U.S. for Use of Garrett v. Midwest Const. Co.

• Decision Date: 16 June 1980
• Docket Number: No. 77-2710,77-2710
• Citation: 619 F.2d 349
• Parties: UNITED STATES of America, For Use of A. C. GARRETT, d/b/a Garrett Construction Company, Plaintiff-Appellee Cross-Appellant, v. MIDWEST CONSTRUCTION COMPANY and Reliance Insurance Company, Defendants-Appellants Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 349

619 F.2d 349

UNITED STATES of America, For Use of A. C. GARRETT, d/b/a Garrett Construction Company, Plaintiff-Appellee Cross-Appellant, v. MIDWEST CONSTRUCTION COMPANY and Reliance Insurance Company Defendants-Appellants Cross-Appellees.

No. 77-2710.

United States Court of Appeals Fifth Circuit.

June 16, 1980.

Benjamin Raye Collier, Dallas, Tex., for defendants-appellants cross-appellees.

James R. Harris, Corpus Christi, Tex., for plaintiff-appellee cross-appellant.

Appeals from the United States District Court for the Southern District of Texas.

Before GODBOLD, HILL and POLITZ, Circuit Judges.

POLITZ, Circuit Judge:

Beneath the placid surface of this modest contract dispute lurk shoals, reefs and sunken choice of law questions. Boarding the good dredge Melvin, we steer a serpentine course to safer waters.

This suit involves a government prime contractor, Midwest Construction Company, a Nebraska citizen, and its subcontractor, Garrett Construction Company, a Texas citizen. Garrett filed suit in district court against Midwest and its surety under the Miller Act, 40 U.S.C. § 270b. It then sued Midwest alone in state court. ¹ Invoking diversity jurisdiction Midwest removed the state court action, 28 U.S.C. § 1441. The district court awarded plaintiff $3,947.40 plus interest, as explained below, and attorney's fees of $3,000. We affirm in part and remand.

In November, 1972, Midwest contracted with the United States of America to: (1) dredge a new entrance channel to Port Aransas Harbor, (2) do some maintenance dredging, and (3) construct the East Breakwater of the entrance channel. Pursuant to Miller Act requirements, Midwest tendered a labor and material payment bond for $198,783.50.

There are two steps in the construction of a breakwater. A sand fill must first be deposited for a foundation; then blanket and cover stone must be placed on top of the sand to stabilize the breakwater, which would otherwise eventually wash away.

In December, 1972, Garrett subcontracted with Midwest to do the dredging and the fill work for the breakwater, for $.45 a cubic yard. As is customary in construction contracts, Midwest was entitled to retain a percentage of the payment until completion of the prime contract. Midwest did not subcontract the blanket and cover work. Anticipating that it might be necessary to dredge a flotation channel north of and parallel to the breakwater for passage of its barges carrying blanket and cover stone, Midwest provided in the subcontract that it could elect to have Garrett dredge a flotation channel at $.45 per cubic yard.

The contract and subcontract specifications called for dredged sand from the northeast half of the new entrance channel to be deposited as fill foundation in the area designated for the new East Breakwater. This deposit was to be at a 1 on 5 slope, i. e., one foot vertical for five feet horizontal, until it reached the height of one foot below mean low tide. On the contract drawings and specifications there were dotted lines around the area designated for the East Breakwater, which represented limits to the spread of sand from the breakwater. Any sand from the fill which drifted and caused shoaling in the Corpus Christi Ship Channel, 400 yards to the north of the breakwater, was to be removed. The following is a rough plat of the work area.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

A preconstruction conference was held on January 5, 1973. To determine what transpired there the magistrate relied on the testimony of William A. Sky-Eagle, Jr., the engineer in charge of the Corpus Christi Office of the U.S. Army Corps of Engineers and the person in charge of supervising this contract. Sky-Eagle testified that all major aspects of the contract were discussed. The contracting parties considered whether some of the sand to be deposited on the East Breakwater foundation might flow into the Corpus Christi Ship Channel. It was understood that if the flow caused shoaling the contractor would have to remove the sand. The contracting officer would supervise the placing of the fill on the breakwater foundation. The area of the fill going across the old entrance channel would be a "plug" in that channel and the Corps "didn't want anything less (i. e., steeper) than a 1 on 5 slope in order to give that fill as much stability as possible." A 1 on 10, 1 on 15, or even flatter slope would be better for the project. It would be easier to control the fill by depositing it at a 1 on 5 slope, but the sand deposited on the East Breakwater would probably come to rest with a flatter side slope, between 1 on 10 and 1 on 20, because of the character of the sandy material in the area. The limits to drift represented by the dotted lines around the breakwater were minimums, not maximums: in other words, the Corps of Engineers wanted the sand to spread at least as far as the limits.

