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Light & Power Const. Co. v. McConnell

Court of Chancery of Delaware, New Castle County

April 27, 1962

LIGHT & POWER CONSTRUCTION COMPANY, a corporation of the State of Delaware, Plaintiff,
J. H. Tyler McCONNELL, Benjamin Ableman and J. Henry Topkis, being the members of Delaware Interstate Highway Division, State Highway Department, State of Delaware, Tim O'Connell and John B. O'Connell, Trading as Tim O'Connell & Sons, and Isaac Watkin, Defendants.

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[40 Del.Ch. 282] Donald W. Booker, of Coxe, Booker, Walls & Cobin, Wilmington, for plaintiff.

James L. Latchum, of Berl, Potter & Anderson, Wilmington, for defendants, J. H. Tyler McConnell, Benjamin Ableman and J. Henry Topkis, members of the Delaware Interstate Highway Division.

Wilfred J. Smith, Jr., of Smith & Gentile, Wilmington, for defendants, Tim O'Connell and John B. O'Connell, trading as Tim O'Connell & Sons.

Defendant Isaac Watkin has not yet been served.

SEITZ, Chancellor.

This is the decision on plaintiff's application for a preliminary injunction to prevent defendants from performing or permitting performance of certain electrical work on a structure being built at the Delaware Memorial Bridge. Plaintiff was granted a restraining order. Light & Power Construction Co. v. McConnell (Del.Ch.), 177 A.2d 633.

Plaintiff is an electrical contractor. Late in 1961, the Delaware Interstate Highway Division ('Division') which operates the Bridge, advertised for bids to construct a sand storage shed to be built at the [40 Del.Ch. 283] Bridge. The Division admits that it followed the procedure contained in the Code provisions relied upon by plaintiff but it says that this was a matter of choice rather than law. When the bids of the general contractors were opened December 18, 1961, the defendant O'Connell's bid was the lowest at $67,500 and it listed plaintiff as its electrical subcontractor. Plaintiff was selected by O'Connell on the basis of an oral quotation solicited by O'Connell.

The next day, December 19, 1961, O'Connell appeared at a regular meeting of the Division and represented that he had been contacted by a business agent of a local electrical union and warned that plaintiff would not be permitted to work on the job because O'Connell was not unionized and plaintiff, as a union contractor, was committed not to bid to or perform work for a non-union contractor; that O'Connell could expect either picketing at the job site or the withholding of electrical workers by the union from plaintiff if plaintiff failed to abide by its contractual understanding with its union. O'Connell also said that plaintiff knew at the time it gave its bid that O'Connell was a non-union contractor. O'Connell said he was giving the information to the Division so that it could determine whether the contract should be awarded to O'Connell. He thereafter formally requested permission to withdraw his bid proposal. On the advice of its counsel the Division in effect refused O'Connell's

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request and awarded his firm the contract.

Sometime later O'Connell presented plaintiff with a proposed form of subcontract which contained a provision which indemnified the General Contractor against all losses, liabilities, suits, etc. incurred by Contractor 'on account of failure of subcontractor to perform agreements herein'. Plaintiff notified O'Connell that it would sign a contract in the form provided by the General Conditions and adopted by the Division. Thus, plaintiff says it was ready and willing to sign a contract in accordance with the terms of its bid and that O'Connell was the one who insisted on a contract with an indemnification provision which was not a customary provision in such a subcontract. Defendants tacitly concede that the 'added' provision was not a customary one in the trade.

On January 12, 1962, the Division's secretary sent O'Connell copies of a proposed contract. On January 23, 1962, the Division's [40 Del.Ch. 284] secretary received a letter from O'Connell enclosing the executed copies and stating that O'Connell had substituted Watkin, an electrical contractor, in place of plaintiff for the reason that plaintiff had declined to sign the subcontract which O'Connell had submitted to plaintiff. O'Connell requested approval of the substitution.

Before O'Connell's letter requesting a substitution had in fact been received, O'Connell appeared before a meeting of the Division's board on January 23, 1962 and represented, according to the Division's resolution, that plaintiff 'refused to sign a subcontract for the electrical work in accordance with its previous bid proposal given to the contractor.' O'Connell requested leave to substitute Watkin for plaintiff. The Division, admittedly without attempting to contact plaintiff in any way, immediately passed a resolution which in its operative part provides as follows:

'NOW THEREFORE BE IT RESOLVED, the Division having considered Contractor's request and being satisfied, in good faith, that Light & Power Construction Company has defaulted in refusing to execute a subcontract as represented to the Division by the contractor, and Pacific National Fire Insurance Company of San Francisco, California, surety on Contractor's bond, having approved of the said substitution, and upon the recommendation of the Division's Engineering Staff and the Architect, the Division does hereby grant its written consent and permission to the contractor to substitute Isaac Watkin as the electrical subcontractor in the place of Light & Power Construction Company for the performance of the electrical work to be performed under Contract No. 48; and

'The Division's Engineering Staff is hereby authorized to advise the contractor in writing of the consent and permission given by this resolution.'

The record is in dispute, but it is plaintiff's sworn position that he was not aware that O'Connell intended to apply for a substitution and that he was not aware of the Division's action until after it had officially sanctioned the substitution.

[40 Del.Ch. 285] Work was commenced by O'Connell and Watkin on January 25, 1962. Plaintiff promptly objected to the legality of the substitution and after its protest was overruled, it commenced this action on February 7, 1962. The defendant Watkin has completed about half of the electrical work. The Division and O'Connell are now restrained from permitting the completion of such work. In view of the ...

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