U.S. for Use and Ben. of A. V. DeBlasio Const., Inc. v. Mountain States Const. Co.
| Decision Date | 26 October 1978 |
| Docket Number | 77-1167,Nos. 77-1112,s. 77-1112 |
| Citation | 588 F.2d 259 |
| Parties | 25 Cont.Cas.Fed. (CCH) 83,002, 3 Fed. R. Evid. Serv. 1342 UNITED STATES of America, for the Use and Benefit of A. V. DeBLASIO CONSTRUCTION, INC., Plaintiff-Appellee, v. MOUNTAIN STATES CONSTRUCTION CO. et al., Defendants-Appellants, and MOUNTAIN STATES CONSTRUCTION CO. et al., Third Party Plaintiffs-Appellants, v. UNITED PACIFIC INSURANCE CO., Third Party Plaintiff-Appellant, v. A. V. DeBLASIO and Jean DeBlasio, his wife, and the martial community composedof them, Third Party Defendants-Appellees. UNITED STATES of America, etc., Plaintiff-Appellants, v. MOUNTAIN STATES CONSTRUCTION COMPANY et al., Defendants-Appellees, and MOUNTAIN STATES CONSTRUCTION CO. et al., Third Party Plaintiffs-Appellees, v. UNITED PACIFIC INSURANCE CO., Third Party Plaintiff-Appellee, v. A. V. DeBLASIO and Jean DeBlasio, etc., Third Party Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Lyle L. Iversen (argued), Lycette, Diamond & Sylvester, Seattle, Wash., for defendants-appellants.
William B. Moore (argued), Ferguson & Burdell, Seattle, Wash., for plaintiff-appellee.
Appeal from the United States District Court for the Eastern District of Washington.
Before DUNIWAY and CHOY, Circuit Judges, and GRANT, * District Judge.
A. V. DeBlasio Construction, Inc., appeals from a judgment awarding it damages for breach of contract under the Miller Act, 40 U.S.C. § 270a et seq., against its contractor, Mountain States Construction Company. DeBlasio contends that damages were improperly limited. Mountain States cross-appeals, claiming that the court improperly rejected various setoffs against DeBlasio. We affirm the judgment of the district court, except for its denial of prejudgment interest, as to which we reverse and remand.
Mountain States contracted with the Bureau of Reclamation to construct irrigation pipelines in the state of Washington. Mountain States subcontracted to DeBlasio the performance of certain excavation work. The Bureau of Reclamation reserved the right to inspect the work to ensure compliance with government specifications.
During construction, friction developed between DeBlasio and Mountain States, each charging the other with failure to comply with contractual duties. Mountain States contended that DeBlasio's performance did not meet government requirements and that DeBlasio had violated government safety standards. On June 25, 1973, Mountain States informed DeBlasio that if DeBlasio did not perform to Mountain States' satisfaction, Mountain States would invoke a contractual provision allegedly allowing the contractor to take over the subcontractor's performance at the subcontractor's expense.
Though DeBlasio made some effort to comply with Mountain States' ultimatum, on July 3, 1973, Mountain States took over DeBlasio's work. Mountain States also suspended payments to DeBlasio.
DeBlasio filed suit against Mountain States and its sureties, alleging breach of subcontracts and seeking recovery for work performed and materials and equipment supplied. Mountain States and its sureties counterclaimed and filed third party complaints against DeBlasio and its surety, claiming that DeBlasio had breached the subcontracts.
The cause was heard by the Honorable Charles L. Powell. Because Judge Powell died before rendering a decision, the parties stipulated to trial on the written record before a different judge. The Honorable Eugene A. Wright made findings of fact and conclusions of law and rendered judgment. Judge Wright found that written subcontracts existed which had been breached. He stated that while both parties were to blame for the dissension which resulted in termination of the contract, Mountain States' termination of DeBlasio was "wholly arbitrary." The court therefore gave judgment in favor of DeBlasio, granting compensation for work completed prior to termination according to the contract rate. Prejudgment interest on this sum was not allowed. The court also dismissed with prejudice the counterclaims and third party complaints. From this judgment, both parties appeal.
In awarding damages to DeBlasio, the court limited recovery to the rates set in the subcontracts. DeBlasio contends that recovery in Quantum meruit according to the reasonable value of its performance should be allowed, even in excess of the contract rate.
