Opposition Brief — Continental Casualty Co. v. United States ex rel. Schaefer

Supreme Court brief1949

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SUBJECT INDEX

Page

Petitioner’s Reasons for Allowance of Writ 1

Statement of the Case 2

AE LATA LD IN A EY 11

1. Respondent Is Entitled to Recover from De-

fendants Macri and Petitioner in Quantum

Meruit, Either the Reasonable Value of All of

the Labor and Materials Furnished by Re-

spondent to Defendants Macri, Less What Re-

spondent Has Already Been Paid, or the Rea-

sonable Value of the Extra Labor and Materials

Furnished by Respondent Plus the Sum Re-

maining Unpaid on the Contract

Respondent is entitled to recover from

defendants Macri and petitioner in quan-

tum meruit, the reasonable value of the

labor and materials furnished by him less

the amount he has received, due to the

willful breaches of the subcontract ae the

Macris

Respondent is entitled to recover from the

Macris the amount of his claim, for the

reason that an injustice can be avoided

only by enforcement of the Macris’ prom-

ises to pay respondent’s costs and ex-

penses, and the Macris are estopped to

assert that their promises are not binding

upon them, such recovery — in quan-

tum meruit '

Respotdent is entitled to recover from

the Macris the reasonable value of the

extra labor and materials furnished by

him, on the basis of an implied-in-fact

agreement to pay for them :

ne ae

SUBJECT INDEX (Cont.)

Cases cited by petitioner in support of reason

No. 1 for the allowance of the writ

Cases cited by petitioner in support of reason

No. 3 for the allowance of the writ

. Respondent Is Entitled to Recover from the De-

fendants Macri and Petitioner the Amount of

His Claim Under the Miller Act... .....

Cc cited by petitioner in support of reason

No. 1 for the allowance of the writ

Decisions of this court which have settled

questions of federal law involved in the

POCRSME COME .W..............-.....--.2-eeenceenqennene nese

Cases cited by petitioner in support of reason

No. 3 for the allowance of the writ........

. Respondegt Is Entitled to Recover All Items

Allowed by the District Court. ........... Ran aee es

Cases cited by petitioner in support of reason

No. 1 for the allowance of the writ...

. The Law Governing the Several Issues...

. The Evidence Establishes With Reasonable

Certainty the Amount Which ee Is

Entitled to Recover...

A. Recovery in quantum meruit of all re-

spondent’s costs and expenses, together

with overhead and profit, based upon the

Macris’ willful and Veneta breaches of

the subcontract .. MESES

B. Recovery based on the ial: that an

injustice can be avoided only by enforce-

ment of the Macris’ promises to pay re-

Page

. 50

SUBJECT INDEX (Cont.)

Page

spondent’s costs, and the Macris are

estopped to assert that their promises are

not binding upon them roe 53

C. Recovery based on the implied-i in-fact

agreement of the Macris to pay er:

ent’s costs ... 63

Cases cited by petitioner in support of rea-

sons No. 1 and 3 for the allowance of the

We cts hed ieee 63

TABLE OF CASES

Page

Alameda County Title Insurance Co. v. Panella, 218

Cal. 510, 24 P. 2d 163... 21

Albachten v. Bradley, 212 Minn. 359, 3N. W. 2d 783 21

American Surety Co. v. Wheeling, 114 Fed. 2d 237

Oo eB TD | Renee ere et fe ne 44

Anderson v. Mt. Clemens Pottery Co., 328 US. 680,

90 L. Ed. 1515, 66 S. Ct. 1187... 62

Bigelow v. RKO Radio Pictures, Inc., 327 USS. 251,

90 L. Ed. 652, 66 S. Ct. 574 . 62

Bishop v. Ryan Construction Co., 106 Wash. 254,

OR SERRE Sonam erures: 14

Brogan v. National Surety Co., 246 U.S. 257, 62 L.

Ed. 703, 38 S. Ct. 250 . er

Callan v. Andrews, 48 Fed. 2d 118 (C.C.A. 2) ce

City & County of San Francisco v. Transbay Con-

struction Co., 134 Fed. 2d 468 (C.C.A. 9), Cert.

Den. 320 USS. 749, 88 L. Ed. 445, 64 S. Ct. 52 27

Collins v. Lewis, 111 Conn. 299, 149 Atl. 668 / 3

Continental Casualty Co. v. Clarence L. Boyd Co.,

140 Fed. 2d 115 (C.C.A. 10) 40

— ~

TABLE OF CASES (Cont.)

Page

Continental Casualty Co. v. United States, 173 Fed.

Ee os oe ee eee ....4, 7, 9, 12, 35, 50, 53

Dermott v. Jones, 2 Wall. 1, 17 L. Ed. 762............ 28

Dow v. United States, 154 Fed. 2d 707 (C.C.A. 10)

CRE a SR i a cl SERS IE SO 32, 36

Farnum v. Kennebec Water Dist., 170 Fed. 173

la ea a cacil pcac iussiny sid ninendhanses 27

Fried v. Fisher, 328 Pa. 497, 196 Atl. 39... 21

Glassell-Taylor Co. v. Magnolia Petroleum Co., 153

BRS PIE. CRA OE ska iaicekcinbcctahinccsnqcckinass 46

Golwitzer v. Hummel, 201 Ia. 751, 206 N.W. 254.15

Great Lakes Construction Co. v. Republic Creosot-

ing Co., 139 Fed. 2d 456 (C.C.A. 8)... 13, 31, 34

Hooper v. O. M. Corwin Co., 199 Wis. 139, 225 N.W.

(EBS ca AAS ie et ae RSS sed SESS a ea ee 25

Klebe v. United States, 263 U.S. 188, 68 L. Ed. 244,

NN a a Bia ae

Lange v. United States, 120 Fed. 2d 886 (C.C.A. 4) 31

L. P. Friestedt Co. v. U. S. Fireproofing Co., 125 Fed.

2d 1010 (C.C.A. 10). ; 40, 41, 43

Luther v. National Bank of Commerce, 2 Wash. 2d

+ | REE Ee eee ete 21

Maryland Casualty Co. v. City of en 199

Wash. 72, 90 P. 2d 226 at oe 13

McDonald v. Supple, 96 Or. 486, ee: Bi os: ee

McEvoy v. United States, 322 US. 102, 88 L. Ed.

ES SRE EER ep ee es tree ... 44, 45

Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d 1034

WR ak i Ass tha afi aa aah Lies 13, 17, 21, 35, 48

Patrick v. Bonthius, 13 Wash. 2d 210, 124 P. 2d 550. 15

Roberts v. Gerlinger, 124 Or. 461, 263 P. 916. . 25

Ross Engineering Co. v. Pace, 153 Fed. 2d 35 (C.C.A.

|g MARE RPT Ee RRS aA ie te 29, 32, 36

Royal Indemnity Co. v. Woodbury Granite Co., 101

wee. @awee. Cot. Mam. GD. oon 31

Schuehle v. sionals of eusne eek 199 Wash. 675, 92 P. 2d

STORRS Mae Sey ie Scie 13

—

TABLE OF CASES (Cont.)

Page

Schwasnick v. Blandin, 65 Fed. 2d 354 (C.C.A. 2)

Be i chat acielll 14, 17, 35, 48

Sofarelli Bros. v. Elgin, 129 Fed. 2d 785 (C.C.A. 4)

Boe Le sannbcinntlnmeiaadigniiaceenbinie 14, 17, 35, 47

Theobald- Jansen Electric Co. v. P. H. Meyer Co., 77

eT a od ol TGS |, iaepeerepemnmencns wonmermeenen mr. aa

Turner v. Henning, 262 Fed. 637 (Ct. App. D.C.)

Typhoon Air Conditioning Co., Inc. v. Fried, 147 Pa.

Super. G05, 24 Ati 2d 926.................-..---------n------s2-0-0+ 15

United States v. Ambursen Dam Co., 3 Fed. Sup.

Ue Gs Ds iis 46

United States v. American Surety Co., 200 U. S. 197,

ee ee Se eee 33, 39, 44

United States v. Davidson, 71 Fed. Sup. 401 (D. Ct.

EERIE ESN CROTE Aa Se Notas oe Weer ee MC EN EE ae 48

United States v. Great American Indemnity Co., 30

Fed. Sup. 613 (D. Ct. N.H.)... . 48

United States v. John A. Johnson Contracting Corp. We

139 Fed. 2d 274, Cert. Den. 321 U.S. 797 (C.C.A.

RR SRLS SER YER oe sicnn hy ay OF, 4

United States v. Maryland Casualty Co., 54 Fed.

Sup. 290 (D. Ct. La.), affirmed 147 Fed. 2d 423

(C.C.A. 5) - cee

United States v. “Massachusetts Bonding and Insur-

ance Co., 18 Fed. 2d 203 (C.C.A. 6)... . 44

United States v. Mathew Cummings Co., 27 Fed.

Sup. 405 (D. Ct. Mass.).. 32, 36

United States v. Otis Williams & Co., 30 Fed. ‘Sup.

590 (D. Ct. Ida.) . er |

United States v. Rego Building Corp.. ., 87 Fed. 2d

Et FD, Rae cece parannen emarencnenr ore oe 4a

United States v. Seaboard Surety Co., 26 Fed. Sup.

681 (D. Ct. — affirmed 106 Fed. 2d 355

(C.C.A. 9) . _.....42, 43, 46

United States v. Standard Accident Ins. Co., 106

Fed. 2d 200 (C.C.A. 7). : 31, 32, 37

United States v. Standard Casualty Co., 32 Fed. siete

oe Ca. Ct. N.Y,)............ 49

TABLE OF CASES (Cont.)

Page

United States v. Wyckoff Pipe & Creosoting Co., 271

U.S. 263, 70 L. 2d. 938, 46 S. Ct. 503... 29, 63

United States v. Zara Contracting Co., 146 Fed. 2d

ee dh | eee 13, 17, 30, 34, 45, 47

U. S. Potash Co. v. McNutt, 70 Fed. 2d 126 (C.C.A.

ge RRR at Sara ah ae on RONG IT PRL Dee OEY BOGS eA: 27, 28

Vaught v. Charleston National Bank, 62 Fed. 2d 817

REE RAR DRI EY GEN SDR NORGE Mee Weer ca ee 25

Western Asphalt Co. v. Valle, 25 Wash. 2d 428, 171

a_i, SEES RES Sets Conia Seems eRe NE PrP Orne eerie 24

Wolfe v. Prairie Oil & Gas Co., 83 Fed. 2d 434

NRA SPI ies lae actin ied eta hh soso. cacovonnesd nw oamnnbade 27

UNITED STATES CODE

Title 40, U.S.C.A., Section 270b..................- ee... 33

TEXTBOOKS

Restatement of Law of Contracts, Section 72... 24

Restatement of Law of Contracts, Section 90... 21

Restatement of Law of Contracts, Section 317... 22

Restatement of Law of Contracts, Section 347...

EIS oN Remnant EL OOP 16, 22, 35, 47

Restatement of Law of Contracts, Section 357... 15, 16

1 Williston on Contracts, Section 36... 24

1 Williston on Contracts, Section 36A 24

1 Williston on Contracts, Section 91.000... 24

1 Williston on Contracts, Section 91A..... 24

1 Williston on Contracts, Section 139... 21

3 Williston on Contracts, Section 679... 21

3 Williston on Contracts, Section 689... 21

3 Williston on Contracts, Section 805... 15

3 Williston on Contracts, Section 842... 15

5 Williston on Contracts, Section 1480.............. 17, 35, 47

—

Iu the Supreme Cowt

of the United States

OcToRER TERM, 1948

CONTINENTAL CASUALTY COMPANY, a cor-

poration,

Petitioner,

vs.

