Golob v. George S. May Intern. Co.

• Decision Date: 27 April 1970
• Docket Number: No. 99--40501--1,99--40501--1
• Citation: 468 P.2d 707,2 Wn.App. 499
• Court: Washington Court of Appeals
• Parties: J. Richard GOLOB and Barbara Golob, husband and wife, Donald R. Golob, and Ann Golob, husband and wife, and Pearl M. Golob, a widow, co-partners d/b/a Golob & Sons, Respondents, v. GEORGE S. MAY INTERNATIONAL COMPANY, a corporation, Appellant.

Page 499

2 Wn.App. 499

468 P.2d 707

J. Richard GOLOB and Barbara Golob, husband and wife, Donald R. Golob, and Ann Golob, husband and wife, and Pearl M. Golob, a widow, co-partners d/b/a Golob & Sons, Respondents, v. GEORGE S. MAY INTERNATIONAL COMPANY, a corporation, Appellant.

No. 99--40501--1.

Court of Appeals of Washington, Division 1, Panel Two.

April 27, 1970.

Gavin, Robinson, Kendrick, Redman & Mays, Robert R. Redman, Yakima, for appellant.

Boose & Garrison, Robert K. Garrison, Sunnyside, for respondents.

HOROWITZ, Acting Chief Judge.

Plaintiffs were awarded damages for breach of contract in an action tried by the court below sitting without a jury. Defendant appeals, its assignments of error raising basically the question as to the proper measure of recovery.

The evidence supports the following statement of the case. Plaintiffs are engaged in extensive farming and cattle feeding business in Yakima County. Their annual sales are about two million dollars. Between 1961 and 1964 the venture failed to show profits commensurate with the investment. At best, the venture was breaking even.

Defendant, a national management consultant firm, persuaded the plaintiffs to utilize defendant's management consulting services for the purpose of improving the efficiency and profit level of the plaintiffs' business. Along other things, defendant represented that the plaintiffs' business should be returning 'a 5% Minimum return on their sales' and defendant proposed to help plaintiffs achieve that return by making management recommendations. Plaintiff Richard Golob testified that defendant's representative, Mr. Hess, 'simply represented the company as being very adequately capable or competent in the agriculture and cattle-feeding field * * *. Mr. Hess allayed any fears that the George S. May Company would not be capable of analyzing our business.' Defendant's executive secretary testified that defendant tended to specialize in small to medium sized business areas and that 'The May Company occupies a little bit of a unique position in the management consultant field * * *.' He further testified that they 'would be peculiarly able to do a study of a kind that was undertaken here as distinguished from some other firm * * *' explaining that that was so 'from the standpoint of experience.'

After a preliminary survey in August, 1966, for which plaintiffs paid defendant, the parties executed a contract about September 20, 1966. By the terms of that contract, plaintiffs agreed to pay defendant at the rate of $33 per hour to a limit of 220 hours, plus or minus 10 per cent leeway, and to pay their own stenographic expenses, and defendant, in turn, promised to perform specialized management advisory services which are described in general terms in the contract but are detailed in a so-called 'Job Manual' delivered to the plaintiffs. The detailed services so described are listed in the margin below. ¹

Defendant's representatives worked on the plaintiffs' premises from September 20 to October 8, 1966, spending 247 manhours analyzing plaintiffs' business operation, consulting with the plaintiffs, transmitting various reports and data to and from the defendant's San Francisco offices, and submitting various recommendations to them. Defendant's representatives informed plaintiffs that defendant's San Francisco offices were cooperating and participating in the work undertaken. Defendant billed plaintiffs currently and in anticipation of complete performance, plaintiffs paid billings in the total sum of $7,600 and further paid the sum of $119.12 for typing services which under the terms of the contract they were required to pay. On October 8, 1966, the last of defendant's representatives left the Yakima area and did not thereafter return to the plaintiffs' place of business.

By October 8, 1966, the defendant had compiled a Job Manual for the possession and use of the plaintiffs. This manual consisted of three progress reports, a series of specific recommendations considered of a minor and subordinate nature, most of which were accepted and approved by the plaintiffs, and certain suggested forms for use in the conduct of plaintiffs' business. The defendant's performance produced some information concerning certain of the nine described services to be rendered as described in the Job Manual, but there was no performance whatsoever with respect to the important Job Manual items 3, 4, 5 and 9.

