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BLAKE CONSTRUCTION COMPANY v. UNITED STATES

United States Court of Appeals, Fifth Circuit.
Feb 25, 1958
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Case Summary: Blake Construction Company and Ætna Casualty Surety Company v. United States (for the use and benefit of Jacob and Jennie L. Lichter)

Factual and Procedural Background

This dispute arose from a masonry subcontract for construction of five missile assembly buildings at the Joint Long Range Proving Ground, Missile Test Center, Cape Canaveral, Florida. Contractor (Blake Construction Co.) held the prime contract with the Government; Subcontractor (Southern Fireproofing Company, Jacob and Jennie L. Lichter) held the masonry subcontract for $138,000 to furnish and lay concrete and insulating block walls and partitions. The specific issue concerned whether Subcontractor was entitled to $3,054.75 as an extra for furnishing and laying additional insulating block in the inside longitudinal walls on the mezzanine floor.

The District Court had allowed the claimed extra and had awarded interest on amounts due; Contractor appealed. The appeal also addressed (1) when the claim became liquidated for the commencement of interest and (2) whether the dispute should have been sent to arbitration under contract provisions and the Federal Arbitration Act. The Court of Appeals reviewed the contract documents, plan notes, prior correspondence, and procedural history to resolve these questions.

Legal Issues Presented

  1. Whether the subcontract and plans required a poured concrete cap on the 4" insulating block of the inside longitudinal wall at the mezzanine such that Subcontractor was entitled to an extra payment of $3,054.75 for additional insulating block.
  2. Whether the dispute (or any part of it) was subject to mandatory arbitration under the contract and the Federal Arbitration Act, and if so whether the District Court erred in proceeding to trial instead of staying for arbitration.
  3. When the claim became a liquidated demand so as to commence accrual of interest and the proper date from which interest should run.

Arguments of the Parties

Subcontractor's Arguments

  • The special notes on the first-floor and mezzanine plan sheets referred to "masonry partitions of 4" concrete or insulating block" and, by use of "or," indicated insulating block partitions were to be treated like concrete partitions and capped with poured concrete.
  • There were no partitions made exclusively of insulating block in the toilet-lounge areas; the only 4" insulating-block elements were those adjacent to concrete blocks (i.e., the double wall), so the notes must have intended that a concrete cap be provided on top of the insulating block in these situations.
  • Because the Government did not require such caps, Contractor saved the cost of the concrete cap while Subcontractor had to furnish and lay insulating block to cover the vertical space that would otherwise have been occupied by the cap; therefore Subcontractor was entitled to an extra for the additional insulating block.
  • The plan notes rendered the contract ambiguous, authorizing parol evidence to explain the note language and the parties' intent.
  • Subcontractor also maintained willingness to arbitrate the dispute (as reflected in correspondence), asserting arbitration was appropriate under the contractual arbitration provisions.

Contractor's Arguments (Appellants)

  • The notes and specifications did not require a poured concrete cap on the inside longitudinal wall; the double wall of concrete block and adjacent insulating block constituted a single wall, not a "partition" as used in the plan notes prescribing caps for free-standing partitions.
  • Any ambiguity asserted by Subcontractor could be resolved against granting the extra; Contractor cited authorities for construction and parol-evidence principles.
  • The dispute was subject to arbitration under the contract and the Federal Arbitration Act, and the District Court should have stayed proceedings for arbitration; Contractor argued the court erred in proceeding to trial.
  • Regarding interest, Contractor maintained (based on contract retainage and completion/acceptance timing) that the claim was not yet due at the date the District Court used for interest accrual, and that a tender or acknowledgment of payment (September 29, 1955 letter) stopped the running of interest.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Highway Construction Company of Ohio v. City of Miami, Fla., 5 Cir., 126 F.2d 777, certiorari denied 317 U.S. 643, 63 S.Ct. 35, 87 L.Ed. 518 Cited by Contractor among authorities concerning construction/interpretation matters and related evidentiary principles (as presented by the parties). Listed among authorities cited by Contractor; the opinion does not state that the court rested its decision on this case.
Kilby Mfg. Co. v. Hinchman-Renton Fireproofing Co., 8 Cir., 132 F. 957 Cited by Contractor among authorities concerning construction/interpretation matters and related evidentiary principles (as presented by the parties). Listed among authorities cited by Contractor; the opinion does not indicate the court relied on it for its ruling.
Colonial Hotels, Inc. v. Maynard, 158 Fla. 318, 29 So.2d 28 Cited by Subcontractor as an authority permitting parol evidence to explain doubtful terms. Cited by Subcontractor; the court stated it need not decide the parol-evidence issue and resolved the dispute on other grounds.
Smith v. Manatee County, Fla., 56 So.2d 453 Cited by Subcontractor as an authority permitting parol evidence to explain doubtful terms. Cited by Subcontractor; the court did not base its holding on this authority and resolved the case without deciding admissibility of the parol testimony presented.
American Locomotive Co. v. Chemical Research Corp., 6 Cir., 171 F.2d 115 Cited for the proposition that a belated or bad-faith invocation of arbitration may be insufficient to halt judicial proceedings where a party is in default. The court applied this principle to uphold the District Court's finding that Contractor was in default and that the late demand for arbitration was not asserted in good faith, supporting refusal to stay the proceedings for arbitration.

