidence offered by appellants to explain the phrase compelled the interpretation that the 72 cents unit price specified for the 9 inch sub-base was payable to appellees only on the condition that the sub-base was constructed of "select material."

In a reply filed by leave of court appellees alleged that they were bound by the terms and specifications of the Tertelings' contract with the United States only so far as those terms and specifications pertained to the particular work called for by the contract sued on. All other averments of the answers were denied.

The Evidence

At the time the negotiations which resulted in the contract sued on began the Tertelings were completing their work under a contract with the United States for the construction of concrete aprons, taxi-ways, and drainage at the Ainsworth Airbase. The work was in charge of Army engineers who had announced a proposal to extend the facilities under construction and had notified the Tertelings that a contract for the extensions would be awarded to them on the terms and specifications stated in the contract for the work then nearing completion. At some time in the past the appellees had done some of the grading and base compaction at this airbase and had available the machinery required for the same work on the proposed extensions.

Speed in the completion of the new work was of first importance. The Army engineers suggested to the Tertelings and the appellees that the Tertelings employ the appellees as sub-contractors to begin work immediately in preparation of the base for the extended concrete aprons and taxiways.

The negotiations thus initiated produced the contract sued on and its execution before the contract between the United States and the Tertelings for the proposed new work was signed. These negotiations were conducted by Briggs, an employee of appellees, and King, superintendent for the Tertelings in the construction work then in progress. They began with a conference between Briggs and King attended by Jones, another employee of appellees, and Parker, the office manager for the Tertelings. The conference took place in the office of the Tertelings at the construction site.

The contract and specifications for the work then in progress were referred to from time to time during the conference. Both parties knew that under the contract and specifications the sub-grade upon which the extended concrete work was to be laid must be constructed in accordance with the controlling specifications, that is to say that both parties understood that the sub-grade must be built to the elevation provided by the Army engineers, constructed of suitable material, and compacted to the degree of density required by the specifications. In this operation it was necessary to cut down the high spots and to fill in the low spots in the excavated area so as to bring the sub-grade to the required elevation. If the material removed from the elevated portions of the area was not sufficient to bring the low parts of the area to the required grade, the additional material for that purpose was to be taken from borrow pits. When the excavated and graded area was brought to the required grade in this manner, it was required that it be compacted to a certain degree of density, in this case for the lower part of the sub-grade to a density of 95 per cent and for the top 9 inches of the sub-grade, referred to by the parties as the sub-base, to a density of 100 per cent.

In some cases the character of the soil where work of this character is done is such that the material excavated can be compacted to the required density. In other cases the required density may be obtained only by mixing material brought in from other locations with the local material. In still other cases it is necessary to remove all soil at the scene of the operations and bring in satisfactory material selected from other locations. In the present...