Nolop v. Spettel

• Decision Date: 08 June 1954
• Citation: 267 Wis. 245,64 N.W.2d 859
• Parties: NOLOP, v. SPETTEL.
• Court: Wisconsin Supreme Court

Page 859

64 N.W.2d 859

267 Wis. 245

NOLOP, v. SPETTEL.

Supreme Court of Wisconsin.

June 8, 1954.

Action commenced May 24, 1952, by Osborne Nolop, d/b/a Nolop Construction Company, against Mark Spettel, to recover money allegedly due for the construction, under a cost-plus contract, of a dwelling house and garage. A reference was ordered, and the matter was heard before the referee. Upon motion, judgment in favor of the plaintiff was entered December 28, 1953, confirming the referee's report. Judgment was for $756.82, with interest from April 28, 1952. Defendant had offered judgment in plaintiff's favor for the sum of $585. This offer was rejected. Defendant appeals. The material facts will be stated in the opinion.

Johns, Roraff, Pappas & Flaherty, La Crosse, for appellant.

Hale, Skemp, Nietsch, Hanson & Schnurrer, La Crosse, for respondent.

FAIRCHILD, Chief Justice.

Although there was never a written contract between the parties to this action, it is stipulated that they agreed to be bound by a written contract that had existed between the respondent and one Doctor Hulick, the pertinent portions of which contract follow:

'2. The owner agrees and covenants with the contractor to pay or cause to be paid to the contractor for the work performed, and the materials furnished by the contractor as follows:

'The actual net cost to the contractor of the materials actually furnished and labor and cartage actually performed by him hereunder on and for said building, plus a profit of 10%.

'The term actual net cost shall include the following:

'(a) The cost of all labor furnished;

'(b) The actual net cost of all materials purchased as shown by the original invoices;

'(c) The expense incurred by the contractor for cartage of all supplies and other expenses incidental to the erection of the building;

'(d) The cost of rental of any equipment which the contractor deems necessary or beneficial in the erection of the building;

'(e) The cost of insurance including workmen's compensation expended by the contractor in the erection of the building, except sub-contracts.

'3. The owner is to make payments to the contractor * * * to be based upon a detailed itemized statement supported by invoices showing the net cost of materials delivered to the building site, materials actually installed in the building, the cost of cartage, the expenditure of labor, * * *'

'4. The contractor agrees to keep accurate records and books of account showing the cost of the work performed and materials furnished. * * *

'5. The contractor agrees that in consideration of the services performed by him that the sum hereinbefore agreed to be paid to him as contractor shall be full and complete compensation for the services to be performed by the contractor, it being the understanding between the parties that the contractor shall received 10% of the total cost of the erection of the building as compensation for his services.'

During the progress of the construction of the buildings statements showing various charges for labor at an hourly rate were submitted to appellant. The evidence shows that appellant was under the impression that all of the charges made by respondent for labor were the amounts actually paid in wages at the rates claimed; and that appellant continued to make payments without objection until the residence was substantially completed, at which time he learned from one of the painters that the rate per hour charged for his services to appellant was higher than the rate actually paid him by respondent. Appellant, then unwilling to pay the balance claimed by respondent, insisted that an accounting be had. An action was begun, and an adverse examination of respondent was had in May 1953. Then for the first time appellant learned what respondent had in fact paid his employees. The items claimed by respondent were reviewed in detail before a referee, and some of the items were disallowed. The referee made his findings of fact and concluded that appellant was indebted to respondent in the sum of $756.82, with interest from April 28, 1952. The circuit court confirmed the referee's report and ordered judgment accordingly.