Court's Reasoning and Analysis

The court first analyzed the plans, specifications, and plan notes to determine the intended meaning of "partition" and whether a poured concrete cap was required on the insulating block of the inside mezzanine wall. The court observed that:

  • The side walls in question consisted of an exterior concrete block and an adjacent 4" insulating non-load-bearing block on the inside; together these produced a single wall assembly. The specifications required parging of the inside face of the concrete masonry units to receive a vapor seal before insulating block was laid.
  • The plan notes referring to "masonry partitions of 4" concrete or insulating block" applied to the numerous, free-standing 4" partitions in the toilet-lounge areas (about 21 per building), which were distinct from the bonded side walls. Those toilet-lounge partitions were free-standing and expressly required caps for stability.
  • The double wall of concrete block plus insulating block forming the side walls was not a "partition" in the sense used in the notes; it was a single wall integrated into the building structure and therefore not what the notes prescribing caps intended to address.
  • Practical considerations and the record showed that pouring the prescribed cap on the toilet-lounge partitions in place would have been nearly impossible because of overhead piping and limited headroom; the Government (United States Engineers) authorized deletion or modification of the cap in those partitions and approved an alternative 6" lower cap, for which an extra ($2,241) was agreed.
  • Given that caps were neither prescribed nor necessary for the other comparable side walls (first floor walls and the outside mezzanine wall), there was no reasonable basis to require a cap on only the opposite mezzanine inside wall or to award an extra for additional insulating block for that wall. The court also noted it was unlikely the United States Engineers would have permitted a plan-required cap to be omitted without express waiver if the cap had been actually required.

On arbitration, the court considered whether the contract mandated arbitration and whether the District Court erred in declining to stay proceedings. Applying the record and F.R.C.P. 52(a), the Court of Appeals concluded the District Court was not clearly erroneous in finding Contractor in default and that the tardy request for arbitration made at trial was a belated afterthought not asserted in good faith. The court relied on American Locomotive Co. to support this approach.

On interest, the court examined the correspondence and the September 29, 1955 communication from Contractor, which stated that upon receipt of an executed release Contractor would forward payment of an admitted balance ($12,940.84). The court concluded that this communication constituted at least an acknowledgment that final payment was due and that, because the difference between that tendered amount and the actual balance ($14,725.61) involved asserted charge-backs that the trial court later disallowed, the acknowledgment was sufficient to treat the claim as liquidated for accrual of interest. The Court of Appeals therefore affirmed allowance of interest but shifted the commencement date to September 29, 1955 (the date of the Contractor's communication), rather than the earlier date fixed by the District Court.

Holding and Implications

Core Ruling: Reversed in part, modified in part, and as modified, affirmed.