UNITED STATES OF AMERICA, for the use of

M. C. SCHAEFER, an individual doing business

as CONCRETE CONSTRUCTION COMPANY,

Respondent,

SAM MACRI, DON MACRI, and JOE MACRI, in-

dividuals and co-partners; A. J. GOERIG and

CLYDE PHILP, individuals and co-partners,

Defendants.

BRIEF OPPOSING PETITION FOR

WRIT OF CERTIORARI

PETITIONER’S

REASONS FOR ALLOWANCE OF WRIT

Respondent asserts that the reasons assigned by

petitioner for allowance of a writ of certiorari (Petition

smsentnoustasantsarteet —

13, 14) are without adequate foundation. These reasons

will be considered separately:

1. The decision of the Court of Appeals is in con-

flict with the decisions of Courts of Appeals of other

Circuits on the same matter.

The Court is referred to pages 27, 40, 48, 63 of this

brief for a discussion of this reason assigned by peti-

tioner for the allowance of the writ.

2. The Court of Appeals has decided important ques-

tions of federal law which have not been, but should be,

settled by this court.

The decision of the Court of Appeals is supported by

decisions of this court which are cited on page 44 of this

brief.

3. The Court of Appeals has decided important ques-

tions of federal law in a way probably in conflict with

applicable decisions of this court.

The court is referred to the discussion of the cases

cited by the petitioner on pages 29, 45, 63 of this brief.

STATEMENT OF THE CASE

The District Court entered judgment against the

defendants Macri and petitioner, their surety. On the

appeals of all of such defendants, the judgment was

affirmed.

Throughout the petition and supporting brief, in-

cluding the questions presented and argument, petitioner

has persistently failed to mention or consider certain

facts which were found to exist by the District Court

and the Court of Appeals, and which are as prominent

in this case as the view of a mountain from a plain.

We refer particularly to promises made by Mr. Sam

Macri to respondent with respect to compensation to

be paid to respondent for labor and materials furnished

by him, in addition to the amounts which would ordi-

narily be required in the performance of the subcontract.

These promises are stated hereafter in the statement of

the case.

By the terms of the subcontract entered into between

defendants Macri and respondent, the latter agreed to

furnish all labor and necessary equipment to do all of the

concrete work, including the erection of the wooden

forms and the installation of reinforcing steel. It was

also agreed in the subcontract that all of the excavating

and all of the materials necessary for the performance

of the subcontract by respondent, were to be furnished

by defendants Macri, with the exception of the form

wire, nails, and curing material. It was further agreed

therein that the excavating was to be done, and the

materials were to be supplied by defendants Macri, in

accordance with the plans and specifications and in

proper time for performance of the subcontract by re-

spondent (R. 99, 100). The excavation required of de-

fendants Macri by this instrument included what is

called fine grading, which consisted in hand grading to

specific dimensions after a shovel had removed ‘earth

to within 3 to 5 inches of such dimensions.

—_ aay

Both the District Court and the Court of Appeals

found that from the time respondent commenced to

perform the subcontract until his work was completed,

defendants Macri were guilty of breaches of their obli-

gations under the subcontract in certain respects which

are well stated in the opinion of the Court of Appeals

in these words (173 Fed. 2d 5,7):

“The court further found that Schaefer’s per-

formance was diligent, but that the Macris had

breached the subcontract in that they failed to make

the excavations in the proper manner so that Schaef-

er’s carpenters had to make extra excavations in

order to install the forms. The Macris also failed to

do the fine grading in the proper manner and in

time for Schaefer to proceed with prompt progress

of the work. The Macris also failed to furnish the

proper quality and quantity of lumber required,

which hindered and delayed Schaefer in the per-

formance of his work. Macris’ breaches were found

willful and negligent and they continued and per-

sisted throughout the entire performance of the

subcontract.”

It will be observed in the last sentence of that

quotation that both courts found that these breaches of

defendants Macri were willful and negligent and con-

tinued throughout the performance of the subcontract

by respondent.

Petitioner mentions the fact that respondent and his

men complained to defendants Macri on many occasions

that the latter were not performing their obligations

under the subcontract. Some of such complaints led to

two meetings at the project between the defendant Sam

Macri and respondent. Petitioner declares that Mr.

—

Macri then told Mr. Schaefer that defendants Macri

would thereafter do better, but petitioner completely dis-

regards the testimony and the findings of both courts

with respect to the remainder of the conversations be

tween these men on the two occasions mentioned.

At the first meeting, on April 29, 1944, approximately

six weeks after the subcontract was executed, the two

men went into the field and examined a number of

excavations. All proved to be defective. Mr. Macri then

asked Mr. Schaefer to do the fine grading, saying that

he would pay for it, but Mr. Schaefer refused to under-

take the work and asked Mr. Macri to have sufficient

men there so he wouldn’t be delayed, that the excava-

tions be done according to specifications, and that ample

lumber be supplied in time in order that respondent’s

men could pour not less than 20 yards of concrete per

day. Mr. Schaefer reminded him of a previous promise

to so perform his obligations that the respondent would

be off the job by September 15th. Mr. Macri replied,

“You'll be out of here by September 15th, there isn’t

gonna be anybody lose any money on our job; we'll

get this thing straightened out and get going. * * * I'll

pay you for the expense of excavating that you do here

(R. 221 to 224).” Mr. Schaefer’s reply was, “Who’s

going to pay for the extra expense of building panels

in the way that we’re now required to build panels, or

setting these panels in holes like this, * * * instead of

to specification, of stripping the forms out of these holes,

doing the necessary excavating to get them out, wreck-

ing them, having to haul them all back to the yard for

——

repair, instead of to structures ahead?” Mr. Macri said,

“I'll pay you for all the extras, just get going.” Mr.

Schaefer replied, “You're going to pay for all additional

cost and expense.” Mr. Macri then said, “I told you that

before.” Mr. Schaefer then added, * ** “You're going

to have the necessary men and equipment in here, and

you're going to get going with the excavating so we can

pour the minimum of twenty or twenty-five yards per

day (R. 225 to 227).” Mr. Macri then said, “Well, that’s

it, that’s all right (R. 227).”

Respondent returned to the project on May 19th and

found no work going on and no lumber. The side walls

still required additional digging to accommodate the

forms and there were no excavations ready for forms.

Respondent then instructed his superintendent to take all

of his men back to Portland with the exception of two

(R. 279, 280, 282).

Mr. Schaef¢mmet Mr. Macri again on June 15th, on

the project. Theré. was still nothing being done. The

shovel was brokeg down and was in the yard. The

Macris did not have a hand-excavating crew on the

jeb. In fact, there was no one on the job (R. 284, 285,

286). At that time enough forms had been prepared by

respondent to permit the assembly of about 72 to 75

structures, the term used to designate the forms when

ready to receive concrete. There were no excavations

ready for the placing of the structures, however, and, in

fact, none was ready to receive forms until June 29th.

At the meeting of June 15th another conversation

was held between Mr. Macri and Mr. Schaefer which

was substantially similar to that of April 29th. After dis-

cussing the general situation, Mr. Schaefer said to Mr.

Macri, “We won’t be through with this job by September

15th.” Mr. Macri replied, “Nobody’s lost any money

on my job. We'll be out by September 15th. This little

excavating, you go ahead and do it. We’ll pay for it.”

Mr. Schaefer then said, “That isn’t all you’re going to

pay for. You’re going to pay all the costs, all expenses,

all the extras.”” Mr. Macri replied, “Well, i told you that

before; quit arguing. * * * You’re not going to~have to

wait for anything any more. You just get back here and

get going (R. 286, 287).”

The District Court found that these conversations oc-

curred. While the Court ef Appeals did not expressly ap-

prove such findings, it clearly adopted them by impli-

cation. The latter court said in its opinion (173 Fed. 2d

5, 7,8):

“The court further found that Schaefer had made

many complaints to the Macris regarding the latter’s

defaults; that the Macris induced Schaefer to con-

tinue performance and to perform some of the

work the Macris were to do, and that Schaefer

would be compensated for the additional expense

because of the adverse-conditions created by the

Macris. The court found that ‘there was an im-

plied agreement or quasi-contract that * * * Schaefer

was to be paid the fair and reasonable value of his

subcontract under the conditions and with the extra

burdens imposed upon (Schaefer by the Macris’

breaches).’”

* * * * *

“The district court held that there was an ‘im-

plied agreement or quasi-contract’ to the effect that

the Macris would pay Schaefer the fair and reason-

able value of his subcontract under the conditions

and with the extra burdens imposed upon Schaefer

by the Macris’ breach and failure to perform their

part of the subcontract. The Macris claim there is

no substantial evidence to support the finding that

they breached the subcontract. While the testi-

mony is conflicting, the record contains sufficient

evidence to support the finding, and this court will

‘not weigh the evidence in such a case. Federal Rules

of Civil Procedure, rule 52 (a), 28 U.S.C.A. We can-

not say that this finding is clearly erroneous.

“Since the court found that the subcontract was

willfully breached by the Macris and that they in-

duced Schaefer to continue performance and even

to perform part of the Macris’ work, Schaefer should

be allowed to recover in excess of the stipulated con-

tract price for the extra work performed in reliance

on the Macris’ statements, which were intended to

induce reliance.”

In spite of diligent effort on his part, respondent was

not able to complete the performance of the subcontract

until April 1945 because of the willful and negligent fail-

ure of defendants Macri to perform the obligations im-

posed on them by the subcontract. Exhibit 51 (R. 572,

578, 586), which is considered in some detail in conten-

tion No. 5 in this brief, and the testimony of two wit-

nesses, one of whom was wholly disinterested, indicate

clearly that respondent could have fully performed the

subcontract in from 3% to 4 months under normal

conditions (R. 464, 572, 586, 1160-1162).

Petitioner insists that respondent has been seeking

the recovery of damages for breach of contract. It is

clear, however, that the only count in the amended

complaint on which the District Court permitted a re-

—7"—""

covery is the one based on quantum meruit. The

opinion of the Court of Appeals indicates beyond doubt

that both courts regarded the judgment as based on the

reasonable value of the labor and materials furnished

by respondent plus overhead and profit, and not upon

damages for breach of contract. This is plain in view

of the language already quoted from the opinion and the

following (173 Fed. 2d 5,8):

“Whether the theory is called implied-in-fact

contract, quasi-contract, or promissory estoppel, the

measure of Schaefer’s recovery against the Macris

should be the reasonable value of the work and ma-

terials furnished plus overhead and profit.”

The Court of Appeals did not base its decision on

“an alleged express oral agreement of Macri to pay extra

costs,” as contended by petitioner (Petition 9). This is

evident from the last quotation, and the last sentence of

the one previously set forth.

It is true that the District Court found that there

was no express contract, or meeting of the minds, that

respondent was to do what fine grading was required

by the defective conditions of the excavations. Respond-

ent stated more than once that he did not wish to as-

sume the obligation of fine grading the excavations;

consequently, there was no express contract that he

would do that work. He did perform much of it, how-

ever, at the request of the defendants Macri and with

their knowledge, because he had to do it to get his own

work done. As a result, an implied-in-fact contract that

the defendants Macri would pay for such work could

and did arise, and the mere fact that respondent declined

ES Seay A Ree

rt rence com Ce RN EE

to promise to perform it did not prevent the creation of

an implied-in-fact agreement when he did perform part

of it under necessity.