The first contention of the respondent, that appellant, by his actions in failing to complain to the contractor and in making payments on the contract and ordering new work to be done, waived any objections to any alleged overcharges or methods of computations, cannot be sustained. The great weight and clear preponderance of evidence does not permit of a finding that appellant, at the time he made those payments, was apprised that the rates per hour and the totals for labor set forth in statements presented to him by respondent included overcharges to cover an excess of incidentals or overhead. He did not learn that he was being so charged until the building was substantially completed. 'A waiver is the intentional relinquishment of a known right.' Swedish American National Bank of Minneapolis v. Koebernick, 136 Wis. 473, 479, 117 N.W. 1020, 1023. 'Since an intention to relinquish an existing right or advantage is generally regarded as an essential of a waiver, it follows that it must be shown by the party claiming a waiver that the person against whom the waiver is asserted had at the time knowledge, actual or constructive, of the existence of his rights or of the facts upon which they depended. Ignorance of a material fact negatives a waiver. Waiver cannot be established by a consent given to a mistake of fact.' 56 Am.Jur. p. 114, sec. 14. At no time did the respondent inform appellant as to what he in fact was paying his men; appellant had no knowledge of the overcharge at the time he paid the bills presented to him; therefore no waiver existed.

Respondent's second contention, that labor includes items other than wages, is an unwarranted interpretation of the contract. He has taken the provision under subparagraph (c) of the contract allowing him 'other expenses incidental to the erection of the building' and treated it as if it were part of (a) which refers to 'the cost of all labor furnished'; then he has insisted that it be included as overhead. Using this method of computation, respondent has billed appellant for labor an amount per laborer greater than the actual amount paid out per laborer in wages.

The contract in question is a cost-plus contract. It provides separately for a profit of 10% to be realized by the contractor on the cost of the erection of the building. The term 'actual cost' governs the entire contract and applies to each of the sub-items, i. e., labor, material, cartage, incidental expenses, rental equipment, and insurance and workmen's compensation. Further, payment by appellant for all of these separate items is subject to their being actually furnished or actually performed on and for said building, as stipulated in the second paragraph of the Dr. Hulick contract.

A review of available cases on cost-plus contracts and analogous cases requires the recognition of the general rules which are to be applied to the instant case. In one of the leading cases on this subject, it is said: 'The term 'overhead'--including the salaries of executive or administrative officials, interest charges for floating bonds, carrying charges, depreciation, taxes, and the general office expenses as here claimed--cannot be allowed as an operating charge in 'cost-plus' contracts. To do so would open the doors to a flood of obligations not intended by the innocent words used in a contract such as the one before us. The term 'time and material basis' was intended to include the necessary cost of operation affecting the particular undertaking, the cost of labor and materials that went into and became part of the finished product; each outlay thus expended must be included. To this there was to be added a profit of 10 per cent. This latter item was intended to take care of that proportionate share of overhead charges included in the company's 'overhead,' or general expense, discussed above, as this contract related to plaintiff's general contracts, and, unless expressly written into the contract by defining exactly the overhead intended to be covered, the words 'time and material,' and like expressions, will not include overhead charges, but refer solely to the wages and salaries of the men engaged in the particular work contracted for and the actual cost of the materials furnished. The words will not be extended beyond their exact meaning, and indeed they should be given a restricted meaning. At least they should be considered in the sense in which they are popularly understood. One thus contracting engages to furnish and keep in condition the tools and necessary equipment to do the work.' Lytle, Campbell, & Co. v. Somers, Fitler & Todd Co., 276 Pa. 409, 120 A. 409, 411, 27 A.L.R. 41. (Emphasis supplied). In the case of The Spica, 2 Cir., 289 F. 436, 446, the contract specifically provided for 'cost to include overhead', and there the court said: 'It is true that in a certain sense cost includes overhead, but by this contract libelant agreed in effect to charge for such a laborer what was actually paid the man plus a reasonable overhead * * *. That meant, among other things, that it was necessary to prove the overhead.' In that case, the court gave an illustration to show the divergence between what libelant asserted and tried to prove and what the evidence showed it contracted to do: 'Capt. Figari complained that one of the items in the bill was a charge for the labor of certain men at $10.60 per day of 8 hours, when the amount actually paid each man was 82 cents an hour or $6.56. Such a charge obviously contains both overhead and profit.' In Shaw v. G. B. Beaumont Co., 88 N.J.Eq. 333, 102 A. 151, 153, 2 A.L.R. 122, it is said: 'A contractor, when he agrees to build, must, in the absence of a contrary agreement, furnish all the tools and necessary appliances for the work contracted to be done.' See also Marion...