Source: https://law.justia.com/cases/federal/appellate-courts/F2/388/746/160267/
Timestamp: 2019-12-14 08:09:03
Document Index: 567250934

Matched Legal Cases: ['§ 25', '§ 162', '§ 16', '§ 1732', '§ 28', '§ 10', '§ 10']

W. L. Hailey & Company, Plaintiff-appellant, v. County of Niagara and Niagara County Water District, Defendants-appellees, Andl. A. Wells Construction Company, Intervenor-appellee.county of Niagara and Niagara County Water District, Plaintiffs-appellants, v. W. L. Hailey & Company, a Tennessee Corporation, Defendant-appellee, 388 F.2d 746 (2d Cir. 1967) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1967 › W. L. Hailey & Company, Plaintiff-appellant, v. County of Niagara and Niagara County Water District,...
W. L. Hailey & Company, Plaintiff-appellant, v. County of Niagara and Niagara County Water District, Defendants-appellees, Andl. A. Wells Construction Company, Intervenor-appellee.county of Niagara and Niagara County Water District, Plaintiffs-appellants, v. W. L. Hailey & Company, a Tennessee Corporation, Defendant-appellee, 388 F.2d 746 (2d Cir. 1967)
US Court of Appeals for the Second Circuit - 388 F.2d 746 (2d Cir. 1967) Argued November 20, 1967
COPYRIGHT MATERIAL OMITTED W. Raymond Denney, Nashville, Tenn., and Paul Z. Lewis, New York City (Denney, Lackey, Chernau & Castleman, Nashville, Tenn., and Jarvis & Pilz, Paul Z. Lewis, New York City, on the brief), for W. L. Hailey & Company.
Anthony L. Pusateri, Lockport, N. Y. (Fogle, Andrews & Pusateri, Lockport, N. Y., on the brief), for County of Niagara and Niagara County Water District.
James O. Moore, Jr., Buffalo, N. Y. (Raichle, Moore, Banning & Weiss, Buffalo, N. Y., on the brief), for L. A. Wells Construction Co.
At Hailey's invitation Wells intervened to seek recovery against Hailey upon a cost-plus subcontracting agreement. The intervenor asserted three additional claims in its pleadings.1 Only the judgments in Wells' first and second cross-claims have been appealed. Wells' first cross-claim is to recover upon an oral contract with Hailey to re-lay damaged pipe in the east branch of the Niagara River between Stations 170+08 and 171+84 for cost plus a reasonable profit. Judge Henderson found that Wells' costs plus a reasonable profit of 15% were $101,370.23. We find that the trial court erred in computing Wells' costs and remand for determination of the actual costs to Wells of operating its construction equipment. In all other respects the judgment in favor of Wells on its first cross-claim is affirmed.
Wells' second cross-claim is for delay and unproductive work due to Hailey's alleged misrepresentation that the trench for the pipeline had been excavated to grade from Station 170+18 to Station 164+40. The trial court found that Hailey had made a misrepresentation and, as a direct consequence, Wells' equipment was engaged in unproductive work and Wells was damaged in the sum of $28,599.51. We modify the judgment in Wells' second cross-claim, reducing the award of damages to $26,934.51.
Engineer Seeley testified that the metal bars in the concrete pipe had been "necked down," that is, that they had been pulled from both ends so that they stretched out in length, shrunk in girth and broke, like a piece of taffy pulled from both ends. This uncontradicted testimony supports the court's finding and is inconsistent with Hailey's theory that Niagara's inadequate plans for the pipe bed caused the break under the lateral stress of the weight of the backfill on top of the pipe. In view of Seeley's testimony, we reject Hailey's contention that the only evidence supporting Niagara's theory of the pipe break is that another section of pipe laid according to the same design did not break under the weight of backfill.
Hailey contends that it contracted with Niagara in reliance upon drawing P-9, which was part of the contract, specifications and bidding material, in the belief that the drawing represented that there was no solid rock along the line of construction. In August 1959, after Hailey had dug the trench for pipes about one-third of the way across the east channel, it hit "hard digging." In spite of attempts to improve the effectiveness of its equipment, Hailey was unable to make much progress. After many unproductive weeks of trying to reach grade and exploratory digging up and down the line of construction, Hailey removed all of its equipment from the east channel. It did no further work on the subaqueous pipeline in the east channel and in 1960 Hailey subcontracted the work to intervenor L. A. Wells Construction Company. After Wells began to work the parties discovered that the level of bedrock along the line of construction was actually several feet above the grade line of the pipe and that two-thirds of the job of digging the trench on the east branch of the river required special rock excavation equipment.
