Unpublished Disposition, 924 F.2d 1064 (9th Cir. 1987)

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US Court of Appeals for the Ninth Circuit - 924 F.2d 1064 (9th Cir. 1987)

UNITED STATES of America, for the use of C. MARTIN COMPANY,INC., Plaintiff-Appellee,v.AMERICAN HOME ASSURANCE COMPANY; SERVICE TECHNICIANS, INC.,Defendants-Appellants.

No. 89-56211.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 4, 1990.Decided Jan. 29, 1991.

Before JAMES R. BROWNING, PREGERSON and LEAVY, Circuit Judges.


Respondent C. Martin Company (Martin), a subcontractor, sued Service Technicians, Inc. (STI) and its bonding company, American Home Assurance Company (AHAC), for payment due under a subcontract under the provisions of the Miller Act. Martin and STI had entered into an agreement in which Martin, as the subcontractor, would perform work that had been awarded to STI by the Navy. Before the expiration of the subcontract, STI and Martin terminated their relationship. Martin claimed that the termination was pursuant to an oral agreement that superseded the subcontract. STI counterclaimed, contending that they never entered into the subcontract and that the original agreement was terminated by STI's exercise of its right to terminate for cause under the "Provision H" therein.

The jury, in a special verdict, found that the parties entered into an oral agreement which superseded the subcontract and that the relationship between the two parties was terminated pursuant to the oral agreement. The district judge then directed a verdict on the terms of the oral agreement. The jury, in a general verdict, determined the amount that Martin was due under the oral agreement. On post-trial motions, the district court judge awarded attorney's fees to Martin for its defense of STI's counterclaim.

STI and AHAC appeal the verdicts and the award of attorney's fees. AHAC also appeals the amount of the judgment entered against it. We affirm all verdicts and judgments of the district court.


1. Was the evidence sufficient to support the special verdict of the jury finding that the subcontract was superseded by an oral agreement that relieved the parties of any further obligations on the subcontract ?

STI contends that the evidence presented at the trial was insufficient to support the special verdict of the jury finding the existence of an oral agreement. The standard of review for a jury verdict in a civil case is whether it is supported by substantial evidence. Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1370-71 (9th Cir. 1987). We hold that sufficient evidence was presented to the jury to support its verdict.

Two persons who were present at the meeting of May 31, 1987 between the representatives of Martin and STI testified to the oral agreement. One was Charles Martin, C. Martin Company's president. The other was Pelham, STI's then vice-president and co-owner. STI admits that the testimony given before the jury regarding the meeting was that Charles Martin and Pelham agreed on three items:

1. That Martin would leave the project on June 5, 1987;

2. That STI would purchase certain materials, equipment and office furniture to be identified and priced later; and

3. That Martin was to be paid for services rendered through June 5, 1987.

No other witnesses testified regarding the meeting of May 31, 1987.

STI does not dispute that Pelham and Charles Martin met on May 31, 1987. As its main argument, STI attacks the credibility of Pelham. STI states that the relationship between Pelham and James Byers, the president of STI, as co-owners of STI became strained during the second half of 1987 and that Pelham resigned from his position in STI around the end of 1987. STI also alleges that Charles Martin and Pelham are long-time family friends.

STI is in effect asking the court to assess the credibility of Charles Martin and Pelham, the task that is uniquely the province of the trier of fact, the jury in this instance. A reviewing court may not assess the witnesses' credibility in determining if sufficient evidence exists. Landes Constr., 833 F.2d at 1371.

It is possible to conclude from the documentary evidence, specifically the draft agreement prepared by Martin on June 3, 1987 and the memorandum prepared by Pelham on June 5, 1987, that the parties did not reach a firm oral agreement on May 31, 1987. However, such conclusion is not necessarily inconsistent with the jury verdict. Martin does not argue that the jury found that the entire oral agreement was entered into on May 31, 1987. It may be that the jury found that a tentative agreement was reached at the meeting and finalized at an unspecified later time and that the documents were unsuccessful attempts to reach a final agreement.

