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Knab Co. v. St. Mary's Hospital Inc.

February 3, 1961


Author: Mercer

Before SCHNACKENBERG and CASTLE, Circuit Judges, and MERCER, District Judge.

MERCER, District Judge.

This is an appeal by the plaintiff, Knab Company, from a judgment entered for defendant upon findings of fact entered by a Special Master which were adopted by the trial court. Plaintiff, a heating, ventilating and air conditioning contractor, is a Wisconsin corporation. Defendant is a charitable corporation organized and existing under the laws of the State of Indiana. The requisite jurisdictional amount being involved, jurisdiction of the federal courts is invoked upon the diversity of citizenship of the parties.

Prior to April, 1953, defendant solicited bids for five prime contracts related to the proposed construction of a six story, five wing hospital at Evansville, Indiana. Plans submitted for bids to general contractors and to mechanical trades contractors were based upon a structural steel frame for the main hospital building. In addition to the main hospital building, the plans called for the construction of a separate boiler house for the heating plant and a tunnel leading therefrom to the main hospital building. Plaintiff was invited to bid upon a contract for installation of the heating, ventilating and air conditioning system and equipment in the new building.

Plaintiff submitted a bid to furnish all labor and materials and to perform all work for the installation of the heating, ventilating and air conditioning systems of the hospital for $779,070.00. When the bids were opened on April 15, 1953, plaintiff's bid was found to be approximately $90,000.00 below the nearest competitor in its field. On April 17, 1953, defendant notified plaintiff that the defendant intended to enter into a contract with plaintiff on the basis of its low bid.

Shortly after the bids were entered on April 15, 1953, defendant notified McCarthy Bros. Construction Company, the low bidder for the general construction work on the hospital, that the overall cost of construction of the building as reflected by the aggregate bids upon the five contracts, exceeded defendant's budget for that purpose. McCarthy suggested that it could reduce its original bid by about $135,000.00 if the walls were constructed of reinforced concrete instead of the structural steel frame. That structural change also embraced a change of construction of all floors above the first floor from flat slab to pan slab reinforced concrete.*fn1 The general construction contract was drafted to embrace the suggested change in structure.

On or about May 4, 1953, plaintiff was advised by letter from McCarthy of the proposed structural change and was requested to notify defendant's architects if plaintiff believed its work would be materially affected by the change. Thereafter, on May 12, 1953, officials of plaintiff conferred with the architects and their mechanical engineer and with representatives of McCarthy with respect to the contemplated change of the structural plan. Thereafter, on May 15, 1953, the successful bidders, including McCarthy and plaintiff, met with agents of defendant at Evansville, Indiana, and signed their respective contracts.

Plaintiff completed its contract and received therefor the sum of $805,774.57, which included the stipulated $779,070.00, plus certain agreed extras.

The complaint in this cause was based upon a claim by plaintiff for additional compensation predicated upon two alternative counts and theories. First, plaintiff alleged that an oral contract was made subsequent to the written contract, which provided that plaintiff was to be compensated for its undertaking upon a cost-plus basis, i.e., cost of labor and materials, plus a percentage markup for overhead and profit. In its alternative count, plaintiff prayed the value of materials and services rendered upon the theory that the formal contract between the parties was abandoned. Under the cost-plus theory, upon the evidence adduced before the Special Master, plaintiff's claim for additional compensation is the sum of $284,115.81. The cause was referred to a Special Master. After a hearing, encompassing 28 trial days, the Master reported his findings of fact and conclusions of law to the court with a recommendation that judgment be entered for the defendant dismissing plaintiff's complaint.

By its order dated May 5, 1960, the trial court approved the report of the Special Master, adopted his findings of fact and conclusions of law as the findings and conclusions of the court and entered judgment dismissing the plaintiff's complaint. Plaintiff then prosecuted this appeal.