Direct holdings and immediate consequences:

  • The District Court's allowance of $3,054.75 as an extra to Subcontractor for additional insulating block was erroneous and is reversed.
  • The award of interest is affirmed but the commencement date for interest is modified to September 29, 1955 (based on Contractor's acknowledgment/tender), rather than the earlier date the District Court used; the court provided the recalculated principal ($14,725.61) and interest figure for the period to judgment (interest at 6% from September 29, 1955 to April 1, 1957 of $1,332.67) producing a modified total of $16,058.28.
  • The Court of Appeals upheld the District Court's refusal to stay proceedings for arbitration, concluding the arbitration defense was asserted too late and in bad faith; Contractor was deemed in default on that procedural point.
  • Costs were apportioned: two-thirds assessed against Contractor (appellants) and one-third against Subcontractor (appellees).

Broader implications: The opinion resolves contract-interpretation questions arising from plan notes and distinguishes between free-standing partitions and bonded wall assemblies for purposes of prescribed construction details and related extras. The opinion does not announce or rely upon a new legal doctrine; it resolves the parties' rights under the particular contract and record in this case.

Disposition: Judgment reversed in part (disallowing the $3,054.75 extra), modified in part (interest accrual date changed to September 29, 1955 and related recalculation), and, as modified, affirmed.

Show all summary ...

JOHN R. BROWN, Circuit Judge.

This is a minor, but heated, controversy growing out of the missiles program. To be sure, its resolution calls for no heady formulae in the field of astronautics. Ours is the more earth-bound task of determining whether the plans and specifications for five missile assembly buildings called for one thing rather than the other. Launching this controversy into decisional finality, we must determine too the stage at which it orbitted into a liquidated demand for the commencement of interest. Subsidiary to this is the question whether a Court, rather than some other agency (Board of Arbitration) is to perform the count-down.

Except for the difficulty, spectacularly present in the comparable field of patent law, of portraying intricate structural detail by words, the main dispute is not too complex. In terms, it is whether the Subcontractor is entitled to $3,054.75 as an extra for furnishing and laying additional insulation block in the inside longitudinal walls on the mezzanine floor of these five buildings.

The Contractor had the prime contract with the Government on the multimillion dollar project for the construction of vertical launching facilities and missile assembly buildings at the Joint Long Range Proving Ground, Missile Test Center, Cape Canaveral, Florida. Subcontractor, for a bid of $138,000, had the masonry subcontract on the five buildings requiring it to furnish "* * all labor and materials * * * and equipment" and to perform "* * * all work necessary to complete the erection of all concrete block and insulating block walls and partitions, setting of all precast concrete sills and glass block and caulking * * *."

Blake Construction Company, Incorporated. The action is nominally under the Miller Act, 40 U.S.C.A. §§ 270a-270c, against Contractor and its surety, but the controversy is, and has been treated as being, between Contractor and Subcontractor alone.

Jacob Lichter and Jennie L. Lichter d/b/a Southern Fireproofing Company of Cincinnati, Ohio.

Each of the five missile assembly buildings was a large hangar-like structure approximately 185 feet in width, 170 feet in depth, and an extreme, center, height of 47 feet. On the front and back, it was open for a width of about 130 feet. On each side of this opening, there was a long enclosed structure, approximately 27 feet in width consisting of a first and mezzanine floor. It is this part of the building with which we are concerned. In this enclosed part, the extreme outside wall was approximately 28 feet high. But the roof over this portion inclined slightly so that the inside wall was about 29 feet in height. At this point, this wall rose vertically for another 17 feet, so that the flat roof over the "hangar" door opening was approximately 47 feet above the ground level.

At the ends of the enclosed structure, on both first and mezzanine floors, were stair wells and substantial spaces separated by interior partitions for toilet, washroom and lounge facilities. These areas were so situated that of the 170 feet depth in the whole structure, that portion of the "inside" wall (next to the open hangar space) which actually enclosed the working area was about 140 feet in length. The similar part of the opposite (i.e., extreme "outside") wall was about 130 feet long. This area between these two side walls and the internal partitions separating it from adjacent stair wells and toilet areas was entirely enclosed with no movable windows or openings. It is undisputed that the plans and specifications called for the wall enclosing this area to be made up of concrete blocks of specified size on the "outside" laid adjacent to 4" insulating non-load bearing blocks on the "inside." Another company was to, and did, apply a bituminous vapor seal on the inside parged surface of the concrete blocks prior to the time the Subcontractor laid the insulating block. In other words, whether in law this is considered as a single wall or, as Subcontractor contends, two adjacent "partitions", it is undisputed that Subcontractor was to install the concrete blocks and insulating blocks to make what was in fact a single wall.