Even if the jury's verdict was based on its finding that a final agreement was reached at the meeting, the scope of this court's review is limited. Under the substantial evidence standard of review, the appellate court must affirm if there is evidence as reasonable minds might accept as adequate to support the verdict even if it is possible to draw two inconsistent conclusions from the evidence. Landes Constr. 833 F.2d at 1371. The evidence is sufficient to support the jury's verdict that Martin and STI entered into an oral agreement at the meeting. The only witnesses who testified to the meeting stated that they reached an agreement. Their testimonies were consistent in all material aspects.1 

2. Was it proper for the trial judge, by way of a directed verdict, to determine the terms and conditions of the oral agreement found by the jury to exist ?

STI argues that the trial judge erred when he directed a verdict on the terms of the oral argument. STI asserts that the questions of the terms and conditions of the oral agreement should have been put to the jury instead. We affirm the directed verdict.

The appellate court's role in reviewing a directed verdict is the same as that of the district court. The Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1151 (9th Cir. 1988). Directed verdict is proper, if without assessing the credibility of the witnesses, the court finds that the evidence and its inferences, considered as a whole in the light most favorable to the nonmoving party, can support only the conclusion that any reasonable jury would reach a verdict in favor of the moving party. Id.

STI seeks to overturn the directed verdict on several grounds. It asserts again that no oral agreement was reached between Charles Martin and Pelham. But that question was already settled by the jury in the special verdict when it found that an oral agreement did exist. The district judge's directed verdict was not a verdict on the existence of the oral agreement. He merely determined the terms of the oral agreement which the jury had found to exist.

STI's next argument is predicated on the credibility of the two witnesses. STI argues that, by directing a verdict based on the testimony of Charles Martin and Pelham, the district court was passing on the credibility of the witnesses. However, the jury had already decided the question of the credibility of the witnesses when it found that they entered into an oral argument. In order for the jury to find that the oral agreement existed, they must have believed what Pelham and Charles Martin said since they were the only persons to testify about the oral agreement. Indeed, as the district judge found, there is no alternative but to conclude that the agreement was for anything else than what the two witness said it was for.

Next, STI argues that, even if an oral agreement did exist, the evidence before the court was so uncertain that reasonable persons could reach a number of different conclusions as to the terms of the agreement. STI offers that it is possible to conclude from the evidence that under the oral agreement none of the terms of the subcontract survived. STI states that it is also possible to conclude that one or more provisions of the subcontract were to be incorporated into the oral agreement, in particular, the Provision H.

The evidence, however, is clear that the terms of the oral agreement had to be what the district court found. Regarding the bill of sale, Charles Martin and Pelham both testified that STI agreed to purchase Martin's inventory of material and equipment. Their testimonies were corroborated by the bill of sale prepared by Pelham for the amount of $46,000 and by STI's conduct in paying Martin $40,000 thereon and tendering a check for $4,250 on the balance.2  So it is clear that STI owes $6,000 on the bill of sale.

With regard to payment for Martin's services, Charles Martin testified that Martin would be paid for all the work done until June 5, 1987. Pelham testified that Martin would be paid the invoices that were due it at that particular time. There was no controverting testimony. The reasonable inference of the testimonies is that STI agreed to pay Martin the amount of the invoice for the work done until June 5, 1987 minus Navy's deductions to STI. This was the method of payment under the subcontract. The district court noted that all of Martin's invoices up to the last one were paid in full less Navy's deductions to STI. The district judge drew the only conclusion reasonable, that Martin would be paid for its work until June 5, 1987 under the subcontract.

3. Was the evidence sufficient to support the general verdict on the amount of damages awarded ?

STI argues that the oral agreement did not include a measure for compensating Martin for its work for the first five days of June. Under such circumstances where there was no true meeting of the minds of the parties on the matter of compensation, STI asserts that the proper basis for compensation is quantum meruit. See Central Steel Erection Co. v. Will, 304 F.2d 548, 553 (9th Cir. 1962). STI claims that the district court erred when it directed the jury to base the calculation of the award on the invoice submitted by Martin, the amount of which was based on the original subcontract.

STI is again attacking the wrong verdict. It was already decided by the directed verdict that Martin would be paid under the subcontract for the work that they performed through June 5, 1987. Given that verdict, the jury had no choice but to base the award on the invoice submitted by Martin under the subcontract (minus deductions by the Navy).

Next, STI argues that Martin's invoice may have included the cost of tools and equipment used at the job site, which is not covered by the Miller Act. However, that argument should have been raised at the trial. This court will not consider an issue raised for the first time on appeal unless it falls into narrow exceptions. Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir. 1985).

