THOMPSON, District Judge.
The United States, acting through the National Aeronautics and Space Administration,
In anticipation of the contract, Dixon had negotiated with subcontractors and on June 8, 1962, Van Harris, doing business as Harris & Sons, submitted a letter-bid to Dixon covering certain site clearance, grading, excavating and backfilling work required by the construction contract. On or about June 18, 1962, Dixon prepared and sent to Van Harris a proposed written subcontract for the performance of this work, and on June 20, 1962, Harris returned the subcontract to Dixon with a covering letter. Relevant portions of the June 8 letter, the June 18 subcontract and the June 20 letter are quoted in the footnote.
On or about June 20, 1962, Harris entered into a written agreement with Andrew
Work on the project commenced about July 1. Harris appeared at the job site, introduced Yost and his foreman, McFarland, to Dixon's General Project Manager, and assisted in getting the site clearance, grading and excavation work lined out and underway. Thereafter, Harris was at the project site from time to time but spent most of his time on other jobs. None of the actual site clearance, grading and excavation work was performed by Harris or by anyone employed by him.
On July 20, 1962, Harris submitted a bill to Dixon for $7,213.50 to cover the completion of the first thirty-five per cent of the work, and payment was made by Dixon less ten per cent retention about August 10, 1962. On August 20, 1962, Harris submitted a bill for an additional twenty per cent of the work. This was never paid. Shortly thereafter, disputes arose in the course of which Dixon charged Harris with having subcontracted the work in violation of the agreement; with having failed to perform certain work relating to small footings and trenches required by the agreement; and with having excavated a basement, leaving a wall twenty-five to thirty feet in depth which was dangerously steep and improperly sloped in violation of safety regulations. Dixon refused to make any further payments to Harris unless full and complete releases were obtained from Paramount and Yost. Harris countered with the contentions that his right to subcontract the job was a part of the agreement; that the small footings and trenches consisted of handwork or small machine work not required under the agreement; that any defects in performance were the result of improper engineering by Dixon; and that Dixon had no right to insist upon releases. Because of the impasse, Harris, Yost and Paramount withdrew from the project.
In October, Dixon needed some equipment immediately and negotiated directly with Paramount for equipment which was furnished and the rental for which has not been paid in the amount of $431.09, which sum is a part of Paramount's total claim for $8,730.87.
In due course, Yost and Paramount gave the written notices required by 40 U.S.C. 270b to Dixon and Fidelity, and thereafter brought actions under the Miller Act. Dixon filed a third party complaint against Harris in one action and a counterclaim in another alleging Harris' breaches of the subcontract, damages in the amount of $37,290, and Harris' obligation to indemnify Dixon for any claims of Yost and Paramount which Dixon might be required to pay.
The cases were consolidated for trial. Shortly prior to trial, Yost was adjudicated a bankrupt and the issues with respect to Yost were settled with the Trustee in Bankruptcy and thereafter were dismissed with prejudice. The case proceeded to trial on the Miller Act claim of Paramount against Dixon and Fidelity and on Dixon's cross-complaint against Harris for damages for breach of contract. Harris appeared and defended in his own proper person. The Pre-Trial Order entered September 28, 1964, approved by Harris and the attorneys for all the parties, admitted that on or about June 18, 1962, Dixon and Harris entered into a written subcontract whereby Harris agreed to perform all site clearance and demolition work at the proposed Jet Propulsion Laboratory site with certain exceptions set forth in said written subcontract. At the conclusion of the trial and on Harris' motion, the Court permitted the Pre-Trial Order to be amended to include as issues of fact and law "(1) that Harris was prevented from performance of any contract with Dixon by Dixon; and (2) that there was no valid
In its Memorandum Opinion which encompasses its Findings of Fact, the District Court rendered judgment in favor of Paramount against Dixon and Fidelity for the sum of $8,730.87, and the Court rendered judgment in favor of Harris and against Dixon on the cross-complaint by Dixon for damages for the alleged breaches by Harris of the purported subcontract.
Dixon and Fidelity have appealed the judgment in favor of Paramount on its Miller Act claim. Dixon has appealed the judgment in favor of Harris on the breach of contract claim, and Paramount has appealed the refusal of the District Court to include attorney fees in the judgment in Paramount's favor under the Miller Act.
