Conderback, Inc. v. Standard Oil Co. of Cal., Western Operations

• Decision Date: 27 January 1966
• Court: California Court of Appeals Court of Appeals
• Parties: CONDERBACK, INCORPORATED, a California corporation, Plaintiff, Cross-Defendant and Respondent, v. STANDARD OIL COMPANY OF CALIFORNIA, WESTERN OPERATIONS, Inc., a corporation, Defendant, Cross-Complainant and Appellant. Civ. 22563.

Page 901

48 Cal.Rptr. 901

239 Cal.App.2d 664

CONDERBACK, INCORPORATED, a California corporation, Plaintiff, Cross-Defendant and Respondent, v. STANDARD OIL COMPANY OF CALIFORNIA, WESTERN OPERATIONS, Inc., a corporation, Defendant, Cross-Complainant and Appellant.

Civ. 22563.

District Court of Appeal, First District, Division 1, California.

Jan. 27, 1966.

Hearing Denied March 22, 1966.

Pillsbury, Madison & Sutro, Francis R. Kirkham, Thomas E. Haven, Anthony P. Brown, San Francisco, for appellant.

FitzSimmons & Petris, Edward R. FitzSimmons, Roderic Duncan, Oakland, for respondent.

SULLIVAN, Presiding Justice.

Defendant Standard Oil Company of California (Standard) appeals from a judgment entered upon a jury verdict in favor of plaintiff Conderback, Incorporated (Conderback) in the sum of $154,374.45 with interest and costs.

The action was brought to recover the balance allegedly due on a contract for the construction, designing, maintenance and dismantling of Standard's exhibit at the Seattle World's Fair in 1962. There were two jury trials. On defendant's motion, the cause first proceeded to trial on the issues raised by the separate defenses of account stated, accord and satisfaction and compromise and release set forth in defendant's answer and in the cross-complaint. (Code Civ.Proc. § 597.) By their negative answers to two special interrogatories submitted to them, ¹ the jury in substance found that the parties had not agreed between themselves at either of the times therein specified as to what was the total amount then due Conderback. The cause then proceeded to a second trial before a different jury on the main issue dealing with the terms of the agreement entered into by the parties. The jury returned a verdict in favor of Conderback in the amount indicated above. This appeal followed.

At all times here material, Conderback was a California corporation engaged in the business of building advertising exhibits. ² It had been organized in 1957 and had its principal place of business in San Francisco. All of its capital stock was owned by Marinus van der Woert and Edward Railsback, its president and vice-president respectively. Prior to the formation of Conderback, Railsback had been continuously employed in the exhibit business since 1935 and had personally done work for Standard since 1939. Van der Woert had worked in the exhibit display business since 1946 and during that time on exhibits for Standard. Both men had been employees together in the same exhibit building firm and were able to acquire some of the accounts, including that of Standard, when the firm ceased doing business.

From the time they organized Conderback, Railsback and van der Woert had continuous business dealings with the advertising department of Standard, approximately 90 per cent of the time with either M. A. Mattes, the advertising manager, or Jeff Kersh, an employee in the department. From 1960 until it suspended its operations, Conderback did over 300 jobs for Standard's advertising department. Among these were Standard's exhibits at the California State Fair, which Conderback built each year. Railsback considered Standard to be one of Conderback's better accounts. However, prior to the Seattle World's Fair job, the largest job done by Conderback for Standard was at the Portland Centennial involving an expenditure of about $40,000. The Seattle job was ten times larger than any job Conderback had done for anyone.

In their years of working together on more than 300 jobs, there had never been any litigation between Conderback and Standard over the former's billings. According to their customary way of working together, Conderback would 'be notified that there was a job coming up and we had a certain budget to adhere to. We would then come back to the shop and design within this budget and endeavor to hold the budget price that they had given us.' An estimate would be given through the use of a basic formula but at the end of the job an adjustment would usually be made based on the same fomula to take care of changes and additions. ³ This applied to so-called 'time and material' business as distinguished from 'bid' business which was billed at the bid price. There was testimony that Conderback's methods of estimating and billing were discussed with Standard and that the latter was well aware of them. The increase of the markup on subcontracted work (see fn. 3, ante) had also been discussed with Standard who had assured Conderback that this so-called agency markup should and could be used.

