R. A. Weaver & Associates, Inc. v. Haas & Haynie Corp.

Citations: 213 U.S. App. D.C. 404; 663 F.2d 168Docket: Nos. 78-1205, 78-1283

Court: Court of Appeals for the D.C. Circuit; December 3, 1980; Federal Appellate Court

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Judgments were rendered in favor of R. A. Weaver Associates, Inc. (Weaver) and International Stone Erectors, Inc. (ISE) against Blake Construction Company, Inc. (Blake) and Haas Haynie Corporation for damages based on breach of contract and tortious conversion of property. The District Court upheld the conversion award but reversed the breach of contract judgments, remanding that issue for further proceedings.

In 1971, the General Services Administration (GSA) sought bids for a federal office building project, requiring black slate from Maine or Virginia. Blake won the contract in 1972 and began negotiating with suppliers, including Weaver and ISE, who proposed Nor Cashire slate from England. On March 19, 1972, Blake and ISE entered into a purchase-order contract for the slate, contingent upon GSA's approval, particularly concerning compliance with the Buy American Act. The contract did not specify a timeframe for obtaining this approval.

ISE later amended the purchase order, emphasizing that the contract was based on the owner's approval of the slate, warning that failure to secure approval would void the contract without recourse. Following this, ISE contracted with Weaver for the slate. In June 1973, test data and samples of Nor Cashire slate were submitted for approval, but on July 17, the supervising architects disapproved the slate, citing insufficient modulus of elasticity, unsatisfactory appearance, and its foreign origin. Blake contested this decision and formally petitioned for approval under the Buy American Act. Subsequently, the architects revised their stance, indicating on September 11, 1973, that the Nor Cashire slate could meet specifications if the submitted test data applied to specific grades.

Walter E. Huber, the GSA contracting officer, delayed approving the substitution of Nor Cashire slate for the originally designated slate, opting instead to explore the possibility of using granite with a financial adjustment for GSA. This indecision lasted three months. On December 14, 1973, after unsuccessful discussions with ISE, Blake formally canceled its contract with ISE due to the lack of GSA approval for the slate. Subsequently, GSA approved the use of charcoal black granite for the plaza and driveways.

Weaver created detailed shop drawings for the project, which ISE submitted to Blake. After the contract cancellation, Blake provided these drawings to Cold Spring Granite Company, resulting in a $13,000 credit on Cold Spring’s contract with Blake. Blake later offered ISE and Weaver $10,000 for the drawings but required a full release of claims, which they declined. In 1975, ISE, Weaver, and another party filed a lawsuit against Blake and others, which proceeded to trial. The jury found in favor of the plaintiffs on claims of breach of contract and tortious conversion, awarding ISE $30,000 and Weaver $86,000 for breach, and $17,000 in compensatory and $100,000 in punitive damages for conversion of the drawings.

Blake moved for judgment notwithstanding the verdict, which the District Court partially granted, limiting the claimants' recovery to $2,000 and $12,000 for out-of-pocket expenses. Blake contested the conversion verdict, arguing that plaintiffs were entitled only to payment for the drawings rather than their return, thus disputing the basis for punitive damages. However, the court upheld the jury's verdict, emphasizing that the claimants had a proprietary interest in the drawings that persisted beyond their contractual rights.

Evidence indicates that Weaver submitted drawings in collaboration with ISE to sell slate and granite products for the South Portal site project, retaining ownership rights. The District Court found substantial evidence that defendants unlawfully exercised control over plaintiffs’ shop drawings, denying plaintiffs' ownership rights. Morton Bender, President of Blake Construction Co., acknowledged the drawings belonged to plaintiffs and admitted an obligation to compensate them. He confirmed transferring the drawings to Cold Spring for a $13,000 reduction in contract price, which the Government later adjusted to pay Cold Spring, anticipating that Blake would compensate plaintiffs. Despite this, Bender did not tender payment to plaintiffs until trial and only offered $10,000 contingent on settling other claims. The jury's finding of conversion liability was supported by evidence, and the $17,000 compensatory damages were justified, considering the potential $4,000 additional value plaintiffs could have negotiated. Weaver's testimony valuing the drawings at $30,000 further substantiated the verdict. The jury was also justified in considering punitive damages due to Bender's willful disregard for plaintiffs’ rights, leading to a $100,000 award deemed reasonable by the District Court.

Blake's arguments to overturn the breach of contract verdict regarding the Blake-ISE purchase-order contract include two main points. First, Blake contends that Weaver could not be considered a third-party beneficiary of the contract. However, evidence showed that Blake was aware of Weaver's involvement in the project, as Weaver sought approval for Nor Cashire slate and was the exclusive distributor for that material. Weaver's subsequent actions, including providing samples and test data, indicated a mutual understanding of his significant interest in the contract.

The second argument, which poses a stronger challenge to the verdict, asserts that the jury’s conclusion of a contract breach was unsupported because the required GSA approval for Nor Cashire slate was never obtained. The court agreed, noting that GSA Contracting Officer Walter E. Huber testified that he decided to change the paving material from slate to granite due to safety concerns and aesthetic preferences, and the government had no obligation to accept the slate.

