Phoenix Assurance Co. of New York v. Appleton City
Decision Date | 07 December 1961 |
Docket Number | No. 16721.,16721. |
Citation | 296 F.2d 787 |
Parties | PHOENIX ASSURANCE COMPANY OF NEW YORK, Appellant, v. APPLETON CITY, Missouri, et al., Appellees. |
Court | U.S. Court of Appeals — Eighth Circuit |
Clem W. Fairchild, Kansas City, Mo., for appellant. Rodger J. Walsh and Davis, Thomson, Van Dyke, Fairchild & Walsh, were with him on the brief.
Barkley M. Brock, Clinton, Mo., for Appleton City, Mo. Haysler A. Poague, Clinton, Mo., and Poague, Brock & Wall, Clinton, Mo., of counsel, with him on the brief.
James S. Cottingham, Independence, Mo., for appellees Byron B. Crail and American Cast Iron Pipe Co. John S. Newhouse, and Newhouse, Shaffer & Wilson, Independence, Mo., with him on the brief.
Before VOGEL, VAN OOSTERHOUT and BLACKMUN, Circuit Judges.
VAN OOSTERHOUT, Circuit Judge.
Plaintiff Phoenix Assurance Company of New York (Phoenix), a corporate surety writing bonds for compensation, brought this action for declaratory judgment to have its rights and liabilities determined upon a construction bond and a statutory bond it had furnished the City of Appleton City, Missouri (City) on behalf of Reser, d/b/a Continental Construction Company, a contractor who had entered into a written contract to construct a sewage system for the City. The City in a counterclaim and cross-petition asserted that Reser had not completed the contract in accordance with its terms, that the City is entitled to liquidated damages specified in the contract for delay, and to actual damages for the amount necessary to complete the construction, and asked that plaintiff's liability upon its bonds for such damages be established and allowed. The City also prayed that it be allowed penalties and attorneys' fees pursuant to V.A.M.S. § 375.420, for vexatious delay.
Various parties holding claims for labor and material furnished on the project intervened in the action and prayed for establishment of their claims and for judgment against Phoenix upon its bonds for the amounts found due them.
Final judgment was entered determining that Reser had not substantially performed his contract with the City and that Phoenix was liable on its bonds for liquidated damages for delay, actual damages, penalties and attorneys' fees for vexatious delay. The judgment fixes the amount of such damages. The claims of the intervenors were established against Phoenix. Phoenix has appealed from the final judgment. Jurisdiction is based upon diversity of citizenship.
Phoenix asserts points entitling it to a reversal as follows:
Said points will be considered in the order stated.
Phoenix contends that the contract between Reser and the City specifically provided that the decision of the City's engineer was to be conclusive as to all parties upon the question of whether the materials and workmanship conformed to the specifications, and that the city engineer approved and accepted the performance of the contract by his letter to the City dated May 20, 1957.
As a result of a pretrial conference, the parties agreed that certain issues of law be determined by the court, leaving the question of amount of damages that might be due either party for later adjudication. The issues thus submitted, as stated by the court, are:
The court in a memorandum opinion (not reported), dated March 30, 1959, expresses its views upon such issues. The court treated the submission of the above stated issues as a motion for summary judgment on certain issues of liability alone, as contemplated by Rule 56 (c) of the Federal Rules of Civil Procedure, 28 U.S.C.A.
Upon the first issue, the court found that the State Health Department regulations were not expressly made a part of the specifications or the contract, and expressed doubt whether the standards of performance set out in such regulations constitute part of the contract, but found it unnecessary to determine such issue because of its view that the contract called for acceptance by the governing body of the City, and that the City had never accepted the work.
In Missouri and generally, it appears to be well-established that parties to a building contract may agree that a designated person, such as a named architect or engineer, shall determine questions relating to the performance of the contract and the amount due, and that such determination shall be final and conclusive, absent fraud or gross mistake. Martinsburg & Potomac R. R. Co. v. March, 114 U.S. 549, 5 S.Ct. 1035, 29 L.Ed. 255; Kihlberg v. United States, 97 U.S. 398, 24 L.Ed. 1106; United Const. Co. v. City of St. Louis, 334 Mo. 1006, 69 S.W.2d 639; Stiers Bros. Const. Co. v. Moore, Mo.App., 158 S.W.2d 253.
In the cases just cited and in other cases relied upon by Phoenix, the court found that the contracts clearly placed the responsibility for finally determining a disputed issue upon a designated person. Here, the City contends and the court determined that the contract required acceptance by the governing body of the City. Our reading of the contract satisfies us that the contract is ambiguous with respect to the issue of who was to approve the performance.
A contract is ambiguous if it is reasonably susceptible of different tenable constructions. Maritz, Inc., v. ACF-Wrigley Stores, Inc., 8 Cir., 283 F.2d 75, 78; Paisley v. Lucas, 346 Mo. 827, 143 S.W.2d 262, 267.
In the Maritz case, supra, we quoted and applied the rules of construction pertaining to ambiguous contracts as stated by the Supreme Court of Missouri in Veatch v. Black, 363 Mo. 190, 250 S.W.2d 501, 507, as follows:
" "
In American Indemnity Co. v. Swartz, 8 Cir., 250 F.2d 532, 536, we said:
With the foregoing principles of interpretation before us, we look to the facts in our present case. Standing in isolation the portion of the contract relied upon by Phoenix, which reads:
"The materials and workmanship used in the work herein contemplated shall be subject to the inspection of the Engineer, and his decision as to what conforms to specifications shall be conclusive on all parties, and all condemned materials shall be immediately removed from the vicinity of the work."
lends some support to Phoenix's position. However, as the trial court aptly pointed out, the paragraph immediately following reads:
Phoenix contends that the qualifying paragraph last quoted applies only to defective materials. The contract when considered as a whole leaves us in serious doubt whether the parties intended to treat defective workmanship in a different manner from defective materials.
The opening paragraph of the contract provides that all work and material shall be "to the satisfaction of the engineer and acceptance by the Governing Body of the City." In a later paragraph it is stated that the contractor will complete the work in...
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