The trial court, which found in its Memorandum Opinion "that there was no meeting of the minds between Harris and Dixon and Dixon never accepted Harris' counteroffer", concluded that "there was no express contract between Harris and Dixon." We think the proper solution of all issues presented on this appeal is governed to a great extent by the sustainability of these findings. Dixon and Fidelity contend that if Harris' letter of June 20, 1962 accompanying the return of the signed subcontract was a counter-offer, Dixon's actions in proceeding to perform was an acceptance of the counter-offer, although, admittedly, there was no express acceptance by conversation, letter or otherwise. Beatty v. Oakland Sheet Metal Supply Co., 1952, 111 Cal.App.2d 53, 244 P.2d 25, is distinguishable because there was evidence of an express acceptance of the counter-offer; and Fidelity and Casualty Co. of New York v. Fresno Flume & Irrigation Co., 1911, 161 Cal. 466, 119 P. 646, 37 L.R.A., N.S., 322, also cited by Appellants, involved an insurance policy signed by the insurer but not by the insured, as is customary, and is of little help. The footnote quotation from the Beatty case properly summarizes the California law.
We deem the foregoing sufficient to show that Dixon's conduct was not so unambiguous as to require an inference of assent to the counter-offer made by Harris in his letter of June 20, 1962. The alleged acceptance was not an unequivocal assent to the counteroffer or a form of expression showing clearly an intention to accept on the terms proposed (See Fn. 2 supra). Accordingly, the District Judge's finding that no subcontract was consummated between Dixon and Harris cannot be said to be clearly erroneous, and must be affirmed under the established rule of appellate review. F.R.Civ.P. 52(a); United States v. United States Gypsum Co., 1948, 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746; Commissioner of Internal Revenue v. Duberstein, 1960, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218.
The foregoing conclusion disposes of Dixon's appeal from the judgment denying recovery on account of Harris' alleged breaches of the subcontract. There was no contract which imposed obligations on Harris to perform any particular scope of work for a stated price. To the extent that work was performed by him at Dixon's request, he was entitled to compensation for the reasonable value thereof on an implied contract, but Harris made no claim that anything was due him.
With respect to the judgment for Paramount against Dixon and Fidelity, the latter contend that Paramount is a "fifth-tier", or, at best, "fourth-tier" subcontractor or equipment supplier who is disqualified from Miller Act (40 U.S.C. 270) protection by the decision in Clifford F. MacEvoy Co. v. United States, etc., 1944, 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163.
Secondly, Dixon argues that if it is the prime contractor, still Harris was its subcontractor, Yost was Harris' subcontractor and Paramount, as a renter of equipment to Yost, is not secured by the Miller Act bond. Paramount suggests that this is still an open question in the Ninth Circuit and that we should approve the interpretation of the MacEvoy decision followed in McGregor Architectural Iron Co. v. Merritt-Chapman & Scott Corporation (1957, M.D. Penn.), 150 F.Supp. 323. The short statement of the rule there suggested is that any subcontractor, no matter how far down the line his contract was negotiated, who actually performs on the project site an integral part of the work required by the prime contract is entitled to Miller Act protection. We decline to adopt this rule because we cannot sustain it as a fair interpretation of the rule announced by the Supreme Court which, in turn, was based upon a reasonable interpretation of the statutory language and Congressional intent. Recovery under the Miller Act is limited to those who have a direct contractual relationship, express or implied, with the prime contractor or a direct contractual relationship, express or implied, with a subcontractor of the prime contractor. See: Elmer v. United States Fidelity and Guaranty Co., 275 F.2d 89 (5 Cir. 1960); Aetna Insurance Co. v. Southern, Waldrip & Harvick, 198 F.Supp. 505 (N.D. Cal.1961); United States for the use and Benefit of Whitmore Oxygen Co. v. Idaho Crane & Rigging Co., 193 F.Supp. 802 (E.D.Idaho 1961); United States for Use and Benefit of Jonathan Handy Co., Inc. v. Deschenes Construction Co., Inc., 188 F.Supp. 270 (D.Mass.1960); United States for Use and Benefit of Newport News Shipbuilding & Dry Dock Co. v. Blount Bros. Construction Co., 168 F.Supp. 407 (D.Md.1959).