Two additional questions arise. First, whether Blake prematurely canceled the contract due to the unmet condition, potentially violating an implied term. Second, whether Blake failed to uphold a duty of good-faith cooperation with ISE and Weaver, which may also be an implied obligation. While the contract explicitly required GSA’s acceptance of the slate for Blake’s performance, it did not specify a timeframe for this approval, leading to the implication that a reasonable time for securing GSA approval was part of the agreement. Notably, around nine months passed between the contract's formation and its cancellation by Blake without a definitive decision from GSA.

The court found that the decision to cancel the contract was not clearly reasonable, leaving the issue for the jury to determine if Blake breached the contract by prematurely terminating it. The jury instructions from the District Court did not allow for a proper consideration of whether Blake’s actions constituted a breach. The court noted that a promissor's nonoccurrence of a condition precedent can be excused if attributable to their own conduct, implying a duty to cooperate in facilitating performance. The instructions provided to the jury limited Blake's obligations to refrain from preventing GSA approval without considering whether a duty to cooperate was an implied term of the contract. As a result, the verdict could not be upheld based on a finding of a failure to cooperate. Consequently, while the judgment regarding damages for conversion of the shop drawings was affirmed, the breach-of-contract claims judgment was reversed, and the case was remanded for further proceedings. Additionally, it was clarified that Haas Haynie Corporation (H&H) acted as a joint venturer with Blake but did not influence project management decisions.

In the construction industry, general contractors typically obtain price quotations from subcontractors to formulate their bids, though these initial quotes may not reflect actual costs post-contract award. After being awarded a contract, general contractors can negotiate with different subcontractors than those who provided quotations. In 1971, Weaver proposed Nor Cashire slate for the South Portal site project, which received favorable feedback from supervising architects regarding its structural and aesthetic qualities. The proposal was made prior to the General Services Administration (GSA) selecting Blake as the general contractor, and ISE notified Blake that Weaver was the American distributor for the slate, which had GSA approval. In February 1973, ISE reiterated this, stating that Nor Cashire slate complied with the Buy American Act concerning the use of imported materials in domestic government projects. 

During the trial, Huber testified that Nor Cashire slate met the necessary requirements for plaza and driveway paving, provided it adhered to the Buy American Act. However, the architects indicated a preference for granite instead of slate, prompting Huber to consider negotiating with Blake for a potential granite substitution if economically viable. Barretto Granite Company was anticipated to supply granite if Blake opted to switch from slate and subsequently sued on the premise of being a third-party beneficiary of the contract between Blake and ISE.

The District Court granted Blake a directed verdict against Barretto, with no appeal filed on this ruling. Other defendants included H&H and Cold Spring, with the court previously dismissing claims of fraudulent representation and tortious interference after the claimants chose to abandon them. Additionally, a summary judgment was entered against the defendants for an antitrust conspiracy charge. Blake is appealing three judgments from the District Court, while ISE and Weaver are appealing the court's decision to nullify the breach-of-contract verdict regarding loss of profits. The parties agree that District of Columbia law applies. Under this law, punitive damages are not available, regardless of the breach's motive. To support a conversion claim, a plaintiff must assert ownership, which was undisputed in this case, thus eliminating the need for jury consideration on ownership. The court's error in directing a verdict on ownership is noted, but here, since ownership was not in dispute, the court's ruling stands. Approval of specific materials for a project was a condition that could only be authorized by the contracting officer, which was not done in this case.

A condition precedent is a necessary fact that must occur before a contractual duty arises, as established in Creighton v. Brown. The court's ruling to set aside a jury's award of lost profits was influenced by this principle. When a contract does not specify a time for performance, it is implied that the performance must occur within a reasonable timeframe, as noted in Fox v. Johnson and supported by various cases. The determination of whether the elapsed time is reasonable does not necessarily rely on the contract's language, nor does it preclude differing interpretations regarding its duration. 

Breach of contract is defined as nonperformance of a contractual duty without legal excuse, which may be total or partial and can occur through failure to perform, hindrance, or repudiation. Each party to a contract is implicitly bound not to interfere with the other's performance; if one party causes such interference, it constitutes a breach, rendering them liable for damages. This legal framework is supported by numerous case law citations, reinforcing the principles of breach and performance in contractual obligations.

The excerpt references a legal framework surrounding constructive conditions in contracts, highlighting that the prohibition against active interference is an implied term within contracts. Key case law is cited, including Karrick v. Rosslyn Steel Cement Co. and Minmar Builders Inc. v. Beltway Excavators, Inc., illustrating that in bilateral contracts, a promissor's interference typically excuses the promisee's performance but does not affect the promissor's obligations. The excerpt notes the application of the interference doctrine in nonfederal litigation, as seen in Ammerman v. Miller. It raises a question regarding the equivalence of interference and noncooperation. Specific incidents involving Blake, who altered a petition related to the Buy American Act and hesitated in seeking a final decision from GSA, are presented as evidence without implying their significance. Lastly, it indicates that the District Court may consider the discussed implied-promise theories upon remand.