Power Service Corporation v. Joslin, 11992.

• Decision Date: 25 July 1949
• Docket Number: No. 11992.,11992.
• Citation: 175 F.2d 698
• Parties: POWER SERVICE CORPORATION v. JOSLIN.
• Court: U.S. Court of Appeals — Ninth Circuit

175 F.2d 698 (1949)

POWER SERVICE CORPORATION v. JOSLIN.

No. 11992.

United States Court of Appeals Ninth Circuit.

June 21, 1949.

Rehearing Denied July 25, 1949.

Lancie L. Watts, Kansas City, Missouri, for appellant.

Frank J. Hennessy, U. S. Attorney, Rudolph J. Scholz, Asst. U. S. Attorney, San Francisco, Cal., for appellee.

Before MATHEWS, HEALY and POPE, Circuit Judges.

POPE, Circuit Judge.

Appellant, a Minnesota corporation, sued appellee, a citizen of California, upon a contract whereby appellant, as subcontractor, undertook to erect and install three boilers in a government ordnance plant in Kansas where appellee was himself subcontractor for installation of plumbing, heating and ventilating facilities. Under the contract appellant, to whom we shall refer as the Corporation, was to perform all necessary work as called for by the plans and specifications, all within a period of 120 days. Joslin, the appellee, was to furnish all materials and equipment required. The Corporation claimed damages on account of Joslin's alleged breach of contract in failing to furnish materials required on time, with resultant loss to the Corporation. The trial court, sitting without a jury, awarded the Corporation damages in the amount of $3753.15. On this appeal it asserts that the damages thus awarded are inadequate and that the court failed to apply the proper measure of damages, contending that under the evidence it should have recovered $34,343.00. These damages, it asserts, were suffered because completion of the job required 39 days extra time, due to the claimed default of Joslin.

Joslin asserts that if the contract were as alleged by the Corporation, the damages could be no more than nominal, but contends that the terms of the contract were such that there was no breach of its terms, and no right to recover damages.

We are therefore confronted, initially, with Joslin's claim that the contract by its terms does not permit recovery of damages for delay in furnishing materials. If his position with respect to the provisions of the contract is sound, a consideration of the question raised by the Corporation with respect to the measure of damages will be unnecessary.

The specifications which formed a part of the proposed contract upon which the Corporation was the low bidder contained a paragraph numbered 1-05(e) which provided that: "In case time for completion of the work is increased due to any of the causes specified herein it is distinctly understood and agreed that the subconstructor the Corporation will accept the additional time in which to complete his subcontract in full satisfaction of any delays encountered, and the Constructor Joslin will not be liable for any costs or expenses incurred by the subconstructor as a result of the increased time for completion of the subcontract."

The same specifications required the Corporation to commence work under the subcontract within five calendar days after the date of receipt by it of notice to proceed and thereafter to prosecute the work to completion within 120 days. The bid form executed by the Corporation contained its agreement to execute the form of contract, which, with the specifications had been prescribed by the War Department, within two days after such forms were presented for signature. The bids, which were for a lump sum, were opened July 8, 1944 and the Corporation was the low bidder. The bid was received at Joslin's Kansas City, Missouri, office, and was there accepted on July 11, 1944. Notice to proceed with the work was given the same day by letter which the Corporation received July 13, 1944.

Joslin claims that the moment the bid was accepted and notice to proceed given, the rights of the parties had become fixed, and a complete contract made, and that the paragraph of the specifications above quoted, excluded any right to damages for delay. The Corporation claims that this provision was eliminated or modified by the later insertion of a rider on the signature page of the formal contract. That came about in the following manner.

By letter dated July 14, 1944 the general contractor for the Sunflower Ordnance Works (generally referred to in the record as the Architect-Engineer-Manager) transmitted to the Corporation a written contract in the form specified in the call for bids with request that it be executed and returned. But, although it did promptly enter upon the performance of the work, the Corporation declined to execute the formal contract pending its continued efforts to persuade Joslin to attach a rider to the subcontract or to make supplemental commitments by letter relating to the matter of reimbursing the Corporation for increased costs occasioned by delay in furnishing certain materials.

