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United States v. United Pacific Co.

filed: October 6, 1992.

UNITED STATES OF AMERICA EX REL. BARTEC INDUSTRIES, INC., PLAINTIFF-APPELLEE-CROSS-APPELLANT
v.
UNITED PACIFIC COMPANY, DBA UNITED PACIFIC RELIANCE COMPANY, DEFENDANT-APPELLANT-CROSS-APPELLEE AND KAUAI BUILDERS, INC., DEFENDANT-THIRD-PARTY PLAINTIFF V. SIMPSON-IRVINE, A JOINT VENTURE ORGANIZED IN THE STATE OF CALIFORNIA; FEDERAL INSURANCE COMPANY, A NEW JERSEY CORPORATION, THIRD-PARTY DEFENDANTS-CROSS-APPELLEES AND SIMPSON-IRVINE, A JOINT VENTURE, FOURTH-PARTY PLAINTIFF-CROSS-APPELLEE V. BARTEC INDUSTRIES, INC., FOURTH-PARTY DEFENDANT-CROSS-APPELLANT.



Appeal from the United States District Court for the District of Hawaii. D.C. No. CIV-89-00238-SJC. Samuel J. Conti, District Judge, Presiding.

Before: J. Clifford Wallace, Chief Judge, and Alfred T. Goodwin and Cecil F. Poole, Circuit Judges. Opinion by Judge Poole.

Author: Poole

POOLE, Circuit Judge:

This Miller Act*fn1 case arises from a dispute over miscast and lost steel to be used in the construction of a hangar and office building for the United States Navy. The steel supplier asserts that the district court erroneously denied it full recovery of the balance on its contract, while the contractor's surety asserts that the steel supplier should collect nothing. The steel supplier also seeks its costs and prejudgment interest. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm in part and reverse in part the district court's judgment.

FACTS

Kauai Builders (Kauai) contracted with the United States Navy to construct a hangar and office building at the Pacific Missile Range facility, Barking Sands, on the island of Kauai, Hawaii. Kauai's surety, defendant-appellant/cross-appellee United Pacific Company (United) issued a payment bond to Kauai as principal guaranteeing payment to suppliers for any materials furnished for use in construction of the project. Third-party defendant/fourth-party plaintiff/cross-appellee Simpson Irvine (Simpson) was Kauai's subcontractor on the Barking Sands project. It was responsible for erecting the structural steel in the hanger and office building. Third-party defendant/cross-appellee Federal Insurance Company, Simpson's surety, issued performance and payment bonds to Simpson. Simpson contracted with plaintiff-appellee/cross-appellant Bartec Industries, Inc. (Bartec) to fabricate and supply the necessary steel.

The Simpson-Bartec subcontract required Bartec to deliver the steel F.O.B. to the Barking Sands job site. The subcontract also required Bartec to deliver the steel within certain specified time periods and to fabricate and mark the steel according to specified conditions. Bartec, however, did not flawlessly manufacture all of the necessary steel. Some of it was misfabricated, incorrectly marked, and/or unpainted. Nor did all of the steel fabricated at Bartec's plant on the mainland safely arrive at Barking Sands. Several beams of steel entrusted to Matson Navigation Company (Matson) for sea transport to Hawaii were damaged and twelve beams were lost at sea during a storm. Simpson repaired the damaged steel at a cost of $139,401 and replaced the lost steel at a cost of $37,933. The accident at sea and the mistakes made by Bartec during fabrication delayed construction of the hangar and office building.

Before the storm and the subsequent damage and loss of the steel, Simpson directed Bartec to deliver the quantity of steel that exceeded the subcontract's freight cost allowance to a Los Angeles dockyard. Shortly thereafter Simpson determined that shipment by barge to Hawaii was too slow and too costly and asked Matson to remove the steel from the dockyard and ship it via the Matson vessel Manukai. Bartec contended that Simpson took delivery of the steel at the Los Angeles dockyard and asked Simpson for payment when the shipment was damaged and/or lost. Simpson responded by asking Bartec to file a claim with Matson for the ill-fated shipment and threatened to withhold payment if that was not done. Both Simpson and Bartec then filed separately the necessary claim against Matson, who in turn paid Simpson $172,835.31 for the damaged steel. Matson also agreed to pay Simpson $50,063 for the lost beams.

Bartec filed this suit in the district court of Hawaii against United Pacific when payment from Simpson for the steel it fabricated was not forthcoming. Bartec sought damages of $190,258.54, which did not include the value of the steel beams lost at sea. Kauai intervened and filed a third-party complaint against Simpson and Federal. Simpson responded by filing a fourth-party complaint against Bartec for costs incurred in remediating damages and losses to the steel shipment, and Bartec counterclaimed against Simpson and cross-claimed against Federal.

The district court held that Bartec should recover $96,349.54, which represented the balance due on Bartec's contract with Simpson less $93,909, the value of the lost steel. The court did not deduct from Bartec's recovery $139,401 - the cost incurred by Simpson to repair the defective steel shipped by Bartec - because Simpson received $172,835 from Matson and its insurer. United Pacific filed a timely notice of appeal on April 25, 1991, and Bartec filed its timely notice of a cross-appeal on May 14, 1991.

Discussion

United and Simpson argue that the district court improperly declined to reduce Bartec's recovery by the cost of correcting the defective steel shipped to Barking Sands. They assert that Bartec should recover nothing because the insurance proceeds paid to Simpson cannot be credited to United as surety for Kauai. Bartec asserts that the district court incorrectly determined the value of the lost steel and that it is entitled to pre-judgment interests and costs. Bartec also asks the court to award it double costs and attorney fees as a sanction of United for bringing this appeal.

A. Value of Lost Steel

The amount of damages awarded in a Miller Act case is a finding of fact, reviewable by this court for clear error. United States ex rel. Morgan & Son Earth Moving, Inc. v. Timberland Paving & Constr. Co., 745 F.2d 595, 599 (9th Cir. 1984). We would affirm the calculations of the district court without further comment were it not for ...


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