PETER KIEWIT SONS'CO. v. Summit Construction Co.

• Decision Date: 26 November 1969
• Docket Number: No. 18559-18561.,18559-18561.
• Citation: 422 F.2d 242
• Parties: PETER KIEWIT SONS' COMPANY, Appellant, v. SUMMIT CONSTRUCTION COMPANY and General Insurance Company of America, Appellees. SUMMIT CONSTRUCTION COMPANY and General Insurance Company of America, Appellants, v. PETER KIEWIT SONS' COMPANY, Appellee. GENERAL INSURANCE COMPANY OF AMERICA, Appellant, v. PETER KIEWIT SONS' COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

422 F.2d 242 (1969)

PETER KIEWIT SONS' COMPANY, Appellant, v. SUMMIT CONSTRUCTION COMPANY and General Insurance Company of America, Appellees.

SUMMIT CONSTRUCTION COMPANY and General Insurance Company of America, Appellants, v. PETER KIEWIT SONS' COMPANY, Appellee.

GENERAL INSURANCE COMPANY OF AMERICA, Appellant, v. PETER KIEWIT SONS' COMPANY, Appellee.

Nos. 18559-18561.

United States Court of Appeals Eighth Circuit.

November 26, 1969.

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W. A. McCullen and Joseph M. Butler of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, S. D., for Peter Kiewit Sons' Co.

Horace R. Jackson of Whiting, Lynn, Jackson, Freiberg & Shultz, Rapid City, S. D., for Summit Construction Co.; Kelton S. Lynn and Gene N. Lebrun, Rapid City, S. D., with him on the briefs.

H. R. Hanley, Rapid City, S. D., for General Ins. Co. of America; H. H. Halstead, Seattle, Wash., with him on the briefs.

Before VAN OOSTERHOUT, Chief Judge, GIBSON, Circuit Judge, and MILLER, Senior District Judge.

FLOYD R. GIBSON, Circuit Judge.

These appeals are from judgments entered by and from rulings of the District Court of the District of South Dakota made in a protracted jury trial¹ on the issues presented in the complaint of Summit Construction Company, a South Dakota corporation, against Peter Kiewit Sons' Company, a Nebraska corporation, and the counterclaim of Kiewit against Summit and General Life Insurance Company, a Washington corporation and surety for Summit. Monetary judgments were rendered against Kiewit in the amount of $1,097,856.47.²

Kiewit has appealed³ from the monetary judgment for breach of contract on the ground that the evidence was insufficient to justify the jury verdict and therefore urges that the judgment be reversed with directions that the matter be retried on the issues presented in Kiewit's counterclaim. Kiewit also argues that even if the general verdict for Summit is sustained on appeal, the several verdicts of the jury must be significantly modified.

Summit has cross-appealed⁴ from the trial court's refusal to submit to the jury as consequential damages the following items: (1) Summit's loss of future profits; (2) the attorney's fees and costs and investigative expense incurred by General and charged to Summit under the indemnity agreement made as a condition to the bond; and (3) the attorney's fees and costs incurred by Summit in disputes with its subcontractors arising as a consequence of Kiewit's breach of contract.

General Insurance has also cross-appealed⁵ from the trial court's refusal to enter a judgment completely exonerating General under its surety contract. Complete exoneration is sought on alternative grounds. General contends it should be released since there was never a valid contract between Kiewit and Summit as there was no meeting of the minds and, assuming arguendo that there was a contract between Kiewit and Summit, the changes were so substantial and General's risks so increased as to constitute a departure from its contract and bond.

The three appeals arising from this diversity case were consolidated for submission and oral hearing but, insofar as they can be separated, will be considered separately and in order of their docketing in this court.

The facts giving rise to Summit's complaint and Kiewit's counterclaim stem from a Subcontract executed on August 21, 1961 between Kiewit and Summit for site work, excavation and backfill on a Minuteman Missile Project at Ellsworth Air Force Base near Rapid City, South Dakota. On August 1, 1961 Kiewit was awarded the prime construction contract on the project by the United States Government's contracting agency. The project involved the construction of 150 underground launch facilities (hereinafter referred to as missile sites) and 15 underground launch control centers within an area 140 miles long and 90 miles wide near Rapid City, South Dakota. The project consisted of 15 flight groups, with 10 missile sites plus 1 launch control center constituting a flight. The 10 missile sites in each flight were positioned along the circumference of a rough circle several miles in diameter around a central control center and were connected with each other and with the control center by underground cable.