This attitude on the part of the Corporation arose out of the fact that shortly after it had been awarded the subcontract it discovered that some portion of the materials for the three boilers, which are referred to in the record as "water wall tubes and headers"¹ were not on hand or presently available for installation.

The work called for by the contract had originally been arranged for in 1942 when the general contract for the erection of the ordnance plant had been made. The plant was to have three power houses, but when two had been completed, work was stopped on the third. Subsequently, and at the time the bids here referred to were called for, it had been decided to complete the third power house and the subcontract, upon which the corporation bid, was for the erection of the three boilers in this third power house, designated as "Power House No. 1". When the work was suspended, materials for the three boilers had been collected and stored on or near the site. One paragraph of the specifications recited: "Nearly all of the materials required for the work has been stored in power house No. 1 or in warehouses adjacent thereto." The specifications further required the successful bidder, immediately after starting work, to compile a list of materials required, check this against the quantities on hand, and report shortages to Joslin.

At the time the bid was presented, neither the Corporation nor Joslin knew what, if any, shortages in this material existed. After the Corporation received the notice to proceed, it did not make a complete list of the materials on hand, but on July 26, 1944 wrote to Joslin as follows: "In connection with our subcontract for complete erection of boilers in Power House No. 1, Sunflower Ordnance Works, Johnson County, Kansas, we wish to advise of a major shortage of materials which will delay the progress of our work beyond our contract schedule.

"This material consists of water-wall tubes for all three of the boilers which we are to erect. In order for us to complete our work in the one hundred twenty day period required, it will be necessary for us to have delivered to the job sufficient tubes for one boiler by August 1, 1944; sufficient tubes for a second boiler by August 8th, 1944, and the balance of the tubes for the third boiler by August 15th, 1944."

On August 8, 1944 the Corporation requested permission to append a proviso on the signature sheet of the formal contract relating to reimbursement of such increased cost as might be occasioned by non-availability of tubes. This was not acceptable to Joslin. Again on August 22 the Corporation requested Joslin to write it a letter in effect acknowledging the Corporation's right to present a claim for increased costs resulting from delay in the delivery of the materials. This request also was declined by Joslin, but on September 11, 1944 the subcontract forms were signed by the Corporation and at the same time there was appended to the signature page and initialed by both the parties to the contract and by the general contractor and the War Department's Contracting Officer, the following sentence: "This contract is signed and executed by the Power Service Corporation without any intent on the part of the corporation to abandon or waive any right which it may have to submit, prove, and collect damages by reason of the late delivery of materials notwithstanding the provisions of Par. 1-05 of the specifications."² It is this sentence upon which the Corporation principally relies. Joslin claims first, that its language was such that it did not purport to increase his obligations under the contract, or to do away with or obviate the effect of specification 1-05(e) reciting that Joslin should not be liable for damages for delay; and second, that even if it did purport so to provide, that when it was inserted the parties had already become bound according to the original specifications, and that therefore the insertion of the quoted language was without consideration and not binding on Joslin.

Notwithstanding the actual signing of the subcontract was thus delayed, the Corporation began the work of construction very promptly after receipt of its notice to proceed. Its engineer testified that the work was begun on the 13th or 14th of July, 1944. It appears that there was a full supply of materials for at least one boiler, and sufficient to start with the others, and crews were at once put to work. It was required by the specifications to prepare and submit to Joslin a proposed work schedule within seven days after notice to proceed. This was done within the time required. On the 13th or 14th of July the Corporation began the compilation of its "list of materials" required. Its chief engineer testified that the list of required materials was checked against the material found on the site and shortages noted, and on the basis of such notations, requisitions for materials required were forwarded to Joslin. The first requisition was dated July 26, 1944, but no complete list of requirements for water-wall or header tubes appears to have been furnished until requisition No. 26 on August 19, 1944. This purported to cover water-wall tubes for all three boilers and...