Petitioner declares: “It is undisputed that Schaefer

never assumed or agreed to any additional contractual

obligations except the original subcontract (Petition

11).” It is true that respondent did not promise to per-

form any obligations other than those set forth in the

subcontract, but it is equally true that he did a tre-

mendous amount of work which he was not obligated

to do by the subcontract under such circumstances as

to give rise to an implied-in-fact promise by defendants

Macri to pay for it. He was compelled to do the extra

work in order that he might perform his own obliga-

tions under the subcontract. Defendants Macri stood

by and watched him do it, accepted such work without

protest, and in fact urged him to go ahead and do it.

Defendants Macri received full benefit from the extra

work done by respondent by being paid by the United

States Government.

It is acknowledged that respondent did not keep

records from which the exact amount of the extra work

could be determined, the reason for such failure being

that it was physically impossible in most instances for

him to do so. There is ample testimony in the record,

however, to permit a determination with reasonable cer-

tainty of the reasonabie value of the extra labor and

materials furnished by respondent. Both the District

Court and the Court. of Appeals concluded that the

amount of respondent’s increased costs was established

cam

with reasonable certainty. In view of the fact that peti-

tioner still contends that there was insufficient proof

insofar as the amount of recovery was concerned, this

question will be more fully considered in the argument

of contention No. 5 in this brief.

ARGUMENT

Summary of Argument

Petitioner’s contention No. 4 concerns the right of

respondent to recover in quantum meruit under the law

of contracts. It is therefore considered first in respond-

ent’s brief. The other contentions of petitioner are dis-

cussed in order, in this brief, with the exception of No. 6,

which does not affect respondent in any way.

1. Respondent is entitled to recover from defendants

Macri and petitioner in quantum meruit, either the

reasonable value of all of the labor and materials fur-

nished by respondent to defendants Macri, less what

respondent has already been paid, or the reasonable

value of the extra labor and materials furnished by re-

spondent.

2. Respondent is entitled to recover from defendants

Macri and petitioner the amount of his claim under the

Miller Act.

3. Respondent is entitled to recover all items allowed

by the District Court.

4. The law governing the several issues.

5. The evidence establishes with reasonable certainty

the amount which respondent is entitled to recover.

—,.

RESPONDENT IS ENTITLED TO RECOVER

FROM DEFENDANTS MACRI AND PETITIONER

IN QUANTUM MERUIT, EITHER THE REASON-

ABLE VALUE OF ALL OF THE LABOR AND

MATERIALS FURNISHED BY RESPONDENT TO

DEFENDANTS MACRI, LESS WHAT RESPOND-

ENT HAS ALREADY BEEN PAID, OR THE

REASONABLE VALUE OF THE EXTRA LABOR

AND MATERIALS FURNISHED BY RESPOND-

ENT PLUS THE SUM REMAINING

UNPAID ON THE CONTRACT

As indicated in the opinion of the Court of Appeals,

there are three separate legal theorics which fully sustain

the right of respondent to recover in quantum meruit.

It will be recalled that the court said (173 Fed. 2d 5, 8):

“Whether the theory is called implied-in-fact

contract, quasi-contract, or promissory estoppel, the

measure of Schaefer’s recovery against the Macris

should be the reasonable value of the work and

materials furnished plus overhead and profit.”

Each of these three theories will be briefly stated

herein, with the authorities upon which it is based. Re-

spondent contends that each of these, standing alone, is

sufficient to warrant the affirmance of the judgment in

this case. Petitioner’s contention No. 4, however, re-

lates to only the first of such theories. It will be briefly

answered, but it cannot in any event have any effect

upon the principles set forth in the discussion of the sec-

ond and third of the theories relied upon by respondent.

—

Respondent is entitled to recover from defend-

ants Macri and petitioner in quantum meruit, the

reasonable value of the labor and materials fur-

nished by him less the amount he has received, due

to the willful breaches of the subcontract by the

Macris.

The basis of this contention is that the District Court

and the Court of Appeals found the following facts:

(1) the Macris were guilty of willful and negligent, ma-

terial breaches of the subcontract through the perform-

ance of the work by respondent, in the respects men-

tioned in the statement of the case. (2) Respondent

furnished labor and materials and performed services for

the Macris at their request of the reasonable cost and

value stated in the findings of fact of the District Court

(R. 103, 104).

It is established beyond any doubt that where one of

the parties to a contract is guilty of a material breach,

the injured party may recover the reasonable value of

the labor and materials which he furnished to the other

party, in quantum meruit.

United States v. Zara Contracting Co., 146 Fed.

2d 606 (C.C.A. 2).

Great Lakes Construction Co. v. Republic Creo-

soting Co., 139 Fed. 2d 456 (C.C.A. 8).

McDonald v. Supple, 96 Or. 486, 190 P. 315.

Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d

1034.

Maryland Casualty Co. v. City of Tacoma, 199

Wash. 72, 90 P. 2d 226.

Schuehle v. City of Seattle, 199 Wash. 675, 92 P.

2d 1109.

— a

Bishop v. Ryan Construction Co., 106 Wash. 254,

180 P. 126.

Sofarelli Bros. v. Elgin, 129 Fed. 2d 785 (C.C.A.

4).

Schwasnick v. Blandin, 65 Fed. 2d 354 (C.C.A. 2).

It is respectfully contended on behalf of respondent

that these decisions govern this situation.

It is asserted by petitioner in its contention No. 4

that there can be no recovery in quantum meruit in this

case for these reasons: (1) Assuming that the Macris

were guilty of continuing total breaches of the subcon-

tract, respondent elected to continue his performance

and thereby waived his right to regard the breaches as

total, and rendered them partial breaches of contract.

(2) There can be no recovery in quasi contract following

the waiver of such total breaches, and the only remedy

available to respondent for the partial breaches of con-

tract is a recovery of damages against the Macris meas-

ured by the increased cost of respondent’s performance

due to such partial breaches of the contract.

Respondent contends that the principle relied upon

by the petitioner should not be applied in this case for

the reason that the breaches of contract by the Macris

were willful.

It is an established principle of contract law, having

particular application to construction contracts, that a

builder is entitled to recover the contract price even

though there are some defects or omissions in his per-

formance, if it can be said that he has substantially

performed the contract. The owner is then entitled to

— ~~

sufficient compensation from the builder to permit the

defects to be corrected or the omissions to be supplied.

3 Williston on Contracts, Sections 805 and 842.

Patrick v. Bonthius, 13 Wash. 2d 210, 124 P. 2d

550.

There is an exceedingly important limitation upon

this principle, however. It is said by the text writers

and it has been repeatedly held by the courts that the

principle does not apply if the builder willfully fails or

refuses to perform the contract in accordance with the

plans and specifications.

3 Williston on Contracts, Section 805.

Golwitzer v. Hummel, 201 Ia. 751, 206 N.W. 254.

Typhoon Air Conditioning Co., Inc. v. Fried, 147

Pa. Super. 605, 24 Atl. 926.

Turner v. Henning, 262 Fed. 637 (Ct. App. D. C.).

See also Patrick v. Bonthius, supra.

Restatement of the Law of Contracts, Section

357.

The significance of these principles relating to the

effect of a willful breach of contract, may be briefly

stated:

By reason of their willful breaches of contract, the

Macris would not have been entitled to rely upon the

doctrine of substantial performance if respondent had

not fully performed, and could not, therefore, have se-

cured full performance from respondent in accordance

with the terms of the contract, and limited his recovery

to damages in an amount sufficient to correct the de-

fects or supply the omissions in the Macris’ performance.

ae.

- a

That being so, the Macris’ only remedy for a failure

of performance by respondent would have been an ac-

tion based upon Section 357 of the Restatement, and

their recovery would have been the net benefit conferred

by the Macris upon respondent. But the net benefit to

respondent was a minus quantity and the principles of

quasi contract which give a remedy when necessary to

avoid an unjust enrichment, declare that respondent

should recover in quantum meruit from the Macris the

difference between the benefits conferred by each of

these parties upon the other.

Assuming, therefore, that respondent is entitled to

recover in quantum meruit, such recovery is not limited

to his actual cash expenditures for labor and materials,

but he may recover, in addition, reasonable overhead

and profit. In other words, respondent is entitled to re-

cover the amount the Macris would have been com-

pelled to pay in the open market for the labor and ma-

terials which were actually furnished by him. This is

established by the following authorities:

Comment c following Section 347 of the Restate-

ment, states:

“If the plaintiff's performance is part of the very

performance for which the defendant bargained as

part of an agreed exchange, it is to be valued, not

by the extent to which the defendant’s total wealth

has been increased thereby, but by the amount for

which such services and materials as constituted the

part performance could have been purchased from

one in the plaintiff's position at the time they were

rendered.”

——o

Theze is an excellent discussion of this subject in 5

Williston on Contracts, Section 1480.

luis measure of recovery was approved in the fol-

lowing cases:

United States v. Zara Contracting Co., 146 Fed. 2d

606 (C.C.A. 2). The court held, in the language of the

Restatement, that the plaintiff's performance was to be

valued by the amount the services and materials sup-

plied by the plaintiff, “could have been purchased from

one in the plaintiff's position’ at the time they were

supplied. A judgment for the plaintiff was increased and

affirmed.

Schwasnick v. Blandin, 65 Fed. 2d 354 (C.C.A. 2).

In reliance upon the same section of the Restatement

and 5 Williston on Contracts, Section 1480, the court

held that the plaintiff could recover the reasonable value

of his services, “measured by what he could have got

for them in the market, and not by their benefit to the

promisor.”

Sofarelli Bros. v. Elgin, 129 Fed. 2d 785 (C.C.A. 4).

The court here allowed recovery of overhead.

Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d 1034.

The court allowed fifteen per cent for profit, “the going

rate on City contracts.”

If an injured plaintiff is entitled to recover the mar-

ket value of the labor and materials furnished by him,

it is clear that overhead and profit should be included

in the sum awarded him, inasmuch as any one offering

to furnish labor and materials in the open market natu-

RT ee

rally includes overhead and profit in the amount of his

offer.

It is respectfully submitted, therefore, that respond-

ent should recover in quantum meruit the amount al-

lowed by the court, including overhead and profit, less

what he has received.

Brief comments appear to be warranted with respect

to several of the statements appearing in petitioner's

contention No. 4.

It is said, page 38, that it is fundamental that where

there is an express contract the law will not create an

implied or quasi contract. Respondent acknowledges

that where there is a single contract which has not been

modified or added to by parol or in writing or by the

conduct of the parties, it is the general rule that a con-

tract may not be implied in fact contrary to the terms

of such original contract. The original contract between

the parties in the present case, the subcontract, was

clearly modiried or added to by the statements and con-

duct of the parties. The rights of these parties are, there-

fore, not governed solely by such subcontract, but by

such mcdifications and additions as well as the subcon-

tract. Inasmuch as the modifications and additions were

not created by express contract, the principle stated

clearly does not prevent the creation of an implied or

quasi contract insofar as such modifications and addi-

tions are concerned.

