Unpublished Disposition, 921 F.2d 280 (9th Cir. 1990)

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US Court of Appeals for the Ninth Circuit - 921 F.2d 280 (9th Cir. 1990)

M.A. MORTENSON CO., a Minnesota corporation, Plaintiff-Appellee,v.UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant-Appellant.

No. 90-35112.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 3, 1990.Decided Dec. 28, 1990.



We must decide whether a contractor may recover from a subcontractor's surety for delay damages resulting from the subcontractor's default in the circumstances of this case.

* The surety, United States Fidelity & Guaranty Company ("USF & G") contends that the admissions of the contractor, M.A. Mortenson Company ("Mortenson") pursuant to Federal Rule of Civil Procedure 36 preclude Mortenson from recovering from USF & G. Mortenson admitted that the replacement subcontractors, Barclay Dean Pella, Inc. ("Barclay") and Tuffey & O'Malley, Inc. ("Tuffey"), had satisfactorily completed their work on the project, that Barclay and Tuffey caused no delay to the project, and that Mortenson had no claims against Barclay and Tuffey. Because Barclay's and Tuffey's contracts required them to complete their assigned projects on the same schedule as the defaulting subcontractor, Drexel Contracting, Inc. ("Drexel"), USF & G reasons that Mortenson's admissions absolves all parties, including Drexel, of fault.

We disagree. It is true that evidence inconsistent with an admission made pursuant to Rule 36 is inadmissible. See 999 v. C.I.T. Corp., 776 F.2d 866, 869-70 (9th Cir. 1985). However, we see no inconsistency here. Mortenson's evaluation of the work of Barclay and Tuffey (even if in violation of their contractual obligations to Mortenson) is simply not relevant to any legal blame that may be attributed to Drexel. Mortenson is free to absolve Barclay and Tuffey of liability without waiving its claims against USF & G based on Drexel's default.

Reduced to its simplest terms, USF & G's argument is an attempt to claim that it is a third-party beneficiary of the replacement contracts between Mortenson and Barclay and Tuffey. In order to recover as a third-party beneficiary to a contract, it must be shown that the "parties intend that the promisor assume a direct obligation to the intended beneficiary at the time they enter into the contract." Del Guzzi Constr. Co. v. Global Northwest, Ltd., Inc., 105 Wash. 2d 878, 719 P.2d 120, 125 (1986) (quotation and emphasis omitted). There is no evidence whatsoever of intent by Mortenson or the replacement subcontractors to benefit USF & G.

The district court did not err in denying USF & G's motion for summary judgment or in denying USF & G's motion to dismiss at the close of Mortenson's case on the issue of Mortenson's allegedly inconsistent admissions.


USF & G contends that Mortenson failed to adduce sufficient evidence to show either causation or damages. We review a district court's factual findings for clear error. Pyramid Lake Paiute Tribe of Indians v. United States Dep't of the Navy, 898 F.2d 1410, 1414 (9th Cir. 1990); Fed. R. Civ. P. 52(a).

As to causation, Mortenson adequately demonstrated that Drexel's default caused delay due to the slow start-up time necessarily incurred by the replacement subcontractors. As to damages, Mortenson presented sufficient evidence that it incurred loss as a result of Drexel's default. The district court's factual findings regarding causation and damages were not clearly erroneous.


USF & G maintains that Mortenson failed to produce any evidence to support its claim for unabsorbed home office overhead damages. Specifically, USF & G contends that Mortenson admitted that the thirteen-week delay in this project did not result in the postponement of any other projects. Since it is the loss or postponement of other projects that gives rise to unabsorbed home office overhead, see Golf Landscaping, Inc. v. Century Constr. Co., 39 Wash. App. 895, 696 P.2d 590, 592 (1984), USF & G reasons that Mortenson's admission precludes its recovery of such damages.

We disagree. The district court correctly observed that "it would be ... impossible for any evidence to be submitted that would demonstrate that somehow during that particular period of time ... that [Mortenson was] prevented from obtaining contracts...." While there may be situations where the contractor simply could not have obtained other contracts during the delay period, such is not the case here. The district court did not err in granting unabsorbed home office overhead damages to Mortenson.


Finally, USF & G contends that Mortenson is not entitled to prejudgment interest on its damages. We review a district court's grant of prejudgment interest for an abuse of discretion. See Adams v. Johns-Manville Corp., 876 F.2d 702, 704 (9th Cir. 1989).

Under Washington law, prejudgment interest may be awarded whenever (1) the amount claimed is "liquidated," or (2) the amount claimed is unliquidated but is an amount due upon a specific contract and can be determined by reference to a fixed standard contained in the contract. See Hanson PLC v. National Union Fire Ins. Co., 58 Wash. App. 561, 794 P.2d 66, 75 (1990) (quotation omitted). Here, we must determine whether the district court properly found the claim to be "liquidated," entitling Mortenson to prejudgment interest. A claim is liquidated "where the evidence furnishes data which, if believed, makes it possible to compute the amount with exactness, without reliance on opinion or discretion." 794 P.2d at 76 (quotation omitted).

An unliquidated claim, by contrast, is one where the exact amount of the sum to be allowed cannot be definitely fixed from the facts proved, disputed or undisputed, but must in the last analysis depend upon the opinion or discretion of the judge or jury as to whether a larger or a smaller amount should be allowed.

Id. (quotation omitted). That the claim is disputed does not change its character as either liquidated or unliquidated. Universal/Land Constr. Co. v. City of Spokane, 49 Wash. App. 634, 745 P.2d 53, 57 (1987).

As noted by the district court, application of this definition has plagued Washington courts for years. On the one hand, Washington appellate courts have granted prejudgment interest to a sailboat purchaser on the theory that repair costs were liquidated, see Miller v. Badgley, 51 Wash. App. 285, 753 P.2d 530, 536 (1988), to a fire department after the negligent destruction of one of its fire trucks, see Walla Walla County Fire Protection Dist. No. 5 v. Washington Auto Carriage, Inc., 50 Wash. App. 355, 745 P.2d 1332 (1987), and to a contractor who recovered reimbursement for sales taxes paid on materials used as part of the construction contract, see Universal/Land, 745 P.2d at 57. Conversely, in Hanson PLC, prejudgment interest was denied to an employer seeking recovery for the fraudulent activities of an employee. 794 F.2d at 75-76. Likewise, in Lester N. Johnson Co. v. City of Spokane, 22 Wash. App. 265, 588 P.2d 1214 (1978), the court upheld the denial of prejudgment interest to a contractor who suffered increased costs due to the City's pumping of sewage into a construction site.

We conclude that the case at hand more closely resembles those cases denying prejudgment interest than those granting it. While the district court adopted the figures proffered by Mortenson regarding costs incurred by the delay, the district court clearly had the discretion to reject these figures, even upon a finding that Drexel was liable for delay damages. There was certainly testimony that suggested that determination of costs attributable to the delay was not an exact science. Moreover, the district court then had to decide how much of the delay was attributable to Drexel's default, again requiring the exercise of discretion. See Lester N. Johnson, 588 P.2d at 1221 (" [t]he trial judge necessarily estimated the amount of damages attributable to the City's pumping," precluding an award of prejudgment interest). Accordingly, we reverse the district court's grant of prejudgment interest.


As Mortenson is the prevailing party, see Silverdale Hotel Associates v. Lomas & Nettleton Co., 36 Wash. App. 762, 677 P.2d 773 (1984), its request for attorney fees and costs based upon Mortenson's contract with Drexel (as incorporated in USF & G's payment bond) is granted. Determination of the proper amount of fees and costs shall be made by the district court on remand.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3