Parliament Ins. Co. v. Hanson

• Citation: 676 F.2d 1069
• Decision Date: 28 May 1982
• Docket Number: No. 79-1804,79-1804
• Parties: 10 Fed. R. Evid. Serv. 1308 PARLIAMENT INSURANCE COMPANY, an Illinois Corporation, Plaintiff-Appellant, v. Adrian HANSON, an individual, and Mary Jo Hanson, his wife, d/b/a C.M. & S. Construction, not incorporated, Defendants-Appellees. . Unit B *
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1069

676 F.2d 1069

10 Fed. R. Evid. Serv. 1308

PARLIAMENT INSURANCE COMPANY, an Illinois Corporation Plaintiff-Appellant, v. Adrian HANSON, an individual, and Mary Jo Hanson, his wife d/b/a C.M. & S. Construction, not incorporated Defendants-Appellees.

No. 79-1804.

United States Court of Appeals Fifth Circuit.

Unit B ^*

May 28, 1982.

Jeffry R. Jontz, Orlando, Fla., for plaintiff-appellant.

Dennis M. Janssen, Thomas Riden, St. Petersburg, Fla., for defendants-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before JONES, FAY and HENDERSON, Circuit Judges.

JONES, Circuit Judge:

This diversity case arises out of an oral construction contract between the plaintiff-appellant Parliament Insurance Company and the defendant-counterclaimant-appellees Adrian and Mary Jo Hanson, doing business as C.M. & S. Construction.

The subject of this action is a 108 unit apartment complex located in St. Petersburg, Florida, known as the Dean Mohr Plaza Apartments. This project was planned in 1972 as a low-income housing complex. A mortgage on the apartment property was to be held by Atico Mortgage Co., and guaranteed under the Federal Housing Administration, hereafter called F.H.A., 236 program. The owner of the complex was to be the Dean Mohr Plaza Apartments, Inc. The original general contractor was Southeast Construction and Development Company and James Austin, a joint venture. Parliament, the plaintiff-appellant, issued performance and payment bonds running to the owner and insuring performance and payment by the general contractor.

The original construction contract was executed on December 20, 1972 in the amount of $1,332,000. In early 1973, the general contractor became financially distressed and announced that it was unable to complete the construction under its contract. At the time of the announced default, it was estimated that the project was fifteen to twenty-two percent complete. There were several unsuccessful attempts to restart the project in 1973.

Parliament first became directly involved in attempts to restart the project in 1974. Early in that year a representative of Parliament met with the owner and the F.H.A. Parliament decided to take responsibility for completing the project. It sought a general contractor to complete the work. Parliament's agent talked to various persons about undertaking the completion of the project. In that connection, Parliament's agent talked with the appellant, Adrian Hanson, who had been an underground site utility subcontractor on the original project. Hanson indicated that he was not interested, but that he knew of a general contractor in Cincinnati named Henry Gallenstein, who was familiar with similar projects and who might be interested in completing this one. Gallenstein was contacted and made one or more trips to the project. He estimated that it would cost $1,400,000 to complete the project and that there was not enough money left in the original construction contract to provide for completion. Gallenstein ceased to be interested in completing the project.

A meeting was arranged in Tampa between Hanson, Parliament's agent, and counsel for Parliament. There were discussions concerning Hanson's ability to complete the project, and the amount of money that would be necessary for that purpose. Ultimately, Parliament's counsel gave his approval to enter into an agreement with Hanson to complete the project. However, because Hanson had insufficient assets to fund the amounts necessary to complete the project and because materialmen and suppliers were reluctant to extend credit on the project, it was further agreed that Parliament would advance to Hanson the funds necessary to purchase materials, pay subcontractors, and hire laborers to perform the work. In some cases where suppliers would not accept Hanson's credit, Parliament would pay them directly at Hanson's direction. No formal written agreement was made concerning the oral understanding which had been developed. By March, 1974, Hanson had begun to reman the job and receive advances from Parliament. Hanson would make requests for funds either directly to Parliament in Chicago or to Parliament's office in St. Petersburg, which would relay the requests to the Chicago office.

Work continued on the project through 1974 and into 1975. Several times during this period, Parliament sent an accountant to St. Petersburg to review the books and records of Hanson with respect to his accounting for the funds which had been advanced. Although the accountant found that Hanson's books and records were poorly kept, neither he nor any representative of Parliament complained to Hanson about bookkeeping deficiencies. After the construction was substantially completed and certificates of occupancy were obtained, Hanson's employment was terminated by Parliament.

