W. G. Cornell Co. of Washington, D. C. v. Ceramic Coating Co., Inc.

• Decision Date: 17 March 1980
• Docket Number: 79-1041,Nos. 79-1039,s. 79-1039
• Citation: 626 F.2d 990,200 U.S. App. D.C. 126
• Parties: W. G. CORNELL COMPANY OF WASHINGTON, D. C. v. CERAMIC COATING COMPANY, INC., Appellant. W. G. CORNELL COMPANY OF WASHINGTON, D. C., Appellant v. CERAMIC COATING COMPANY, INC.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 990

626 F.2d 990

200 U.S.App.D.C. 126

W. G. CORNELL COMPANY OF WASHINGTON, D. C. v. CERAMIC COATING COMPANY, INC., Appellant.

W. G. CORNELL COMPANY OF WASHINGTON, D. C., Appellant v. CERAMIC COATING COMPANY, INC.

Nos. 79-1039, 79-1041.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 10, 1979.

Decided March 17, 1980.

Joel M. Finkelstein, Washington, D. C., with whom Peter B. Krauser, Washington, D. C., was on brief, for appellant in No. 79-1039 and appellee in No. 79-1041.

Jack Rephan, Washington, D. C., with whom Herman M. Braude, Washington, D. C., was on brief, for appellee in No. 79-1039 and cross-appellant in No. 79-1041.

Also Charles W. Bills, Washington, D. C., entered an appearance for appellant in No. 79-1039 and appellee in No. 79-1041.

Before TAMM and MIKVA, Circuit Judges, and GREENE, ^* United States District Judge for the District of Columbia.

Opinion for the Court PER CURIAM.

PER CURIAM:

This is an appeal from a decision of the district court in a breach of contract and warranties case. We affirm the district court on the issue of liability but remand certain portions of the damage award for entry of judgment in accordance with this opinion.

I. FACTS

Ceramic Coating Co., Inc. (Ceramic) is a Kentucky corporation engaged in the business of lining metal pipe with glass-like coatings which reduce friction in the pipe's interior. W. G. Cornell Co., Inc. (Cornell), a Maryland corporation, brought suit in the district court against Ceramic on the basis of diversity jurisdiction seeking damages for breach of contract and breach of express and implied warranties in connection with Cornell's purchase of some glass-lined ductile iron pipe from Ceramic. The pipe was purchased for installation by Cornell in two related projects at the Blue Plains water purification plant in Washington, D.C.

Installation of the pipe supplied by Ceramic began on the first project in late 1972 and was completed in 1974. However, the installation was not tested at that time pursuant to an understanding with the District of Columbia that the system could only be properly tested after the related project was completed. This was accomplished in May, 1975 and testing was commenced. That portion of the system constructed with normal cement-lined pipe was found to operate satisfactorily. The other portion, consisting of Ceramic's pipe, was found to be leaking from bolt holes located on the flanges.

An examination of the pipe revealed that the flange faces were warped, creating a cup effect around the 1/16 gasket used by Cornell to install the pipe. Cornell replaced the 1/16 gaskets with a 1/8 size; this process consumed approximately six months. When the system was next tested, the bolt-hole leakage had ceased, but there were new leaks from the pipe threads, particularly in the large diameter pipes. Cornell was eventually able to stop this leakage by application of an epoxy. With the District of Columbia's agreement to reduce the pressure requirements specified in the contract, the system finally passed inspection one year after the scheduled system completion date.

II. LIABILITY

The district court found that the pipe was properly installed by Cornell and that the leakage was caused by warpage of the flange faces which prevented sufficient pressure from being put on the gaskets. The court further found that Ceramic was aware of the possibility of warpage resulting from the heating and cooling process used to apply the glass lining to the pipe, and of the tendency of the process to embrittle the pre-applied sealant which otherwise would have acted as a safeguard against leakage. The district court thus concluded that Ceramic breached the contract and certain implied and express warranties ¹ in that the pipe failed to meet the performance specifications in the contract. Based upon our examination of the trial record we cannot say that these findings are so clearly erroneous as to justify reversal. We thus affirm the district court's holding as to liability.

