Guerini Stone Co. v. Carlin Construction Co.
240 U.S. 264 (1916)

Annotate this Case

U.S. Supreme Court

Guerini Stone Co. v. Carlin Construction Co., 240 U.S. 264 (1916)

Guerini Stone Company v. P. J. Carlin Construction Company

No. 78

Argued November 12, 1915

Decided February 21, 1916

240 U.S. 264

ERROR TO THE DISTRICT COURT

OF THE UNITED STATES FOR PORTO RICO

Syllabus

In the case of subcontracts, as in other cases of written agreements, a reference to an extraneous writing for a particular purpose makes it a part of the agreement for that purpose only.

In this case, held that the general contract between the government and the contractor was not admissible as against a subcontractor except for the specific purpose mentioned in the subcontract, to-wit, showing what drawings and specifications were referred to therein, nor was the subcontractor bound by provisions in the general contract so as to be obliged to submit to delays resulting from the action of the government permitted by the original contract.

Where a contractor agrees with a subcontractor to provide labor and materials not included in the subcontract, he assumes an obligation not conditioned on the question of his fault, and whether the delay in supplying such labor and materials be attributable to him or to the exercise by the owner of a right reserved by the principal contract, he remains liable under the subcontract.

In this case, held that, although the principal contract between the government and the contractor gave the government the right to suspend, as the contractor had not safeguarded himself by incorporating that provision into the subcontract, he was not relieved from the damages caused the subcontractor by such suspension.

In estimating profits that might be realized if a building contract had been proceeded with in the ordinary manner to completion, no more definite and certain method can be adopted than to deduct from the contract price the probable cost of furnishing the materials and doing the work.

A provision in a subcontract requiring the contractor to make monthly payments not exceeding 85% of cost of work erected cannot be construed to require precisely that percentage, nor can a provision that the subcontractor furnish requisitions of the amount to be paid make the subcontractor sole judge of the amount it is entitled

Page 240 U. S. 265

to receive. Such provision must receive reasonable construction.

Where the form of a request to instruct is such that compliance with it might mislead the jury, there is no error in refusing it.

The facts, which involve the rights and liabilities of a subcontractor on government work, are stated in the opinion.

MR. JUSTICE PITNEY delivered the opinion of the Court.

We have here under review a judgment for damages in favor of plaintiff in error against defendant in error, reversal being asked upon the ground that, through erroneous rulings made by the trial judge, the recovery was unduly limited. The writ of error was sued out under § 244, Jud.Code (Act of March 3, 1911, c. 231, 36 Stat. 1087, 1157), prior to the Act of January 28, 1915 (38 Stat. 804, c. 22, §§ 3 and 6).

Defendant, a corporation of the State of New York, on December 12, 1910, secured a contract with the government of the United States for the construction of a post office and court building at San Juan, Porto Rico. A few days later, it entered into a subcontract in writing with one Guerini, by the first paragraph of which he agreed:

"To furnish and set in position, including the concrete backing, all the imitation of sandstone, and to construct the interior concrete walls, concrete floors, concrete roof, backing the granite construction, enclosing all the I-beams . . . agreeable to the drawings and specifications made by the said architect (copies of which have been delivered to the subcontractor), and to the dimensions and explanations thereon, therein and herein

Page 240 U. S. 266

contained, according to the true intent and meaning of said drawings and specifications,"

etc., it being agreed that the work should be done

"under the direction and to the satisfaction of the general contractors and James Knox Taylor, architect (acting as agents of the owner) or his or its representative."

A subsequent paragraph reads as follows:

"25th. The subcontractor further agrees to furnish the material and build the concrete footing complete to the basement floor for the sum of $6.70 a cubic foot."

"Also to furnish the materials and build all the sidewalks for the sum of $1.85 a square yard."

"Also set in position all the granite walls, steps, balusters, buttresses, and curbing, and all other granite work for the sum of 40 cents a square foot surface. The three above items to be at the option of the general contractor. . . ."

Thereafter the plaintiff corporation was formed under the laws of Massachusetts, and Guerini transferred the contract to it. Defendant was notified of this, expressed satisfaction in writing under date February 20, 1911, and thereafter dealt with plaintiff as subcontractor.

At a later time, defendant exercised the third only of the options given to it by the 25th paragraph.

The plan of the building contemplated a foundation of concrete and piles, which was to be constructed by defendant complete to the basement floor; above this a basement story, surfaced with granite blocks to be furnished by defendant (as a practical matter, to be sent from the United States) and to be set in position by plaintiff under the accepted option. The blocks were to be backed with concrete, to be furnished and set by plaintiff. Above the basement story, the exterior walls were to be faced with imitation sandstone, backed with concrete, which, together with interior walls, floors, and roof of concrete, were to be constructed by plaintiff.

Page 240 U. S. 267

The contract contained the following clauses that bear upon the matters in dispute:

"6th. The subcontractor shall and will proceed with the said work and every part and detail thereof in a prompt and diligent manner, . . . and shall and will wholly finish the said work according to the said drawings and specifications and this contract in 300 days from the date upon which the building is ready to receive his work and after he has been notified to proceed by general contractors, and in default thereof, the subcontractor shall pay the general contractors the sum of $20 for every day thereafter that the said work shall remain unfinished as and for liquidated damages. The subcontractor further agrees to begin work at the building within three days from the time that he is notified by the general contractors that the building is ready to receive such work."

