Meares v. NIXON CONSTRUCTION COMPANY

173 S.E.2d 593 (1970) 7 N.C. App. 614

Houston D. MEARES, d/b/a Dixie Fire & Sprinkler Company
v.
NIXON CONSTRUCTION COMPANY.

No. 7026SC27.

Court of Appeals of North Carolina.

May 6, 1970.

Fairley, Hamrick, Monteith & Cobb, by Laurence A. Cobb, Charlotte, for plaintiff-appellee.

Ernest S. DeLaney, Jr., Bradley, Gebhardt, DeLaney & Millette, Charlotte, for defendant-appellant.

BRITT, Judges.

In its brief defendant states its contention regarding the first assignment of error as follows: "The Court below committed error when it instructed the jury it should find that the defendant breached the contracts by failing to pay the estimates within thirty days without the jury first finding that said estimates had been approved."

A portion of the charge included in this assignment of error is as follows:

"By way of summary, ladies and gentlemen, with regard to the second issue, `did the defendant breach the Birmingham contract, as alleged in the compaint?" the court instructs you that if you find from the evidence and by its greater weight, the burden being upon the plaintiff on this issue to so satisfy you, that the defendant, Nixon, failed to pay the invoices submitted to them in accordance with the paragraphs of the contract that I have previously read to you, and that the defendant's delays or refusals to make these payments were not reasonable delays, and that there was no bona fide dispute in existence as to the amounts due at that time or as to the percentage of the work completed, and if you further find from the evidence and by its greater weight that the plaintiff had not at that time previously breached the contract, then and in that event the court instructs you it would be your duty to answer the first issue `yes.' On the other hand, if you fail to so find, or if after considering all of the evidence, you are unable to say where the truth lies or if you find the evidence evenly balanced, then and in any of these events it would be your duty to answer the second issue `no.' If, however, the work had not progressed to the point required to permit the submission of the invoices and to require payment thereof, or if you find that under the circumstances the delays in payment, if any, were reasonable, that is, that the defendant had reason to believe that the work had not progressed and was not progressing according to the contract and that the plaintiff was not under the terms of the contract entitled to submit or to have the submitted invoices paid, at the time of their submission in accordance with the provisions of the contract, then it would be your duty to answer the second issue `no.'"

Later in the charge the trial judge gave a similar instruction regarding the Cleveland contracts. Previous to the instruction above set forth the court quoted paragraphs (A), (B) and (C) of section 6 of the contracts but did not quote the proviso of section 6 preceding paragraph (A). Sections 3, 5 and 6 of the contracts provided as follows:

"3. The General Contractor agrees to pay to the Subcontractor for the performance of the above described work the sum of [amount specified in each contract] in current funds, subject to additions and deductions for changes as may be agreed upon, and to make payments on account thereof in accordance with Section 6 hereof.

* * * * * *

5. The Subcontractor shall present to the General Contractor a monthly estimate of work completed for the full month; said estimate to be submitted not later than Saturday of the month of the completion of said work.

* * * * * *

6. Provided this agreement has been approved by the Owner, the Owner shall upon approval of said estimate, make payments on account to Subcontractor on behalf of the General Contractor as follows:

(A) The estimates shall show percentages of work completed and, where applicable, amounts requested for payment. Unless otherwise agreed, such requests for payment shall be made only once monthly and submitted for the full month not later than the 5th day of the following month. Such requested amounts, less the retained percentages as specified below, shall be paid within 30 days after the date submitted in New York office.

(B) Prior to receipt of each payment, the Subcontractor shall, upon request of General Contractor or Owner, furnish lien waivers for all work, labor and material performed and furnished through date for which each payment becomes due.

(C) The General Contractor and the Owner shall retain 10% of the amount due on each payment until final payment becomes due."

The gist of defendant's argument is that before plaintiff could justify a termination of his work on the Birmingham and Cleveland contracts for failure of defendant to pay monthly estimates when due, plaintiff had the burden of showing that the owner (Overmyer) approved the estimates. We do not accept this argument. In 2 Strong, N.C. Index 2d, Contracts, § 12, p. 315, is found a concise resume of certain well-settled principles of law with respect to construction of contracts; these include the following: "The heart of a contract is the intention of the parties, which is to be ascertained from the language used, the subject matter, the end in view, the purpose sought, and the situation of the parties at the time. * * A contract is to be construed as a whole * * *."

Needless to say, the contract does not clearly state who had the responsibility of relaying the monthly estimates from defendant to the owner and seeking their approval, but considering "the subject matter, the end in view, the purpose sought, and the situation of the parties," we think the contract contemplated that defendant had this responsibility. The invoices of monthly estimates submitted by plaintiff complied with defendant's requirements as to form; they also complied with "Instructions To Sub-Contractors" provided by defendant's parent corporation (plaintiff's exhibit 14). Evidently, defendant did not expect plaintiff to exercise such responsibility regarding invoice No. 103 for the Cleveland job as the evidence discloses that this invoice, dated 26 May 1966, was paid on 13 July 1966. Plaintiff's evidence discloses that in connection with the Birmingham job he timely submitted to defendant estimate invoices dated 30 April 1966 for $7,614.00 and 30 May 1966 for $6,963.75 and that neither was paid. Plaintiff testified: "I was in contact with the Accounts Payable Department in New York with reference to payment of these invoices. They never gave me a reason why these invoices were not paid." Plaintiff's evidence further discloses that he submitted two estimate invoices to defendant on the Cleveland job and they were not paid.

