Thos. J. Dyer Co. v. Bishop International Engineering Co.

• Decision Date: 30 May 1962
• Docket Number: No. 14550.,14550.
• Citation: 303 F.2d 655
• Parties: The THOS. J. DYER COMPANY, Plaintiff-Appellee, v. BISHOP INTERNATIONAL ENGINEERING COMPANY and General Insurance Company of America, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

303 F.2d 655 (1962)

The THOS. J. DYER COMPANY, Plaintiff-Appellee, v. BISHOP INTERNATIONAL ENGINEERING COMPANY and General Insurance Company of America, Defendants-Appellants.

No. 14550.

United States Court of Appeals Sixth Circuit.

May 30, 1962.

Taft, Stettinius & Hollister, Cincinnati, Ohio, for appellants, Leonard A. Weakley, Cincinnati, Ohio, of counsel.

Clark, Robinson & Hellebush, Cincinnati, Ohio, for appellee, Thomas H. Clark, Cincinnati, Ohio, of counsel.

Before MILLER, Chief Judge, SIMONS, Senior Judge, and CECIL, Circuit Judge.

SHACKELFORD MILLER, JR., Chief Judge.

Appellee, The Thos. J. Dyer Company, a subcontractor on the project hereinafter referred to, brought this action against the appellant, Bishop International Engineering Company, hereinafter referred to as Engineering Company, the general contractor, to recover the sum of $134,684.53 for materials and labor furnished by it in the construction of the project. The appellant, General Insurance Company of America, was also made a defendant as surety on the "Owner's Protective Bond," executed by the Engineering Company as principal.

The following facts were stipulated by the parties. Appellee is an Ohio corporation engaged in the plumbing contracting business. The Engineering Company is a partnership engaged in the general contracting business. On or about August 19, 1958, the Engineering Company entered into a written contract with The Kentucky Jockey Club, Inc., hereinafter referred to as the Jockey Club, by the terms of which it agreed to provide labor and materials required in connection with the construction of a portion of a Horse Racing Plant, known as Latonia Race Track, upon premises belonging to the Jockey Club, situated in Boone County, Kentucky. That portion of the construction project covered by the contract was described as "Phase One."

On or about April 27, 1959, the appellee entered into a written subcontract with the Engineering Company, by the provisions of which it agreed to provide materials for and to install certain plumbing and utilities required in connection with the completion of the construction work to be performed by the Engineering Company, pursuant to its contract with the Jockey Club, for which it was to receive the sum of $115,000.00. Paragraph 3 of this subcontract reads as follows:

"3. The total price to be paid to Subcontractor shall be ........ Dollars ($115,000.00) lawful money of the United States, no part of which shall be due until five (5) days after Owner shall have paid Contractor therefor, provided however, that not more than ......... per cent (90%) thereof shall be due until thirty-five (35) days after the entire work to be performed and completed under said contract shall have been completed to the satisfaction of Owners, and provided further that Contractor may retain sufficient moneys to fully pay and discharge any and all liens, stopnotices, attachments, garnishments and executions. Nothing herein is to be construed as preventing Contractor from paying to the Subcontractor all or any part of said price at any time hereafter as an advance or otherwise."

The Engineering Company has provided all of the labor and material and has done all things necessary for the completion of the work required of it under the contract of August 19, 1958, and has received payment of the sum of $2,236,908.95, specified by the contract as the consideration to be paid to it for the work to be performed by it thereunder.

From time to time following the execution of the contract of August 19, 1958, the Engineering Company was called upon by the Jockey Club to provide labor, services and materials for the completion of various items of construction relating to the above mentioned Horse Racing Plant which had not been included within Phase One of the construction program of the Jockey Club. The Engineering Company has received compensation for certain portions of such additional labor, services and materials provided by it at the request of the Jockey Club but has not yet received payment for all of it.

From time to time after April 27, 1959, the date of the subcontract with appellee, appellee was called upon by the Engineering Company to provide labor, services and materials in addition to those specified in the above described subcontract, to which it agreed, as evidenced by change orders, letter proposals and acceptances. Some of such additional labor, services and materials fell within the scope of the above described construction contract between the Engineering Company and the Jockey Club, while some of it was beyond the scope of that contract.

