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Hailey v. County of Niagara and Niagara County Water District

decided: December 27, 1967.

W. L. HAILEY & COMPANY, PLAINTIFF-APPELLANT,
v.
COUNTY OF NIAGARA AND NIAGARA COUNTY WATER DISTRICT, DEFENDANTS-APPELLEES, AND L. A. WELLS CONSTRUCTION COMPANY, INTERVENOR-APPELLEE. COUNTY OF NIAGARA AND NIAGARA COUNTY WATER DISTRICT, PLAINTIFFS-APPELLANTS, V. W. L. HAILEY & COMPANY, A TENNESSEE CORPORATION, DEFENDANT-APPELLEE



Lumbard, Chief Judge and Kaufman and Feinberg, Circuit Judges.

Author: Lumbard

LUMBARD, Chief Judge:

This is a consolidated appeal from judgments of the District Court for the Western District of New York in two diversity suits which were tried jointly, without a jury, before Judge Henderson. The actions arose out of a project initiated by the County of Niagara and the Niagara County Water District to draw water from the Niagara River. W. L. Hailey & Company, a Tennessee corporation, was the prime contractor on the project. L. A. Wells Construction Co., a Delaware Corporation with its principal place of business in Ohio, was one of its subcontractors and has intervened in Hailey's suit against Niagara. There is diversity of citizenship between all of the parties.

In Hailey v. Niagara, Hailey's first cause of action is for damages caused by Niagara's alleged misrepresentation or warranty that the subaqueous construction work specified in the bidding and the contract did not require any rock excavation. Judge Henderson found that there was no misrepresentation or warranty and that an experienced contractor would have expected to find rock that would require excavation. We affirm the dismissal of this cause of action. Hailey's second cause of action is for costs it sustained in repairing intake pipes in the west branch of the Niagara River. It alleges that the repairs were required because of improper design and planning by Niagara. Judge Henderson found that the repairs were required because Hailey chose to construct a dike over the pipes in the course of its work and the dike broke. We affirm the dismissal of this cause of action.

At Hailey's invitation Wells intervened to seek recovery against Hailey upon a cost-plus subcontracting agreement. The intervenor asserted three additional claims in its pleadings.*fn1 Only the judgments in Wells' first and second cross-claims have been appealed. Wells' first cross-claim is to recover upon an oral contract with Hailey to re-lay damaged pipe in the east branch of the Niagara River between Stations 170 08 and 171 84 for cost plus a reasonable profit. Judge Henderson found that Wells' costs plus a reasonable profit of 15% were $101,370.23. We find that the trial court erred in computing Wells' costs and remand for determination of the actual costs to Wells of operating its construction equipment. In all other respects the judgment in favor of Wells on its first cross-claim is affirmed.

Wells' second cross-claim is for delay and unproductive work due to Hailey's alleged misrepresentation that the trench for the pipeline had been excavated to grade from Station 170 18 to Station 164 40. The trial court found that Hailey had made a misrepresentation and, as a direct consequence, Wells' equipment was engaged in unproductive work and Wells was damaged in the sum of $28,599.51. We modify the judgment in Wells' second cross-claim, reducing the award of damages to $26,934.51.

Hailey contends that it is entitled to indemnity from Niagara upon Wells' first cross-claim because the pipe was damaged due to Niagara's improper plans and specifications or failure to modify the plans to meet conditions. Judge Henderson found that the pipe was not damaged because of any error in design or supervision and that the damage was caused by improper methods of construction by Hailey which resulted in spud damage. We affirm the portion of the judgment in Wells' first cross-claim which denied Hailey indemnity against Niagara.

In Niagara v. Hailey, Niagara brought suit in the state court to recover additional payments to Hailey for subaqueous rock excavation, alleging that these payments were made by mistake since the work was required to be performed under the contract. Hailey removed the case to the district court where it was tried jointly with Hailey v. Niagara. The trial court found that the payments were made under the provisions of the contract relating to change orders and denied recovery. We reverse the judgment dismissing the complaint and remand for determination of the amount, if any, of Niagara's recovery of payments for work which Hailey was required to perform under the contract.

On May 1, 1959 Hailey agreed to construct the Niagara County District's Water Project for a lump sum payment of $1,236,836 according to elaborate specifications set forth in the contract. The plans called for subaqueous work in the west branch of the Niagara River consisting of installation of twin 60 inch covered raw water lines extending approximately 540 feet into the river from a pumphouse to be constructed on Grand Island. From the pumphouse a pipe line was to be built to carry the water across Grand Island to a 42 inch subaqueous covered raw water line which was to extend 3,000 feet under the east branch of the Niagara River to a water treatment plant in Wheatfield. Hailey had no difficulty fulfilling the part of the contract requiring construction work on land, but it ran into considerable difficulty in the subaqueous portions of the work.

HAILEY'S SECOND CAUSE OF ACTION

In the west channel of the river, where Hailey was to lay twin intake pipes, some pipe which was laid in 1959 had to be relaid in 1960 because it was found to have broken. Hailey contends that the pipe broke because, due to improper design and planning by Niagara, the supports upon which the pipe rested were insufficient to distribute the weight of the backfill. We consider this claim first since it is unrelated to the chronology of events in the east channel which must be considered in connection with all of the other claims on appeal.

The trial court found that the damage which made it necessary to relay the pipe was caused by the collapse of a dike which Hailey had built over the pipe in order to construct out of water the section of pipeline nearest to the shore. The court found that the sliding and sloughing of the dike towards the shore created a mud slide which pulled the pipes apart through skin friction, and displaced them upwards and shorewards.

Engineer Seeley testified that the metal bars in the concrete pipe had been "necked down," that is, that they had been pulled from both ends so that they stretched out in length, shrunk in girth and broke, like a piece of taffy pulled from both ends. This uncontradicted testimony supports the court's finding and is inconsistent with Hailey's theory that Niagara's inadequate plans for the pipe bed caused the break under the lateral stress of the weight of the backfill on top of the pipe. In view of Seeley's testimony, we reject Hailey's contention that the only evidence supporting Niagara's theory of the pipe break is that another section of pipe laid according to the same design did not break under the weight of backfill.

The trial court's adoption of Niagara's theory of the pipe break is not clearly erroneous. Judge Henderson found, and Hailey does not dispute, that construction of the dike was not a requirement of the contract, but a mode of construction chosen by the contractor. Hailey certainly cannot recover the expense of making repairs to work which was damaged because of the failure of a method of construction chosen by it and ...


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