We think the instructions complained of were fully justified by the pleadings and the evidence; the assignment of error is overruled.

Defendant assigns as error the admission of certain testimony by plaintiff on the question of the amount of damages sustained by plaintiff, and instructions to the jury pertaining thereto.

On direct examination and over defendant's objection, plaintiff testified substantially as follows: His actual net cost on the Birmingham job was $7,668.62 and lost profits amounted to $6,479.00, a total of $14,147.62. The profit figure of $6,479.00 was arrived at "just like we estimate every job, 20%. This includes overhead and profits." Nixon paid American Cast Iron Company $3,703.11 after that firm filed a lien; after giving credit for that payment, plaintiff's "net cost" was $10,444.51 which included a "lost profit" item of $6,479.00. With respect to the Cleveland jobs, over defendant's objection plaintiff testified substantially as follows: At the time he prepared his bid, he calculated an overhead and profit figure of $21,500.00. This was based on 20% of the total. The total amount of plaintiff's cost and loss of profits in connection with the Cleveland jobs was $29,948.49.

Plaintiff presented no evidence as to what it would have cost him to complete the Birmingham and Cleveland jobs. Regarding the Cleveland underground system job, plaintiff testified:

"For getting about 400 feet of pipe in the ground my company had incurred expenses in excess of what is shown on the contract form. This is the contract that I had signed and if I had been able to complete the contract I would have incurred costs substantially greater than the amount that appears on the contract."

The amount specified in the Birmingham contract was $32,395.00. Defendant presented evidence tending to show that it paid Charlotte Automatic Sprinkler Company $27,925.00 to complete the Birmingham job and that other payments made thereon brought defendant's total cost to $34,445.36. Defendant's evidence tended to show that the Cleveland underground job cost defendant $83,695.95 as opposed to plaintiff's contract for $40,166.67; that the Cleveland interior jobs cost defendant $54,466.00 for each building as opposed to plaintiff's contract for $33,667.00 for each building.

In his charge to the jury, the trial judge recapitulated plaintiff's evidence regarding loss of profits and later in the charge on the question of damages said:

"Now, applying this rule as the court has attempted to give it to you in this case, the court instructs you that if you answer the third issue and if you consider the third issue, then you should consider as damages the following things: the unpaid balance of the contract price, if any, to which the plaintiff would be entitled; second, lost profits and, as I have previously indicated to you, you would determine that item if you determine it in any amount, by taking the contract price and by subtracting from that contract price what it would have cost the plaintiff in this instance to complete the contract, because the evidence, of course, would indicate that he did not complete this particular contract and that would be an item that would have to be deducted before you could make any determination of lost profits, if you make such a determination."

With respect to the issue on amount of damages on the Cleveland contracts, the court instructed:

"The measure of damages on this issue would be the same as the measure of damages on the third issue I gave you with regard to the Birmingham contracts. I will not repeat those instructions."

The assignment of error is well taken. Defendant's objections to plaintiff's testimony as to how plaintiff estimated his loss of profits should have been sustained. With proper evidence to support them, the court's instructions would have been correct, but this was not the case.

In a suit for damages arising out of a breach of contract, the party injured by the breach is entitled to full compensation for the loss and to be placed as near as may be in the position which he would have occupied had the contract not been breached. Harris & Harris Construction Co. v. Crain and Denbo, Inc., 256 N.C. 110, 123 S.E.2d 590 (1962). In an action for damages for breach of a construction contract, the profits and losses must be determined according to circumstances of the case and the subject matter of the contract. Harris & Harris Construction Co. v. Crain and Denbo, Inc., supra. A party seeking to recover for "gains prevented" or "lost profits' must present evidence rather than speculation.

In Tillis v. Calvine Cotton Mills, Inc., 251 N.C. 359, 111 S.E.2d 606 (1959), the court said "damages must be certain, and this certainty which is required does not refer solely to their amount, but also to the question whether they will result at all from the breach." As the court said in Perfecting Service Co. v. Product Development & Sales Co., 259 N.C. 400, 131 S.E.2d 9 (1963), "For a breach of contract the injured party is entitled as compensation therefor to be placed, insofar as this can be done by money, in the same position he would have occupied if the contract had been performed." The measure of lost profits in the instant case is thus the difference between the contract price and what it would have cost plaintiff to complete the work under the contract. It was also said in Tillis v. Calvine Cotton Mills, Inc., supra, "It is incumbent upon the plaintiff to present facts, as to all reasonable factors involved, that the jury may have a basis for determining damages." The testimony of plaintiff that his anticipated profit was 20% of the contract price does not provide an adequate factual basis for the jury to ascertain the measure of damages under the standard of certainty established by the decisions of our Supreme Court.

Although the assignment of error relating to the determination of damages is sustained, we do not think a new trial of all issues is warranted. We think that defendant had a fair trial on all issues except issues No. 3 and No. 7. For that reason the judgment of the superior court is vacated and this cause is remanded for further hearing on the question of damages, if any, due plaintiff on the Birmingham and Cleveland contracts.

Error and remanded.

BROCK and GRAHAM, JJ., concur.