City of Portland ex rel. Donohue & Fleskes Corp. v. Hoffman Const. Co., 403-515

CourtSupreme Court of Oregon
Citation596 P.2d 1305,286 Or. 789
Docket NumberNo. 403-515,No. 411-542,403-515,411-542
PartiesCITY OF PORTLAND, a Municipal Corporation, ex rel. DONOHUE & FLESKES CORPORATION, a corporation, Respondent/Cross-Appellant, v. HOFFMAN CONSTRUCTION COMPANY, an Oregon Corporation, and Seaboard Surety Company, a corporation, Appellants/Cross-Respondents. HOFFMAN CONSTRUCTION COMPANY, an Oregon Corporation, Appellant, v. ARGONAUT INSURANCE COMPANY, a corporation, and Donohue & Fleskes Corporation, a corporation, Respondents. ; SC 24760,; SC 24760.
Decision Date05 September 1979

Ellis J. Horvitz, Encino, Cal., argued the cause for appellants/cross-respondents Hoffman Const. and Seaboard Surety and for appellant Hoffman. With him on the briefs were John L. Schwabe, and Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland.

Jack L. Kennedy of Kennedy, King & McClurg, Portland, and Gerald R. Pullen, Portland, argued the cause and filed briefs for respondent/cross-appellant, and for respondent Donohue & Fleskes Corporation.

Paul R. Meyer of Kobin & Meyer, Portland, argued the cause for respondent Argonaut Insurance Company. With him on the brief was Elizabeth Yeats, Portland.


HOWELL, Justice.

These two actions, consolidated for trial and on appeal, arise out of the construction of the City of Portland's secondary sewage treatment facilities. Hoffman Construction Company (Hoffman) was the general contractor on the project. Seaboard Surety Company (Seaboard) is its surety. Donohue & Fleskes Corporation (Donohue) was a subcontractor hired by Hoffman to perform mechanical, piping, and equipment work on the project. Argonaut Insurance Company (Argonaut) is its surety. The City of Portland (City) is a party because Seaboard executed a public performance bond to assure the City of Hoffman's faithful and complete performance of its general contract with the city. City brought the action, Multnomah County Circuit Court No. 403-515, "on behalf and for the use and benefit of DONOHUE."

Donohue's claim in quantum meruit against Hoffman alleged that Hoffman breached the subcontract by failing to discharge certain of its contractual obligations and by wrongfully terminating the subcontract. Donohue further alleged that Hoffman's breach of the subcontract obstructed Donohue's work, "greatly increasing the cost thereof to Donohue * * *." Donohue sought to recover the reasonable value of the "labor, services, material and equipment furnished," together with interest from the time Hoffman allegedly terminated the contract.

Hoffman's claim against Donohue alleged damages for extra expenses incurred that were caused by Donohue's alleged breach of the contract in several respects. Hoffman also, in addition to its counterclaim, filed a separate action against Donohue, case No. 411-542, but this action raises the same issues and seeks the same damages as its counterclaim.

The jury returned separate verdicts in each case in favor of Donohue and against Hoffman. Accordingly, the trial court entered judgment in favor of Donohue, together with attorney fees. The trial court refused to award Donohue pre-judgment interest as demanded. Hoffman appeals from the judgment. Donohue cross-appeals from the trial court's failure to award pre-judgment interest.

The facts of the case can be briefly stated as follows. Hoffman was the general contractor for the construction of City's secondary sewage treatment facilities in January, 1972. Hoffman contracted with Donohue to perform the mechanical, piping, and equipment work on the project for the sum of $1,400,000.

The first task in the project, which was Hoffman's responsibility, was to dewater the swampy building site. Hoffman ran into unexpected difficulties in dewatering, which caused six months' delay in the project. The mud on the site was a persistent problem. In addition to the dewatering difficulties, there was evidence that Hoffman failed to provide a sufficient schedule for doing the work; failed to coordinate the work of the various subcontractors; failed to provide adequate working conditions for Donohue; and actively interfered with Donohue's attempts to do its work. There was contrary evidence that many of Donohue's problems were the result of Donohue's own failure to do its job in a workmanlike manner. The disputes between the parties finally led Hoffman to terminate the subcontract on March 5, 1974. These actions followed.