On October 7, 1966, plaintiffs called to the attention of the defendant's representatives the nature of work yet to be done. Plaintiffs were then furnished a written memorandum of the unperformed work, substantial in nature, and performance of that work was promised within one week. The promised work was not performed and plaintiffs' repeated calls to the defendant concerning the matter were not answered. There was testimony from the plaintiffs, and particularly from the plaintiff, Richard Golob, that because the defendant's work was never completed 'it's valuless to us.' The trial court found that the contract

was performed in part but that at the conclusion of Defendant's performance, the contract remained unperformed to a substantial degree; that said contract is an undivisible contract and the portions thereof not performed render the partial performance of the Defendant Worthless to the plaintiffs. (Italics ours.)

In his memorandum decision, after analyzing the defendant's part performance, the court indicated the sense in which he used the word 'worthless.'

This work would, of necessity, have had to go on from the very beginning and perhaps to different conclusions, but nonetheless the same thinking and investigating processes would have had to be started all over again and done to completion. While there is no testimony as to the value of such service by another agency, * * * we are requesting of the plaintiff that they do a useless act.

Defendant appeals, contending, first, that the court erred in overruling defendant's objection to the following question and answer:

Q Now, Mr. Frame, we also went into the question as to whether or not the job was complete and whether or not it could be completed, and I would ask you at this time in that same context and in light of Mr. Redman's question, would it be practical for Golob & Sons to get a firm to complete this particular job as outlined and proposed by the May Company?

A Theoretically, it could be completed. From the practical standpoint, I don't believe that it could be by another firm who does not know and understand the particular objectives that the George S. May people had in mind of what they were definitely going to do. An outside firm doing it now would come in and take a new look and probably start out all over again.

Defendant objects to the evidence on the ground that it is irrelevant and immaterial to the claimed applicable measure of damages; namely, the reasonable cost of completing performance of the contract. For the reasons we next discuss, we are of the opinion that the trial court did not err in receiving evidence objected to and that the court applied the proper measure of recovery.

The contract between the parties called for services from the defendant involving business judgment informed by experience. Defendant does not claim that the instant contract was a severable contract with consideration apportioned. The contract here was properly treated as an entire contract, to accomplish nine types of services for an entire maximum price based upon the number of hours involved. The nine types of services to be performed were part of an interdependent whole, having as their ultimate common purpose the rendition of recommendations from an expert that would improve the profit level of the plaintiffs' business. Unless the defendant made the recommendations promised, the defendant would substantially fail to perform its contract. The court found that the 'contract remained unperformed to a substantial degree.' See Kramer v. Zappone, 53 Wash.2d 115, 330 P.2d 1072 (1958) and Saletic v. Stamnes, 51 Wash.2d 696, 321 P.2d 547 (1958). Defendant does not contend that it did not breach the contract nor does it claim that the breach was justified or excused. Its basic claim is that plaintiffs are not entitled to recover at all for failure to prove recoverable damages for breach of contract.

In our opinion the court below applied the correct measure of damages whether the action and evidence below be considered one for recovery of damages for substantial breach of contract or one for restitution. ² In the former action, the aggrieved party affirms the contract and seeks recovery for the monetary value of substituted performance to the extent unperformed; I.e., the reasonable cost of performance elsewhere when the contract is executed. ³ He wishes to place himself in as substantially as good a position as if the contract had been fully performed. ⁴ If the as a practical matter such that it has to be as a practical atter such that it has to be done all over again, then, in effect, the defendant has failed to perform at all and the aggrieved party seeking recovery for the monetary value of substituted performance must again pay the price of complete performance. Here, the testimony objected to was accepted by the trial court as establishing the fact that the part performance under the kind of contract here involved was such that it was worthless in the sense that the work would have been done all over again. ⁵ True, aside from the contract price and the payments made pursuant to the contract, there was no separate evidence of the cost of substituted complete performance. However, the contract price of the contract entered into approximately 18 days before the defendant's breach, prima facie established that cost ⁶ and evidence of the plaintiffs' advance payment in full and of payment in full of stenographic expenses required to be paid by the plaintiffs under the terms...