The specifications 6-06 Erection of Masonry Units provided:
"Where insulating block is to be applied to the inside of exterior walls, the inside face of the concrete masonry units shall be parged (back plastered) with mortar so as to provide a smooth, unbroken surface to receive the vapor seal as specified in the section on waterproofing; * * *."

The plan drawings plainly show that this double wall (of concrete block and adjacent insulation block), on the first floor, shall run from the ground level floor to the underside of the mezzanine floor beams, and for the mezzanine, from that floor to the underside of the structural ceiling-roof beams. The written specifications prescribed similar requirements. On the first floor, this carried the double wall for the height precisely indicated on the plans, 13'4". On the mezzanine floor, the height for the outside wall was 12'0", but with the incline of the overhead roof, the inside (toward the hangar space) wall was 13'0".

The specifications 6-06 Erection of Masonry Units: e. Masonry Wall Construction provided:
"In general, terminate walls against beam soffits or structural ceilings and wedge tight to ceilings or beams and slush joints at top with mortar."
This is followed in context by the following provision which bears on the technical identification of "exterior" walls, the meaning of "wall" and the necessity for retaining an absolute vapor seal:
"Partitions that abut exterior walls shall have the masonry units of the partitions properly bonded with the wall masonry, except that where insulating block is used, masonry partitions shall be bonded with insulating block using corrugated or crimped anchors, so that there is no break in the vapor seal. * * *."


It is here where the rub comes. For Subcontractor contends, as he always has, that while the plans and specifications called for the insulating block to run up to the underside of the floor or beams above, all this was either changed, or at least made obscure, by special notes written on the face of the sheets showing the floor plan for the first floor and mezzanine respectively.

Sheet 3 covering first floor:
"Note: Interior masonry partitions of 4" conc. [concrete] or insulating block on first floor shall be constructed of block to a height of 13'4" and capped with 4" wide conc. [concrete] from top of block to underside of conc. [concrete] slab. Cap to be reinforced with 1 #40 T. B."

Sheet 4 covering mezzanine:
"Note: Interior masonry partitions of 4" conc. [concrete] or insulating block on mezzanine floor shall be constructed of block to a height of 12'0" and capped with 4" wide con. [concrete] from top of block to underside of roof deck conc. [concrete] cap reinforced with 1 #40 T. B."

Subcontractor's argument runs somewhat like this: (1) the special notes on the plans (see notes 5 and 6, supra) refer expressly to "masonry partitions of 4" concrete or insulating block" and presumably the disjunctive "or" was purposefully used; (2) while there are many (approximately 21) partitions in the toilet-lounge areas of 4" concrete blocks, there are none made exclusively of insulating blocks; (3) the only interior "partitions" of 4" insulating block are those which are laid immediately adjacent to the concrete blocks and separated only by the bituminous vapor seal; (4) therefore, it must have been intended that Contractor would install a poured concrete cap on the top of the 4" insulating block; and (5) since the Government did not require that this be done, Contractor has gained by the saving of the cost of the concrete cap, whereas Subcontractor has lost to the extent that it was necessary to furnish and lay insulating blocks for the vertical space which would have been occupied by the concrete cap.

As a corollary Subcontractor also contends that these notes made the plans ambiguous and thus authorized resort to parol evidence. In our disposition we need not determine whether, as is most doubtful, the conversations between Contractor and Subcontractor immediately preceding the signing of the formal contract had the claimed effect of an agreement that Subcontractor's interpretation was correct, or whether it was error for the Court to have received the parol testimony. For we are of the clear opinion that no cap was called for and what the Subcontractor furnished and installed was exactly what the plans obliged him to do.

The Contractor cites among others: Highway Construction Company of Ohio v. City of Miami, Fla., 5 Cir., 126 F.2d 777, certiorari denied 317 U.S. 643, 63 S.Ct. 35, 87 L.Ed. 518; Kilby Mfg. Co. v. Hinchman-Renton Fireproofing Co., 8 Cir., 132 F. 957. Subcontractor asserts that this was merely explanatory of doubtful terms and permissible under such authorities as Colonial Hotels, Inc. v. Maynard, 158 Fla. 318, 29 So.2d 28; Smith v. Manatee County, Fla., 56 So.2d 453.