None of the authorities cited by petitioner in the

argument of its contention No. 4 is applicable to the

present case for the reason that not one purports to

cover the situation in which the original contract was

modified or added to by parol or the conduct of the

parties, as in the present case.

Respondent is eutitled to recover from the

Macris the amount of his claim, for the reason that

an injustice can be avoided only by enforcement

of the Macris’ promises to pay respondent’s costs

and expenses, and the Macris are estopped to

assert that their promises are not binding upon

them, such recovery being in quantum meruit.

This contention is based upon the foliowing estab-

lished facts: From the beginning, the Macris knew that

they were not performing their duties in accordance

with the specifications. They knew, furthermore, that

respondent was refusing to perform any of Macris’ work

and that he was actually unable to do his own until the

Macris had completed what they were required to do.

In this state of affairs, Mr. Sam Macri promised “to do

better.” He also promised on two occasions to pay the

respondent’s costs, but it is not entirely clear whether

he promised to pay all of respondent’s costs and ex-

penses, or the additional costs and expenses made neces-

sary by the Macris’ failure to perform their obligations.

There is evidence supporting each view, but it is en-

tirely immaterial which is adopted, as the governing

rules of law and extent of recovery are the same in each

instance. The District Court intimated that he inclined

toward the latter (R. 103, 2214, 2215), but he actually

decided that respondent should recover all costs and

expenses less what he had already received (R. 103, 104,

112). Hereafter these promises will be stated to be sim-

ply, “to pay respondent’s costs and expenses.”

The Macris should reasonably have expected that

the promises to pay respondent’s costs would induce

respondent to do all of the Macris’ work which they

left undone, in order that respondent might make cer-

tain that he could fully perform all of his own obliga-

tions. The Macris knew that respondent himself had

executed a performance bond and that he would have

been liable to both the Macris and the surety named in

such bond in the event of a default on his part. In that

event, either the surety or the Macris would have taken

over respondent’s obligations and performed his con-

tract, with resulting loss of profits and prestige to re-

spondent.

In reliance upon these promises, respondent con-

tinued to perform his duties and, in fact, completed

everything he was required to do. In so carrying out his

own work, respondent performed a considerable portion

of the Macris’ duties which increased his costs to an

amount between two and three times greater than would

have been necessary if the Macris had performed ac-

cording to specifications. The Macris did not “do bet-

ter,” and performance of the prime contract with the

government would have been delayed far beyond its

actual completion, if respondent had not done a con-

siderable portion of the Macris’ work. The Macris, of

course, received the full benefit of the labor and ma-

terials furnished by respondent.

————

This theory of respondent is based upon the prin-

ciple stated in Section 90 of the Restatement of the Law

of Contracts in these words:

“Promise reasonably inducing definite and sub-

stantial action. A promise which the promisor

should reasonably expect to induce action or for-

bearance of a definite and substantial character on

the part of the promisee and which does induce such

action or forbearance is binding if injustice can be

avoided only by enforcement of the promise.”

1 Williston on Contracts, Section 139.

3 Williston on Contracts, Sections 679 and 689.

That principle was applied in the following decisions:

Albachten v. Bradley, 212 Minn. 359, 3 N.W. 2d

783.

Fried v. Fisher, 328 Pa. 497, 196 Atl. 39.

Luther v. National Bank of Commerce, 2 Wash.

2d 470, 98 P. 2d 667.

Alameda County Title Insurance Co. v. Panella,

218 Cal. 510, 24 P. 2d 163.

In Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d

1034, 1041, the court said, with respect to a promise

made without consideration:

“Nelson (the general contractor) was anxious to have

the work progress with as great speed as possible.

Hence his proposal to pay half the rental of the ad-

ditional tug and allow Vigilant (the subcontractor)

the use of the scow without charge. Vigilant having

acted upon the oral agreement, Nelson could not

thereafter withdraw from it.”

It is evident that the facts of this case bring it within

the operation of the principle stated in Section 90 of the

Restatement and the cases cited. The result is that the

promises of the Macris to pay resjondent’s costs are

binding on them, and since they have not performed

those promises, respondent is entitled to pursue all ap-

propriate remedies for breach of contract.

The Macris have paid only about one-third of re-

spondent’s total costs and expenses shown by Exhibit

63, the audit which formed the basis for the judgment

of the District Court (R. 104, 112, 1241, 1252), and,

consequently, none of his extra costs and expenses. It

is clear, therefore, that their failure to perform their oral

promises constitutes a total breach of such promises

within the meaning of Section 317 of the Restatement.

That being true, respondent is entitled to a recovery

in quantum meruit, by reason of the principle stated

in Section 347 of the Restatement, based on the value

of the labor and materials furnished by him.

The correct amount of respondent’s recovery is

demonstrated in the discussion of contention No. 5 in

this brief, on the basis of each view of the testimony

with respect to the extent of the promises of the Macris.

If they promised to pay all of respondent’s costs and

expenses, the latter should recover the reasonable value

of all labor and materials furnished by him, less what

he has already received. If the Macris promised to pay

his additional costs and expenses, respondent should re-

cover the reasonable value of all additional labor and

materials furnished by him, plus the portion of the con-

tract price remaining unpaid. In either event, he is en-

titled to overhead and profit in amounts proportionate

to his recovery, for the reasons previously stated.

Respondent is entitled to recover from the

Macris the reasonable value of the extra labor and

materials furnished by him, on the basis of an im-

plied-in-fact agreement to pay for them.

This theory is based upon these established facts:

From the beginning the Macris knew that they were not

performing their obligations under the subcontract ac-

cording to the specifications and knew that the respond-

ent was doing a considerable portion of the Macris’

work. At the meetings of April 29th and June 15th,

1944, Mr. Macri asked Mr. Schaefer to perform a sub-

stantial portion of the work required to be done by the

Macris, particularly the fine grading. Mr. Schaefer re-

fused to take over the fine grading. Mr. Macri promised,

“to do better” after these meetings, but he failed to

show any improvement. It was still necessary, therefore,

that respondent do a substantial amount of work re-

quired by the subcontract to be done by the Macris, if

the prime contract was to be finished within a reason-

able time. Respondent, accordingly, continued to do the

Macris’ work and this was fully known to the latter.

The Macris accepted this work and secured the full

benefit of it in the form of compensation from the Bu-

reau of Reclamation. The work done by respondent

beyond that which would ordinarily have been required

of him by the subcontract, was not a gratuity on his

part. He expected full compensation for it, and a rea-

sonable man in the position of Mr. Macri should have

understood that such was respondent’s expectation.

—_—

In this situation it is believed that the authorities

unanimously declare that respondent is entitled to re-

cover from the Macris the reasonasle value of the extra

labor and materials furnished by him, on the basis of

an agreement implied in fact.

Section 72 of the Restatement of the Law of Con-

tracts contains these words:

“(1) Where an offeree fails to reply to an offer,

his silence and inaction operate as an acceptance in

the following cases and in no others:

“(a) Where the offeree with reasonable oppor-

tunity to reject offered services takes the benefit of

them under circumstances which would indicate to

a reasonable man that they were offered with the

expectation of compensation.

* * * *& *

“(2) Where the offeree exercises dominion over

things which are offered to him, such exercise of

dominion in the absence of other circumstances

showing a contrary intention is an acceptance * * *.”

In 1 Williston on Contracts, Section 36, the principle

is stated in this manner:

“Even though no request is made for the per-

formance of work or service, if it is known that it is

being rendered with the expectation of pay, the

person benefited is liable.”

See also 1 Williston on Contracts, Sections 36 A,

91, and 91 A.

The decisions fully support the principles set forth

in the Restatement and Williston on Contracts.

Western Asphalt Co. v. Valle, 25 Wash. 2d 428,

171 P. 2d 159.

Roberts v. Gerlinger, 124 Or. 461, 263 P. 916.

Vaught v. Charleston National Bank, 62 Fed. 2d

817 (C.C.A. 10).

Hooper v. O. M. Corwin Co., 199 Wis. 139, 225

N.W. 822.

Collins v. Lewis, 111 Conn. 299, 149 Atl. 668.

Callan v. Andrews, 48 Fed. 2d 118 (C.C.A. 2).

Respondent acknowledges that there can be no im-

plied-in-fact contract contrary to an express contract.

It is suggested by petitioner that there can be no im-

plied-in-fact agreement on the part of the Macris to pay

respondent’s costs or any part of them, for the reason

that the expressed intentions of these parties are incon-

sistent with such an implied agreement. Petitioner now

relies particularly upon Mr. Schaefer’s expressed inten-

tion that he would not take over the fine grading of the

excavations.

Petitioner has quoted (Petition 9) from that portion

of the opinion of the District Court, in which the court

said that he could not find that there was a meeting of

the minds or an express contract that Mr. Schaefer was

to complete the work and do what fine grading was re-

‘ quired by the defective conditions of the excavations,

and was then to be paid the reasonable value of all his

costs. The basis of this finding by the court was simply

that Mr. Schaefer refused to promise to carry out the

fine grading and excavating when Mr. Macri offered to

turn it over to him. The court added that Mr. Schaefer

continued to complain. The court concluded by saying

that Mr. Schaefer’s conduct was not consistent with a

meeting of the minds and an express contract that Mr.

Macri was to pay Mr. Schaefer the fair value of his

services.

There are two very clear reasons why this finding of

the court is not inconsistent with an implied-in-fact

agreement on the part of the Macris to pay respondent

the reasonable value of the labor and materials furnished

by him.

First, a finding that there was no express contract or

meeting of the minds that respondent was to perform

all or a part of the fine grading, simply means that there

was no bilateral contract by the terms of which re-

spondent promised to do that work. A finding that there

was no bilateral contract and consequently no promise

by respondent to do the work, is clearly not inconsistent

with the existence of a unilateral contract by the terms

of which an agreement may be implied in fact on the

part of the Macris, to compensate respondent for the

work which he actually performed. It is conceded that

respondent did not expressly agree to do any fine grad-

ing, but that does not mean that if, through necessity,

he was compelled to do some fine grading in order to

get the job done, he should not be compensated for it

on the basis of a unilateral contract implied in fact.

Second, the refusal of Mr. Schaefer to undertake the

excavating and fine grading was in answer to Mr.

Macri’s request that Mr. Schaefer take over all the ex-

cavating and fine grading, not simply that he take over

the fine grading required by reason of the defective con-

dition of the excavations.

—

Cases cited by petitioner (Petition 14; Brief 38-

41) in support of reason No. 1 for the allowance of

the writ (Petition 13).

Petitioner contends that the cases cited by it estab-

lish the following propositions:

(a) If, following a total breach of contract, the in-

jured party continues to perform his obligations there-

under, he thereby waives his right to rescind the contract

and recover the reasonable value of benefits conferred

by him upon the other party. His only remedy there-

after is an action for damages for breach of contract.

U. S. Potash Co. v. McNutt, 70 Fed. 2d 126

(C.C.A. 10).

City & County of San Francisco v. Transbay

Construction Co., 134 Fed. 2d 468 (C.C.A. 9),

Cert. Den. 320 U.S. 749, 88 L. Ed. 445, 64 S.

Ce. $2.

Respondent contends that this principle is inapplica-

ble in the present situation for the reason that the

breach of the Macris was willful. This matter has al-

ready been covered in the argument. Furthermore, in

neither of the cases cited did the injured party continue

to perform in reliance upon promises of the other party

to compensate him in full for such performance.

