Pat J. Murphy, Inc. v. Drummond Dolomite, Inc., 60-C-191.

• Decision Date: 07 March 1963
• Docket Number: No. 60-C-191.,60-C-191.
• Citation: 214 F. Supp. 496
• Parties: PAT J. MURPHY, INC., Plaintiff, v. DRUMMOND DOLOMITE, INC., Defendant, v. AMERICAN EMPLOYERS INSURANCE COMPANY, a corporation, Cross-Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

214 F. Supp. 496

PAT J. MURPHY, INC., Plaintiff, v. DRUMMOND DOLOMITE, INC., Defendant, v. AMERICAN EMPLOYERS INSURANCE COMPANY, a corporation, Cross-Defendant.

No. 60-C-191.

United States District Court E. D. Wisconsin.

March 7, 1963.

O. S. Hoebreckx, Milwaukee, Wis., for plaintiff, Grootemaat, Cook & Franke, Milwaukee, Wis., of counsel.

Malcolm K. Whyte and Victor M. Harding, Milwaukee, Wis., Robert L. Rohde, Sheboygan, Wis., for defendant, Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, Wis., Federer, Grote, Hesslink, Rohde & Neuses, Sheboygan, Wis., of counsel.

James P. Brody and Foley, Sammond & Lardner, Milwaukee, Wis., for cross-defendant.

GRUBB, District Judge.

This is an action by plaintiff, Pat J. Murphy, Inc. (hereinafter called the "contractor"), for damages for breach of contract with alternate claims for quantum meruit and for damages for misrepresentation. Defendant, Drummond Dolomite, Inc. (hereinafter called the "owner"), has cross-claimed against American Employers Insurance Company, the surety on the contractor's performance bond, and counterclaimed against the contractor for damages allegedly resulting from failure to complete performance under the contract.

The object of the contract was the construction of a haul road and related work to service the owner's quarry on Drummond Island, Michigan. The contract provided for differing rates of compensation for various classifications of earth to be excavated. In the performance of the work, the contractor encountered a certain hard material. The dispute between the parties centers on the classification of this material and the compensation for its excavation.

The parties have agreed to the severance and submission on stipulated facts of the following issues:

1. Choice of controlling law.

2. The scope of authority of the owner's engineer under the contract.

3. The applicability of the Wisconsin Standard Specifications for Road and Bridge Construction in the determination of the classification.

1. Choice of Controlling Law.

Jurisdiction in this case is based on diversity of citizenship. The court must follow Wisconsin conflict of laws rules in determining the law applicable to the contract and tort claims of the case. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Klaxon Company v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); 1A Moore, Federal Practice, § 0.311(1) (2d ed. 1961).

The contract was drawn and executed in Wisconsin between a Wisconsin corporation and a Delaware corporation having its business and executive office in Wisconsin, whose operations—the mining of dolomite rock—are conducted in Michigan. All construction work under the contract was to be performed in Michigan. The center of the controversy involves a particular Michigan phenomenon, Michigan earth.

The terms of the contract do not reveal an express intention as to controlling law. Reference to compliance with Michigan statutes and ordinances in the performance of the work is a necessary incident to a contract for the construction of a road in Michigan. Application of the Wisconsin Standard Specifications for Road and Bridge Construction to matters of performance not otherwise specifically noted in the contract does not indicate an intent that the legal rights of the parties were to be determined under Wisconsin law.

The Wisconsin rule of conflict of laws with respect to contracts has recently been stated in Estate of Knippel, 7 Wis. 2d 335, at pages 341-342, 96 N.W.2d 514, at page 517 (1959), as follows:

"* * * With respect to various other types of contract, (other than antenuptial agreements) this court has held that the choice of law governing validity and interpretation is basically a question of the intention of the parties except where their intention is to commit a fraud on the law. In the absence of evidence to the contrary, the law of the place of making the contract is presumed to be intended unless the place of performance be different. In the latter instance there is a rebuttable presumption that the law of the place of performance controls. (Citations omitted.) * * *"

The court also noted the "grouping of contacts" or "center of gravity" standard for determining controlling law in a contractual transaction set forth in Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246 (1954).

Under the circumstances of this case, the presumption that the law of the place of performance, Michigan, controls has not been rebutted. Michigan also is the state having the most significant contacts with the matter in dispute. The substantive rights of the parties under this contract must be determined under Michigan law. Cf. Lummus Company v. Commonwealth Oil Refining Co., 280 F.2d 915 (1st Cir., 1960), where the court construed the contract as indicating an intent of the parties as to controlling law. The contract in the instant case does not reveal an intention that either Wisconsin or Michigan law was to be controlling.

Under Wisconsin conflict of laws rules relating to tort claims, the place of the wrong controls the substantive rights of the parties. Wojciuk v. United States Rubber Co., 13 Wis. 2d 173, 108 N.W.2d 149 (1961); Haumschild v. Continental Casualty Co., 7 Wis. 2d 130, 95 N.W.2d 814 (1959). The place of the wrong is the state in which the last event necessary to make an actor liable takes place. In the case of loss occasioned by fraud, the place of wrong is where the loss is sustained, not where the fraudulent representations are made. Restatement of Conflict of Laws, Section 377, and see paragraph 4 of Note accompanying the section. An illustration of this rule defines the place of wrong as that state where a person parts with the possession of goods as a result of fraudulent misrepresentations.

The event which allegedly occasioned the contractor's loss, the unanticipated encounter with hard material, occurred in Michigan. Reduction in value of equipment and business losses substantially occurred in Michigan. The law of Michigan, therefore, controls the substantive rights of the parties in tort.

2. Scope of Authority of the Owner's Engineer.

Under the construction contract, the owner's engineer who had prepared the plans and specifications therefor was in complete control of field operations. Payments by the owner were to be based on the engineer's monthly estimates of work completed and materials furnished as computed and approved by said engineer. The engineer's determinations were made final by express provision of the agreement in two areas only. These are as follows:

Paragraph 10 of the Contract:

"10. Contractor understands and agrees that Walter H. Knapp of Wisconsin, Inc., as owner's engineer, is in complete control of field operations, and that all work performed and materials furnished must be inspected, accepted and approved by said owner's engineer prior to payment therefor, and that the decision of owner's engineer shall be final with respect thereto. * * *"

Paragraph 2.b. of "Drawings and Specifications" under "General Conditions" of the Specifications which were incorporated into the contract by reference:

"b. Before submitting his proposal, each bidder shall carefully check the drawings and specifications, and should he find any uncertainty in the requirements, he shall report same to the Owners' Engineer in writing. The Owners' Engineer will make a ruling on each report and will notify all bidders as to his decisions. Should any conflict or any uncertainty be discovered after signing of the contract, it shall be called to the attention of the Owners' Engineer, and his decision in

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