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Grinnell Co. v. Miller

decided.: June 27, 1945.


Author: Mcallister

Before GOODRICH and McALLISTER, Circuit Judges, and GIBSON, District Judge.

McALLISTER, Circuit Judge.

Grinnell Company, Inc., brought suit against Anthony P. Miller, Inc., a building firm, and Miller, its President, appellees herein, for a balance due on an account for certain plumbing materials, ordered from the Grinnell Company by Harry Hurowitz, a sub-contractor, and furnished to a job on which the Miller Company was general contractor.

Appellant based its claim against Miller and the Miller Company on the following grounds: (1) That they signed a written contract agreeing to pay Grinnell for the plumbing materials; (2) that Hurowitz was the agent for the Miller Company in the purchase of the materials, and, therefore, the Miller Company was bound on the obligation incurred by him; (3) that Miller agreed to sign a contract, on behalf of the Miller Company, to pay Grinnell for all the material furnished to Hurowitz on the job, provided a surety on a performance bond would consent to such agreement; that the surety did consent to such agreement, and, that although the Miller Company did not sign the contract, nevertheless, it was bound to pay the account because the material was furnished in reliance upon the prior agreement that it would sign the contract if the surety consented; (4) that there was an oral promise on the part of Miller, acting for the Miller Company, to pay the Grinnell account, prior to the time the material was furnished on the job, and that the Grinnell Company furnished such material relying upon such oral promise.

Appellees denied that they signed a written contract; that Hurowitz was the agent of the Miller Company; that the surety ever consented to Miller's agreement to pay Grinnell for the plumbing material; and they further denied making any oral promise to pay Grinnell for the Hurowitz account.

On trial before a jury, the district court directed a verdict of no cause of action in favor of Miller and the Miller Company on the ground that a verdict for plaintiff based upon the testimony of plaintiff's witnesses would have to be set aside as being against the weight of the evidence.

In order to ascertain whether the court was justified in directing a verdict in favor of the defendants, it is necessary to review in some detail the testimony and the circumstances surrounding the transactions of the parties, for this is, essentially, a fact case.

On March 21, 1939, the Miller Company entered into a contract to erect an apartment house for the Ogontz Housing Corporation in Philadelphia. Bids on subcontracts were advertised for, and, from a number of competitors, Hurowitz was awarded the plumbing and heating contract on a bid of $93,000, subject to his furnishing a bond to guarantee performance. This bond, on which the Standard Surety & Casualty Company of New York was surety, was furnished to the Miller Company on May 17, 1939. On June 15, 1939, Hurowitz gave the order for the plumbing and heating materials to the Grinnell Company, at a price of $50,000.

An important part of appellant's case is based upon alleged statements made by Miller to the representatives of the Grinnell Company, when the latter first started to supply material for the job.

Hepburn, the Grinnell salesman who had discussed the material order with Hurowitz, testified that he subsequently saw Miller and told him that he was sure that Grinnell would not trust Hurowitz to the extent of a $50,000 order, and that, in reply, Miller said: "You don't need to worry, Bill, I will see that you are paid, I will hold up money, I will see that you are paid by holding back the money that is going to him." Hepburn then added: "Now, he might not have said it in the exact words I am bringing out, * * *."

A few days after the negotiations between Hurowitz and Hepburn, the order for the material was referred to Rice, credit manager of the Grinnell Company, who, with Hepburn and Reiter, office manager of the Philadelphia branch of the company, interviewed Miller on June 21, 1939, and presented a written form of agreement, requesting its execution by Miller on behalf of the Miller Company. Under this proposed contract, Miller would have agreed to pay the Grinnell Company for all materials ordered by Hurowitz and specified for the job, not to exceed the sum of $50,000.In reply to the request to sign such a contract, Miller seems to have done about what any reasonable businessman, or contractor, who had a performance bond, would do. He approved the instrument conditionally, stating that the proposition seemed fair to him and that he would sign the agreement if it were approved by his attorney and by the company that was surety on the performance bond. Anything more than this, would obviously have been foolhardy, as Miller, by an absolute agreement to pay Grinnell for the material ordered by Hurowitz, might easily have lost all the protection he had secured under the surety bond.

However, Hepburn testified that at the time the foregoing request to sign the contract was made to Miller, he asked Miller "how long will it take for this to be settled," and stated: "In the meanwhile, Hurowitz is holding up the job wanting material. Now, what do you want us to do?"; and that Miller replied: "Give him whatever he wants, Bill * * * For heaven's sake, don't hold up the job, we can't afford to have any stoppage there; I will see that it is paid."

With respect to what took place on the same occasion, Reiter testified that Miller said he would sign the agreement if it were acceptable to the surety company, and that he also requested that if Grinnell received any orders from Hurowitz, the material should be furnished and Miller would pay for it. Rice's version was that Miller said he would sign the agreement if the surety company approved; and, as Rice recalled, Miller said he would pay for materials furnished by Grinnell "until he told us to stop."

The foregoing constitutes the whole of the testimony submitted on behalf of plaintiff, which is claimed to prove an oral agreement on the part of Miller and the Miller Company to pay for any or all the materials ordered by Hurowitz up to a total of $50,000.

The interview between Miller and the three representatives of the Grinnell Company above mentioned took place on June 21, 1939. On June 24, Miller wrote Grinnell and advised that the proposed form of agreement had been submitted to the surety company for its approval. Nearly three weeks later, on July 14, Miller again wrote Grinnell advising that Hurowitz, the surety company, and the Miller Company were in the midst of negotiations in connection with the matter. But still there was no notification that the surety consented to have Miller sign the agreement to pay Grinnell for all of the material ordered by Hurowitz. As a matter of fact, no such agreement was - then or in the future - ever signed by Miller or the Miller Company.

On July 17, the surety company wrote Grinnell advising that Hurowitz was about to give the surety company joint control of the expenditure of all funds received by him under his contract with Miller, and stating that it presumed it would be satisfactory to Grinnell, on all future invoices, to accept payment, as Hurowitz received the funds in the ordinary progress of the work.

On July 18, 1939, Miller wrote the surety company expressing his belief that, if the surety company intended to secure an assignment from Hurowitz of all moneys payable to him on his contract, such a transaction "will compel the Grinnell Company to request assurance from you that their account will be paid."

However, Grinnell did not require assurance from the bonding company that the Grinnell account would be paid. Instead, on July 24, Grinnell wrote the surety, in reply to the latter's communication of July 17, referring to the advice that Hurowitz was about to give the surety joint control over expenditures, and stated that it was entirely satisfactory to Grinnell to have the surety make payments directly to Grinnell for the materials furnished to Hurowitz.

The surety then entered into an agreement with the Miller Company that the latter should assume the pay roll of the men working for Hurowitz, deducting such sums so paid out, from the amount due Hurowitz on his contract, and paying the balance over to the surety. Out of the money received by the surety, it paid Grinnell for materials from time to time. But toward the end of the job, it became evident that the pay roll expense had eaten up most of the money provided for the plumbing contract, and there remained insufficient funds due Hurowitz thereunder from Miller to pay Grinnell for the material it had supplied to Hurowitz. The latter was not financially responsible and Grinnell ended up, "holding the bag" for $29,564.79, for which it brought suit against Miller and the Miller Company.

After an examination of the record and a careful consideration of the arguments of counsel, it is our conclusion that if the case had been submitted to the jury and a verdict returned for plaintiff, the district court would have been obliged to set the verdict aside as being against the great and overwhelming weight of the evidence; ...

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