Consolidated Electric Co. v. United States, 19553.

• Decision Date: 18 January 1966
• Docket Number: No. 19553.,19553.
• Citation: 355 F.2d 437
• Parties: CONSOLIDATED ELECTRIC CO., et al., Appellants, v. UNITED STATES of America for Use and Benefit of GOUGH INDUSTRIES, INC., Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

355 F.2d 437 (1966)

CONSOLIDATED ELECTRIC CO., et al., Appellants, v. UNITED STATES of America for Use and Benefit of GOUGH INDUSTRIES, INC., Appellee.

No. 19553.

United States Court of Appeals Ninth Circuit.

January 18, 1966.

Robert M. Peterson, of Newton & Irvin, Los Angeles, Cal., for appellants.

Ralph W. Hoffman, of Behymer, Hoffman & Hunt, Los Angeles, Cal., for appellees.

Before JERTBERG and ELY, Circuit Judges, and POWELL, District Judge.

ELY, Circuit Judge.

In this Miller Act (40 U.S.C. §§ 270a-270d (1964)) case, the prime contractor and his surety appeal from a summary judgment granted by the District Court against them and a subcontractor and in favor of one who supplied material to the subcontractor. The subcontractor, Consolidated Electric Company, did not appeal.

Jacob J. Peretz, doing business as Peretz Construction Co., entered into a contract with the United States. Under the terms of this prime contract, Peretz agreed to furnish the necessary labor and materials to pursue and complete construction on what is known as the Animal Laboratory at the Veterans' Administration Center, Los Angeles, California. In accordance with the requirements of the contract and with the provisions of the Miller Act, Peretz and Standard Accident Insurance Company, as surety, executed and delivered to the Veterans' Administration a bond in the amount of $203,300.00. The condition of the bond was that Peretz promptly pay all who supplied him with labor or materials in the prosecution of the work contemplated by the contract and any authorized extension or modification thereof.

Peretz contracted with Consolidated Electric Company for the latter to furnish labor and material for all of the electrical work necessary to complete the project. Consolidated then entered into an oral agreement under which Gough Industries, Inc., was to furnish certain electrical materials, and it was agreed that the total price for such items should be $40,039.99. Gough alleged that it furnished the materials, that only $36.22 was paid on the account, that $601.10 in credit memos had been issued by Gough, and that there remained an unpaid balance of $39,402.67. Consolidated is in the hands of an assignee for the benefit of creditors, and the United States, for the use and benefit of Gough, brought suit against Consolidated, Peretz and Peretz's surety. The District Court granted a summary judgment for the entire amount of the prayer plus costs.

Summary judgment has been described as a "drastic remedy". 3 Barron & Holtzoff, Federal Practice and Procedure § 1231 (Wright ed.), quoted in Hoffman v. Babbit Bros. Trading Co., 203 F.2d 636, 638 n. 1 (9th Cir. 1953). It should be rendered, upon motion, only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). If, viewing the evidence as a whole and the inferences which may be drawn therefrom in the light most favorable to the party opposing the motion, we can see that there is no genuine issue of fact, then the granting of a motion for summary judgment should be sustained. United States ex rel. Austin v. Western Elec. Co., 337 F.2d 568, 575 (9th Cir. 1964); see generally Wright, Federal Courts § 99 (1963). When an issue requires determination of state of mind, it is unusual that disposition may be made by summary judgment. See Alabama Great So. R. R. v. Louisville & N. R. R., 224 F.2d 1, 5, 50 A.L.R.2d 1302 (5th Cir. 1955). It is important, and ordinarily essential, that the trier of fact be afforded the opportunity to observe the demeanor, during direct and crossexamination, of a witness whose subjective motive is at issue.

Appellants here contend that genuine undetermined issues of fact include the following: (1) whether Consolidated had actually paid for all or part of the material furnished by Gough; (2) whether Gough and Consolidated fraudulently applied funds received from Peretz to charges on other jobs, including one described as the "Economy Blueprint Job", and overpaid such accounts so as to avoid crediting the Peretz account job and to collect the money a second time by recovery in the present suit; (3) whether Gough knew or had reason to know that Peretz was the source of all or a portion of the funds paid to it by Consolidated and whether Gough is thereby bound to apply such payments to the Peretz job account.

We now look to the facts as they are shown by affidavits and deposition testimony offered in support of and in opposition to appellee's motion for summary judgment.

During the period of construction Peretz paid Consolidated $69,800.00. During this same period Consolidated paid $39,811.99 to Gough. Gough's books show that only $36.22 of the amount received from Consolidated was credited to the Peretz job, and Consolidated's books do not reflect that any of the amounts were to be applied to the Peretz job.

Consolidated's records of purchases from Gough for the "Economy Blueprint Job" reveal that it had purchased supplies valued at $19,407.86 from Gough for that job. The check record, however, indicates that Consolidated paid Gough $21,699.55, an overpayment of $2,291.69 on the "Economy Blueprint Job", and that the prime contractor for that project paid Gough an additional $7,024.31. Thus, there was an apparent overpayment of $9,316.00 for supplies furnished by Gough to Consolidated for the "Economy Blueprint Job". The credit manager of Gough, one Carnahan, testified in his deposition that, as a general rule, the allocation of cost of labor and material to a job by a contractor such as Consolidated would be fifty percent to labor and fifty percent to materials. One Haggard, the president of Consolidated, testified that the allocation usually runs forty percent to labor and sixty percent to materials. Yet on the "Economy Blueprint Job" the total actual billing by Consolidated to the prime contractor was $31,701.46 for both labor and material, and Gough was paid $28,723.80 for materials only, more than ninety and...