We start with the firm conclusion that "partition" as it is used in the notes (see notes 5 and 6, supra) obviously did not refer to that portion of the side walls made up of concrete blocks and insulating blocks laid together. While it may be true that to assure a perfect vapor seal, the two were not mechanically bonded together, this structure constituted a single wall and not a partition to separate one space off from another. The plans themselves show that "partition" was used in this sense. For in the toilet-lounge areas, there were, in each building, 21 free-standing 4" partitions which all agree were to be made up of concrete blocks without an adjacent course of insulating blocks. Unlike the concrete blocks of the side walls which were bonded on each side and top and bottom into the adjacent strength members of the main structure, these partitions were free standing. To afford added stability, a concrete cap was prescribed.

Actually, the controversy likely had its genesis in the fact that in a literal application of the plans and specifications and the notes (see notes 5 and 6, supra) to these toilet-lounge area partitions, it was going to be an almost impossible task to pour these caps on top of the concrete blocks in view of the location of certain overhead pipes and the limited space below the concrete floor or ceiling slab. In view of this, Contractor sought and obtained permission from the Government to delete the cap on the top. As an alternative the Engineers approved the pouring of a 6" cap at a point somewhat lower in the concrete block partition. As this did increase the amount of concrete block to be installed, an extra in the amount of $2,241 was agreed to though not yet paid.

Equally important is the fact that the use of the cap in the side walls on the mezzanine floor made no sense. It is not that we now substitute ourselves as engineers. But in interpreting plans, we can read them in the light of the obvious purposes to be achieved. Here it is significant that Subcontractor seeks an extra for only one of four of the walls surrounding the enclosed space. Its justification — since it must obviously find one — is that for the first floor, the height shown by the plans, indicated specifically as precise measurements on the plans, and those prescribed in the note (see note 5, supra) were all the same — a height of 13'4". Likewise it says that for the outside wall on the mezzanine, the measurements and note (see note 6, supra) all specify 12'0". It is only the opposite side on the mezzanine where there is a difference (height from mezzanine floor to overhead beam is 13'0"), and it is this additional foot which, Subcontractor says, was filled with "extra" insulation blocks.

If a cap was neither prescribed nor needed — and this is admitted — on either of the first floor walls or on the outside wall of the mezzanine, there is no basis shown anywhere why one would have been needed or would serve any useful function in the opposite mezzanine wall. We are fortified in this conclusion by the fact everywhere so apparent in this record that had it been reasonably required by the plans, the United States Engineers, as the proper and ubiquitous watchdog, would have insisted on absolute compliance or an express waiver.

The letter from the Engineers of October 11, 1954, quoted in Contractor's letter of October 19 refers only to the toilet-lounge area and not, as now claimed, to this one particular inside wall on the mezzanine floor.

The result is that we hold that the District Court erred in allowing this sum of $3,054.75 as an extra.

This would not, however, result in an automatic rendition for the Contractor on this score if, as it so vigorously asserts, the case was always one for arbitration under the contract provisions and the Federal Arbitration Act, 9 U.S.C.A. § 1 et seq. We dispose of this quickly by saying that in this record we could certainly not find the District Judge to have been clearly erroneous, F.R.C.P. 52(a), 28 U.S.C.A., in his conclusion that the Contractor was in default and the request for stay of the judicial proceedings made for the first time as the actual trial got underway was a pure afterthought and came too late.

While we have now finally held against the Subcontractor's contention on the basic claim, this record reflects that Subcontractor was making every effort to negotiate and discuss this problem with the Contractor. In the extensive correspondence from Subcontractor, much of which went unheeded and even unanswered, Subcontractor indicated plainly its willingness to arbitrate. Typical of the Contractor's studied indifference to the demand for payment of the claim or arbitration was Contractor's summary rejection of the specific inquiries put to it as to the procedural details of the proposed arbitration even though these were matters left initially to the parties under the agreed American Institute of Architects rules for arbitration.

