Texas Tunneling Company v. City of Chattanooga, Tenn., Civ. A. No. 3215.

• Decision Date: 23 March 1962
• Docket Number: Civ. A. No. 3215.
• Citation: 204 F. Supp. 821
• Parties: TEXAS TUNNELING COMPANY v. CITY OF CHATTANOOGA, TENNESSEE; Lewis A. Schmidt d/b/a Schmidt Engineering Company, and William A. Havens, Alfred W. Burger, Harry H. Moseley, Jasper W. Avery, Frank S. Palocsay and Edward S. Ordway d/b/a Havens and Emerson.
• Court: U.S. District Court — Eastern District of Tennessee

204 F. Supp. 821

TEXAS TUNNELING COMPANY v. CITY OF CHATTANOOGA, TENNESSEE; Lewis A. Schmidt d/b/a Schmidt Engineering Company, and William A. Havens, Alfred W. Burger, Harry H. Moseley, Jasper W. Avery, Frank S. Palocsay and Edward S. Ordway d/b/a Havens and Emerson.

Civ. A. No. 3215.

United States District Court E. D. Tennessee, S. D.

March 23, 1962.

COPYRIGHT MATERIAL OMITTED

Robert L. McMurray, Donald L. Halladay, Noone, Moseley & Noone, Chattanooga, Tenn., for plaintiff.

Will Allen Wilkerson, Wilkerson & Abshire, Chattanooga, Tenn., for defendant Havens & Emerson.

Ellis K. Meacham, Chattanooga, Tenn., for defendant City of Chattanooga, Tenn.

FRANK W. WILSON, District Judge.

In this suit the plaintiff, Texas Tunneling Company, seeks to recover damages it claims to have sustained as a result of alleged misrepresentations upon the part of the defendants. More specifically, the plaintiff contends it was caused to sustain heavy losses in digging a tunnel at Chattanooga, Tennessee by the defendants having wrongfully omitted, withheld and misrepresented geological information.

The following matters, which are not in dispute, constitute a narration of the background and events leading up to this lawsuit.

For a number of years the City of Chattanooga has had under design and construction an interceptor sewer system for the City. Upon March 18, 1952 the City entered into a contract with Havens and Emerson for engineering services upon this project. Havens and Emerson is a partnership composed of five partners, engaged in business as consulting engineers, and maintaining offices in Cleveland, Ohio and New York City. Under the terms of their contract with the City, Havens and Emerson did certain design and engineering work upon the interceptor sewer system, including the designing of a tunnel leading through a hill known as Stringers Ridge. The tunnel was designated as Stringers Ridge Sewer Tunnel, was approximately 976 feet long and was designed to have an outside diameter of nine feet.

During the same period that Havens and Emerson were employed as consulting engineers, the City also employed Lewis A. Schmidt, an individual operating a resident engineering firm under the name of Schmidt Engineering Company, to perform certain engineering services. These services, insofar as they pertain to the sewer tunnel and are material to this lawsuit, were limited primarily to inspection services.

For a period of time during 1955 the City likewise employed the firm of Law-Barrow-Agee, of Atlanta, Georgia, to perform certain test bore drilling in connection with the design and location of a portion of the interceptor sewer system, including the Stringers Ridge Tunnel area. A number of test bores were drilled by the Law-Barrow-Agee firm, including five test bores in the area of the Stringers Ridge Tunnel, these holes being bored at intervals of 200 feet and varying in depth from 38 feet near the base of the Ridge to 168.5 feet near the crest of the Ridge. The results of this work were filed with the City by Law-Barrow-Agee in the form of a "Test Boring Record," which is Exhibit No. 6 in the trial record. This report, among other matters, purports to set out in diagrammatic, numerical and descriptive form the materials encountered and the percentage of core recovery made at all depths in each test bore. There was also filed with the City the "Test Boring Field Report," which is Exhibit No. 5 in the trial record, this being a compilation of the drillers' daily field notes. In the course of the drilling certain core recoveries were made, and these too were turned over to the City after labeling and identification.

Copies of both the Test Boring Record (Exhibit No. 6) and the Daily Test Boring Field Report (Exhibit No. 5) of Law-Barrow-Agee were turned over by the City to Havens and Emerson and were presumably used by them in their engineering and design work for the City. At any rate, as a part of this work, Havens and Emerson prepared a diagrammatic drawing of the results of the test borings, designating this drawing as "Stringers Ridge Sewer Tunnel Boring Logs" and being further identified as Drawing No. 456-11-2. This drawing is Exhibit No. 4 in the trial record. It was prepared from the Law-Barrow-Agee Test Boring Record (Exhibit No. 6), and purports to set forth in graphic, descriptive and numerical form the information contained in that report. With regard to two of the test bores in the central part of the tunnel area, designated in the record as Test Bores 31 and 32, the Havens and Emerson Boring Log Drawing (Exhibit No. 4) omitted information as to the percentage of core recovery in and near the tunnel level, although this information was shown upon the Law-Barrow-Agee Test Boring Record (Exhibit No. 6). It is this omission that forms one of the principal issues in the lawsuit.