(b) The law will not imply a contract where there is

an existing express contract embracing the same subject.

Wolte v. Prairie Oil & Gas Co., 83 Fed. 2d 434

(C.C.A. 10).

Farnum v. Kennebec Water Dist., 170 Fed. 173

(C.C.A. 1).

Pee

Respondent contends, however, that the injured

party, following a total breach of a contract, is entitled

to recover in quantum meruit the value of his perform-

ance. This has already been demonstrated in the argu-

ment.

breach of contract, is limited to the compensation stated

in the contract.

U. S. Potash Co. v. McNutt, 70 Fed. 2d 126

(C.C.A. 10).

Dermott v. Jones, 2 Wall. 1, 17 L. Ed. 762.

See other cases cited (Brief 38).

The proposition stated is of no value to petitioner.

Here, a contract arose by which the Macris agreed to

pay respondent’s costs and expenses. The proposition

relied upon, therefore, has been fully met.

(d) Respondent was not entitled to rescind the sub-

contract and recover in quantum meruit.

See authorities cited (Brief 39, 40).

Respondent did nc¢ rescind the subcontract, nor was

the decision of either court below based upon a rescis-

sion. Such decisions were based upon the fact that re-

spondent fully performed the subcontract and supplied

labor and materials in addition thereto, for which he is

entitled to compensation.

(e) Paragraph 5 of the subcontract with reference

to delay by the general contractor (Petition 5) furnishes

the sole remedy open to respondent.

See cases cited (Brief 41)..

These decisions are inapplicable for several reasons:

(i) Neither the Macris nor petitioner raised this ques-

tion in their pleadings, nor was it presented to the Court

of Appeals.

(ii) The Macris waived this provision by agreeing to

pay respondent’s costs, thereby leading respondent to

believe that the Macris did not intend to rely upon this

provision of the contract.

Ross Engineering Co. v. Pace, 153 Fed. 2d 35

(C.C.A. 4).

(iii) Upon the performance of the extra work by re-

spondent, an implied-in-fact contract arose by which

he was to be compensated for such work. Paragraph 5

was thereby wholly abrogated.

Cases cited by petitioner (Petition 14; Brief 38)

in support of reason No. 3 for the allowance of

the writ (Petition 14).

Klebe v. United States, 263 U.S. 188, 68 L. Ed.

244, 44 S. Ct. 58.

United States v. Wyckoff Pipe & Creosoting Co.,

271 U.S. 263, 70 L. Ed. 938, 46 S. Ct. 503.

These cases are clearly distinguishable for reasons

which have already been stated.

RESPONDENT IS ENTITLED TO RECOVER

FROM THE DEFENDANTS MACRI AND PETI-

TIONER THE AMOUNT OF HIS CLAIM UNDER

THE MILLER ACT

The basis for this contention is that it has already

been demonstrated under the previous headings of this

brief that respondent has a right to recover from the

Macris either the full amount of his costs and expenses,

together with overhead and profit, less what he has al-

ready received, or the amount of his extra costs and ex-

penses, together with overhead and profit, plus the sum

remaining unpaid on the subcontract.

It is established beyond doubt that if, under the law

of contracts, a subcontractor has a right to a judgment

against the general contractor by reason of having fur-

nished labor or materials in the prosecution of the work

provided for in the prime contract for the construction

of a public work of the United States, he, the subcon-

tractor, is entitled to a judgment likewise against the

surety on the payment bond of the general contractor,

by reason of the terms of the Miller Act.

In each of the following six cases, it was held that

the subcontractor was entitled to a judgment against

the surety under the Miller Act for the reason that, un-

der the law of contracts, the subcontractor had a right

te recover from the general contractor.

United States v. Zara Contracting Co., 146 Fed. 2d

606 (C.C.A. 2). In that case the court allowed a re-

aa :

covery against both in quantum meruit in reliance upon

the general law of contracts.

United States v. John A. Johnson Contracting Corp.,

139 Fed. 2d 274, Cert. Den. 321 U.S. 797 (C.C.A. 3).

The court allowed a recovery based upon the general

law of contracts, in reliance upon the Restatement, Wil-

liston on Contracts, and a number of decisions.

Great Lakes Construction Co. v. Republic Creosot-

ing Co., 139 Fed. 2d 456 (C.C.A. 8). The court per-

mitted a recovery in quantum meruit following a breach

on the part of the general contractor.

Lange v. United States, 120 Fed. 2d 886 (C.C.A. 4).

The court applied the law of contracts of Maryland and

decided that a promise of the general contractor was

supported by adequate consideration.

United States v. Standard Accident Ins. Co., 106

Fed. 2d 200 (C.C.A. 7). In that case the court allowed

a recovery of a sum considerably in excess of the amount

specified in the subcontract, for the reason that the sub-

contractor and the general contractor entered into a

binding contract by which the latter agreed to pay a

greater sum than that specified in the subcontract.

Royal Indemnity Co. v. Woodbury Granite Co., 101

Fed. 2d 689 (Ct. App. D.C.). The court held that the

surety of the general contractor is liable whenever the

general contractor himself is liable.

It has been repeatedly held that a recovery may be

allowed under the Miller Act against both the general

contractor and his surety, for labor or materials fur-

- —

nished under orders or requests by the general contractor

in modification of the subcontract.

Dow v. United States, 154 Fed. 2d 707 (C.C.A. 10).

The subcontract provided that the banks of excavations

should be vertical and that the subcontractor should per-

form his work as directed by the general contractor. The

latter directed the subcontractor to cut the banks on a

one-to-one slope, that is, on a 45-degree angle, and the

subcontractor complied. The court held that the sub-

contractor was entitled to recover for the extra work

done by him in cutting the banks on a slope.

Ross Engineering Co. v. Pace, 153 Fed. 2d 35 (C.C.A.

4). A recovery was allowed in that case for extras or-

dered orally by the general contractor, in spite of a

provision in the subcontract that extra work should be

ordered in writing.

United States v. Standard Accident Insurance Co.,

106 Fed. 2d 200 (C.C.A. 7). The court enforced an ex-

press agreement to pay for extra work done by the

subcontractor.

United States v. Otis Williams & Co., 30 Fed. Sup.

590 (D. Ct. Ida.). The plaintiff was permitted to re-

cover for extra work required by changes made by the

government.

United States v. Mathew Cummings Co., 27 Fed.

Sup. 405 (D. Ct. Mass.). The plaintiff recovered for

extra work orally ordered by the general contractor, in

spite of a term in the subcontract which declared that

no charges for extras would be allowed unless ordered

in writing.

In conformity to the principle that if a subcontractor

is entitled to a judgment against the general contractor

under the law of contracts, he has a right to a judgment

against the surety, it has been held that there need not

be a bilateral contract between the subcontractor and

the general contractor to justify a recovery against the

latter and his surety, and that a unilateral contract is a

sufficient basis for a recovery against both.

United States v. John A. Johnson Contracting Corp.,

139 Fed. 2d 274, Cert. Den. 321 U.S. 797 (C.C.A. 3).

The court said that the judgment entered in favor of

the subcontractor in the trial court could be sustained

on either of two grounds: (a) The subcontractor’s per-

formance of the work created a unilateral contract.

(b) His performance amounted to an acceptance of the

general contractor’s offer, thus creating a bilateral con-

tract.

United States v. American Surety Co., 200 U.S. 197,

50 L. Ed. 437, 26 S. Ct. 168. This case clearly establishes

that it is immaterial under what sort of arrangement the

labor or materials are furnished, a view which is plainly

supported by the statute itself, 40 U.S.C.A., Section 270

b. The plaintiff in that case performed services for a

subcontractor and not for the general contractor. The

court held that the labor and materials thus furnished

were within the obligation of the surety, saying:

“The obligation is ‘to make full payments to all

persons supplying it (the general contractor) with

labor or materials in the prosecution of the work

provided for in said contract.’ This language, read

in the light of the statute, looks to the protection

ao,

of those who supply the labor or materials provided

for in the contract, and not to the particular con-

tract or engagement under which the labor or ma-

terials were supplied.”

There may be recovery against the general contractor

and his surety in quantum meruit for the reasonable

value of the labor and materials furnished, where the

general contractor has been guilty of a breach of con-

tract.

United States v. Zare Contracting Co., 146 Fed.

2d 606 (C.C.A. 2).

Great Lakes Construction Co. v. Republic Creo-

soting Co., 139 Fed. 2d 456 (€.C.A. 8).

The measure of recovery in an action against the

general contractor and his surety based upon the fur-

nishing of labor or materials, is not simply the value of

the benefit conferred upon the general contractor, but

is the value of the labor »r materials in the open market.

If the market value is adopted as the measure of re-

covery, it is evident that such recovery shall include

reasonable overhead and profit in addition to actual ex-

penditures, inasmuch as any one offering to furnish labor

or materials in the open market will include overhead

and profit in figuring the amount of his offer.

United States v. Zara Contracting Co., 146 Fed.

24 606 (C.C.A. 2).

The court is referred to the discussion of this prin-

ciple of contract law under contention No. 1 in this brief

and to the authorities there cited. The cases considered

were not brought under the Miller Act, with the excep-

tion of the Zara case, but the principle is equally ap-

plicable to either sort. For reference, these authorities

are cited again.

Restatement of the Law of Contracts, Section 347

(1) (a) Comment c.

5 Williston on Contracts, Section 1480.

Sofarelli Bros. v. Elgin, 129 Fed. 2d 785 (C.C.A.

4).

Schwasnick v. Blandin, 65 Fed. 2d 354 (C.C.A. 2).

Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d

1034.

Petitioner has stated in its brief, page 26, that re-

spondent “is seeking to recover damages for breach of

the subcontract on the part of Macri.”” We believe that

it has been clearly demonstrated in the statement of the

case that such is not the fact. The opinion of the Court

of Appeals establishes that both courts regarded the

judgment as based on the reasonable value of the labor

and materials furnished by the respondent plus over-

head and profit, and not upon damages for breach of

contract (173 Fed. 2d 5, 8). Not a single item of dam-

ages which is normally awarded to the injured party in

an action for damages for breach of contract, was al-

lowed in this judgment. Respondent did not seek nor

was he awarded damages for loss of profits. What he

was allowed was reasonable overhead and profit to bring

his actual costs into conformity to the amount petitioner

would have been compelled to pay in the open market

for the labor and materials furnished by respondent.

Petitioner has made an extremely serious error in

reasoning in its argument with respect to its liability as

surety on this bond, in its contention No. 1, pages 27

to 33 of the brief.

—,

The language of the Miller Act is quoted on page 24.

It is said that this statute requires a payment bond with

a surety or sureties,

“for the protection of all persons supplying labor

and material in the prosecution of the work pro-

vided for in said contract.”

The principal provision of the bond is also quoted on

page 25, the material terms of which are as follows:

“If the principal shall promptiy make payment

to all persons supplying labor and material in the

prosecution of the work provided for in said con-

tract, * * * then this obligation to be void; other-

wise, to remain in full force and virtue.”

It is then stated repeatedly that inasmuch as all of

the extra labor and materials furnished by respondent

were outside the scope of the subcontract entered into

between the Macris and respondent, the claim of re-

spondent to the reasonable value of such extra labor and

materials is outside the scope of the statute and bond,

and therefore there is no liability on the part of the

surety to compensate respondent for such extra labor

and materials.

