SS Silberblatt, Inc. v. Seaboard Surety Company, 18843

• Decision Date: 23 October 1969
• Docket Number: 18844.,No. 18843,18843
• Citation: 417 F.2d 1043
• Parties: S. S. SILBERBLATT, INC. and Travelers Indemnity Company, Appellants, v. SEABOARD SURETY COMPANY and Carter Electric Company, Appellees. CARTER ELECTRIC COMPANY, Appellant, v. S. S. SILBERBLATT, INC. and Travelers Indemnity Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

417 F.2d 1043 (1969)

S. S. SILBERBLATT, INC. and Travelers Indemnity Company, Appellants, v. SEABOARD SURETY COMPANY and Carter Electric Company, Appellees.

CARTER ELECTRIC COMPANY, Appellant, v. S. S. SILBERBLATT, INC. and Travelers Indemnity Company, Appellees.

Nos. 18843, 18844.

United States Court of Appeals Eighth Circuit.

October 23, 1969.

Bernard A. Reinert, of Kenney, Reinert & Hespen, St. Louis, Mo., for S. S. Silberblatt, Inc. and Travelers Indemnity Co.; Francis L. Kenney, Jr., St. Louis, Mo., and E. C. Curtis, of Farrington & Curtis, Springfield, Mo., with him on the brief and reply brief.

Joseph J. Becker, Clayton, Mo., for Carter Electric Co.; William J. Becker, Clayton, Mo., with him on the brief.

Bernard L. Balkin, Achtenberg, Sandler & Balkin, Kansas City, Mo., for Seaboard Surety Co., F. W. Mueller, St. Louis, Mo., with him on the brief.

Before VAN OOSTERHOUT, Chief Judge, and MEHAFFY and HEANEY, Circuit Judges.

MEHAFFY, Circuit Judge.

This is a Capehart Act case growing out of controversies between S. S. Silberblatt, Inc., the general contractor on an 800-unit military housing project at Fort Leonard Wood, Missouri, Carter Electric Company, Silberblatt's electrical subcontractor, and the latter's alleged surety, Seaboard Surety Company.¹ Travelers Indemnity Company is a party to the suit by reason of its being Silberblatt's surety.

Jurisdiction is established by diversity of citizenship and the requisite amount in controversy as well as 28 U.S.C. § 1352 and the applicable provisions of the Capehart and Miller Acts.²

The district court held that the performance bond and the labor and material payment bond which Carter procured from a former attorney-in-fact for Seaboard were invalid because the attorney-in-fact lacked authority to execute them and because Seaboard did not hold him out to Silberblatt as its agent and did not subsequently ratify his actions. The court held also that Silberblatt was not entitled to damages from Carter to which it awarded the electrical subcontract or from Carter's alleged surety, Seaboard, for breach of contract. Carter was likewise denied relief by the district court on its counterclaim for moneys allegedly due from Silberblatt. The court held that Silberblatt and Carter had waived any rights which they had under the subcontract and, in fact, that no contract existed at the time of the alleged breach but that the parties were merely operating under an employer-employee relationship and were not entitled to recover anything from each other.

The district court made separate findings of fact and conclusions of law in the "Silberblatt-Seaboard Controversy" and the "Silberblatt-Carter Controversy." The court's decision is not reported.

We affirm the judgment of the district court absolving Seaboard of liability on the purported bonds, but reverse and remand the court's judgment as to the Silberblatt-Carter controversy holding that the subcontract was not abandoned by the parties but that it was in existence at the time Carter walked off the job in November, 1962.

This case reaches us upon a voluminous record and with an aggregation of subsidiary and collateral issues, some discussed by the trial court and argued in briefs, all of which we have considered but a number of which we conclude have no bearing upon the crucial and determinative points which form the basis for our conclusions. For example, we are of the opinion that the effective date of the subcontract is of no significant consequence in view of our holding that there are other sufficient grounds on which to base our affirmance of the trial court's finding that Seaboard is not liable under the purported bonds.

On August 3, 1960, the Department of the Army sent Silberblatt a "Letter of Acceptability" stating that Silberblatt's bid, dated May 13, 1960, in the amount of $12,194,200.00 for the construction of the aforementioned 800-unit housing project was the lowest acceptable bid, and outlining the requirements which Silberblatt must meet preparatory to entering into the formal contract. Following completion of these requirements, the formal contract was executed February 23, 1961. On that date performance and payment bonds were also executed by Silberblatt as principal and Travelers Indemnity Company as surety in compliance with 42 U.S.C. § 1594.

