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Spencer, White & Prentis Inc. of Connecticut v. Pfizer Inc.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


decided: June 3, 1974.

SPENCER, WHITE & PRENTIS INCORPORATED OF CONNECTICUT, PLAINTIFF-APPELLEE,
v.
PFIZER INCORPORATED, DEFENDANT-APPELLANT

ON APPEAL FROM THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Hays and Oakes, Circuit Judges, and Christensen, Senior District Judge.*fn*

Author: Christensen

CHRISTENSEN, Senior District Judge:

This is an appeal from a summary judgment entered by the district court in favor of a contractor for the balance of a construction agreement. The stated ground was that the owner's counterclaims for damages suffered in the execution of the work by the contractor constituted "the only defense asserted by the defendants" but that such defense was without merit. As a part of the same order, the district court had "severed" plaintiff's claim from these counterclaims, presumably because the latter required separate future adjudication, upon a finding that "a severance will both serve the ends of justice and further an efficient disposition of the litigation". And the case comes to us without certification for an interlocutory appeal, or any express determination by the court below that there was no just reason for delay in the entry of a "final" judgment on plaintiff's claims.

We have looked into this tangle of Rules 21, 42(b), 54(b), and 56, Fed. R. Civ. P., and Rule 5(a), (b), Fed. R. App. P. and their overlay of 28 U.S.C. §§ 1291 and 1292(b) only so far as seems necessary to ascertain our lack of appellate jurisdiction -- an obstacle which may prove of little surprise to anyone reading this synthesis of the record except possibly the parties,*fn1 but yet confirmed only after unraveling some interesting twists in the exercise of our jurisdiction to determine that we have no jurisdiction.*fn2

The appellee-plaintiff, Spencer, White & Prentis Incorporated of Connecticut, was employed as contractor by appellant-defendant, Pfizer Incorporated, to install foundation caissons at Pfizer's plant at Groton, Connecticut. The written contract*fn3 between the parties provided that Spencer would be paid on a "cost plus fixed fee basis". The contract proper contained the following definition of cost:

"The cost includes labor, including job supervision and engineering staff, yard expense, insurance, welfare and pension funds, losses not covered by insurance . . . materials . . . and all incidental expense required for the work. . . ."

The "general conditions" attached to and "made a part of this contract with the same force and effect as if the same were set forth at length" provided among other things that "compliance by contractor with the foregoing requirements with respect to carrying insurance*fn4 shall not relieve the Contractor from liability under the indemnity provisions hereinafter stated."

On the last-mentioned subject, paragraph 9(i) of the General Conditions provided so far as material here that "Contractor assumes the entire responsibility and liability for and agrees to hold Owner harmless from any and all damage or injury of any kind or nature whatsoever . . . to all property . . . arising out of or occurring in connection with the execution of its Work hereunder and all damage . . . of whatsoever nature resulting from the performance of its Work . . . or resulting to the Work . . . shall be borne by Contractor and all Work hereunder shall be solely at its risk. . . ."

The contractor installed the caissons and brought suit for an unpaid contract balance of $59,912.50. The owner Pfizer in an amended answer and counterclaims admitted that the $59,912.50 had not been paid but alleged by way of defense and counterclaim that it was entitled to at least $61,000 from the contractor on the theory of absolute liability of the contractor by virtue of the last quoted provisions, or on an alternate theory of negligence, for damage which had been caused in the execution of the work to an underground salt water line.

The contractor moved for severance of its unpaid balance claim from the counterclaims for damages, and for summary judgment on its claim. The district court granted the motion in all respects, and pursuant to direction in its memorandum and order a judgment in the sum of $59,912.50 was entered by the clerk in favor of the contractor and against the owner, which judgment later was amended to include interest pursuant to a supplemental order. The owner has appealed from this judgment as so amended, and states the issues to be determined upon this appeal as follows:

1. Does a cost plus fixed fee construction contract, which provides that the contractor shall be strictly responsible for any damage caused to property during the course of construction excuse the contractor from damage resulting from its own acts solely because "cost" is defined in the contract as including losses not covered by insurance?

2. Did the district court abuse its discretion by directing the entry of judgment on the complaint prior to the adjudication of the compulsory counterclaims?

The appellee in its counter-statement would have us resolve these issues by the proposition embraced in the lower court's memorandum that "any losses arising from Spencer's acts are either covered by insurance procured for Pfizer's benefit or payable by Pfizer as reimbursable items of cost under the contract."