"7th. . . . Should the subcontractor be obstructed or delayed in the prosecution or completion of the work by neglect, delay, or default of the owner, the architect, the general contractors, or of any other contractors employed by them upon the work, or by alterations which may be required in said work, or by any damage which might happen by fire, lightning, earthquake, or cyclone, or by the abandonment of the work by the employees through no fault of the subcontractor, then the time herein fixed for the completion of the work shall be extended for a period equivalent to the time lost by reason of any or all of the causes aforesaid,"

etc.

"11th. The general contractors will provide all labor and materials not included in this contract in such manner as not to delay the material progress of the work, and in the event of failure so to do, thereby causing loss to the subcontractor, agree that they will reimburse the subcontractor for such loss, and the subcontractor agrees that, if he shall delay the material progress of the work so

Page 240 U. S. 268

as to cause any damage for which the general contractors shall become liable, then he shall make good to the general contractors any such damage over and above any damage for general delay, herein otherwise provided, the amount of such loss or damage in either case, to be fixed and determined by the architect, or by arbitration, as provided in article 3rd in this contract."

"12th. It is hereby mutually agreed by the parties hereto that the sum to be paid by the general contractors to the subcontractor for said work and materials shall be sixty-four thousand seven hundred and fifty dollars ($64,750), subject to additions or deductions as hereinbefore provided, and that such sum shall be paid in current funds by the general contractors to the subcontractor in monthly payments on account, not to exceed in amount 85 percent of the cost of the work actually erected in the building, provided that the subcontractor furnishes to the general contractors a written requisition, on a form to be supplied by the general contractors, not less than twelve days before payment is required. . . ."

The action was commenced in June, 1912. The complaint, besides the jurisdictional averments, alleged the making of the contract between Guerini and defendant, the assignment to plaintiff, and defendant's consent and recognition of plaintiff as the contracting party; averred that thereafter and during the month of February, 1911, at defendant's request and in pursuance of the terms of the contract, plaintiff employed and sent to Porto Rico its representatives, brought laborers from the United States and employed others in Porto Rico, organized its working forces, purchased and supplied the necessary tools and materials, and prepared itself and was ready and willing to perform its obligations under the contract, but that thereafter, until the 16th day of October, 1911, plaintiff was not permitted by defendant to proceed with the work, owing to defendant's failure to provide the necessary

Page 240 U. S. 269

granite blocks; that, on that day, plaintiff did proceed with all possible diligence and performed all the work provided for by the contract as fast as defendant, in the course of construction work, permitted plaintiff to do so; that nevertheless, during the period from October 16, 1911, until March 9, 1912, the work was unreasonably and unjustifiably delayed by the failure of defendant to provide necessary materials and carry on its part of the construction work so as to permit plaintiff to perform the work required of it under the contract, and that plaintiff was thereby greatly damaged; that, on March 9, 1912, all work of every nature was stopped on the building, and plaintiff was prevented by defendant from continuing with any work; that said stoppage "has continued ever since, is still continuing, and . . . will continue for a period of at least several months hereafter," and that defendant has accordingly committed a breach of its obligations under the contract, the result of which has been and is to cause great damage and loss to plaintiff, which has been obliged to keep its labor force on hand during all of said period at great loss and expense; that, by the terms of the contract payment of not more than 85 percent of the amount of the work actually done was due and payable by defendant monthly on twelve days' notice from plaintiff to defendant, and that plaintiff during the months of December, 1911, and January and February, 1912, duly notified and demanded of defendant payment of the sums due for the work actually performed, but that defendant continuously and repeatedly failed and refused to make said payments; that, because of said repeated violation and breach of the contract on the part of defendant, plaintiff, under date of May 22, 1912, notified defendant in writing of its election to terminate the contract and bring its action for damages for breach thereof, and that plaintiff has offered to defendant to arbitrate their differences, but that defendant has refused. Plaintiff claimed damages to the amount of

Page 240 U. S. 270

$45,797.45 for work and labor performed, materials furnished, and moneys expended in and about the performance of the contract, and for lost profits. In a separate paragraph, an indebtedness of about $40,000 was alleged for the reasonable value of work, labor, and materials supplied.

Defendant answered, admitting some of the averments of the complaint, but denying that plaintiff had complied with the terms of the contract or had been prevented by defendant from proceeding with and carrying on its work; admitting that plaintiff notified defendant of its election to cancel or rescind the contract and bring its action for damages for the alleged breach thereof, but denying that there was cause for rescission, and denying that plaintiff had sustained damages as claimed by it. The answer further set up that the subcontract was subject to all the terms and conditions of the principal contract made between defendant and the government of the United States; that defendant had at all times proceeded strictly in accordance with the terms and conditions of the latter contract, that, during the course of the construction of the building, the representatives of the government found it desirable or necessary to change the manner of constructing the foundations, and that this action of the government was within its rights under the original contract, and plaintiff was bound thereby equally with defendant.