III. DAMAGES

The trial court awarded actual, incidental and consequential damages to Cornell in the amount of $190,290.96, off-set by $23,089.74 which the court found still owing to Ceramic under the contract, resulting in a net award to Cornell of $167,201.22. This figure includes, inter alia, $65,409.30 to cover the costs of keeping a job superintendent and foreman assigned to the Blue Plains project during the one year delay in completing installation of the pipes; $34,172.36 for clean-up costs after the job was completed; and $43,510.39 for the fair rental value of machinery and equipment forced into idleness at the job site. The trial court refused, however, to award Cornell an additional $122,002.13 for overhead allocable to the project during the one-year delay. We will discuss these elements of the damage award in turn.

A. Labor Costs

In support of its claim for the cost of keeping a superintendent and foreman on the payroll during the delay period, Cornell presented testimony that these employees were necessary because they were familiar with the projects and would be needed once the repairs were completed to put the system into operation. Ceramic urges, however, that Cornell failed to prove that it could not have mitigated these damages by retraining other employees or finding other temporary work for these employees.

It is well established that the burden of proving damages could have been mitigated falls on the party who breached the contract. 5 A. Corbin, Contracts § 1039 (1963), Jackson v. Wheatley School District, 464 F.2d 411 (8th Cir. 1972) (Wrongfully terminated employee does not have burden of showing he couldn't take another job so as to mitigate his damages); Hardwick v. Dravo Equipment Co., 279 Or. 619, 569 P.2d 588 (1977). Having failed to carry this burden, or even raise the question at trial, Ceramic cannot now claim that the award was improper for failure to mitigate.

B. Clean-Up Costs

Cornell's claim for clean-up costs is based solely on the evidence presented by one witness who testified as to the total amount expended on clean-up. However, this witness stated that he did not know what portion of these costs was attributable to the delay caused by the defective pipes. In fact, the trial judge specifically suggested that Cornell present another witness who could testify as to the allocation. This Cornell failed to do.

It is clear in contract law that a plaintiff is not required to prove the amount of his damages precisely; however the fact of damage and a reasonable estimate must be established. 5 A. Corbin, Contracts § 1020 (1964); Restatement of Contracts § 331 (1932). Cornell failed to present any evidence that clean-up was made more onerous by Ceramic's breach or of the cost attributable to the assertedly added burden. Having failed to present such evidence at trial, Cornell has not shown that it was damaged, and certainly cannot be permitted to recover the full amount of its clean-up costs. This portion of the damage award is therefore reversed.

C. Idle Machinery

The sum awarded by the trial court for the loss occasioned by tools and machinery left idle at the job site is challenged by Ceramic on the grounds (1) that the court should not have used fair rental value of the machinery as a measure, and (2) that it should have reduced any amount awarded by the wear and tear which the machinery would have suffered had it in fact been in use.

With respect to the use of fair rental value, Ceramic did not object to this standard at trial when evidence of these amounts was introduced by Cornell. Furthermore, although using Associated General Contractor rates may well have been preferable, L. L. Hall Construction Co. v. United States, 379 F.2d 559, 177 Ct.Cl. 870 (1966); Cornell Wrecking Co. v. United States, 184 Ct.Cl. 289, 291 (1968), the use of rental value is not so unreasonable as to warrant reversal as clear error. Indeed, fair rental value has been used in other cases to measure such damages. E. g., Laburnum Construction Corp. v. United States, 325 F.2d 451, 163 Ct.Cl. 339 (1963); Warren Brothers Roads Co. v. United States, 105 F.Supp. 826, 123 Ct.Cl. 48 (1952); Morrison-Knudsen Co. v. United States, 84 F.Supp. 282, 113 Ct.Cl. 536 (1949); Henry Ericsson Co. v. United States, 62 F.Supp. 312, 104 Ct.Cl. 397 (1945), cert. denied, 327 U.S. 784, 66 S.Ct. 701, 90 L.Ed. 1011 (1946); Brand Investment Co. v. United States, 58 F.Supp. 749, 102 Ct.Cl. 40 (1944), cert. denied, 324 U.S. 850, 65 S.Ct. 684, 89 L.Ed. 1410 (1945). Thus Ceramic cannot properly raise this objection for the first time on appeal. General Insurance Co. of America v. Hercules Construction Co., 385 F.2d 13, 22 (8th Cir. 1967).

We find Ceramic's second...