Although the rule appears on its face to be a mechanical and somewhat sterile application of a statute designed for the protection of laborers, mechanics and materialmen, it is justified by its clarity, conciseness and understandability and eliminates many doubts and problems which would otherwise arise. It is easy to say in the abstract that any subcontractor who actually performs on the project site an integral part of the prime contract is covered by the bond, but the imaginable difficulties in application of the rule are manifold. For example, what would be the position of an equipment concern which delivers specially
So, it might appear that the judgment for Paramount must be reversed and this would be so if it were not for the finding that Harris had no express contract with Dixon. Under the undisputed facts and findings in this case, no one has been paid by the prime contractor, Dixon, for the equipment supplied by Paramount. All the equipment rentals here involved were incurred after July 20, 1962, and were not included in Harris' first progress billing which Dixon paid. The reasonable value found by the trial court from undisputed evidence of the benefit so conferred is the amount of the judgment rendered.
These facts require us to interpret the statutory language [40 U.S.C. 270b] "any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action." [Emphasis added.] Do these facts create an implied contract between Paramount and Dixon? It seems apparent that, wholly apart from the Miller Act, California law will justify recovery against Dixon on a contract implied in law, that is, a quasi-contractual obligation "arising without reference to the assent of the obligor, from the receipt of a benefit, the retention of which is unjust, and requiring the obligor to make restitution." 42 Cal.Jur.2d 796. Quasi-contractual obligations "presuppose the acceptance and retention of benefits by a person under circumstances making it inequitable for the benefits to be retained without payment of their reasonable value." (Idem.) See: Lazzarevich v. Lazzarevich, (1948), 88 Cal.App.2d 708, 200 P.2d 49; Harriman v. Tetik, 1961, 56 Cal.2d 805, 17 Cal.Rptr. 134, 366 P.2d 486; Kessler v. Sapp, 1959, 169 Cal.App.2d 818, 338 P.2d 34.
Such liability is not in reality contractual in character, but is imposed in the absence of any privity between the parties or circumstantial evidence of contractual assent to prevent unjust enrichment. Bayne v. United States, 1876, 93 U.S. 642, 23 L.2d 997; 46 Am.Jur. 99-101.
But the two reported cases we have found which interpret the meaning of implied contract, as used in the Miller Act, have reached the conclusion that it encompasses only contracts implied in fact, that is, contracts based on assent inferred from all the facts and circumstances. In United States ex rel. Hargis v. Maryland Casualty Co. (S.D.Cal.1946), 64 F.Supp. 522, the Court said:
The same conclusion was reached in United States for Use of Bruce Co. v. Fraser Constr. Co. (W.D.Ark.1949), 87 F.Supp. 1. A quasi-contractual obligation to prevent unjust enrichment is not included within the scope of implied contracts as the term is used in the Miller Act.
In the instant case, we cannot endorse Paramount's contention that the fact that in October (after Harris, Yost and Paramount had terminated performance of the presumed Harris subcontract), Dixon ordered equipment directly from Paramount, justifies an inference that all prior equipment rentals were incurred upon the request of Dixon with an implied promise to pay. The evidence clearly shows that Paramount dealt with Yost, who had a subcontract with Harris, who had a putative subcontract with Dixon. Also, the fact that Dixon's Project Manager had dealings with Paramount's foreman and with Yost throughout their performance of their work does not justify an inference that Dixon had contracted directly with Yost or Paramount. If this inference were permissible, every subcontractor or material supplier who received instructions, information or guidance from the prime contractor would be held to have a direct contractual relationship with the prime contractor. There is an obvious distinction between dealings relating to the performance of his work with a person whose relationship to the prime contractor is too remote for Miller Act coverage, and conversations or conduct from which an inference of a promise to pay would be warranted.
The trial court, in the Memorandum Opinion, stated: "Thus, when Yost and Paramount commenced and performed work on the job site they did so under an implied contract for reasonable value for services rendered and equipment used, whether they did so under an implied contract running from Dixon to them, or under an implied contract running from Dixon to Harris and to Yost as Harris' assignee." Accordingly, Paramount argues that we should, in effect, telescope the subcontracts and find that Harris was only a "paper subcontractor" to be ignored in the chain. We have no quarrel with the cited decisions where this has been done in cases involving subterfuge, collusion between the prime contractor and subcontractor or circumstances indicating the interposition of straw men, presumably for the purpose of insulating the prime contractor and surety company from extensive Miller Act liability. Cf. Fine v. Travelers Indemnity Co. (W.D.Mo.1964), 233 F.Supp. 672; United States, etc. to the Use of Acme Furnace Fitting Co. v. Fort George G. Meade (D.Md.1960), 186 F.Supp. 639; Continental Casualty Co. v. United States etc., 5th Cir. 1962, 308 F.2d 846. The argument has superficial appeal in this case where it has been found that Harris did not in fact have an express subcontract for a particular portion of the work. Because Harris was working only on a quantum meruit basis for the reasonable value of work done, there is an inclination to consider him as Dixon's agent in the sub-delegations of the work to others. We are fearful, however, to rely upon such a principle in view of the evident tendency it would have to destroy the MacEvoy rule as we have adopted it. It would be pure fiction to characterize
The net result of this discussion is that the only contract, express or implied, between Paramount and Dixon upon which Dixon and Fidelity are liable under the Miller Act is the obligation to pay $431.09 for equipment furnished in October upon Dixon's direct request to Paramount.