The case was tried before the judge of the district court and a jury. Plaintiff introduced evidence tending to support the material averments of its complaint. It appeared that, in January, 1911, defendant notified plaintiff's predecessor that "work must start at once," and that, in February, plaintiff sent its representatives to Porto Rico; that, upon their arrival so little work had been done upon the foundations that they were unable to do anything upon the building itself, but preliminary work was done in the way of getting tools and machinery to the Island, building

Page 240 U. S. 271

workshops and an office, and preparing moulds for the casting of the artificial stone; that, during the spring and summer, delay was occasioned by the failure of defendant to construct the foundations; that this continued until about the first week in October, when the foundation work and the grading inside the foundation walls had proceeded to a point that would admit of the commencement of the course of granite, and enough granite was upon the ground to allow a start to be made of setting it. In August or September, plaintiff was notified of defendant's acceptance of the option to call upon plaintiff to set the granite at 40 cents per square foot, but the granite was slow in arriving, and some of the stones were misfits, so that the work of laying was considerably interrupted. There was difficulty also with the derrick equipment, defendant having, under the contract, furnished two derricks and an engine, but with insufficient power to admit of operating both derricks at the same time. This was remedied, sometime in December by the provision of additional power. The granite setting proceeded from the middle of October to the 12th of February, 1912, plaintiff's evidence being to the effect that it was set as fast as delivered, but that, because the granite came in separate shipments, a little at a time, sometimes with needed blocks missing, the work of setting it could not be speeded. On or about February 12, 1912, plaintiff stopped setting granite, with defendant's consent.

The evidence tended to show that much of the delay during the spring and summer of 1911 was occasioned by a change made by arrangement between defendant and the government in the provisions of the general contract respecting the mode of constructing the foundations. The pleader would seem to have limited the complaint respecting delay prior to October 16, 1911, to such as was due to defendant's failure to provide granite blocks, but the evidence was not thus limited.

In February, 1912, when the granite work had been

Page 240 U. S. 272

practically finished, it was ascertained that the foundations had settled, and that there were variations in the foundation work from the specifications as agreed upon between the government and defendant. On March 9th, work was suspended by order of the government pending an investigation which resulted in showing that practically the entire building would have to be underpinned in order to secure a safe foundation. This result was officially communicated to defendant under date March 25, 1912, and a few days later, pursuant to an order of the Assistant Secretary of the Treasury, all work upon the building was stopped "pending the settlement of responsibility for deviations from contract requirements regarding foundations." The question of responsibility lay between defendant and the representatives of the government; plaintiff having had nothing to do with the foundations. Leaving the question undetermined, the government, in the month of May, 1912, entered into an agreement with defendant for underpinning the entire building. It perhaps does not clearly appear when this work was commenced, but it was in progress when the action was begun, and Mr. Berrymen, the government's superintendent of construction then in charge of the building, testified: "This work is now [November, 1912] about 85 percent completed." The same witness testified that, from March 9th, 1912, until the time of the trial, "conditions were such that it was impossible for the Guerini Stone Company to continue with their work under the contract."

On March 9, 1912, plaintiff's agent at San Juan was notified by defendant's representative there that the federal authorities had ordered all work upon the building suspended pending investigation of the foundations. On the same day, he wrote defendant's San Juan office asking whether plaintiff's men should be discharged and sent back to the United States, but got no satisfactory reply. Further correspondence upon the same topic led to no result.

Page 240 U. S. 273

Meanwhile, the parties had been in disagreement about payments on account. The contract (paragraph 12) provided for payment of the contract price

"in monthly payments on account, not to exceed in amount 85 percent of the cost of the work actually erected in the building, provided that the subcontractor furnishes to the general contractors a written requisition, on a form to be supplied by the general contractors, not less than twelve days before payment is required,"

etc. The contract, however, did not provide how the cost of the work other than the granite setting should be ascertained. For the concrete backing and other concrete work and the imitation sandstone covered by the subcontract, no "unit prices" were specified. The price of "6.70 a cubic foot," mentioned in the 25th paragraph as the optional price for concrete footings, was treated by the parties as if intended to read $6.70 per cubic yard -- approximately 25 cents per cubic foot. This, however, had reference to work that plaintiff was not called upon to do, and obviously did not furnish a unit price for the concreting actually done by plaintiff.

In December, 1911, and January, 1912, plaintiff made written requisitions for payments on account, based upon statements of the "amount of work completed to date." They were not complied with, and the parties soon realized the practical importance of agreeing upon a unit price to be employed in estimating the amounts payable. According to the testimony of Mr. Converse, President and Treasurer of the Guerini Company, he went from Boston to New York city on February 2, 1912, by appointment, and conferred with Mr. Carlin, defendant's representative, upon the subject of unit prices, and it was then agreed that plaintiff should make its applications and receive its payments upon the basis of a certain written schedule of units, produced by Mr. Carlin, which specified (inter alia): "Exterior and interior concrete walls, arches, and cement

Page 240 U. S. 274

work, $1.07 per cu. ft; concrete floors and casings, 45 1/2

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