Hoffman contends that it was entitled to a directed verdict on the ground that Donohue's evidence of the value of its performance was not sufficient to support an award in any particular amount. As always in reviewing the denial of a motion for directed verdict, we consider the evidence in the light most favorable to the other party. Simpson v. Sisters of Charity of Providence, 284 Or. 547, 588 P.2d 4 (1978).

Donohue's evidence showed the costs incurred in performing the job until Hoffman terminated the contract, with computations showing an additional allowance of 15 percent of the total for overhead and 10 percent for profit. Mr. Donohue testified that the amounts expended were reasonable and were necessary in order to perform the job. Mr. Fleskes testified to the same effect, and also that the percentage allowances for overhead and profit were customary. There was also supporting testimony by Donohue's accountant.

Hoffman argues, however, that there was uncontradicted evidence that at least some of Donohue's extra work was made necessary by its own mistakes, and that Donohue failed to present evidence which would permit the jury to determine which of Donohue's costs were attributable only to the requirements of the job and to causes for which Hoffman was responsible. As a consequence, Hoffman argues, Donohue failed to meet its burden of proof, and the case should not have been submitted to the jury.

We have examined the portions of the record cited by Hoffman in support of this argument and are convinced that with one exception the testimony did not require the jury to believe that Donohue was at fault. The single exception involves an error by Donohue in the preparation of some construction drawings. The evidence cited does not show what, if any, additional work was required as a result of this error. We have not searched the record for other evidence on that question. If, indeed, this error caused some of Donohue's additional costs, and if Donohue failed to prove the amount of those costs so that the jury could deduct that amount from the verdict, Hoffman did not call this lapse in the proof to the trial court's attention. The motion for a directed verdict was on the general ground that there was no evidence that the costs which Donohue proved "were in fact a reasonable value of the work they performed as opposed to just overwork on their own behalf or extra expenditures that they made themselves."

The error in the construction drawings was just one of the many detailed items about which the jury heard evidence over a period of six weeks. Donohue's theory at trial was that it was entitled to recover the reasonable value of all of its work. Proof of total costs was presented, therefore, without an attempt to allocate specific costs to specific parts of the job. Donohue's witnesses testified that such an allocation would be extremely difficult.

We discuss the general question of the proper measure of recovery later in this opinion. Reserving that question, the only issue presented by this assignment of error is whether the trial judge was required to direct a verdict for Hoffman on the entire case on account of a failure of proof, which was never pointed out to him, with respect to this single, apparently minor, episode. He was not.

Hoffman also contends that it is, in any event, entitled to a new trial because of a number of alleged errors in the jury instructions. We consider first those claims of error directed at the instructions describing the permissible grounds for quantum meruit recovery.

Hoffman's position is that by giving certain instructions and by failing to give one requested instruction, the trial court erred in failing to inform the jury that "quantum meruit recovery under theories of radical deviation and seriously burdensome conditions (must be limited) to a case where the parties abandoned the contract." 1 Donohue alleged in its complaint that Hoffman breached the contract in a great many particulars, and that the breaches "obstructed, impeded and delayed Donohue's performance of its work, greatly increasing the cost thereof * * *." The complaint also alleges, in a separate paragraph, that Hoffman wrongfully terminated the subcontract. There is no allegation that the subcontract was abandoned.

The law in Oregon on quantum meruit recovery by a party whose performance has been made substantially more onerous by the breaches of the other party is stated in McDonald v. Supple, 96 Or. 486, 190 P. 315 (1920); in Hayden v. City of Astoria, 74 Or. 525, 145 P. 1072 (1915), and its successor, Hayden v. City of Astoria, 84 Or. 205, 164 P. 729 (1917). Except for dictum in McGrath v. Electrical Const. Co., 230 Or. 295, 364 P.2d 604 (1961), which was specifically withdrawn by the later opinion in that case denying rehearing, 230 Or. 309, 370 P.2d 231 (1962), there appear to be no recent cases on the point.

The facts of the Hayden cases were that plaintiffs had been hired by the City of Astoria to build a storage reservoir dam and clear a reservoir site. The contract stated the amount of materials anticipated to be required in the construction, and also stated a date for completion. However, the defendant city changed the plans and delayed the work, causing plaintiffs extra expense in rendering their performance. We held, in the first Hayden case, that plaintiffs could recover those extra expenses in quantum...

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