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UNITED STATES EX REL. PARKER-HANNIFIN CORP. v. LAN

August 2, 1979

THE UNITED STATES OF AMERICA for the use and benefit of Parker-Hannifin Corporation, Plaintiff
v.
THE LANE CONSTRUCTION CORPORATION, et al., Defendants



The opinion of the court was delivered by: MUIR

I. Introduction.

The above action was filed in the name of the United States of America for the use and benefit of the Parker-Hannifin Corporation (Parker) under the Miller Act, 40 U.S.C. ยง 270a et seq., seeking recovery on a payment bond posted by the Defendants in accordance with the provisions of the Miller Act. Parker asserts that it has not been paid for the manufacture of hydraulic cylinders which were utilized by Vertex Systems, Inc., a purported sub-contractor of Lane Construction Corporation (Lane), the prime contractor for the Cowanesque Lake Dam Project, as a means for opening and closing gates which were inserted by Lane into the intake tower of the dam. The matter was tried to the Court on June 28, June 29, July 5, July 9, and July 10, 1979. The following represent this Court's findings of fact, discussion, and conclusions of law.

 II. Findings of Fact.

 1. The plaintiff in interest in this case is Parker-Hannifin Corporation (Parker). (Undisputed)

 2. Parker is an Ohio corporation with its principal place of business in Cleveland, Ohio. (U)

 3. Lane is a Connecticut corporation with its principal place of business in Meriden, Connecticut. (U)

 4. The Home Insurance Company is a New Hampshire Corporation with its principal place of business in Manchester, New Hampshire. (U)

 5. Seaboard Surety Company is a New York corporation with its principal place of business in New York, New York. (U)

 6. American Reinsurance Company is a New York corporation with its principal place of business in New York, New York. (U)

 8. General Reinsurance Corporation is a Delaware corporation with its principal place of business in Wilmington, Delaware. (U)

 9. Employers Reinsurance Corporation is a Missouri corporation with its principal place of business in Kansas City, Missouri. (U)

 10. Prior to August 11, 1976, Lane intended to submit a bid to the United States Government as a prime contractor on the Cowanesque Lake Dam project located in Tioga County, Pennsylvania. (U)

 11. In its preparation for submission of said bid, Lane requested proposals and quotations from various parties for utilization in formulation of its bid. (U)

 12. On or about July 27, 1976, Vertex Systems, Inc. (Vertex), in response to Lane's request, delivered to Lane a quotation on Sections 15A and 15B of the specifications as well as on Section 5C of the specifications, which quotation contained the following language;

 
"Item 15A-1 and 15B-1 are complete in accordance with the plans and specification, excluding field painting. Item 5C-1 excludes field painting, spiral stair and wire mesh partition enclosing elevators. The above prices are F.O.B. nearest rail siding, presumably Wellsboro Junction, Pennsylvania.
 
Any present or future sales, use, excise, or other similar tax applicable to the sale are not included.
 
The above prices quoted are conditioned upon 90% Monthly payments with 10% Retention, 5% Of the purchase price is payable on delivery, and the remaining 5% Payable upon acceptance, but not later than one hundred twenty (120) days after shipment.
 
Within thirty (30) days of receipt of the purchase order, Vertex will submit for your approval a cost breakdown for the purpose of making progress payments showing the amount allocated for engineering, material and labor. These amounts will total to the sales price." (U)

 13. The quotation did not contemplate installation in the field by Vertex. (U)

 14. Vertex requested that The Orton Company (Orton) furnish a quotation for hydraulic cylinders to be used in the items covered by the Vertex quotation. (U)

 15. Orton, in turn, requested a quotation from Parker for hydraulic cylinders. (U)

 16. Parker supplied to Orton a quotation, as requested by Orton for the hydraulic cylinders.

 17. Orton is a seller of equipment manufactured by Parker and several other manufacturers and also acts as a sales agent for Parker for equipment manufactured by Parker. (U)

 18. Orton is not a subsidiary of Parker nor is it controlled by Parker.

 19. When Orton sells equipment manufactured by Parker as a distributor, Orton buys the equipment from Parker and resells the equipment to Orton's customer.