We begin our consideration of jurisdiction with recognition that a claim or counterclaim properly severed from another by virtue of Rule 21*fn5 "may be . . . proceeded with separately";*fn6 that justification for severance is not confined to misjoinder of parties;*fn7 that the fact that a counterclaim is a compulsory one does not per se preclude its severance under the current rule;*fn8 that appeal from a judgment on a validly severed single claim may be timely taken as of right notwithstanding the pendency of the remaining claims or counterclaims,*fn9 and that other possible basis for appellate jurisdiction would have to be sought only if the severance constituted an excess or abuse of discretion on the part of a district court.*fn10

Facially the court's order of severance in reliance upon Rule 21 is suspect when it is read with its grant also of summary judgment on plaintiff's claims, especially in light of the assigned reasons. While application of Rule 42(b)*fn11 involves primarily the consideration of convenience and fairness, that of Rule 21 also presupposes basic conditions of separability in law and logic. The terms of the court's memorandum and order negate the latter conditions and indicate that what it said in attempted justification for severance was self-defeating or at best would relate only to the matter of separate trials.*fn12 We therefore conclude that the "severance" was so transparently a confusion of Rule 21 with 42(b), or an attempt to separate an essentially unitary problem, that it should be disregarded out of hand as devoid on its face of any foundation for appellate jurisdiction or, at least, an abuse of discretion with the same result.*fn13

This notwithstanding, we understand appellee to argue that the counterclaims, being patently without merit, may be disregarded along with, consequently, any abortive severance, to leave plaintiff's claim in substance unencumbered and final. Or, taking the court's memorandum supporting the attempted severance as the basis for the entry of a final judgment on one of multiple claims or counterclaims and treating the court's direction for the entry of "summary judgment" as a direction for the entry of "final judgment" pursuant to Rule 54(b), Fed. R. Civ. P.,*fn14 the argument appears to be that there still can be found compliant or de facto finality. To determine whether appellate jurisdiction thus can be rescued, the justification for and substance of the summary judgment must be examined in the conceded absence of any certification by the trial court for interlocutory appeal,*fn15 and in view of the concept of finality*fn16 embraced in 28 U.S.C. § 1291.*fn17

The district court held that since "the damage done to the water line is either covered by insurance or it is a loss not covered by insurance, and that in either event it was a cost for which the plaintiff was entitled to reimbursement under the contract" the damage done to the water line was thus invalidated as a defense by the very terms of the contract.

If paragraph 9(i) of the General Conditions*fn18 was not as a matter of law controlling*fn19 over the preceding more general reference to "cost,"*fn20 at least there would have been a material ambiguity or inconsistency not subject to resolution by summary judgment. The "damage . . . is either covered by insurance or it is a loss not covered by insurance" gambit*fn21 is simply too pat. Confessing in effect an ambiguity, the attempted avoidance on the ground of inescapable immateriality completely fails.*fn22

While the meaning of an unambiguous contract is a question of law, the meaning of an ambiguous one presents a question of fact on which resort may be had to extrinsic aids of construction throwing light upon the intent of the parties.*fn23 The intent of the parties to an ambiguous contract is a question of fact which cannot be resolved on summary judgment.*fn24 It is true that the amount due on the contract independent of the counterclaims was not disputed. The amount for which plaintiff was entitled to judgment, however, was disputed and depended upon contractual provisions which, if not supporting the counterclaims as a matter of law, were ambiguous as a matter of fact.

What we have said about the impropriety of granting summary judgment in favor of plaintiff-appellee confirms the inseparable relationship between the counterclaims and plaintiff's claim, and further demonstrates the invalidity of the order of severance.*fn25

We reject appellee's contention that the district court's statement of reasons for granting the purported severance, coupled with its direction that summary judgment be entered, should be construed as compliance with the requirements of Rule 54(b). However broadly interpreted there was no direction of "final judgment" upon "an express determination that there is no just reason for delay." Moreover, because the contested issues of the claim and the counterclaim were essentially the same, it is doubtful that any purported certification pursuant to Rule 54(b) could be valid. There is a certain implausibility in a white blackbird, a two-year-old yearling, or separated inseparables.*fn26

In Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 100 L. Ed. 1297, 76 S. Ct. 895 (1956), it was held that amended Rule 54(b) does not constitute an unauthorized extension of 28 U.S.C. § 1291, since the District Court cannot, in an exercise of its discretion, treat as "final" that which is not "final" within the meaning of § 1291, and any abuse of its discretion would be reviewable by the court of appeals. Within the principle of that case we hold that the granting of the summary judgment, any attempt to make that judgment final for the purpose of appeal, and the purported severance of the counterclaims, amounted at least to abuses of discretion, if not to action outside the powers of the district court. Appellate jurisdiction cannot be so manipulated or controlled through misapplication of rules of procedure in derogation of the finality requirements of 28 U.S.C. § 1291, supra.

For the reasons above stated this appeal sua sponte is dismissed.


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