The aggregate additional consideration which the Engineering Company agreed to pay appellee for the additional labor, services and materials to be provided pursuant to the change orders, letter proposals and acceptances, amounted to $112,652.17, making the total consideration payable to appellee for all services and materials which it agreed to perform and provide in connection with the construction of the Latonia Race Track equal the sum of $227,652.17.

Appellee has provided all the labor and materials and has done all things necessary for the completion of the work required of it under the subcontract, change orders, proposals and acceptances. Appellee completed its work as required on or before August 1, 1959, and the completed project was accepted by the owners on or about August 28, 1959.

The Engineering Company has not been paid by the Jockey Club for any work performed or material supplied by the appellee, other than that required pursuant to the terms of the original contract, dated August 19, 1958, between the Engineering Company and the Jockey Club.

The Engineering Company has paid to appellee for work performed and materials provided under the subcontract, changes orders, proposals and acceptances the sum of $119,133.06. After the payment of $119,133.06 there remained a balance due from the Engineering Company to the appellee of $108,519.11.

Under date of August 19, 1958, the appellant General Insurance Company of America executed a bond to the Jockey Club in the face amount of $2,086,908.75, upon which the Engineering Company was the principal.

On December 4, 1959, the Jockey Club filed in the United States District Court for the Western District of Kentucky, Louisville Division, a proceeding for its reorganization under Chapter X of the Federal Bankruptcy Act. That proceeding is still pending.

The Engineering Company in its defense to the action contends that by the provisions of paragraph 3 of its subcontract with the appellee no payment was due thereunder to the appellee until five days after the Jockey Club, owner of the construction project to which the contract related, had made payment to the Engineering Company; that the Jockey Club has paid to it on account of the work performed and the materials furnished by the appellee certain payments, all of which have been paid by the Engineering Company to the appellee; and that because it has not received any further payment from the Jockey Club, now being reorganized in bankruptcy, it has no obligation to make further payment to the appellee.

Following the filing of the stipulation of facts, the District Judge made findings of fact and conclusions of law, sustained appellee's motion for summary judgment, and entered judgment for the appellee in the principal amount of $108,519.11, together with $9,224.12 as interest due to the date of the judgment.

Appellant questions the right of the District Judge to make findings of fact in passing on a motion for summary judgment. Rules 52(a) and 56(c), Rules of Civil Procedure, 28 U.S.C.A. The facts were stipulated, and insofar as the findings of the District Judge may vary from them or from the admissions contained in the pleadings, they will be disregarded. The ruling on the motion for summary judgment will be reviewed on the basis of the stipulated facts and the admissions contained in the pleadings.

The parties devote considerable time to the question of whether paragraph 3 in appellee's subcontract is an enforceable provision of the contract, appellant contending that it is enforceable and appellee contending that it is not. We think this argument misconceives the real issue in the case. It appears to be settled law that contract provisions making certain obligations conditional or contingent upon the happening of a certain event are valid and enforceable. Fox v. Buckingham, 228 Ky. 176, 180-181, 14 S.W.2d 421; Gatliff Coal Co. v. Cox, 142 F.2d 876, 880-881, C.A.6th; Ward v. Flex-O-Tube Co., 194 F.2d 500, 503, C.A.6th. But the question remains whether the contract provision relied upon creates such a conditional or contingent obligation. This presents a question of construction or interpretation of the contract provision, not a question of its validity. Lewis v. Tipton, 10 Ohio St. 88.

In construing the contract sued on in this case, the first question is whether paragraph 3 of the subcontract of April 27, 1959, is applicable not only to the original subcontract but also to the several supplemental contracts between the parties for work additional to that covered by the original subcontract.

Appellee argues in support of the judgment that paragraph 3 in the subcontract of April 27, 1959, was applicable only to the labor and material covered by that instrument, and the subsequent agreements for additional work by it, which work was not contemplated in the original general contract, or in the initial subcontract, constitute separate contracts which do not contain the provisions of paragraph 3. It contends that the defense relied upon under paragraph 3 of the initial subcontract is not applicable to the work performed under the supplemental contracts. This contention appears to be in accord with the general rule. Canister Co. v. Wood & Selick, 73 F.2d 312, 314, C.A.3rd; 17 C.J.S. Contracts §§ 331-336. The subsequent letter proposals and...