There are three diagrams in drawing P-9, which Hailey contends misrepresented the level of bedrock along the line of construction. At the top is a cross-sectional representation of the drill cores from test borings made at 200 feet intervals across the river bottom. In the center is a plan of the pipe route, also showing the location of the boring holes in relation to the pipeline. At the bottom is a profile of the pipe line showing the position of the pipe with respect to the waterline, and beneath the pipe is a line which is designated "approximate top of rock." Hailey claims that this line constitutes either an express warranty or a representation by Niagara that the actual top of the rock was below the pipeline and that no subaqueous rock work was required to complete the job. The trial court found that drawing P-9 clearly and correctly showed the elevations of rock obtained from the borings and that the borings were taken 200 feet apart at distances varying from 60 feet to 200 feet and more from the actual line of construction of the pipeline. The data from the borings was transposed to the profile in drawing P-9 in accordance with standard engineering practice and labeled "approximate top of rock." The court found that the drawing contained no representation or information as to the rock elevations along the actual line of construction and contained all of the information with reference to the borings and composition of the river bed known to the appellees. It held that Hailey was negligent in interpreting P-9 and failing to consult an engineer to interpret the drawing, and that an experienced contractor or engineer would have been alerted by the information in the drawing to the possible presence of rock above grade along the actual line of construction.
After hitting hard digging, Hailey sought to fulfill its contract obligations by procuring a dipper dredge, a specialized piece of equipment suited to excavation of hard river bed. In the spring of 1960 Hailey learned that intervenor Wells owned this type of equipment. Hailey's president, Steele, met with Louis A. Wells, the president of Wells, at the job site. Steele told Wells that Hailey had excavated the ditch to grade as far as Station 164+40 and that, while Hailey had encountered hard digging, there was no rock work involved. Wells subcontracted with Hailey for the sum of $93,000 to lay pipe from Station 170+08 south and to excavate the ditch from Station 164+40 south pursuant to the terms of the contract.
When Wells began to work, it discovered that the trench had not been excavated to grade from Station 170+08 to Station 164+40 as Hailey had represented and that, in order to reach grade, it would have to undertake extensive rock excavation work with the dipper dredge. Wells' pipelaying work was delayed fourteen days until the dipper dredge could dig the trench to grade in the section which Steele had represented as already dug to grade. The costs incurred during the delay which resulted from Hailey's misrepresentation are the basis of Wells' second cross-claim.
Hailey contends that even if it is liable, the trial court's finding of damages in favor of Wells in both cross-claims cannot be sustained because Wells failed to itemize its claim for damages.2 We disagree. Wells proved its damages through the testimony of its president, Mr. Wells. His uncontradicted testimony established how much working time was devoted to removing and relaying pipe under the first cross-claim and in unproductive efforts to lay pipe and reach grade under the second cross-claim. His testimony as to which equipment was used on each job and how many hours of labor were attributed to each cross-claim is also uncontradicted. On the basis of the corporation's general ledger, Wells' past practice and Wells' experience as a subaqueous construction contractor, he testified that certain values could be assigned to the working time of each piece of equipment and that portions of Wells' overhead, miscellaneous expenses and compensation insurance expense could be allocated to the different claims. He also testified that 15% profit on the job was reasonable, especially since his costs did not include the purchase of any substantial amounts of construction materials.
Hailey's main contention is that Wells' proof must fail because Wells did not submit an itemized statement to support each claim of damages. We are not persuaded by Hailey's claims that Wells did not segregate charges related to various jobs in its books and accounts and that an accountant retained by Hailey to examine Wells' books could not determine from the books how Wells' costs should be allocated. It is well settled that once a plaintiff has proved that it is more probable than not that he has been damaged, plaintiff need only show the amount of his damages with reasonable certainty. "The rule to be applied is a flexible one, for as this court said long ago in Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264, 266: ` [W]hen it is certain that damages have been caused by a breach of contract, and the only uncertainty is to their amount, there can rarely be good reason for refusing on account of such uncertainty any damages whatever for the breach. A person violating his contract should not be permitted entirely to escape liability because the amount of the damage which he has caused is uncertain.'" Randall-Smith, Inc. v. 43rd St. Estates Corp., 17 N.Y.2d 99, 105-106, 268 N.Y.S.2d 306, 312, 215 N.E.2d 494, 498 (1966). Duane Jones Company, Inc. v. Burke, 306 N.Y. 172, 117 N.E.2d 237 (1954); Steitz v. Gifford, 280 N.Y. 15, 19 N.E.2d 661, 122 A.L.R. 292 (1939); Dunkel v. McDonald, 272 App.Div. 267, 70 N.Y.S.2d 653 (1947), aff'd, 298 N.Y. 586, 81 N.E.2d 323 (1948). Accord, Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S. Ct. 248, 75 L. Ed. 544 (1931); Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264-266, 66 S. Ct. 574, 90 L. Ed. 652 (1946); De Long Corporation v. Lucas, 278 F.2d 804, 810 (2 Cir.), cert. denied, 364 U.S. 833, 81 S. Ct. 71, 5 L. Ed. 2d 58 (1960).
