Veneto v. McCloskey & Co.

• Decision Date: 18 July 1955
• Citation: 333 Mass. 95,128 N.E.2d 337
• Parties: Joseph A. VENETO v. McCLOSKEY & CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 337

128 N.E.2d 337

333 Mass. 95

Joseph A. VENETO v. McCLOSKEY & CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 6, 7, 1954.

Decided July 18, 1955.

Frank P. Hurley, Boston, for plaintiff.

Francis D. Branca, Boston, (Frank Mulready, Boston, with him), for intervener.

Vincent R. Brogna, Boston (Maxwell McConnell, Boston, and J. Dress Pannell, Harrisburg, Pa., with him), for defendant McCloskey & Co.

Before QUA, C. J., and WILKINS, SPALDING and WILLIAMS, JJ.

SPALDING, Justice.

McCloskey & Co. (hereinafter called McCloskey), a Delaware corporation engaged in the business of erecting buildings and the United States of America entered into a written agreement on February 15, 1950, whereby McCloskey was to construct a one thousand bed Veterans' Administration hospital in Boston for a lump sum of $10,563,000 subject to increase or decrease by virtue of the operation of the unit prices for rock excavation and concrete as set out in the contract. McCloskey and Joseph A. Veneto (hereinafter called Veneto), an earth removal contractor in the Boston area, entered into a written contract on February 15, 1950, whereby Veneto agreed to perform all the work specified in the McCloskey-United States contract with respect to site preparation and demolition; excavation, filling, and backfilling for building construction; excavation, trenching, and backfilling for utilities systems; site grading and excavation, for a lump sum of $157,500 subject to increase or decrease by virtue of the operation of a unit price of $4 per cubic yard for rock excavation as set out in the contract. ¹ Veneto also agreed to furnish a surety bond guaranteeing completion of the work and payment of all bills for material and labor. On February 23, 1950, Veneto as principal and the American Fidelity Company as surety executed a bond for the faithful performance of the contract in the amount of $157,500.

Veneto commenced work under his contract with McCloskey within a few days after its execution, but on March 1, 1950, his power shovel operators were ordered off the job by union officials for the reason that Veneto had no contract with the union and was therefore not an approved contractor. As a result Veneto was forced to stop work. He then made a contract dated March 17, 1950, with J. F. White Contracting Company (hereinafter called White), which had previously been Veneto's subcontractor, whereby White agreed to perform the excavation, filling, and backfilling for building construction; excavation, trenching, and backfilling for utilities system; and site grading and excavation. Veneto agreed to supply all trucks necessary for the work and all the earth fill required for backfilling and grading. White was to be paid the actual net cost of the work plus a profit of ten per cent. The contract further provided for payment to White directly by McCloskey, such payments to be made on or before the fifteenth of each month in an amount equal to the actual net cost shown by White's statement submitted on the twenty-fifth of the preceding month. McCloskey agreed in writing to be bound by the contract, and the surety assented.

This suit arises out of the Veneto-McCloskey contract. McCloskey held Veneto in default of the contract and, after the surety declined to complete performance, McCloskey took possession and completed the work. Veneto alleges that he was improperly defaulted and that money is due him under the contract. McCloskey denies that anything is due Veneto, and counterclaims for the cost of completion of the contract after default. The American Fidelity Company (hereinafter called the surety) was ordered to intervene.

A master, to whom the case was referred, submitted a report. Veneto, the surety, and McCloskey all filed objections to the report. McCloskey and Veneto made motions to recommit to the master, but the court denied the motions. McCloskey appealed from the denial of its motion to recommit. The exceptions to the master's report were overruled and the master's report was confirmed. From the interlocutory decree confirming the report McCloskey and Veneto appealed. A final decree was entered dismissing Veneto's bill with costs, dismissing White's counterclaim (with which we are not concerned since White did not appeal), and ordering Veneto to pay McCloskey on its counterclaim the sum of $133,248.42 and interest in the sum of $24,348.18, or a total of $157,596.60 together with costs. The surety was ordered to pay a like amount. The indebtedness of Veneto and the surety was joint and several. Veneto, McCloskey, and the surety appealed.

Veneto's Appeal.