The Seattle World's Fair was scheduled to open on April 21, 1962. In the spring of 1961, Railsback and van der Woert met with Mattes, advertising manager of Standard, to discuss the possibility of having Conderback handle Standard's exhibit as the Fair. Mattes inquired as to whether the project was beyond the 'scope' of Conderback and was assured by the latter's representatives that they could handle the job since much of the work would be subcontracted. Mattes was told that because Conderback was a small company and the project was a large one, Conderback would have to bill Standard in advance of any expenditures. Mattes selected Conderback to do the job. There were no other competitive bidders.

During these preliminary discussions Mattes advised Conderback that his depart ment had authority for a budget of $230,000 for the project 'plus a 10 per cent discretionary factor.' ⁴ On July 6, 1961 Conderback wrote to Mattes: 'Confirming our discussions * * * we believe the exhibit as presented, including tentative individual displays, can be constructed, with minor modifications, for the $230,000.00 budget plus the 10% override. ⁵ This letter was signed by both van der Woert and Railsback and underneath said signatures contained the language 'ACCEPTED BY Standard Oil Company of California' with space provided for signature and date. Mattes acknowledged acceptance on the same date. Railsback testified that the letter-contract of July 6, 1961 was entered into on the basis of the budgeted amount. The next day, July 7, 1961, Standard, through Mattes, issued its purchase order to Conderback for 'Century 21 Exhibit--Seattle,' covering exhibit building and displays, but silent as to any specified price. ⁶ At that time there were no plans in existence.

Conderback started work almost immediately. To design Standard's building at the Fair, it retained one Tepper who was to work directly with Railsback and van der Woert, but who soon 'by-passed' them at Mattes' request and worked with the latter who approved the building and all exhibits before Conderback saw them. Conderback also retained an architect and an engineer and entered into a number of subcontracts for the performance of the construction work. The subcontractors billed Conderback for the work done and the latter in turn eventually billed Standard for the same amounts plus a markup for the supervision of the work involved.

The concept of the Century 21 Exhibit as designed within the limits of the initial budget of $230,000 soon started changing and continued to change up to and even after the Fair opened in April 1962. These changes were made principally by Mattes. At first Conderback did not challenge his decisions but finally at the beginning of 1962 the matter 'was so far out of hand that * * * [Conderback] could never catch up,' since it had no control of the budget or the design or the coordination between them. When Railsback raised some question about completing on time the work as modified, Mattes replied 'Let's get the job done, we will worry about that later.'

At about this time--February 1962--the parties realized that the job had already cost more than the initial budget figure of $230,000. Standard thereupon requested from Conderback a written estimate of the total cost of the job. According to Standard's Whitmore, this was required for budgetary reasons. In compliance with the request, Conderback wrote to Standard on February 12, 1962 giving an itemized breakdown of costs and noting that to date there were total authorized expenditures of $307,518.12. ⁷ Standard then requested a firm bid on the amount required to finish the job. In reply Conderback on February 26, 1962 sent Standard 'our firm bid' for the Century 21 Exhibit in the sum of $351,587.20 based on the detailed breakdown furnished in its latter of February 12, 1962. ⁸ Standard accepted and confirmed this 'firm bid' by its letter of March 23, 1962. ⁹

The Fair exhibit opened on time. During the next two months, Standard made several requests for a final billing. On June 15, 1962, Conderback's van der Woert wrote Mattes attaching 'our breakdown sheets covering expenses incurred by our Company to June 1, 1962.' Explaining 'over-budget expenditures,' ¹⁰ Conderback requested an opportunity to meet with Mattes and 'to negotiate the outcome of these expenditures.' 'Actual costs as of 6/1/62' were scheduled at $520,134.17 of which $344,465.31 were noted as 'paid.' Conderback requested payment 'at this time' of $137,405.49, which did not include balance of maintenance costs, dismantling costs or State of Washington Sales Tax.

There ensued a number of meetings between the representatives of the parties. In the meantime Conderback was receiving invoices after June 1--the cutoff date of their June 15 billing. Standard indicated that it was not willing to discuss these latter invoices at the time. On June 30, 1962, Conderback's van der Woert wrote to Mattes attaching 'schedules covering costs * * * to June 1, 1962, maintenance costs for the exhibit to October 26, 1962, and costs incurred during the month of June' but holding in abeyance design fees and sales tax. Total actual costs to June 1, 1962 were therein scheduled at $525,134.17, of which the same amount was noted paid as in the June 15 schedule and $109,762.23 was the 'additional requested.' The parties agreed upon a number of the items for which Conderback...