Pursuing further the history and background of this lawsuit, in the latter part of 1955 the City solicited bids upon a portion of the interceptor sewer system, including the Stringers Ridge Tunnel. For this purpose the City distributed to prospective bidders plans and specifications, the proposed contract, and a copy of the Havens and Emerson Boring Log Drawing (Exhibit No. 4). These bids were opened upon January 10, 1956. The bids ranged from a low bid by Stein Construction Company of $270,395, including the tunnel portion bid at $234,240, to a high bid of $418,118, including the tunnel portion bid at $377,712. The contract was awarded to the low bidder, Stein Construction Company, and was executed under date of January 24, 1956. Around this same date, officials of the Texas Tunneling Company, the plaintiff herein, first came to Chattanooga and undertook negotiations with Stein Construction Company for the purpose of subcontracting the digging of the tunnel. Stein Construction Company furnished the plaintiff with the plans and specifications, the contract with the City, and a copy of the Havens and Emerson Boring Log Drawing (Exhibit No. 4). The plaintiff negotiated a subcontract with Stein Construction Company to dig the 976 foot Stringers Ridge Sewer Tunnel at $109 per foot, or for a total subcontract price of $106,384. This subcontract was executed upon January 27, 1956. The plaintiff began digging the tunnel in March of 1956 and this work was completed in November of the same year. This forms the background to this suit.

Turning now to the plaintiff's complaint, the plaintiff contends that it was caused to sustain a heavy loss in performing the subcontract by reason of having underestimated the job, having estimated the job could be completed in 18 weeks, whereas because of the materials encountered it took 34 weeks to do the work. The plaintiff contends that it was misled by the defendants as to the geological formations to be encountered in digging the tunnel, resulting in its having underbid the job and thereby sustaining the loss complained of. More specifically the plaintiff contends that the City of Chattanooga, Havens and Emerson and Schmidt Engineering Company, individually and working together, made the following misrepresentations which caused the plaintiff to underbid the job and sustain its loss:

(1) They omitted or caused to be omitted from the Boring Log Drawing (Exhibit No. 4) the fact that diamond core drilling was performed on Test Bores 31 and 32 at or near the tunnel level, these test bores being in the central portion of the tunnel.

(2) They omitted or caused to be omitted from the Boring Log Drawing (Exhibit No. 4) the percentage of core recovery made in Test Bores 31 and 32 at or near the tunnel level.

(3) They negligently omitted or concealed the fact that core boring samples were retained and subject to inspection.

(4) They omitted or caused to be omitted information from the Law-Barrow-Agee Test Boring Field Reports (Exhibit No. 5) that showed materials to be encountered in digging the tunnel at Test Bores 31 and 32 substantially different from that shown upon the Boring Log Drawing (Exhibit No. 4) furnished the plaintiff.

In its answer the City contended that it had no privity or dealings with the plaintiff, who was a subcontractor, that it was not a party to any misrepresentations, that the contract and drawing specifically provided that the City did not warrant the geological information, and in fact that the drawing was expressly excluded as being any part of the contract, and finally that it did not conceal from the plaintiff the fact that it held core boring samples. Similar defenses were asserted by the defendants, Havens and Emerson. In addition Havens and Emerson admitted that the percentage of core recovery was omitted from their drawing (Exhibit No. 4) but averred that this was an unintentional oversight and that the omission of this information was not material, that the plaintiff was not misled by the omission, but rather that the materials actually encountered by the plaintiff were those as shown upon the drawing. Havens and Emerson denied that they had anything to do with the core samples or were in any way responsible therefor.

A somewhat similar answer was filed by the defendant, Lewis A. Schmidt, but it will not be necessary to go into this as, at the time of the trial, the Court entered a judgment of dismissal as to this defendant at the conclusion of the plaintiff's evidence. The Court was of the opinion that there was no evidence that Mr. Schmidt knew of or was in any way responsible for the alleged omissions and misrepresentations complained of by the plaintiff. Likewise a third-party action by the City against Stein Construction Company has heretofore been dismissed upon a motion for summary judgment.

Likewise for reasons set forth in a former opinion, this case will be dismissed as to the defendant, the City of Chattanooga, and will remain for consideration as to the defendants, Havens and Emerson, and with regard to these defendants only as to the second alleged...