Court Opinion

ID: 8903213
Source: CourtListenerOpinion
Date Created: 2022-11-27 01:25:32.439381+00
Date Added: 2024-06-11T17:07:59.556256
License: Public Domain

GIBBONS, Circuit Judge,
dissenting:
In this appeal two separate setoffs against amounts claimed by an electrical subcontractor against a' general contractor are in issue. One of those credits, amounting to $9,170.37, arises out of a dispute over a defective transformer. I join in the majority’s judgment insofar as it affirms the award of this credit to the general contractor. In regard, however, to the majority’s disposition of the other setoff, resulting in an award to the general contractor of a net credit of $9,360.31, I respectfully dissent. The $9,360.31 represents the difference between the net expense ($26,360.31) incurred by the general contractor in purchasing certain electrical switches required by the Commonwealth and the portion of that expense which the subcontractor allegedly agreed to absorb ($17,000.00). To resolve *1119the question over who should absorb the disputed $9,360.31 in expenses it is necessary to interpret the provisions of the subcontract. Despite the studied obfuscation of the majority opinion, it is a rather simple matter of the plain meaning of the chosen language. The district court and the majority chose, however, to rewrite the subcontract in order to substitute what they think may be a fair result for the bargain struck by the parties.
The general contractor, Andriehyn, urges that the “Force Account Work” provisions in Part E of the contract between it and the Commonwealth of Pennsylvania are incorporated by reference in the subcontract between it and Zangrilli, the electrical subcontractor. If there is any such incorporation by reference, it is by virtue of the following language in the subcontract:
Witnesseth that the said party of the first part [Zangrilli] '. . . hereby covenants, promises and agrees to furnish all labor, material, and equipment to complete electrical work in its entirety required in the erection of Emergency Renovations, Pennhurst State School & Hospital, Spring City, Pa. P.W.-7291-1-4-2-3 in accordance with plans and specs and addendum # 1 prepared by Pa. Dept, of Property & Supplies and attached agreement on page 2.
No one contends that “addendum # 1 prepared by Pa. Dept, of Property & Supplies and attached agreement on page 2” is a cross-reference to the “Force Account Work” provisions in Part E of the general contract. If there is a cross-reference it is in the words “plans and specs.” The heart of the majority’s reasoning is:
We have already explained why we believe that the phrase “plans and specs” as used in this subcontract included modifications subsequently ordered by the Commonwealth. Given that interpretation, it seems clear that the phrase “plans and specs” must also include the force account provisions of the general contract. .
. We agree that a meticulous draftsman probably would not have used the phrase “plans and specifications” to refer to the amount of compensation which one of the contracting parties was to receive. But we do not believe that we are required to give the colloquial phrase “plans and specs” in the one-page subcontract between Zangrilli and Andri-chyn the same meaning which we would attach to the phrase “plans and specifications” in a detailed and meticulously drafted agreement. .
At p. 1115 supra.
And so, the majority meticulously redrafted the agreement for the benefit of Andri-chyn, its original draftsman. That is not the way the law of contracts appears to me. Moreover, it is inconsistent with the plain meaning of the language, because “plans and specs” refers not to the section of the general contract containing the Force Account provisions, but to an entirely different set of documents.
A portion of the table of contents of the general contract is printed in the margin.1 *1120Under Part D appears item 7, “Plans and Specifications Furnished the Contractor.” Item 7 refers to a list of separate documents detailing the plans and specifications of the entire project, and provides that the Commonwealth will supply the general contractor with a stated number of copies of such “plans and specifications.” Under Part E appears item 4, “Force Account Work.” Item 4 details the formula by which the Commonwealth is to pay the general contractor for project changes involving additional work. There is no reference in item 4 to the method by which the general contractor is to pass the costs of such changes on to its subcontractors. The only possible meaning of “plans and specs” as used in the subcontract is to the separate set of documents referred to in Part D, item 7. To expand the scope of this phrase to include the force account work provisions in Part E of the general contract, provisions which make absolutely no reference ' to plans and specifications or to subcontractors, is to flout the established law governing the interpretation of subcontracts.
The settled rule as to the interpretation of subcontracts which refer to general contracts is as follows: Tryon, 152 California, 31, 39 [91 P. 983]; Moreing v. Weber, 3 Cal.App. 14, 20 [84 P. 220]; Short v. Van Dyke, 50 Minnesota, 286, 289 [52 N.W. 643]; Noyes v. Butler Bros., 98 Minnesota, 448, 450 [108 N.W. 839]; Modern Steel Co. v. English Construction Co., 129 Wisconsin, 31, 40, 41 [108 N.W. 70].
The reference in the sub-contract to the drawings and specifications was evidently for the mere purpose of indicating what work was to be done, and in what manner done, by the sub-contractor. Notwithstanding occasional expressions of a different view (see Shaw v. First Baptist Church, 44 Minnesota, 22, 24 [46 N.W. 146]; Avery v. Supervisors, 71 Michigan, 538, 546, 547 [39 N.W. 742]; Stein v. McCarthy, 120 Wisconsin, 288, 295 [97 N.W. 912]), in our opinion the true rule, based upon sound reason and supported by the greater weight of authority, is that in the case of sub-contracts, as in other cases of express agreements in writing, a reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified. Woodruff v. Hough, 91 U.S. 596, 602 [23 L.Ed. 332, 335]; Neuval v. Cowell, 36 California, 648, 650; Mannix v.