While it is true that Wells' books did not segregate expenses due to the different aspects of the work performed, Mr. Wells testified as to how much of his expenses were attributable to each claim. In light of the corporation's method of bookkeeping, we find that Mr. Wells' testimony was a reasonable method of proving damages and perhaps the best method available under the circumstances. See Achilles v. New England Tree Expert Co., 369 F.2d 72 (2 Cir. 1966). We see no basis for disturbing the trial court's findings on the issue of damages because of appellee's method of proof. Accord, Merritt, Chapman & Scott Corporation v. Guy F. Atkinson Company, 295 F.2d 14 (9 Cir. 1961); Walla Walla Port District v. Palmberg, 280 F.2d 237 (9 Cir. 1960). See 78 A.L.R. 858; 22 Am.Jur.2d, Damages § 25; 25A C.J.S. Damages § 162 (11); 13 N.Y.Jur., Damages §§ 16-13.
Hailey's claim that Mr. Wells' testimony should have been excluded as hearsay since he relied upon the corporate books and records which were not in evidence is frivolous, as is the claim that Wells is required to comply with the shopbook statute, 28 U.S.C. § 1732. Wells' books and records were available throughout the trial and could have been used by Hailey to impeach Mr. Wells' testimony.
On the first cross-claim Hailey is liable for cost plus reasonable profits. Wells claims $30,900 plus 15% profit on "rental" of the derrick scow, dipper dredge and a tug. Mr. Wells testified as to the "reasonable rental value" of the equipment then multiplied it by the number of hours spent at work, including the total as part of the claim. Obviously the actual cost to Wells of operating this equipment is something less than the rental value Wells would have charged to someone else for use of the equipment.3 It was error to allow Wells to recover the hypothetical cost to someone else of renting Wells' equipment for the purpose of performing this work since Wells already owned this equipment and did not actually incur a rental expense. Under the terms of the oral agreement with Hailey, Wells is only entitled to recover actual expenses plus 15% profit. Further, we must assume that reasonable rental value includes a reasonable profit, so that the trial court's addition of 15% profit to the rental value was piling profit on profit. For these reasons the trial court's computation of cost plus reasonable profits in the first cross-claim is clearly erroneous and the judgment must be reduced by $35,535 less the actual cost incurred by Wells by operating the equipment, plus 15% profit. We remand the intervenor's first cross-claim for redetermination of damages.
On Wells' second cross-claim, which is for unproductive work and delay caused by Hailey's misrepresentation that the trench was dug to grade, we find that Wells could properly include reasonable rental value of the equipment listed in its claim under applicable principles of New York law. Immick Co. v. State, 251 App.Div. 919, 297 N.Y.S. 623 (1937). However, it was error to allow recovery of 15% profit on the fair rental value of the equipment. As we stated with regard to the first cross-claim, an allowance of profits upon fair rental value would be piling profit on profit. Therefore the judgment in the second cross-claim must be reduced by $1,165, that portion of the profit awarded by the trial court which was calculated upon the fair rental value of the equipment. The judgment in favor of Wells is reduced to $26,934.51.
On January 16, 1961 Wells sent to Hailey a bill for "Work completed as of December 15, 1960." Hailey contends that the part of this bill related to the cost plus contract is Item #7, "pipe removal," for $48,600. Hailey failed to note that items #1, 2 and 3 of the same bill for concrete pipe, steel pipe and trench excavation work also relate to construction north of Station 170+08 and therefore part of these items represent billings for cost plus work, while the balance of these items, from Station 170+08 south represent billings for progress payments on the original subcontract agreement.