Discussions during the conference made it clear that Midwest would be unable to begin its blanket and cover work until May or June, instead of early in the year as had been originally planned. Sky-Eagle told Midwest to have Garrett put extra fill on the breakwater because during this delay there would be erosion of the sand fill by wave action and ship swells. The extra fill would allow the breakwater to erode down to the specified height by the time Midwest was ready to begin the blanket and cover work.

Garrett started work in January, 1973. Its dredge, the Melvin, dredged and dumped 24 hours a day. It was supervised by a representative of the Corps of Engineers, there to make sure the work was done consistent with the government's contract with Midwest.

As the matter developed, the sand did not settle at a 1 on 5 slope, but at a flatter slope, between 1 on 10 and 1 on 20. The sand spread beyond the limits around the East Breakwater and some got into the ship channel, causing shoaling. One of the issues on appeal concerns the responsibility for removal of the sand from the ship channel.

Some sand got into the area that Midwest planned to use for its flotation channel. Another issue on appeal concerns the responsibility for dredging this channel. There is a dispute over its initial depth. Midwest claimed depths ranging from 5.1 to 7.3 feet. At best, this would have allowed only marginal clearance for its tugboats, which drew from 6 to 6.5 feet of water. The Army Corps of Engineers figures, which the magistrate found were more accurate, showed depths ranging from 3 to 5 feet. Thus, even before the sand drifted the channel was too shallow to float Midwest's barges. Midwest had Garrett dredge sand from the flotation channel and deposit it on top of the breakwater fill, providing the extra fill that Sky-Eagle had asked for at the preconstruction conference.

Garrett billed Midwest $3,947.40 for the dredging of the flotation channel and the removal of the sand from the ship channel. Midwest refused to pay, claiming that the extra dredging was needed because Garrett did not deposit the sand on the breakwater at a 1 on 5 slope, as required by the specifications. Midwest insisted that it merely had Garrett remove the sand from the flotation channel and the Corpus Christi ship channel where it had spread because of Garrett's improper performance of the contract, and put it back on top of the East Breakwater where it belonged.

In August, 1973, after the entire project was completed, Midwest sent Garrett a check for $4,939.20, which represented the amount of the retainage. There was no payment for the dredging in the ship and flotation channels. This check was offered as final payment for all work on the contract. Garrett refused to accept it.

In adopting the recommendation of the magistrate the district court found that "1 on 5 slope" meant the steepest slope permissible, and that the dotted lines around the breakwater were minimum limits. It found that the drift was foreseeable under the contract, and in any event it was partially due to Midwest's delay in doing the blanket and cover work. It found Midwest liable for the extra dredging and awarded Garrett $3,947.20 for the extra work done. It also awarded $3,000 in attorney's fees and interest on $3,552.66 ($3,947.20 less 10% properly retained until August 31, 1973, the day following the completion of all the work on the prime contract) from March 15, 1973, the date it became due, until it was paid. It awarded Garrett interest on the $394.74 properly retained for the extra work from August 31, 1973, the date the retainage became due, until it was paid. Finally, it awarded Garrett interest on the retainage sum of $4,939.20 from August 31, 1973, when it became due, until January 14, 1977, when Midwest filed a motion to deposit the $4,939.20 in court. ²

On appeal, Midwest asserts that it is not liable for the $3,947.20 of extra work, and that it is not liable for attorney's fees. On its cross-appeal, Garrett asserts that it is entitled to interest on the $4,939.20 from January 14, 1977, until June 13, 1977, the date of Judgment.

The magistrate did not indicate what law was applied in resolving the merits of the contract dispute or in the award of attorney's fees.

The Contract Parol Evidence

Midwest contends that the magistrate should not have admitted extrinsic evidence to prove the meaning of "1 on 5 slope" and the dotted lines around the breakwater. Midwest argues that the parol evidence rule bars Sky-Eagle's testimony. Therefore, it contends that its construction of the term "1 on 5 slope" as meaning no flatter than 1 on 5, and its interpretation of the dotted lines as indicating the maximum drift of sand, not the minimum, should be accepted. We disagree. Under federal common law, as under the law of most states, including Texas, parol evidence is admissible to prove the meaning of ambiguities in contract language. Chadwick v. Esperanza Trade & Transport, LTD., 548 F.2d 1161, 1162 (5th Cir. 1977) ("If the language of the...