The Court was eminently justified in its implied conclusion that the so-called defense of arbitration and the tardy demand for it was not asserted in good faith so that Contractor was in default. American Locomotive Co. v. Chemical Research Corp., 6 Cir., 171 F.2d 115.

Despite our ruling on the basic issue of the extra for $3,054.75, the problem of interest still remains. This comes about because, while that basic issue was the center of the controversy, when the suit was instituted, it was necessary to include the demand for the additional sum of $14,725.61 over 90% of which was then admittedly due and owing. The Trial Court first allowed interest on the total ($17,780.36) of this amount plus the claimed extra from March 10, 1955. Subsequently this was modified to allow interest from September 10, 1955 down to the date of judgment, April 1, 1957.

Contractor asserts that the contract required final payment of the withheld retainage of 10% within thirty days after completion and acceptance of the whole project and, as modified by a contemporaneous letter, not earlier than forty-five days after completion of the whole project if acceptance were delayed on account of a dispute in which the Subcontractor was in no way involved. Consequently, it argues that Subcontractor did not satisfactorily establish that the whole project was either accepted or completed thirty or forty-five days, respectively, prior to the interest date, September 10, 1955, fixed by the Court.

As we view this, we need not determine the correctness of this precise point. The record overwhelmingly demonstrates that over this long period of extensive correspondence, efforts toward negotiation, and conferences ultimately held on the dispute, the refusal to pay was never based on the contention that the claim was premature or not yet due. The refusal was persistently and emphatically placed on absolute non-liability for the claimed extra (and some undisclosed disputes over a job in Baton Rouge, Louisiana). Indeed, on September 29, 1955, after a conference finally held on September 23, 1955, Contractor sent a statement of account to Subcontractor showing an admitted balance then due of $12,940.84. This was sent with a release and the letter of transmittal stated that "If you will execute and return this release to us, we shall be pleased to forward you our check for this amount." This was not an offer to settle, generally inadmissible in evidence. Nor was it so treated. For on the trial, Contractor insisted that this itself amounted to a tender sufficient to stop the running of interest.

The Treasurer of the Contractor testified:
"Q. And was there a tender of payment of certain amounts in the event the receipt was obtained?
"A. Yes."
Thereafter, counsel for Contractor in connection with this testimony and the letter of September 29, 1955, stated:
"There is a claim in this case of interest and I think if there is a tender or a showing that a substantial portion, if not all of the amount that is in dispute here has been made I think it would certainly have some weight to be considered insofar as the allowance of interest would be concerned."



The Court was entitled to treat it as did the Contractor — an acknowledgment of liability for a present indebtedness for whatever amounts were rightfully due under the contract and which Contractor fixed at the prescribed amount. If it was not an acknowledgment, as such, it was at least a sufficient indication that the Contractor considered the final balance, whatever it might be, due and owing under the contract so that, if this were not so, it was up to the Contractor to prove that in point of time the claim was premature. Since the difference between this tendered amount and the actual balance due ($14,725.61) was made up of asserted credits or charge-backs which the Court held were unfounded and no complaint is now made of this ruling, the Court was entitled to consider that the acknowledgment that final payment was due covered the full amount of the balance remaining unpaid. As the amount ($14,725.61) did not include the disallowed extra and there was disagreement only as to asserted, but disallowed, charge-backs, it was a liquidated claim sufficient to commence the running of interest as of the time recognized by the Contractor.

The result is that while we affirm allowance of interest, we modify it so that the period begins on September 29, 1955, rather than September 10, 1955. Since nothing remains but simple calculation, the judgment is reversed in part, modified in part and, as modified, affirmed.


Allowed by judgment below $17,780.36 Disallow the "extra" 3,054.75 ___________ Principal amount of judgment as modified $14,725.61 Interest @ 6% September 29, 1955 to date of judgment, April 1, 1957 1,332.67 __________ Total $16,058.28

While the matters in final controversy were really limited to the interest and the extra totaling $4,733.80 on which Contractor prevailed for approximately two-thirds, it was necessary for Subcontractor to sue for the total balance remaining unpaid on which, of course, it otherwise prevailed. Costs are therefore adjudged two-thirds against Contractor (appellant) and one-third against Subcontractor (appellee).

Reversed in part, modified in part, and as modified affirmed.