Plaintiff's position on appeal is crystalized into the contention that its written contract with defendant was amended upon June 8, 1953, by an oral agreement covering the changed structural plans and providing that plaintiff was to be paid for its work upon the basis of cost of material and labor, plus a percentage for overhead expenses and profit. As nearly as we can reconstruct plaintiff's argument from its brief, plaintiff contends that the hospital upon which it made its bid never came into existence at all, but that plaintiff was required by the defendant to do its mechanical construction work upon a new building which was not within the contemplation of the parties at all when plaintiff's bid was made.

Salient and noteworthy upon a first perusal of the record of this cause as reproduced for our review is the sheer bulk of the evidence which was introduced before the Special Master and upon which his findings of fact were based. Those findings were adopted by the trial court as its own findings of fact and we may not interfere therewith unless the findings are clearly erroneous. Fed.Rules Civ.Proc. 52(a), 28 U.S.C.A.., Troyak v. Enos, 7 Cir., 204 F.2d 536; Sullivan-Waldron *products Co. v. Indiana Limestone Co., 7 Cir., 216 F.2d 70; Connolly v. Gishwiller, 7 Cir., 162 F.2d 428, certiorari denied 332 U.S. 825, 68 S. Ct. 166, 92 L. Ed. 400. The statement of that principle largely disposes of this appeal.

The Master found, in pertinent part, that plaintiff submitted a bid based upon plans and specifications for a building to be constructed with a structural steel frame and flat slab concrete floors above the main floor; that plaintiff was advised prior to execution of the written contract of the proposed change in the building structure from structural steel to a reinforced concrete frame and from flat slab to pan slab floors, and was requested to advise the general construction contractor and defendant's architects whether the proposed change would materially affect the work upon which plaintiff's bid was based; that, thereafter, the contract was executed by plaintiff providing for the installation by it of all heating, ventilating, and air conditioning equipment and systems in a building with reinforced concrete frame and pan slab construction of floors above the first floor; that plaintiff's president and vice president conferred with George E. Quick, a partner of the defendant's architectural firm, on June 8, 1953, and represented to the architects that plaintiff would have increased costs as a result of the change from the steel-frame, flat-slab building to a reinforced concrete frame with pan slab floors; that plaintiff was then instructed by Mr. Quick to keep accurate records of its increased costs by wing and floor area of the structure for which plaintiff would be reimbursed, in addition to its contract price, plus not to exceed 15% of such increased costs for overhead and profit; that plaintiff did not keep and report a record of its actual cost increase which resulted from the change in the structure, and plaintiff, therefore, was not entitled to any compensation in addition to the contract price until and unless it had satisfied the condition of submitting its record of increased costs by floor and wing to defendant's architects; that the evidence failed to show that plaintiff suffered a delay in the completion of its work as a result of the change in the frame of the building; that the change of the frame of the building from steel to reinforced concrete and of the floors from flat slab to pan slab constituted a major change in the materials to be used by the general construction contractor, but that that change had no demonstrated radical effect upon plaintiff's work or contract; that neither plaintiff nor defendant had, either expressly or by conduct, abandoned the express written contract, and that the evidence disclosed no circumstances which would justify excusing plaintiff from its duties or limitations which it assumed under that contract; and that all work done and all materials furnished by plaintiff in the construction of the hospital were done and furnished by plaintiff pursuant to the terms of its undertaking expressed in the written contract.

We do not consider it necessary copiously to summarize all of the evidence of record to demonstrate that we cannot say that any of those material findings of fact are clearly erroneous. The evidence amply discloses that a major part of plaintiff's work was not affected at all by the change in structural plans of the main hospital building. A very substantial part of plaintiff's undertaking involved the installation of equipment and duct work in the boiler house and the tunnel leading from the boiler house to the main hospital building. It appears that the change from structural steel to reinforced concrete frame and from flat slab to pan slab floors in the main hospital building required no change whatsoever in the mass of pipes, equipment and installations required by plaintiff's contract. Plaintiff's contract required it to install the same equipment and the same pipes at the same locations and ...

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