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United States v. United Pacific Insurance Co.

June 2, 1970


Major and Hastings, Senior Circuit Judges, and Cummings, Circuit Judge.

Author: Major

MAJOR, Senior Circuit Judge.

This litigation had its genesis in a contract between A. M. Turner Company (Turner) and the United States of America, for the rehabilitation of a bridge structure in Rock Island, Illinois. Howard Steel Company (Howard) was a subcontractor of Turner in the prosecution of its contractual undertaking upon that project. United Pacific Insurance Company (Pacific) was Turner's surety. The United States, for the use of Howard, commenced a suit (case No. 210) against Pacific for money allegedly due to Howard under its subcontract with Turner. Howard alleged that Turner had breached that subcontract by its refusal to make payments to Howard as provided for therein. Subsequently, Turner commenced a suit (case No. 216) against Howard for damages resulting from Howard's alleged breach of the said subcontract by stopping work on the project on May 22, 1967. In that suit Howard filed a counterclaim praying for judgment on account of lost profits and other damages, predicated upon its theory that Turner had breached the said subcontract.

The cases were consolidated for trial and tried before District Judge Robert D. Morgan, without a jury. In case No. 210, judgment was entered in favor of Howard against Pacific in the amount of $70,211.04, with interest in the amount of $5,526.02. In case No. 216, Turner's complaint against Howard was dismissed and judgment entered in favor of Howard on its counterclaim against Turner in the amount of $23,488.60, without interest. Pacific appeals from the judgment in case No. 210 (No. 17889), and Turner from that in case No. 216 (No. 17890).

The issues for review, as stated in Turner's brief, are:

"1. Does the evidence offered at trial support the trial court's finding that Howard Steel Company left the job on May 22, 1967 because it had completed all its work which could then be done?

"2. Did Howard Steel Company breach its contract with Turner by its withdrawal from this job on May 22, 1967 and its failure to return to work?

"3. Was Turner obligated to make payment to Howard on or before May 31, 1967, of the 'undisputed' portion of the May 19, 1967 payment from the Government to Turner even though Howard had pulled off the job?

"4. Was Turner in default of any payment due to Howard Steel as of May 22, 1967, when Howard Steel abandoned the job?

"5. Does the quality of the evidence offered by Howard Steel Company in its Counterclaim for damages in Cause No. 17890 support the award of damages on that claim?

"6. Should a new trial of this matter be granted in the interest of justice?"

It is at once evident that the first five issues merely question the sufficiency of the evidence to support the trial court's findings of fact. Issue 6 raises the question as to whether the trial court abused its discretion in denying a post-trial motion for a new trial. Turner in the concluding portion of its brief in support of its argument relative to issue 6 stated, "Prior to the commencement of trial, it was evident to all involved that the court's decision would be determined largely by the credibility of the witnesses."

The trial court rendered a memorandum opinion (not published) in which it discussed in detail the evidentiary situation developed by the parties. The opinion contains a recitation of the evidence, some of it of a controversial nature, upon which the court based its specific findings of fact.

A careful study of the record in connection with the trial court's opinion, including its findings of fact, leads to the conclusion that the same factual issues argued here were raised in the district court and decided adversely to Turner. We think this is a typical case for the application of Rule 52(a) of the Federal Rules of Civil Procedure.

Of the many cases which could be cited where this rule has been given effect, Pacific Queen Fisheries et al. v. Symes et al., 307 F.2d 700 (9th Cir.), is of particular relevancy because there, as here, the controversy involved the construction of a contract. The court stated (page 706):

"Secondly, it is not incumbent upon appellees to persuade this court that the district court's findings of fact are correct; on the contrary, the appellants must persuade this court that the district court's findings of fact are, as specified by appellants, clearly erroneous. Third, this court must view the evidence in the light most favorable to the party who prevailed below; such a party must be given the benefit of all inferences that may reasonably be drawn from the evidence. The findings of the trial court sitting without a jury must be accepted unless they are clearly erroneous; they cannot be upset if they are supported by substantial evidence."

The Supreme Court stated in Zenith Radio Corp. v. Hazeltine Research, Inc., et al., 395 U.S. 100, 123, 89 S. Ct. 1562, 1576, 23 L. Ed. 2d 129:

"The question for the appellate court under Rule 52(a) is not whether it would have made the findings the trial court did, but whether 'on the entire evidence [it] is left with the definite and firm conviction that a mistake has been committed.'"

Closely akin to the rule which limits our scope of review is the well recognized principle that where issues are tried to the court, its function is to determine the issues and the credibility of the testimony. United States ex rel. Helwig v. Maroney, 271 F.2d 329 (3rd Cir.). If under the factual circumstances of the case the ultimate conclusion is one about which reasonable minds could ...

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