The error in reasoning is quite apparent. The statute

and the bond clearly mean that if anyone furnishes to

a general contractor labor and material which have the

effect of prosecuting the work provided for in the prime

contract between the general contractor and the govern-

ment, the one furnishing such labor and material is en-

titled to compensation from the surety if the general

contractor fails to pay him. The mere fact that the

furnishing of certain labor and materials may be outside

the scope of a subcontract entered into between the gen-

eral contractor and the subcontractor, does not mean

that the subcontractor is not entitled to compensation

under the statute and bond from the general contractor

and the surety. The statute and bond are clearly satis-

fied if the labor and materials furnished by the subcon-

tractor are such as to constitute “prosecution of the

work provided for in said contract,” namely, the contract

between the general contractor and the government.

The word “contract,” as used in the statute and bond

refers to the prime contract between the general con-

tractor and the government and not to a subcontract

between the general contractor and another.

If petitioner’s contention is sound, a subcontractor

who furnishes extra labor and materials beyond those

called for by the subcontract, is not entitled to compen-

sation under the statute and bond under any circum-

stances whatever.

The decisions already cited in this brief under this

contention No. 2 clearly establish that this position is

wholly untenable. Five decisions have been cited herein

in support of the proposition that a recovery may be

allowed under the Miller Act against both the general

contractor and his surety, for labor and materials fur-

nished under orders or requests by the general contractor

in moaitication of the subcontract. In three of these

cases, Dow v. United States, supra, Ross Engineering

Co. v. Pace, supra, and United States v. Mathew Cum-

mings Co., supra, it was held that the plaintiff, a sub-

contractor, was entitled to recover from the general

contractor and the surety the reasonable value of labor

and materials furnished by the plaintiff pursuant to an

oral request made by the general contractor. In United

States v. Standard Accident Insurance Co., supra, the

court enforced an express agreement to pay for extra

work done by the subcontractor. In United States v.

Otis Williams & Co., supra, the plaintiff was permitted

to recover for extra work required by changes made by

the government. It has also been established, as hereto-

fore stated, that there need not be a bilateral contract

between the subcontractor and the general contractor

to justify a recovery against the latter and his surety.

In United States v. John A. Johnson Contracting Corp.,

supra, the court expressly held that a unilateral contract

is a sufficient basis for a recovery against both.

We respectfully contend, therefore, that a subcon-

tractor who furnishes extra labor and materials in re-

sponse to the oral request of the general contractor and

the oral promise by him to pay for such extra labor and

materials, is entitled to recover the reasonable value

thereof from the general contractor and his surety.

There are only two tests that need be met, therefore,

by a plaintiff in an action under the Miller Act: (1) Has

the plaintiff furnished labor and materials to the general

contractor of such a character that they constitute

prosecution of the work provided for in the contract

between the general contractor and the United States

government? (2) Has the plaintiff furnished labor and

materials to the general contractor under such circum-

stances that the latter is liable to the plaintiff for the

reasonable value of such labez and materials by reason

of the law of contracts?

Respondent respectfully contends that both of these

tests have been fully met in the present case. The mere

fact that most of the recovery sought by respondent

was for labor and materials outside the original scope

of the subcontract, has no bearing whatever upon re-

spondent’s rights against the petitioner; the labor and

materials furnished by respondent clearly were within

the prosecution of the work provided for in the prime

contract between the Macris and the government, and

that is all that is required. The Supreme Court itself, in

United States v. American Surety Co., supra, declared

that the language we are considering in the statute

- “looks.to the protection of those who supply the

labor or materials provide for in the contract, and

not to the particular contract or engagement under

which the labor or materials were supplied.”

If a general contractor should agree to pay a sub-

contractor a grossly excessive amount for a certain por-

tion of the work, the surety would most certainly con-

tend that its liability extended no farther than the

reasonable value of the labor and materials furnished

by the subcontractor plus overhead and profit. If that

is true, then in the reverse situation, which exists in the

present case, the surety should also be liable for the

reasonable value of labor and materials furnished plus

overhead and profit.

Cases cited by petitioner (Petition 13, 14; Brief

34) in support of reason No. 1 for the allowance of

the writ (Petition 13).

——

It is respectfully submitted that not one of the cases

cited by petitioner is contrary to the decision of the

Court of Appeals in the present case.

L. P. Friestedt Co. v. U. S. Fireproofing Co., 125

Fed. 2d 1010 (C.C.A. 10). The plaintiff and an inter-

venor contended that they were entitled to recover

against the surety under the Miller Act by reason of the

fact that the performance of their subcontracts was

made more expensive than it normally would have been,

by reason of the undue delay of the general contractor.

The court affirmed a judgment which denied both claims.

This case is readily distinguishable from the present case

on several grounds: (a) Neither of these claimants con-

tended that it furnished anything extra which was nec-

essary for the completion of the contract. (b) There

was no contract or agreement of any kind between these

claimants and the general contractor by which the latter

undertook to compensate either of the claimants for any

costs or expenses beyond those which normally would

have been incurred in the performance of such subcon-

tracts. (c) The only contention of the claimants was

that their performance was made more expensive by

the delay of the general contractor. In the present case,

mere delay was of minor importance. (d) Actually, both

claimants sought to recover damages for breach of con-

tract. In that connection, the court said:

“Stripped of all technicality, plaintiff and inter-

venor seek to recover damages claimed to have been

incurred because of the breach by the contractor of

an implied covenant in the sub-contract against

unreasonable delays preventing the sub-contractors

from proceeding with their work.”

In the present case, the Court of Appeals, after quot-

ing from the opinion in the Friestedt case, made this

statement:

“Here the new agreement between the Macris and

Schaefer contemplated that Schaefer was to per-

form extra work, which the Macris were originally

obliged to perform, in order that the main contract

between the Macris and the United States could be

performed. The performance of the new agreement

furnished labor and materials agreed by the Macris

to be supplied under the main contract and hence

labor and materials within the terms of the Miller

Act and the bond.”

Petitioner stresses the statement of the court in the

Friestedt case that ‘“‘the claim for which the parties seek

recovery here did not arise under the contract, but out-

side of the contract.” There was no agreement outside

of the original subcontract by which these claimants

were to receive any compensation whatever; that is, the

claimants did not establish that they were entitled to a

judgment against the general contractor as a matter of

contract law. In the present case, it has been fully

demonstrated that respondent is entitled to recover

from the general contractor as a matter of contract law.

United States v. Maryland Casualty Co., 54 Fed.

Sup. 290 (D. Ct. La.), affirmed 147 Fed. 2d 423 (C.C.A.

5). The plaintiff here sought to recover the rental or use

—

value of certain equipment which was kept idle due to

an order of the government enginee1 suspending work on

the project. Here, likewise, there was no agreement of

any kind by which the general contractor undertook to

pay any compensation to the plaintiff for any costs or

expenses in addition to the cost of performance under

normal conditions. Furthermore, it is clear that the

plaintiff sought simply damages for breach of contract

as distinguished from the reasonable value of labor or

materials actually furnished to the project. If the equip-

ment was kept idle, it is clear that it contributed nothing

to the prosecution of the work. In this connection, the

court said:

“Nothing was owing for work, labor or equipment

and nothing was owing for material in the prosecu-

tion of the work; no modifications of the contract

had been made or were contemplated, All that

transpired was that, without fault of the subcon-

tractor, the Government engineer ordered the work

stopped and declined to permit removal of equip-

ment. This was a breach of the contract, and it

may be that appellant is entitled to recover for this

breach as against the prime contractor or the Gov-

ernment, or both, but it becomes patent that we are

not warranted in fastening upon the Casualty Com-

pany liability on its bond for this breach.”

United States v. Seaboard Surety Co., 26 Fed. Sup.

681 (D. Ct. Mont.), affirmed 106 Fed. 2d 355 (C.C.A.

9). The plaintiff, a subcontractor, sought by this action

to recover profits lost by it due to the delay of the gen-

eral contractor. The latter was compelled to discontinue

work because of insolvency. The plaintiff then refused

to perform further and his surety completed the work.

The court held that the plaintiff was not entitled to re-

cover damages for loss of profits.

This case has no application to the present situation

for the reason that respondent is not attempting to re-

cover damages for loss of profits which he might have

earned under other circumstances than those which ac-

tually existed. Respondent is attempting to recover an

item of profit in order that his total recovery may

amount to the market value of the labor and materials

furnishd by him.

This case is distinguishable for the further reasons

that the plaintiff did not claim compensation for extra

labor or materials furnished by him, and alleged no con-

tract of any sort to pay him for any extra labor and -

materials.

United States v. John A. Johnson & Sons, 65 Fed.

Sup. 514 (D. Ct. Md.). Here a subcontractor sought to

recover increased costs due to the failure of the general

contractor to construct certain temporary roads neces-

sary to the proper performance of the subcontractor’s

work. The court denied a recovery on this claim in re-

liance upon the Friestedt, Maryland Casualty Co., and

Seaboard Surety Co. cases which have just been con-

sidered herein. This case may be distinguished from

the decision of the Court of Appeals in the present case

on the same grounds as the other cases already con-

sidered: The subcontractor was seeking to recover dam-

ages for breach of contract. There was no agreement,

in writing or otherwise, by which the general contractor

undertook to compensate the subcontractor for any costs

Sa esa

in addition to those normally to be expected. Although

an appeal was taken in this case, such appeal did not

include the claim just discussed. Consequently, the Cir-

cuit Court of Appeals did not pass upon the question

whether that claim was within the terms of the statute

and bond.

United States v. Massachusetts Bonding and Insur-

ance Co., 18 Fed. 2d 203 (C.C.A. 6). The plaintiff

brought that action under the Miller Act for damages

for the alleged wrongful death of her husband. The

court held that the plaintiff’s claim was not within the

terms of the statute and bond.

American Surety Co. v. Wheeling, 114 Fed. 2d 237

(C.C.A. 4). That action was not brought on a bond

given under the Miller Act, and has no application here.

Decisions of this court which have settled ques-

tions of federal law involved in the present case

(Petition 14).

McEvoy v. United States, 322 U.S. 102, 88 L. Ed.

1163, 64 S. Ct. 890.

United States v. American Surety Co., 200 U.S.

197, 50 L. Ed. 437, 26 S. Ct. 168.

These cases establish that there may be a recovery

under the Miller Act on an implied as well as an express

contract and, in fact, that the character of the arrange-

ment between the subcontractor and the general con-

tractor is unimportant.

a "

Cases cited by petitioner (Petition 14; Brief 34)

in support of reason No. 3 for the allowance of the

writ (Petition 14).

McEvoy v. United States, 322 U.S. 102, 88 L. Ed.

1163, 64 S. Ct. 890. The plaintiff in that case furnished

labor and materials to one who did not fall in the classi-

fication of the general contractor or a subcontractor.

The Supreme Court held that he was not entitled to

recover from the surety in this action under the Miller

Act for the reason that he did not fall within the classi-

fication of persons who may bring an action against the

surety on a bond given under that act. The statute

authorizes an action against the surety on such a bond

only by those material men, laborers, and subcontractors

who deal directly with the prime contractor, and by

those who have a contractual relationship with a sub-

contractor and who gives statutory notice to the prime

contractor. The plaintiff simply did not fall within

either classification. This decision has no application

whatever to the present case.