 20. In connection with such resales of equipment, Orton assumes the credit risk in the event the customer fails to pay for the equipment.

 21. When Orton acts as a sales agent for Parker, Orton instructs the customer to issue its purchase order to Parker in care of Orton and Orton then forwards the order directly to Parker. (P-51)

 22. When an order is forwarded to Parker by Orton acting as a sales agent, the equipment covered by the order is shipped directly to the customer by Parker and invoiced directly to the customer by Parker.

 23. When Orton acts as a sales agent for Parker, Orton receives a commission from Parker based upon a percentage of the price of the equipment paid by the customer to Parker.

 24. When Orton acts as a sales agent for Parker, Parker assumes the credit risk with respect to the order.

 26. Vertex used the Orton quotations in Vertex's quotation to Lane.

 27. The quotation directed Vertex to issue its purchase order to Parker-Hannifin Corp. c/o The Orton Co. (U)

 28. On or about August 9, 1976, Vertex sent a letter to Lane reaffirming its previous quotation of July 27, 1976. (U)

 29. Lane accepted Vertex's proposal on or about August 16, 1976. (U)

 30. The quotation price proposed by Vertex and accepted by Lane was Seven Hundred Twenty Six Thousand Five Hundred ($ 726,500) Dollars, itemized as follows:

 TABLE

 (U)

 31. The completed dam will be a rolled earth and rockfill construction of the following dimensions:

 TABLE

 32. The entire dam construction area occupies more than 1,000 acres.

 33. The employees who have worked on the dam have expended at least 1,250,000 total man hours of labor on the dam.

 34. On the basis of Lane's bid, on or about August 11, 1976, the United States of America, acting by the Department of the Army, and Lane entered into Contract No. DACW31-76-C-0094 (the "Prime Contract"), pursuant to which Lane undertook to furnish all labor and materials and to perform all work in connection with the Cowanesque Lake Dam Project at Tioga, Pennsylvania. (U)

 35. The total estimated contract price for said contract was Thirty-Seven Million, One Hundred Fifty-Three Thousand, Twenty-Five Dollars and Fifty Cents ($ 37,153,025.50). (U)

 36. Pursuant to the Miller Act and the terms of the Prime Contract, defendant Lane and the defendant sureties, on or about August 13, 1976, duly executed a Miller Act Bond to the United States of America, wherein Lane, as principal, and the sureties bound themselves jointly and severally in the sum of $ 2,500,000 conditioned that if the principal should promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in the Prime Contract, and any and all duly authorized modifications, notice of which modifications to the sureties being waived, then the above obligation would be void and of no effect. (U)

 37. The Miller Act Bond was duly accepted by the United States of America and, upon such acceptance, the Prime Contract for the construction and completion of the Cowanesque Lake Dam Project was awarded to Lane. (U)

 38. Item No. 15A-1 of the Prime Contract required Lane to manufacture, furnish and install in the Cowanesque Lake Dam two hydraulic service gate assemblies and two hydraulic low flow gate assemblies complete with hydraulic power units, hydraulic cylinders, controls, piping, gate stems, gates, air vents and appurtenances. (U)

 39. Item No. 15B-1 of the Prime Contract required Lane to manufacture, furnish and install one emergency gate and two emergency gate frames complete with all accessories and appurtenances including a gate handling crane. (U)

 40. Item No. 5C-1 of the Prime Contract required Lane to manufacture, furnish and install miscellaneous metals. (U)

 41. Lane was obligated to perform the Prime Contract in strict accordance with the Specifications and Drawings referred to in the Contract. (U)

 42. Section 15A of the Specifications referred to in the Prime Contract dealt with the manufacture, furnishing and installation of the hydraulic service ...


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