Parliament then commenced this action against Hanson. Parliament contended that Hanson had a fiduciary duty to account for the funds which had been advanced and on this basis, Parliament sought an accounting and damages. Hanson counterclaimed for breach of the oral contract. Hanson asserted that Parliament had breached an oral agreement to pay withholding and social security taxes for Hanson's workers, storage fees, equipment rental fees and a fixed sum of $132,500 as payment for the services of supervising and managing the construction project.

After a four day non-jury trial the district court dismissed Parliament's action and entered judgment on Hanson's counterclaim in the amount of $159,635. This judgment was later amended, and increased to $179,087. In this appeal, Parliament asserts that six errors were made by the district court. Parliament contends that the court erred in refusing to require a full accounting from Hanson for the funds advanced. It claims that Hanson was a fiduciary, who had an obligation to account. Parliament bases this argument on the fact that it disbursed $1,314,864 to Hanson, but that Hanson's records only show expenditures of $1,164,989 on the project. Parliament also contends that the complicated nature of these transactions, as well as the alleged agency status of Hanson requires a full accounting.

This diversity action is governed by the laws of Florida. Florida courts have stated the principle that in an action for accounting, there are two issues: whether there is the right to an accounting, and the amount due under the accounting. Manning v. Clark, 56 So.2d 521 (Fla.1951); Charles Sales Corp. v. Rovenger, 88 So.2d 551 (Fla.1956); Wood v. Brackett, 266 So.2d 398 (1 D.C.A.1972). Under Florida law, a party seeking an accounting has the burden of showing a relationship between the parties that requires or permits the ordering of an accounting. See, Riggs v. Saltmarsh, Cleaveland & Gund, 341 So.2d 818 (1 D.C.A.1977). Equity jurisdiction to obtain an accounting in Florida may rest upon the existence of a trust or fiduciary relationship, or the complicated nature of the transaction. F.A. Chastain Construction, Inc. v. Pratt, 146 So.2d 910 (3 D.C.A.1962); Cushman v. Schubert, 110 So.2d 703 (2 D.C.A.1959). See also Fla.Jur.2d, Accounts and Accounting, § 17-28. The district court held that the relationship between these two parties was merely that of oral contractors. No fiduciary relationship was created. Although an accounting may be proper where the accounts are complicated, F.A. Chastain Construction, Inc. v. Pratt, supra, the district court specifically held that Parliament had not shown any right to an accounting. To the contrary, the court found that Parliament had substantially defaulted on its major obligations under the oral contract, and was liable to Hanson for a breach of that contract. This Court has held, applying Florida law, that the right to an accounting is an issue of fact for the trier of fact. Smith v. AMI of Florida, Inc. 538 F.2d 1090 (5th Cir. 1976). The district court's findings are not clearly erroneous and are supported by the record. They will not be disturbed on appeal. F.R.Civ.P. 52.

Parliament's second assignment of error concerns evidentiary rulings of the district court with regard to the testimony of a former employee of Hanson, who later became an employee of Parliament's new contractor. This employee had access to some of the books and records of Hanson. He testified that he began to get suspicious regarding the money which Parliament was disbursing to Hanson. He claimed that Hanson was diverting some of the money for uses unrelated to the Dean Mohr project. When questioned about specific instances of monetary diversion by Hanson, the employee was unable to remember. However, he stated that he had made certain notes concerning these transactions which would aid his memory. The district court allowed voir dire on this subject. The witness then testified that he had regularly kept logs while he was employed by Hanson, contemporaneously with the asserted monetary diversions. The witness stated, however, that the notes he needed to aid his memory were not these original logs, but were abbreviated summaries taken from the logs. He also testified that these summaries were made after Hanson had been removed from the Dean Mohr project, when the witness became employed by Parliament's new contractor. Furthermore, the witness made these summaries within a short time of the commencement of this litigation. The district court refused to allow the witness to testify from these notes.

Parliament contends that these notes should have been made available to the witness under the theory of "present recollection refreshed". It claims that the former employee testified to a lack of memory, and that his memory could have been aided by reviewing these notes. In timely objections at the trial and on this appeal, Hanson contends that these notes were inadmissable, and were being introduced under the guise of "past recollection recorded".

It is to be noted that district...