Soon after receipt of the Letter of Acceptability and prior to the signing of the formal contract with the Government, Silberblatt began awarding subcontracts to the approximately twenty or twenty-five subcontractors needed to construct the project. On August 31, 1960, representatives of Silberblatt met with Lester (Les) L. Carter, President of Carter Electric Company, and a subcontract was executed by Mr. Carter to do the electrical work, underground telephone lines, etc. for the sum of $600,000.00, with certain additional optional items contained in addenda to the contract. Mr. Carter testified that Bruce Silberblatt, son of S. S. Silberblatt and Vice President of the company, signed the subcontract on behalf of Silberblatt at that time but that Carter was not given a copy which was signed by Silberblatt. S. S. Silberblatt testified that delivery of a signed copy to Carter was withheld pending the furnishing of acceptable performance and payment bonds which Silberblatt was authorized to require under the terms of the contract. On March 20, 1961, Silberblatt requested Carter to return his copy of the contract for Silberblatt's signature and it was signed and returned to Carter March 30, 1961. The court held that it was then that the contract was executed by Silberblatt.

On October 31, 1960, Carter forwarded to Silberblatt a duplicate original of the required surety bonds, dated August 31, 1960, which had been executed by Carter as principal and John P. Duncan as attorney-in-fact for Seaboard, as surety. They bore Seaboard's corporate seal impression and a notary's certificate fully executed. Attached to the original of the bonds which Carter retained was a verified copy of Power of Attorney No. 4390, executed on October 21, 1958 by Seaboard to Duncan, but no power of attorney certificate was attached to the copies furnished Silberblatt, the obligee thereunder. It developed that this power of attorney and also a later one issued to Duncan by Seaboard had been revoked, and it is agreed by all parties to this litigation that Duncan had no actual authority to bind Seaboard, the issue being whether Seaboard was estopped to deny his so-called "apparent" agency or authority.

The first that Seaboard heard of the bonds was when it received an inquiry on or about January 5, 1961 as to whether it was Carter's surety on the aforementioned project. It immediately telephoned Silberblatt concerning the status of the job and, thereafter, upon making a check of its records Seaboard discovered that they did not reflect the issuance of any such bonds. Thereupon, two representatives of the company were sent to St. Louis to see Duncan and Carter about the matter. Duncan admitted executing them but stated that he intended to replace them with bonds written by another company after the first of the year. He received $1,500.00 from Carter as a premium, which he never forwarded to Seaboard, and claimed that it was a service fee for the work he had done on the case.

On January 11, 1961, Seaboard wrote to Silberblatt stating that Duncan had no authority to execute the bonds and it did not consider them valid and suggesting that Silberblatt require Carter to provide other suretyship. On January 16, 1961, Silberblatt wrote Carter by certified mail instructing Carter to immediately provide other satisfactory surety.³

Other correspondence ensued but Carter never procured any other bonds, and his attorney indicated that he could not get other bonds for the same amount. This is not surprising since Seaboard states that its premium for the purported bonds executed by Duncan in the amount of $600,000.00 would have been $3,350.00, rather than the $1,500.00 which Duncan collected and kept. Duncan indicated that he was on the verge of obtaining bonds from Glens Falls but this never materialized.

Although Silberblatt requested Carter to obtain bonds from another company, the termination of its contract for failure to do so was apparently never considered. This is expressly reflected in a letter of February 6, 1961 from Silberblatt to Carter's attorney in which it is stated:

"You may rest assured that we are not, and have not at any time, requested that Carter Electric Company withdraw from its contract with us. We are happy to have them with us."

A provision in the subcontract authorized Silberblatt to demand of Carter satisfactory performance and payment bonds at any time prior to or during the progress of the work.⁴ Silberblatt did not require Carter to obtain other bonds, however, but instead furnished Carter with an executed copy of the subcontract on March 30, 1961. Seaboard continued to deny liability under the bonds and on February 27, 1961, wrote to the Missouri Superintendent of Insurance detailing Duncan's unauthorized acts.

Early in 1962 Carter began having severe financial difficulties and requested weekly draws on the moneys remaining in the subcontract. On January 24, 1962, Carter discussed with Silberblatt on the telephone an agreement to give Silberblatt one-third of the profit on the job in return for weekly advances, plus payment of such invoices as might be mutually agreed upon. Silberblatt contends that he never agreed to this but told Carter to put it in writing and send it on to him and he would consider it. Carter mailed a letter to Silberblatt on the same date outlining the terms to which he agreed. Carter later repudiated the agreement, stating that he had been advised by his attorney that it was in violation of the Federal Anti-Kickback Act.⁵ Carter Electric, however, relied on this so-called "partnership and profit sharing agreement" in its...