17. UNITED STATES EX REL. COASTAL STELL ERECTORS, INC. v. ALGERNON BLAIR, INC. United States Court of Appeals 479 F.2d 638 (4th Cir. 1973)
Facts
Coastal Steel Erectors, Inc. (plaintiff) is a subcontractor of Algernon Blair, Inc. which entered into a contract with United States Fidelity and Guaranty Company (defendants) to construct a hospital. The plaintiff’s job as a subcontractor was to supply cranes of their own for handling and placing steel. Yet the defendants refused to pay the plaintiff due to the plaintiff not using its own cranes but used rentals which was against the contract provision. The plaintiff spent approximately $37,000 and was 28 percent done of its obligation at the time and ceased to perform due to the nonpayment. The defendants subsequently hired a new subcontractor. The plaintiff instituted the suit to recover for labor and equipment furnished.
Issue
Is a subcontractor entitled to recover in quantum meruit, or restitution remedy, when he terminated his performance due to the other party’s breach but he already rendered and spent labor and money required for performance?
Rules
Scaduto v. Orlando, 381 F.2d 587, 595 (2d Cir. 1967).
The impact of quantum meruit is to allow a promisee to recover the value of services he gave to the defendant irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract.
Application
The plaintiff argued that since they already paid for the labor and the cranes, the defendant has to pay for the costs. The defendants contend that because the plaintiff did not follow the provision of the contract, they are not obligated for payment. The court held for the plaintiff. At the time the plaintiff terminated the performance, they had spent approximately $37,000 and would have lost more if they completed the performance. However, the defendant unjustly enriched themselves by breaching the contract without making proper payment. According to Scaduto v. Orlando, quantum meruit, or restitution interest, permits the injured party to recover the value of services he gave to the breaching party. Here, the plaintiff had spent $37,000 and performed 28 percent of the total work without any compensation. This would establish unjust enrichment on the defendant’s side. Therefore, the plaintiff should be entitled to restitution interest.
Holding
Yes, a subcontractor is entitled to recover in quantum meruit.
Conclusion
Reversed and remanded.
Feedback and notes
This is a case of restitution or unjust enrichment. Recovery is appropriate where the parties have formed a contractual relationship in nature. Most of the time, remedy is in the form of monetary damages. In the class, we discussed the concept of restitution, anticipatory repudiation, compensatory damages. In compensatory damages, the focus is on the loss inflicted on the injured party. In restitution, it is on the defendant’s benefit (unjust enrichment) On the other hand, anticipatory damages are about future breach which would be hard to calculate the damages. Yet restitution is easy to calculate the cost compared to AR. Restitution is not an easy concept of remedy to understand and I made wrong comments of the difference between the AR and restitution. After class, I sum up the concepts as follows. Restitution as the name indicates requires restoration of unjust enrichment. It is different from AR because the unjust enrichment has already occurred. It is not the type of typical monetary damages since the basis is not the loss but benefits the defendant enjoyed. Restitution can be in the form of money or also in specific performance.