The remainder of the judgment, $8,298.78, cannot be recovered under the Miller Act inasmuch as Paramount's relationship is too remote in the chain of subcontracts. This sum ($8,298.78), nevertheless, is properly included in the judgment against Dixon upon the quasi-contractual concept of unjust enrichment supported by the evidence, the findings and the law to which we have alluded. True, such a quasi-contractual action would not normally lie within federal jurisdiction, but in this situation where the non-federal cause of action is inseparably bound with and arises from the same facts which support a substantial federal cause of action, the Court will proceed to a decision of all issues inasmuch as there is no valid reason to have double litigation of an issue which has been tried and can as readily be settled now. Hurn v. Oursler, 1933, 289 U.S. 238, 53 S.Ct. 586, 77 L.Ed. 1148.
Paramount has appealed for attorney fees under the Miller Act. The Miller Act recovery has been reduced to $431.09 and is too insubstantial in relation to the case as a whole to persuade us that the assignment of error now deserves our attention on this appeal.
The judgment against L. E. Dixon Company for $8,730.87 (which includes $431.09) is affirmed. The judgment against Fidelity and Deposit Company of Maryland is reduced to $431.09, together with interest on said sums at the rate of 7% per annum from October 11, 1962 until paid.
"Pursuant to our conversations, it is our intention to perform all site clearance and demolition, all heavy machine excavation — back-fill, compaction and grading to 1/10th.
"We exclude handwork, small machine trenching — trimming and compaction, engineering, testing and temporary fences.
"The above will be accomplished in two move-ins — the first at the beginning of this project and the second when the footings and foundations are in and we can accomplish exterior back-fill, compaction and grading.
"These sections will be performed in one continuous operation and pursued diligently until their completion."
June 18, 1962 subcontract (Ex. 3):
"DESCRIPTION OF WORK
"Furnish all labor, material and equipment, and perform all work necessary to complete DEMOLITION, ROUGH GRADING, EXCAVATING, FILLS & BACKFILLING, all as shown on the drawings, defined in the specifications, and as more particularly defined under Spec. Part IV, Div. 1; Part IV, Div. 2; Part V, Div. 1 and including all applicable work as defined in original alternate bid items 1-8 incl., 11 and 12.
"Special Conditions: The removal of 30" storm drain lines as shown on the drawings to be included. The removal from the site of excess earth resulting from hand excavation and fine grading to be a part of the work of this agreement.
"The excavation and filling of small footings and including hand trimming, fine grading for slabs, hand fills, engineering, testing and temporary fences to be by others."
June 20, 1962 letter, Harris to Dixon (Ex. 5):
"In the sub-contract — Job #881, forwarded by your company to us, this date, the third paragraph of our June 8th letter of intent has been omitted.
"This paragraph reads, `The above will be accomplished in two move-ins — the first at the beginning of this project and the second when the footings and foundations are in and we can accomplish exterior back-fill, compaction and grading', and as you and I had discussed this at length — agreeing to these methods — I assume the omission was inadvertence.
"I also explained that for the furtherance of its completion it would be necessary to have one sub-contractor on this project and as there were no objections, I have made arrangements for this.
"With this letter attached to and a part of this sub-contract, I inclose, herewith, the signed yellow copy as requested."
"When Schechtman handed to Mrs. Beatty the written terms of his offer to sell, she said to him that the offer `was entirely satisfactory'. She took the writing with her, and based her written offer to Persico on the terms which it contained. Schechtman knew as is hereinafter more fully set forth that Mrs. Beatty intended to sell the steel to Persico. She told him that his offer was satisfactory, she took the writing with her, and she acted on it as she had told him she was going to act. It is difficult to perceive how a clearer case of acceptance would be established." [Italics added.]