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Malan-Dean Corp. v. Travelers Indemnity Co.

decided: February 6, 1980.

MALAN-DEAN CORPORATION AND CONTINENTAL CASUALTY CO., PLAINTIFFS-APPELLEES,
v.
THE TRAVELERS INDEMNITY COMPANY, DEFENDANT-APPELLANT .



Appeal from judgment of the United States District Court for the Southern District of New York, Whitman Knapp, Judge, declaring liability for breach of contract and confirming calculation of damages made by Honorable Nina Gershon, Magistrate . The judgment of liability is affirmed; the Magistrate's report of damages is remanded for further calculation.

Before Moore and Timbers, Circuit Judges, and MacMAHON, District Judge.*fn*

Author: Per Curiam

This controversy had its origin in a prime contract dated November 22, 1957 between the United States Navy and a contractor (referred to herein as Malan-Dean), for the construction of a jet engine test facility in Trenton, New Jersey. A part of the project was subcontracted to the Arthur E. Magher Company (Magher). Both Malan-Dean and Magher have long since been in bankruptcy. However, both companies supplied performance bonds, Malan-Dean with the Continental Casualty Company (Continental) and Magher with The Travelers Indemnity Company (Travelers). The protagonists in this hoped-for final round of the contest after twenty-three years, thus, are Continental and Travelers, Continental seeking to hold Travelers liable for alleged defaults by Magher. The issue of liability was tried before Judge Knapp in the United States District Court for the Southern District of New York, who determined that Travelers was obligated to make certain payments to Malan-Dean (Continental) and referred the determination of the amount to a United States Magistrate for calculation. The Magistrate, in a most painstaking analysis of scores of items in issue, rendered a report that was confirmed by Judge Knapp.

The facts and issues have so comprehensively been set forth by Judge Knapp and Magistrate Gershon in their respective opinion and report that further reference thereto would be surplusage except for one item to which we now refer.

In May, 1963 Malan-Dean submitted a claim to the Navy, as follows:

(a) Rewelding $262,573.93

(b) Reinforcing repairs 162.890.41

(c) Hydrostatic testing and special

preparation for test 288,509.90

(d) Additional cost of exhaust

gas cooler 270,524.19

TOTAL $984,498.43

The item "Rewelding" was based upon Navy claims that the welding was defective and that rewelding was required. As the result of negotiations a "Change Order "O' " was entered into with the Navy, reading in pertinent part, as follows:

"You are directed to perform additional rewelding; perform additional work in fabricating the special reinforcing rings and provide additional heating, insulation, etc., for the hydrostatic testing of the facility, all as directed by the Officer in Charge of Construction; and for the work performance of the additional work included herein, the ...


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