RESPONDENT IS ENTITLED TO RECOVER ALL

ITEMS ALLOWED BY THE DISTRICT COURT

The allowance of all items other than “overhead”

and “profit” is fully supported by these decisions:

Brogan v. National Surety Co., 246 U.S. 257, 62

L. Ed. 703, 38 S. Ct. 250.

United States v. Zara Contracting Co., 146 Fed.

2d 606 (C.C.A. 2).

: -

Glassell-Taylor Co. v. Magnolia Petroleum Co.,

153 Fed. 2d 527 (C.C.A. 5).

United States v. Seaboard Surety Co., 26 Fed.

Sup. 681 (D. Ct. Mont.), affirmed 106 Fed. 2d

355 (C.C.A. 9).

United States v. Ambursen Dam Co., 3 Fed. Sup.

548 (D. Ct. Cal.).

A few comments with respect to the items appearing

in Exhibit 63 may be of some value. “Labor (R. 1252%,”

“Batching (R. 1256, 1297, 1328),” “Payroll insurance

(R. 1253),” “Payroll taxes (R. 1254),” are all allowable

as labor. Batching represents the mixing of aggregate

by another company. The items of payroll insurance

and taxes are allowable on the principle of necessity, as

labor not be employed without making such pay-

mentsf “Truck hire (R. 1254, 1296),” and “Equipment

1 (R. 1254),” are allowable as they represent sums

id for the rental of equipment belonging to others.

“Small tools (R. 1254),” and “Hardware (R. 1255),”

are proper as expendable items. “Equipment repair and

maintenance (R. 1254, 1298),” are allowable as minor

repairs made necessary by the use of machinery. “‘Gaso-

line (R. 1255),” and “Oil (R. 1255),” are allowable as

expendable supplies. “Form oil,” “Metal pipe plugs”

which were made especially for use on this job, “Hunt

Process and Sealcure (R. 1255),” “Sisalkraft Paper,”

“Lumber for cement shed,” and “Roofing for cement

shed (R. 1256),” are proper as materials used in the

prosecution of the work, the first four of these items

being used in the actual construction of the concrete

structures, and the last two being incorporated in a ce-

ment shed used by the respondent. The remaining items

_—

should be included as necessary expenses.

Overhead and profit have been considered in the

argument of contention No. 1 in this brief. Both items

are a part of “labor and material” as surely as if they

represented actual work and actual materials.

The measure of recovery in an action against the

general contractor and his surety based upon the fur-

nishing of labor and materials, is not simply the value

of the benefit conferred upon the general contractor,

but is the value of the labor and materials in the open

market. If the market value is adopted as the measure

of recovery, it is evident that such recovery should in-

clude reasonable overhead and profit in addition to

actual expenditures, inasmuch as anyone offering to

furnish labor or materials in the open market will in-

clude overhead and profit in figuring the amount of his

offer.

United States v. Zara Contracting Co., 146 Fed.

2d 606 (C.C.A. 2).

The court is referred to the discussion of this prin-

ciple of contract law under contention No. 1 in this

brief, and to the authorities cited there. The cases con-

sidered were not brought under the Miller Act, with the

exception of the Zara case, but the principle is equally

applicable to either sort. For reference, these authorities

are cited again.

Restatement of the Law of Contracts, Section

347 (1) (a) Comment c.

5 Williston on Contracts, Section 1480.

Sofarelli Bros. v. Elgin, 129 Fed. 2d 785 (C.C.A.

4).

Schwasnick v. Blandin, 65 Fed. 2d 354 (C.C.A. 2).

Nelson v. City of Seattle, 180 Wash. 1, 38 P. 2d

1034.

Cases cited by petitioner (Brief 35) in support

of reason No. 1 for the allowance of the writ (Pe-

tition 13).

Only three of the cases cited by petitioner have any

bearing whatever upon the right of the respondent to

recover overhead and profit. All of the cases cited will

be considered briefly.

United States v. Davidson, 71 Fed. Sup. 401 (D. Ct.

Ida.). In entering judgment for the subcontractor, the

court disallowed items of overhead and profit, without

any discussion of the question and without citing any

authorities. The court did not indicate whether the

items were disallowed because of a failure of proof or

because they were not within the scope of the statute

and bond.

United States v. Great American Indemnity Co., 30

Fed. Sup. 613 (D. Ct. N.H.). Here also the trial court

in entering judgment for the plaintiff, a subcontractor,

declined to include an award for profit. The court dis-

cussed the question and cited three cases, two of which

have no bearing on the question. The third is the Theo-

bald-Jansen case discussed below, which is certainly no

authority for the position taken by petitioner.

Theobald-Jansen Electric Co. v. P. H. Meyer Co.,

77 Fed. 2d 27 (C.C.A. 10). Here the general contractor

entered into an agreement with another company, the

—

intervenor, by which the latter agreed to assume the ob-

ligations of the general contractor on a certain construc-

tion project, in return for half of the profit to be de-

rived from it. The intervenor, after the work was com-

pleted, intervened in this action against the surety of

the general contractor to recover the compensation

which the latter had agreed to pay, namely, half of the

profit to be derived from the project. The court denied

a recovery, declaring that inasmuch as the general con-

tractor could not sue his own surety, neither could the

intervenor.

It is obvious that this decision is not an authority

for the proposition that a subcontractor is not entitled

to recover profit as an item making up the market value

of his performance.

United States v. Standard Casualty Co., 32 Fed. Sup.

836 (D. Ct. N.Y.). The court indicated that insurance

premiums on workmen’s compensation and employers’

liability policies are not “labor and materials.” The issue

before the court is not made clear, however, as it ap-

pears that the plaintiff was a casualty insurance com-

pany.

United States v. Rego Building Corp., 87 Fed. 2d

1021 (C.C.A. 2). In that case the court simply affirmed

the judgment of the District Court without opinion.

Continental Casualty Co. v. Clarence L. Boyd Co.,

140 Fed. 2d 115 (C.C.A. 10). Nowhere in the opinion

in that case is the matter of overhead and profit dis-

cussed.

THE LAW GOVERNING THE SEVERAL ISSUES

Respondent has no objection to this statement in the

opinion of the Court of Appeals with respect to the law

governing the several issues (173 Fed. 2d 5, 7, 8):

“On the issue of the Macris’ liability to Schaefer,

we think that the Washington law should govern.

“On the issue of Continental’s liability on the

payment bond, the federal law should control be-

cause the determination of the extent of the liability

involves the construction of a federal statute, the

Miller Act, under which it was created, * * *.”

THE EVIDENCE ESTABLISHES WITH REA-

SONABLE CERTAINTY THE AMOUNT WHICH

RESPONDENT IS ENTITLED TO RECOVER

The decision of the Court of Appeals with respect to

the amount of recovery is found in these words (173

Fed. 2d 5, 9):

“Schaefer introduced a statement of costs pre-

pared by a certified public accountant which showed

all Schaefer’s costs on this project. From this amount

was subtracted the amount the Macris had paid on

account and judgment was rendered for the differ-

ence. There was evidence to show what Schaefer’s

costs would have been if the work had progressed as

originally contemplated, and this amount was sub-

stantially the same as the amount of Schaefer’s bid,

so the increased costs of Schaefer were properly

_ ———

computed by reference to this statement. In the

light of this evidence we cannot say that the finding

of the trial court was erroneous. The judgment in

favor of Schaefer against the Macris is affirmed.”

The statement of costs referred to by the court in

that quotation is Exhibit 63, the audit prepared by a

certified public accountant at respondent’s request (R.

1241, 1243, 1251, 1252).

It has already been shown in the argument under

contention No. 1 in this brief that respondent should be

ullowed to recover on three separate theories. These

will now be considered separately to demonstrate that

the amount of the judgment can be sustained on each.

Recovery in quantum meruit of all respondent’s

costs and expenses, together with overhead and

profit, based upon the Macris’ willful and continu-

ing breaches of the subcontract.

The District Court found that the value of the labor

and materials furnished and services rendered for which

the Macris were chargeable, was as shown in Exhibit 63;

and the court allowed all the items set forth therein with

the exception of interest and two minor items (R. 103,

104). Petitioner has not attacked the accuracy of this

audit, nor has it contended that it does not truly show

respondent’s actual costs and expenses. Petitioner does

contend that respondent should not be permitted to re-

cover overhead and profit, but that contention has al-

ready been answered.

—~—aa

There is substantial evidence establishing the items

of overhead and profit. The accountant who prepared

Exhibit 63 testified that he fixed overhead at 20% of

the total direct costs because the true percentage, which

he ordinarily used, was too high for a business of this

kind (R. 1239, 1251, 1259, 1269). This was undoubtedly

due to respondent’s most unfortunate experience on this

project. The accountant then stated that he computed

the profit at 10% of the total of the direct costs and

overhead, as most cost-plus jobs in the construction field

are figured on that basis. He added that it had been

respondent’s practice to bill on that basis, and to include

overhead in his cost (R. 1272, 1273).

It cannot be seriously contended, therefore, that re-

spondent has not met the burden of proof with respect

to the measure of his recovery on the theory set forth

under this subdivision A.

It is respectfully submitted, therefore, that respond-

ent’s recovery should be computed as follows, if this

theory is adopted:

(a) Respondent’s total direct costs al-

lowed by the court. § i $67,712.84

(b) Overhead—20% of (a). 13,542.57

og Oe ee . 81,255.41

(d) Ten per cent profit... 8125.54

(e) Total costs, overhead and ae

plus (d) _... ........ 89,380.95

(f) Amount paid _ the Macris ....... 32,614.66

(g) Total amount due and unpaid—(e)

PE TIED senenssesssssin: vevseesee-s-.. $56,766.29

_ =e

This figure varies slightly from the amount of the

judgment due to an error in calculation at the conclu-

sion of the trial.

Recovery based on the principle that an injus-

tice can be avoided only by enforcement of the

Macris’ promises to pay respondent’s costs, and

the Macris are estopped to assert that their prom-

ises are not binding upon them.

As previously pointed out, it is not entirely clear

whether Mr. Macri promised Mr. Schaefer to pay all

of respondent’s costs, or only his extra costs due to the

Macris’ breaches of the subcontract. The District Court

allowed all of respondent’s costs and expenses together

with overhead and profit, less what he received. in

affirming the amount of the recovery, the Court of Ap-

peals said (173 Fed. 2d 5, 9):

“* * * the increased costs of Schaefer were

properly computed by reference to this statement

(Exhibit 63).”

If, under the theory set forth under this subdivision

B, respondent is entitled to recover all of his costs and

expenses together with overhead and profit, less what

he has received, it is clear that the judgment should be

affirmed, for the reasons stated in subdivision A.

If, on the other hand, respondent is entitled to a

judgment for the amount specified in the subcontract,

less what he received, and in addition thereto his extra

costs and expenses, there is ample testimony in this

record to support the judgment. The following discus-

sion deals only with the latter recovery, ie., for the

additional costs and expenses, and the corresponding

overhead and profit.

Petitioner contends that the respondent failed to

keep a separate account of his increased costs and that

he failed to introduce any evidence of their extent at the .

trial. It is further contended that the respondent, not

having met the burden of proof, is entitled to recover

nothing inasmuch as the evidence shows the Macris

have already paid respondent almost all he would have

been entitled to receive if the subcontract had been

faithfully performed by the Macris.

There are two answers to these contentions, although

it is conceded that respondent did not keep a separate

account of his extra costs.

In the first place, the breach of contract by the

Macris was willful and negligent and was of such char-

acter as to render precise computations of extra costs

economically and in most situations physically im-

possible.