The master found that Veneto was properly defaulted by McCloskey. This conclusion is amply supported by the subsidiary findings. Article V of the Veneto-McCloskey contract provided that Veneto's failure to make prompt payment for materials or labor furnished for the work or failure to submit satisfactory evidence of payment of all indebtedness included in any previous monthly statement would give McCloskey the right, on two days' written notice to Veneto, to terminate the employment, take possession of the tools and appliances, and complete the work. On June 30, 1950, McCloskey sent a letter to Veneto requesting that he furnish within two days satisfactory evidence of payment of all indebtedness which had been included in any previous monthly statement; the letter further stated that upon Veneto's failure to comply with the request McCloskey would be at liberty to exercise its rights and remedies under the contract. The master found that Veneto never replied and that on June 30 he owed trucking bills amounting to at least $7,344.44 which had been included in previous monthly statements. He made no finding that money was due Veneto from McCloskey at the time the trucking bills were due and payable. (It will appear under the discussion of the surety's appeal that McCloskey may have paid out less than it owed for the cumulative May estimate of Veneto which included White's costs but it does not appear that anything was owed to Veneto.) On July 11, McCloskey sent a letter to Veneto (sending copies to the surety and White) stating that Veneto was in default of his contract for, among other things, having failed to pay for labor, material, and equipment or submit any satisfactory evidence of payment.

Veneto argues the denial of his motion to recommit, but since he took no appeal therefrom the question is not open. Proctor v. Norris, 285 Mass. 161, 164, 188 N.E. 625.

The Surety's Appeal.

The surety in this case appeals essentially on two grounds: first, the contract between Veneto and McCloskey was modified by the increase to $8 of the unit price for excess rock excavation, and secondly, the basis and methods of payment under the contract were materially altered by McCloskey.

The master found that whatever rights the surety had against McCloskey, including such rights as arose out of the terms of the Veneto-McCloskey contract of February 15, 1950, and the White-Veneto contract of March 17, 1950, have never been waived or abandoned. He made no finding as to whether the surety was released from its obligations because of any act of McCloskey. The final decree indicates that the court considered that there was no total release of the surety.

The master found that the Veneto-McCloskey contract was modified on or about May 2, 1950, by McCloskey's increasing the unit price for excess rock excavation from $4 to $8 less certain charges in consideration of Veneto's agreement to excavate rock by a trench rock method rather than a shaft rock method. This finding is challenged by McCloskey. At McCloskey's request the master in his supplemental report summarized the evidence on which this finding was based, as follows: 'Both Harney [Veneto's representative] and * * * [Veneto] testified the $8 offer was made in March, 1950, in connection with taking on White as subcontractor. McCloskey testified it was made on May 2, 1950, because * * * [Veneto] was losing money on rock excavation. Brenner [McCloskey's representative] testified it was made on May 2, 1950, in connection with his refusal to approve the April estimate. Lawry [White's subcontractor for blasting] testified that the trench method was first proposed April 25, 1950; both Brenner and Lawry testified McCloskey & Co. desired the plan adopted, and Lawry testified that it was adopted early in May, 1950, and committed to writing May 10, 1950, as evidenced by the writing of that date.' The writing referred to was one made up by Lawry reducing the plan to excavate trench rock to writing by identifying specific locations where such trench rock would occur and the plan was accepted by Harney at that time.

We are of opinion that the summary of the evidence does not afford a basis for the conclusion that the change in method of blasting was the agreed exchange for the promise of $8. No method of blasting was specified in the contract and Veneto would have been within his rights by employing either or both methods. Thus the fact that he adopted the trench method does not without more indicate that his doing so was consideration for the payment of $8. The promise, therefore, to pay the additional price for rock removal was gratuitous and did not constitute a modification of the contract.

We pass now to the matter of the payments made to Veneto or on his behalf by McCloskey before the default. It is the position of the surety that these payments departed from those prescribed by the contract to an extent sufficient to release it from all liabilities on the bond. The master found that as of May 25, 1950, Veneto had earned no more than $122,781 and, with ten per cent retained by McCloskey, was entitled to $110,502.90. But there had been paid to Veneto and White $141,126.93 for this work, which resulted in an overpayment of $30,624.03. This was computed, at least partially, on a percentage of completion basis. It is...