The standard of review for a jury verdict is whether it is supported by substantial evidence. Landes Constr., 833 F.2d at 1370-71. STI does not argue that the jury did not have substantial evidence; its argument attempts to attack the directed verdict or raises a factual issue that should have been raised in the trial court. We affirm the general verdict of the jury.

4. Was it proper for the district court to award attorney's fees to Martin on STI's counterclaim ?

STI's counterclaim was based on the original subcontract which contained a "Provision X," which entitles the prevailing party to recover its attorney's fees in the event a suit was instituted in connection with any dispute arising from the subcontract. STI argues that, since the trial court's judgment entered in the case does not mention the counterclaim filed by STI, Martin was not the prevailing party. Therefore, STI maintains, the award of attorney's fees was improper.

While there may be no written judgment against STI, the district court judge, in entering a directed verdict against STI on its counterclaim, made explicit that the jury's general verdict necessarily implied a rejection of STI's counterclaim, which was mutually exclusive with Martin's claim.3  It is clear that Martin is the prevailing party. We affirm the district court's award of attorney's fees.

5. Was it proper for the trial court to render a judgment against the bonding company for the portion of the damages arising from the contract that was not covered under the Miller Act ?

The general verdict of the jury awarded damages in the amount of $32,891.68 for Martin's labor. The district court added to the verdict amount $6,000 it found owing to Martin on the sale of material and equipment and entered a judgment in favor of Martin in the amount of $38,891.68. The judgment was entered for that amount against both STI and AHAC. AHAC argues that the judgment against it should have been for $32,891.68 because it, as the bonding company, is not liable for the $6,000 owing for the material and equipment.

The payment bond posted under the Miller Act protects persons supplying "labor and material" for the prosecution of the work covered under the prime contract. 40 U.S.C.A. Sec. 270a(a) (2) (West 1986). It does not cover items such as tools, equipment, and furniture. The bill of sale of June 6, 1987 was for the purchase of Martin's "inventory of materials, equipment and furniture." AHAC has admitted in the oral argument that almost all of the $46,000 was for the sale of material, for which AHAC is responsible for under the Miller Act. Therefore, the proportion represented by the sale of items not covered by Miller Act (equipment and furniture) in the $6,000 balance is very small. AHAC has not provided the panel with a breakdown of the items which are covered and which are not covered under the Miller Act. Under such circumstance, we cannot find that the district court erred in ruling that AHAC is jointly responsible for the balance of $6,000 on the bill of sale.


There was sufficient evidence to support the verdicts of the jury regarding the existence of an oral agreement and the calculation of the amount due to Martin for its services. We affirm the jury's verdict. The directed verdict of the district judge is also affirmed because the evidence and its inferences can support only the conclusions reached by the district judge regarding the terms of the oral agreement. The award of the attorney's fees was proper because Martin was the prevailing party on STI's counterclaim. We affirm the judgment against AHAC, the bonding company.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


STI states that their testimonies were different in some aspects. STI points out that Charles Martin testified that Pelham arrived for the meeting on Sunday, May 31, 1987 and left on Monday, June 1, 1987 while Pelham testified that he arrived on Saturday and left on Sunday. Charles Martin testified that he and Pelham had lunch together on Sunday while Pelham testified that they had breakfast on Saturday. Charles Martin said that only he and Pelham were present for the meeting while Pelham said that Duke Martin was also present. None of the discrepancies are material as to the existence of the oral agreement itself


The difference of $1,750 represented the telephone system repossessed by the telephone company. It appears that STI can easily get the phone system back because Martin has now paid the telephone company


In fact, the district judge entered an oral judgment on the counterclaim. After the jury returned the special verdict on the oral agreement, STI moved for a directed verdict on its own counterclaim. In denying the motion, the district judge stated " [i]n view of the jury verdict on the fact that the contract was not terminated pursuant to provision H, I've granted a dismissal of the counter-claim which you've advised me is a claim based upon the remedies provided for in provision H. So, that--I've ruled that that is out of the case. That cross-complaint is dismissed. That's ordered judgment for the Plaintiff, a cross-Defendant on that counter-claim." E.R. at 27 (emphasis added)