The extra work done by respondent consisted in the

following:

Fine grading the excavations to the proper level;

removing earth from the walls of the excavations to give

them more slope and permit the forms to be inserted

properly; removing earth or cribbing and back-filling,

where the walls were not properly excavated to the neat

concrete line; removing from excavations, panels as-

_—

sembled into structures, when it appeared that the ex-

cavations had not been dug to the proper grade, and

reassembling such panels in the excavations after addi-

tional fine grading; removing the forms under adverse

conditions after the concrete had set; taking the forms

back to the yard in order that they might be rebuilt,

and returning them to the next excavation; rebuilding

panels to a different size because of a lack of lumber

and the vertical walls of the excavations; additional use

of trucks; additional use of other equipment; additional

supervision, that is, a superintendent and foreman were

required for a much .onger period than would have been

necessary under normal conditions.

It is evident that from the nature of the operation

and the extra work done, it would have been eco-

nomically, and in most instances physically impossible

to have kept an exact account of all these extra costs.

Mr. Schaefer testified that with respect to part of such

extra operations it was a physical impossibility to estab-

lish a dividing line between what was work required by

the subcontract and what was additional work (R.

1368).

. In the second place, respondent did produce very

substantial evidence of additional costs, and it is respect-

fully submitted that such evidence fully meets the re-

quirements established by the Supreme Court which

will be discussed.

This evidence consisted in the testimony of several

witnesses and Exhibits 51 (R. 572, 578, 586) and 63 (R.

1241, 1243, 1251, 1252). Exhibit 51 shows the estimated

time of performance of all aspects of his work: con-

structing forms, pouring concrete, and stripping the

forms. It also shows the daily progress of the work by

means of cumulative percentages of the total to be done

in each of these three categories. It also indicates ex-

actly how many men were employed each day and in

what work they were primarily engaged. Exhibit 63 is

the audit prepared by the certified public accountant at

respondent’s request, setting forth all of his costs and

expenses itemized by months.

Mr. L. E. Bufton, an engineer of uncommon experi-

ence in the field of concrete construction (R. 1133 to

1139), testified that after examining the specifications

covering this job, the work required of respondent under

the subcontract could have been performed by him, if

the Macris had performed their obligations under the

subcontract, in not more than four months (R. 1160,

1161, 1162). He added that to accomplish this in four

months, he would need an average of 25 men per day

(R. 1216), which means, assuming 25 working days in

each month, 2,500 man days would have been required.

By means of a hypothetical question setting forth

the details of the conditions under which respondent

was compelled to do his work, Mr. Bufton was asked

how and to what extent the conditions mentioned would

affect the reasonable cost and value of the performance

by respondent (R. 1167, 1168, 1169). His answer was

that he could not state the additional costs in dollars

—

and cents but that he felt that the cost might be from

two to three times as much as it should have been under

normal conditions (R. 1172 to 1175).

Finally, Mr. Bufton said that he figured the reason-

able cost and value of the performance of the work un-

dertaken by respondent, assuming that the Macris per-

formed their obligations as required by the subcontract,

would be $27.88 per cubic yard. He added that this

figure included an allowance for the services of the sub-

contractor himself and overhead. By overhead he said

he meant home office and general supervision (R. 1162,

1163, 1164). Mr. Bufton also referred to a similar

project in Oregon. He said the subcontractor carrying

out the concrete work in that instance had bid $30.00

per cubic yard with the understanding that he would

furnish all the lumber for forms (R. 1141, 1142, 1143).

Respondent here testified that his bid of $26.00 per cubic

yard would have been raised to $30.00 if he had been

required to furnish the lumber (R. 419). Thus their

bids were in the same amount.

Mr. Darcy, respondent’s superintendent, testified

that if the excavations had been ready with the banks

on a one-to-one slope and a lateral clearance of one foot

at the foundation of the structure, and lumber had been

furnished of proper quality and on time, no more than

three and a half months at the very outside would have

been necessary to complete the job (R. 464). Actually

a year and three weeks were required.

Exhibit 51 clearly indicates that this job could have

been completed within three and a half months or at

least within the four months specified by Mr. Bufton,

if the Macris had faithfully performed the subcontract.

That exhibit shows the following actual performance by

respondent during the periods indicated:

Form setting, from Feb. 9, 1945, to Mar. 8, 1945,

the most productive month—17% per cent of

the entire job.

- Pouring concrete, from Mar. 1, 1945, to Mar. 30,

1945, the final 30 days—30 per cent of the entire

job.

Stripping forms, from Mar. 5, 1945, to Apr. 4, 1945,

the final month—39 per cent of the entire job.

These figures demonstrate that so far as pouring

concrete and then stripping the forms were concerned,

operations in which respondent was not directly depend-

ent on the Macris, respondent could have performed all

of the work contemplated by the subcontract in 100

days of elapsed time. During no month was he able to

construct in the excavations more than 171% per cent of

the entire number of forms required on this project, but

it appears from Exhibit 51 that in seven days of actual

time and eight days of elapsed time, from January 19,

1945, to January 26, 1945, respondent’s men were able

to set 614 per cent of the entire number of forms, and

that on each of sixteen other days, widely scattered,

they set one per cent or more of the total number. It

was in the setting of the forms in the excavations that

the breaches of the Macris created the most serious ob-

stacle to respondent.

—

Exhibit 51 establishes by means of the following

computation that respondent actually demonstrated the

capacity to complete the work in the same or less time

and with less men than Mr. Bufton estimated:

Form setting (including yard, form setting, field

repair, and trucking crews)—614% of the work

required. 107 man-days.

Concrete pouring—30% of the work required 176

man-days.

Form stripping—30% of the work required 34 man-

days.

All types of work—100% would require 2,346 man-

days.

One other fact is worthy of mention: The ratio of

respondent’s demonstrated performance of 2,346 man-

days to Mr. Bufton’s estimated performance of 2,500, is

94/100. The ratio of respondent’s bid per cubic yard

of $26.00 to Mr. Bufton’s estimate of $27.88, is 93/100.

The significance of this fact is that it establishes that

respondent’s bid may properly be used as a basis for a

computation of the amount for which the work could

have been done.

Respondent’s extra costs may be determined with

reasonable certainty from the testimony and exhibits

just considered, by two separate computations:

1. Based on the difference between respondent’s ac-

tual, total costs and his estimated costs.

(a) Respondent’s bid, per cubic yard... $ 26.00

(b) Respondent’s estimated costs, elimi-

nating 10% profit but not over-

head—10/11 of (a)... ie 23.64

compensation was paid to the

Macris—Exhibit 14 (R. 160)..___1,356.697

(d) Respondent’ s estimated costs, iticlud-

ing overhead but not profit—(b)

multiplied by (c) x 32,072.32

(e) Respondent’s total, actual costs in-

cluding 20% overhead — (<) of

table in subdivision A 81,255.41

(f) Respondent’s extra costs including

20% overhead—(e) minus (d). 49,183.09.

(g) Ten per cent profit... 4,918.31

(h) Total extra costs and eietiiadsillinad plus

SCPC RR ata ai cleat ren $54,101.40

To this should be added, of course, the amount which

remains unpaid under the subcontract.

(i) Amount required by the subcontract

to be eects multiplied by

(c)

RESETS Te IN Re we SNEED NM MA $35,274.12

(j) Amount paid by the Macris 32,614.66

(k) Balance — pecan

minus (j) ss 2,659.46

(1) Total amount due and aa on this

basis—(h) plus (k)_ vee $56,760.86

It will be observed that this is $4.11 less than the

amount of the judgment.

2. Based on Mr. Bufton’s estimate that the total

cost might be from two to three times as much as it

should have been under normal conditions.

A figure of two and one-half was adopted in making

this computation, which means that the extra costs are

assumed to be one and one-half times the costs under

normal conditions.

(a) Respondent’s estimated costs, includ-

ing 20% overhead but not profit—

(d) of previous table in subdivi-

sion B 32,072.32

(b) Total costs based on Mr. Bufton’s

estimate of rate increase, but re-

spondent’s estimate of costs, in-

cluding 20% overhead—(a) multi-

plied by 1% 48,108.48

(d) Total extra costs and profit—(b) plus

(e) Balance remaining unpaid on subcon-

tract—(k) of previous table in

Subdivision B 2,659.46

(f) Total amount due and unpaid on

this basis—(d) plus (e) $55,578.79

This is $1,186.18 less than the amount of the judg-

ment, but it would be substantially increased by using

Mr. Bufton’s estimated cost of $27.88 per cubic yard,

or adopting his estimated increase of three times the

cost under normal conditions.

It is respectfully submitted that the evidence, as

—

thus analyzed, fulfills the requirements of the Supreme

Court with respect to the character of proof required

to sustain a money judgment.

Anderson v. Mt. Clemens Pottery Co., 328 U. §.

680, 90 L. Ed. 1515, 66 S. Ct. 1187, was an action for

overtime compensation under the Fair Labor Standards

Act. The Circuit Court of Appeals reversed a judgment

entered in favor of the plaintiff in the District Court,

for the reason that the evidence of the extent of his

overtime work was conjectural. The Supreme Court re-

versed the Circuit Court of Appeals and affirmed the

judgment of the District Court, saying:

“*** here we are assuming that the employee

has proved that he has performed work and has

not been paid in accordance with the statute. The

damage is therefore certain. The uncertainty lies

only in the amount of damages arising from the

statutory violation by the employer. In such case,

‘it would be a perversion of fundamental principles

of justice to deny all relief to the injured person,

and thereby relieve the wrongdoer from making any

amends for his acts.’ * * *|It is enough under these

circumstances if there is a basis for a reasonable

inference as to the extent of the damages.”

Bigelow v. RKO Radio Pictures, Inc., 327 U. S.

251, 90 L. Ed. 652, 66 S. Ct. 574, was an action under

the Sherman and Clayton Acts for an injunction and to

recover treble damages. The Supreme Court affirmed

the judgment for the plaintiffs entered in the District

Court, although the evidence of damages sustained by

the plaintiffs consisted simply in a comparison of

the plaintiff’s receipts before and after the defend-

ant’s wrongful acts. In reversing the Circuit Court of

Appeals for the Sixth Circuit, the court said:

“In such a case, even where the defendant by

his own wrong has prevented a more precise com-

putation, the jury may not render a verdict based

on speculation or guesswork. But the jury may

make a just and reasonable estimate of the dam-

age based on relevant data, and render its verdict

accordingly. In such circumstances ‘juries are allow-

ed to act on probable and inferential as well as

upon direct and positive proof.’ ”

Recovery based on the implied-in-fact agree-

ment of the Macris to pay respondent’s costs.

It is probable that the implied-in-fact agreement is

limited to an undertaking by the Macris to pay all of

respondent’s additional costs and expenses. Inasmuch as

his claim was unliquidated, he has a right to recover in

quantum meruit or by specific performance of the agree-

ment. In either event his recovery is the same, and the

evidence amply justifies the affirmance of the judgment,

as was pointed out fully in the discussion under sub-

division B.

Cases cited by petitioner (Petition 14; Brief 42)

in support of reasons No. 1 and 3 for the allowance

of the writ (Petition 13, 14).

United States v. Wyckoff Pipe & Creosoting Co.,

271 U.S. 263, 70 L. Ed. 938, 46 S. Ct. 503.