Hailey claims that the June 12, 1961 bill is an upward revision of the charges in the January 16 bill. However the bill itself makes clear that this was a supplementary billing for the extra work due to unanticipated digging of rock in order to bring the trench to grade, both in the section of the trench covered by the original subcontract and in the section covered by the cost-plus agreement. One item is "Relaying 170' of pipe at $46.20 * * * $7,854.00." Adding this additional charge to the portion of the January 16 bill attributable to the first cross-claim gives a total billed cost of about $63,800, not including overtime for rock digging.
The district court found that the payments to Hailey for "extras" were paid under the provisions of the contract relating to change orders. However, we believe that the court failed to make the crucial finding: Whether or not Hailey was required to do the work for which it was paid extra by the terms of the contract without a change order.
Section 10, Article IX of the New York Constitution, formerly Art. III, § 28, prohibits "grant of any extra compensation to any * * * contractor." In T. J. W. Corporation v. Board of Higher Education of the City of New York, 276 N.Y. 644, 12 N.E.2d 800 (1938), a case remarkably similar to the one before us, the New York Court of Appeals affirmed a directed verdict for defendant Board of Education to recover on its counterclaim for payments made by mistake for work that was within the scope of the lump sum contract and not extra work, as plaintiff claimed. New York law is clear; Niagara is entitled to recover any payments for work which Hailey was required to perform under the terms of the contract.
Hailey argues that, as § 10, Article IX was repealed in 1963, Niagara cannot recover. However, the cases cited, Bloch v. Frankfort Distillery, Inc., 247 App.Div. 64, 288 N.Y.S. 749 (1st Dept. 1936); Lido Capital Corp. v. Eskelsen, 162 Misc. 323, 295 N.Y.S. 163 (1936); Lido Capital Corp. v. Vogel, 161 Misc. 48, 291 N.Y.S. 92 (1936), all deal with contracts for purchase and sale of alcoholic beverages entered before the end of Prohibition. They are exceedingly weak authority for the general principle that all repeals of constitutional provisions are retroactive unless containing a provision to the contrary. However even if we were to accept this as a principle of construction, the amendment repealing the section in question provided for an effective date of January 1, 1964. Certainly we cannot give retroactive effect to a statute having a specific effective date. Therefore § 10, Article IX is applicable to the payments in question, which occurred prior to January 1, 1964. Judgment is reversed and the case is remanded for determination as to which, if any, extra payments were for labor services and materials which appellee was under a duty to supply without a change order.
The parties and the district court referred to the claims of intervenor Wells as "cross-claims." Technically only claims against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein or relating to property that is the subject matter of the original action should be denominated as cross-claims. Fed. R. Civ. P. 13(g). 3 Moore, Federal Practice ¶ 13.18. In the interest of simplicity and consistency we have continued to refer to Wells' causes of action as "cross-claims."
"First Claim. Removing and replacing damaged and misplaced pipe: — Labor ....................................... $33,685.25 — Compensation Insurance (11% of labor costs) ....................... 3,705.37 — Overhead (25% of labor costs) ....................... 8,421.31 — Miscellaneous Expenses (463 hours at $24.70) ...................... 11,436.10 — Rental of derrick scow (58 — 8 hour tricks at $400) ............... 23,200.00 — Rental of tug (58 tricks at $50.00) ...................... 2,900.00 — Rental of dipper dredge (8 tricks at $600) ......................... 4,800.00 __________ Direct Cost .............................. 88,148.03 Profit at 15% ............................ 13,222.20 __________ Total Claim .............................. 101,370.23 Advance paid ............................. 25,000.00 __________ Balance .................................. $76,370.23 $76,370.23 "Second Claim. Delay and unproductive work occasioned by the fact that the trench had not been excavated between Station 170 + 08 and Station 164 + 40. — Labor ....................................... $ 7,608.98 — Compensation Insurance (11% of labor cost) ........................ 836.98 — Overhead (25% of labor cost) ........................ 1,902.24 — Miscellaneous Expenses (138½ hrs. at $24.70) ...................... 3,420.95 — Rental Derrick Scow (14 days at $400) .......................... 5,600.00 — Rental Tug (14 days at $50.00) ........................ 700.00 — Rental Dipper Dredge (8 days at $600) ........................... 4,800.00 __________ Direct Cost .............................. 24,869.15 Profit at 15% ............................ 3,730.36 __________ Balance .................................. $28,599.51 $28,599.51"