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Lichter v. Mellon-Stuart Co.

July 6, 1962


Author: Hastie

Before BIGGS, Chief Judge, and HASTIE and SMITH, Circuit Judges.

HASTIE, Circuit Judge.

This is an appeal from a final judgment in a diversity suit. The appellee, Mellon-Stuart Co., a Pennsylvania corporation, had a contract to build a ten-story annex to the Pittsburgh branch of the federal reserve bank of Cleveland and to alter the existing seven-story building. The appellants, Jacob and Jennie Lichter, citizens of Ohio, doing business as Southern Fireproofing Company, whom we shall call Southern, received two subcontracts in connection with the job. They agreed, in one, to do the exterior stone work and, in the other, to do the interior masonry work required by the prime contract.

Before making its bid, Southern was told that the stone work could be started by June 1, 1956, and completed within 60 to 90 days, and that the masonary work could be commenced by the middle of July and completed by December 1, 1956. The bids were based on these representations. However, without fault on Southern's part, it failed to complete either contract as of January 10, 1958, although the work had been "substantially" finished. At that point the contracts were terminated, with Mellon accepting its obligation to pay substantially the contract price, for the work accomplished. Southern, however, both during construction and after completion, demanded extra compensation, claiming that breaches of both contracts had increased its costs of performance. This suit is based on those claims. All disputed legal claims are controlled by Pennsylvania law.

The court below found that Southern's work under the masonry contract had been delayed by a number of factors, including change orders, shortages of materials, faulty material, delay by other trades, strikes, and interference by Mellon-Stuart. It also found as follows:

"Beginning in January, 1957, Mellon required Southern to start the interior masonry work. It had become increasingly apparent that Mellon was deviating from the two Progress Schedules * * * received by Southern on October 13, 1955 and September 21, 1956, respectively. * * *

"Because the building was not ready for the interior masonry work, Southern in January, 1957, requested a suspension of the interior masonry work until the mechanical trades had completed their work in order that it might proceed in an orderly manner on each floor in sequence. Mellon refused and thereafter required Southern to perform its masonry work piecemeal and in a haphazard and disorderly manner. In addition, contrary to the specifications, Southern was directed by Mellon to do its (Southern's) masonry work on the alterations of the old building before the new building was 'practically complete'. All this required Southern to perform the masonry work over a longer period of time than if it had been performed in sequence, floor by floor, and increased its cost considerably." 193 F.Supp. 216, 220-221.

Despite these findings the trial judge held that the piecemeal manner in which the work was required and the resulting additional costs "stemmed primarily from excusable and contemplated delays", and that Southern's right to damages for "delays" was precluded by the contract. Contesting this ruling, Southern contends, as it did below, that its losses on the masonry contract were not caused by "delay" within the meaning of the contract. Rather, it argues that the responsible cause of the additional costs in suit was the "haphazard, disorderly and piecemeal" manner in which Mellon-Stuart, in violation of the contract, required the masonry work to be done.

The court below relied upon article VI of the subcontract which provides procedure pursuant to which additional time may be allowed by the subcontractor for delays imposed upon him "by substantial changes, omissions or additions, or by fire or the act of God, or by reason of the acts of the Owner or Contractor". It is also provided that the subcontractor shall be allowed time only and "no pecuniary compensation" for the completion of work thus delayed.

Certainly a contract may validly provide that a contractor shall be entitled to no relief except an extension of the time of performance if circumstances beyond his control shall delay his performance, even though such delay does in fact increase his costs. We have today so ruled in Johnson v. Fenestra, Inc., 3 Cir., 305 F.2d 179, relying upon Henry Shenk Co. v. Erie County, 1935, 319 Pa. 100, 178 A. 662. Such a clause might preclude damages here if it were the subcontractor's essential complaint that his performance had been made more costly because he was required to postpone his operations. However, the major contention in this case is just the opposite. The subcontractor complains that he was compelled to proceed with his work too soon and haphazardly before other trades had finished their activities in the areas where masonry was required. Various delaying circumstances, affecting other phases of the overall construction, are said merely to have created a condition of unreadiness for the orderly and systematic performance of masonry work. But this condition is not asserted as a breach of contract. The alleged breach was Mellon's response to Southern's request for delay in the light of the unanticipated condition of the project. Moreover, Southern argues that this breach is established in the present record by a finding of the court below, sitting without a jury, that Southern's workmen were required to perform an average of 13 separate operations on each floor of the 10-story structure, when normal procedure would have involved not more than 2 or 3 operations on each floor.

But even if Southern is correct in its contention that Mellon breached the contract by insisting that the subcontractor proceed under conditions necessitating piecemeal performance of the masonry work, we think there is an insuperable obstacle to recovery on this record. In the opinion of the court below, on Southern's motion for denying a new trial, this difficulty is stated as follows:

"Even if one could find from the evidence that one or more of the interfering contingencies was a wrongful act on the part of the defendant, no basis appears for even an educated guess as to the increased costs suffered by plaintiffs due to that particular breach or breaches as distinguished from those causes from which defendant is contractually exempt from responding in damages." 196 F.Supp. 149, 151.

The record shows that in proving damages the subcontractor introduced testimony as to what it would have cost to perform all of the masonry work if that undertaking had proceeded without untoward occurrences in the manner contemplated at the time of contracting. Next, the actual cost of the entire masonry job as delayed, interrupted and hindered by all causes was proved. The entire difference was claimed as damages without any itemization. During the trial the court inquired of counsel about this method of proof, indicating its risk from the plaintiff's point of view. The colloquy was as follows:

"The Court: What happens if we find the plaintiff is not entitled to damages for delays caused by strikes or change orders, etc.? The plaintiff has lumped his damages and ...

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