This claim must be rejected. 1 Typically the Washington state courts measure damages for breach of contract according to the contract rate, which reflects the parties' expectations as to the value of performance. Diedrick v. School District 81, 87 Wash.2d 598, 610, 555 P.2d 825, 833 (1976). This is the general rule of contract law. Restatement of Contracts § 346(2), Comment d, Illustration 8 (1932). Recovery in quantum meruit is appropriate when the breaching party has been unjustly enriched through wrongful conduct. It may also be appropriate when the party aggrieved has been induced to perform to the breacher's benefit beyond the scope of the contract. For example, applying Washington law this court allowed recovery in Quantum meruit against a contractor who had willfully breached a contract and had intentionally induced the subcontractor to continue to perform and even to take over some of the contractor's duties. Continental Casualty Co. v. Schaefer,173 F.2d 5, 8 (9th Cir.), Cert. denied, 337 U.S. 940, 69 S.Ct. 1517, 93 L.Ed. 1745 (1949). The Schaefer court relied upon a Washington Supreme Court decision allowing recovery in Quantum meruit to deprive a tortfeasor of its wrongful gains. Olwell v. Nye & Nissen Co., 26 Wash.2d 282, 286-87, 173 P.2d 652, 654 (1946).
In the instant case the court did not find that Mountain States had acted tortiously. Nor did it find that Mountain States had intentionally induced DeBlasio to perform beyond the scope of the contract. 2 Instead the court found that DeBlasio had fulfilled some of its contractual obligations, thereby entitling it to the compensation agreed upon by the parties. And given DeBlasio's share of some responsibility, though slight, for termination of the contract, it would be particularly unjust to allow DeBlasio to recover more than it had accepted in the contract. 3
Although the subcontract between Mountain States and DeBlasio allowed reasonable attorneys' fees for the prevailing party in litigation, the court refused to award fees to DeBlasio. DeBlasio challenges this ruling.
The court acted within its discretion. In seeking attorneys' fees, DeBlasio asked the court to enforce part of the very contract for whose termination DeBlasio was partly at fault. The court in its discretion could conclude that allowing attorneys' fees when both parties had acted improperly would be inequitable and unreasonable. Cf. 11 Williston on Contracts § 1418 at 656-59 (3rd ed. 1968). 4
DeBlasio contends that the trial judge committed error in refusing to admit certain evidence about lost profits. DeBlasio claims that the evidence would prove that Mountain States' termination hampered DeBlasio in obtaining bonds required for public work, causing a loss in public contracts.
Though lost profits may comprise an element of contract damages, the trial judge has discretion to refuse such damages and evidence thereon when the alleged loss cannot be proved adequately and remains speculative. See Magna Weld Sales Co. v. Magna Alloys & Research Pty. Ltd., 545 F.2d 668, 672 (9th Cir. 1976) (applying Washington law); 11 Williston, supra at § 1345. Such evidentiary rulings are particularly within the competence of the trial judge. Magna Weld Sales Co., 545 F.2d at 672.
Particularly in view of the attenuated chain of causation alleged, the trial judge below did not abuse his discretion in rejecting the profferred testimony as too speculative. Fed.R.Evid. 403. Nor did he abuse his discretion in determining that the offered evidence was not even probative as to lost profits. Fed.R.Evid. 402. We cannot say that the trial judge erred.
The court did not award prejudgment interest to DeBlasio for monies owed on the contract. We agree with DeBlasio that such interest should have been awarded. We reverse and remand on this issue.
The Washington state courts have held that a successful plaintiff in a contract dispute is entitled to prejudgment interest for amounts found owing when that amount is objectively "determinable by computation with reference to a fixed standard contained in the contract, without reliance upon opinion or discretion." Mall Tool Co. v. Far West Equipment Co., 45 Wash.2d 158, 176, 273 P.2d 652, 663 (1954) (emphasis omitted); See Westinghouse Electric Corp. v. CX Processing Laboratories, Inc., 523 F.2d 668, 679 (9th Cir. 1975) (applying Washington law); Vermette v. Andersen, 16 Wash.App. 466, 472, 558 P.2d 258, 262-63 (1976). This is the general rule of contract law. Restatement of Contracts § 337(a), Comments e & g. Prejudgment interest has not been allowed when damages could be determined only after a hearing on subjective questions like the reasonable value of services or the earning capacity and qualifications of a discharged employee. Dravo Corp. v. L. W. Moses Co., 6 Wash.App. 74, 92, 492 P.2d 1058, 1070 (1971); Lloyd v. American Can Co., 128 Wash. 298, 314-15, 222 P. 876, 882 (1924).
Here, the court calculated damages according to the rates provided in the subcontracts. Having rejected the Quantum meruit measure of recovery, it did not have to make findings about reasonable value. Because the damages constituted a liquidated figure which could be computed objectively from the contract rates, prejudgment interest should have been awarded. Accordingly, we reverse and remand to the district court to award prejudgment interest.
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