A control center consisted generally of a large reinforced underground concrete structure, with surface housing, protective fencing, parking and roadway. A missile site was essentially comprised of three structures: (1) a waterproof concrete tube (hereinafter referred to as the silo) 14 feet in diameter extending from approximately 80 feet below natural ground level⁶ to the finished construction ground surface 4 feet above natural ground level; (2) a concrete cylinder nearly 10 feet in width called an equipment room was built around the silo and encased the silo from the -32 foot level to the finished construction ground surface (the silo and equipment room measured together had a diameter of about 34 feet); and (3) a 16U32U16 foot underground support building extending from the -12 foot level to the finished construction ground surface located approximately 18 feet from the equipment room.

The various mechanical and electrical installations housed in the equipment room were connected by conduits to the support building. The lowest point at which the conduits left the equipment room was -28 feet, with most of the conduits leaving at the -22 foot level and entering the support building at close to natural ground level. Although surface construction of protective fencing, parking area and roadway was negligible, other minor structures such as jack pads and closure tracts were constructed at certain levels in the excavated area.

Summit's initial bid covered only site work and excavation and excluded the backfill work, but the executed Kiewit-Summit Subcontract covered both excavation and backfill at the 150 missile sites and the 15 launch control centers. Inasmuch as the contractual dispute does not centrally involve the work concerning the control centers, that part of the Subcontract will receive only passing consideration. Therefore, for the purpose of this opinion, Summit's responsibilities consisted of clearing the missile sites, stockpiling the turf, excavating to the -32 foot level, and backfilling and compacting from the -32 foot level after completion of the silo, equipment room and support building. When it became apparent that Summit would have to accept the backfill work in order to get the Subcontract, Summit requested that an additional provision be inserted to clarify Summit's backfill duties as it was cognizant of the difficulties in backfilling with pipe in the backfill area from observation of backfill operations at the Malmstrom Minuteman Project in Montana and at an earlier Titan missile project with which Summit had been connected. The provision added by Kiewit read as follows:

"7. Backfill containing electrical and mechanical facilities to be done in the following manner:

"The backfill is to be brought up to approximately one (1) foot above the pipe.

"The mechanical and electrical Subcontractors⁷ are to excavate, lay pipes, & etc., and compact the backfill around and above the pipes, conduit, & etc. before this Subcontractor continues his operation."

The lump sum contract price of $2,601,315 was agreed upon and the Subcontract executed on August 21, 1961.

The agreed method of construction permitted Summit to excavate the first 12 feet with heavy equipment such as scrapers, resulting in a dish bowl-shaped excavation, but the following 20 feet of excavation could only be done by use of a backhoe. Below the -32 foot level another subcontractor was to drill a circular hole some 20 feet in diameter extending an additional 50 feet underground. The excavation sloped gradually down to the -12 foot level, but from there to the -32 foot level the excavation resembled a deep inverted cone. The diameter of the excavated area at the -32 foot level was approximately 40 feet, leaving only a three-foot wide shelf between the slopes of the excavation and the equipment room when the silo and equipment room had been completed. Due to the close quarters, much of the compaction of the backfill from the -32 foot level to the -20 foot level had to be done by hand tamping. As the cone widened above the -20 foot level, the area of operations between the side of the equipment room and the earth bank was sufficient to permit the use of other compaction equipment. Above the -12 foot level the area widened extensively which made possible the efficient usage of large tractors and rollers.

The excavation, the temporary construction of fencing, roads and ditches, and the production and stockpiling of sand, gravel and earth for backfill progressed without significant incident until April 1, 1962. During the next ten days it became readily apparent that Summit and Kiewit were at odds in their interpretations of the backfill procedure defined in paragraph 7 of the additional provisions to their contract.⁸ Summit contends that the provision reflected its intention to have nothing to do with backfilling with pipe in the excavation, that the one foot above the pipe phrase meant Summit was to backfill to approximately ground level without any interference from either the electrical, mechanical or structural subcontractors. It is Summit's position that after completion of this initial backfill stage the other subcontractors were then to re-excavate, install the necessary pipe and conduit, and backfill to the former level, from which Summit would complete the backfill operation to the finished construction ground surface.

Summit's complaint asserts Kiewit committed a substantial breach of special provision 7 by requiring Summit to work concurrently with the electrical, mechanical and structural contractors and to phase its backfill operation. Summit also alleges...