Guerini Stone v. P. J. Carlin Construction Co., 240 U.S. 264, 277-78, 36 S.Ct. 300, 306, 60 L.Ed. 636 (1916); accord, Lodges 743 and 1746, etc. v. United Aircraft, 534 F.2d 422, 441 (2d Cir. 1975); R. P. Farnsworth & Co., v. Tri-State Construction Co., 271 F.2d 728, 736 (5th Cir. 1959). The law of Pennsylvania is not to the contrary. In Potts Manufacturing Co. v. Loffredo, 235 Pa.Super. 294, 340 A.2d 468 (1975), the Pennsylvania court held that, as a matter of law, a subcontract’s reference to the plans and specifications of the general contract did not incorporate any of the general contract’s other provisions, including those provisions relating to the acceptance and payment for work performed pursuant to the plans and specifications of the general contract. As is evident, the majority opinion is devoid of any reference to Pennsylvania precedents for its rewriting of the subcontract to include a cross-reference to a section of the general contract which the subcontract does not even mention.
What the district court did, and what the majority has done, is substitute, for the subcontract the parties draw, their own notions about how a prudent general contractor ought to have proceeded. In doing so, however, they are proceeding not out of knowledge, but out of ignorance of the practices and market conditions in the construction industry at the time the job was bid. It is at least as likely that in those market conditions a general contractor would be willing to contract with the Commonwealth on a cost adjustable basis (because that was required by the Commonwealth), while negotiating with his subcontractors for the best fixed price arrangement he could bargain for. The instant subcontract was for a fixed price. I do not suggest that I know what the market condi*1121tions were, since there is nothing in the record about them. Moreover, it is at least questionable whether parol evidence about market conditions would be admissible to vary the plain terms of the subcontract. See, e. g., Potts Manufacturing Co., supra. My point is that what the majority has done is far worse than a parol evidence violation. It is the reliance upon a completely uninformed hunch, respecting market conditions and industry practices, as a basis for rewriting the subcontract.
Moreover, the general contractor’s actions respecting the purchase of the automatic transfer switch is entirely inconsistent with the notion that the force account formula was a part of the subcontract. If it was, there was no need to negotiate a new and separate agreement. That agreement is quoted in the margin.2 There is extended discussion of it in the majority opinion, but the opinion concludes, correctly, that it did not dispose of the question of price adjustment. Rather, when one sifts through the verbiage, the majority concludes that it was surplusage, since the “Force Account Work” clause of the general contract applied. Obviously, however, Andrichyn did not think so at the time it was negotiated.
Finally, the most outrageous portion of the majority opinion is in footnote 4:
Even if the force account provisions had not been incorporated into the subcontract, Zangrilli’s compensation for purchasing the automatic switches would still have been limited to the amount awarded by the Commonwealth on a force account basis. If a provision entitling Zangrilli to “Reasonable compensation” were read into the contract [cf. Pa.Stat.Ann. tit. 12A § 2-305(1) and (2) (1970)] or if Zangrilli purchased the switches and thus became entitled to “reasonable compensation” on a quasi-contractual basis, [see DeGasperi v. Vali-centi, supra; Binns v. First Nat’l Bank of Calif., Pa., supra], we believe that the “reasonable compensation” to which Zan-grilli would be entitled would equal the amount awarded by the Commonwealth under the force account provisions.
The very fact that the majority makes this point shows more clearly than anything else its lack of confidence in its contract analysis. But what is worse, is that since the district court made the same misinterpretation of the subcontract as the majority, it had no occasion to pass on the question of what is “reasonable compensation” for the general contractor’s purchase of the automatic switches. Appellant seeks only review of the district court’s legal error, and neither appellant nor appellee has had occasion to address the question of the reasonableness of the setoff. Without reference to testimony in the record, however, the majority in an attempt to bolster a deficient legal analysis, now makes a finding of fact which the district court never made, and on which the parties have had no opportunity to be heard. Such highhandedness is less than due process in an appellate tribunal.
I would remand for redetermination of the setoff on the assumption that the “Force Account Work” clause of the general contract was not referenced in and was not a part of the subcontract.

. “TABLE OF CONTENTS

. Mr. Anthony Zangrilli
Jos. Zangrilli & Sons, Inc.
53 High Street
Pottstown, Penna. 19464
Re: Pennhurst State School and Hospital — PW
7291 # 1-4-2-3
Automatic Transfer Switches
Dear Tony,
Confirming our telephone conversation January 26, 1972, you wish to be relieved of the purchasing of Automatic Transfer Switches. Our office will accept this responsibility and place a purchase order for the Automatic Transfer Switches with Westinghouse Electric Supply Company.
It will be your company’s responsibility to receive, unload, set in place and do all required wiring to energize the switches, all excavation will be done under your original contract, leaving this site properly graded, then seeded. We accept your credit for the sum of fifteen thousand five hundred ($15,500.00) dollars for the elimination of manual transfer switches and concrete pad.
The acceptance of this credit by this office is subject to the approval of the Department of Property and Supplies.
If you are in accord, kindly sign copy of this letter and return for our files.