ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil Action No. 746-70).
Hastie, Van Dusen and Adams, Circuit Judges.
This appeal arises from a dispute between a prime construction contractor and one of its subcontractors, that generated a lawsuit by the prime contractor in which a counterclaim was interposed by the subcontractor. A jury returned a verdict for the latter. The questions with which we must deal concern the admissibility at trial of certain evidence and the propriety of a particular jury instruction.
In June of 1969, Construction, Ltd. was awarded a Government contract for the building of the so-called "South East Asia (SEA) Project" at Fort Dix, New Jersey. Under the terms of the contract, Construction was responsible for the installation of a series of control towers, latrines, classroom buildings, "test" buildings, a shower building, and various other facilities, on a range at Fort Dix. Construction was to receive $1,498,000 for the job.
On July 17, 1969, Construction entered into a subcontract with the Brooks-Skinner Building Company, whereby Brooks-Skinner agreed to supply and erect all of the prefabricated metal buildings for the SEA Project.*fn1 Under the subcontract Brooks-Skinner was to deliver the buildings to the job site by October 28, 1969, and to finish its work by November 28, 1969. The subcontract specified a consideration payable to Brooks-Skinner of $175,000.*fn2 The parties inserted a notation in their agreement to the effect that actual -- not liquidated -- damages would be recoverable in the event of a delay by Brooks-Skinner.*fn3
There was testimony at the trial that Brooks-Skinner was late in completing the work required of it, an admitted breach of the subcontract, and that only a few of the buildings were finished by Brooks-Skinner as of December 31, 1969. Further testimony indicated that Brooks-Skinner did not complete all of its work until May 8, 1970.
Another critical item developed at trial was that the Government, during the course of construction of the SEA Project, had deleted its order for four of the latrines from the prime contract, its prerogative under the terms of that contract. The Government offered to take a "credit" of $10,963 for the four deleted latrines, and finally withheld payment from Construction for these latrines in the amount of $13,113.*fn4
Construction brought suit against Brooks-Skinner seeking to recover damages allegedly brought about by the subcontractor's delay,*fn5 and asserted that Brooks-Skinner's tardiness had caused it a loss of $206,386.*fn6 However, inasmuch as Construction still owed Brooks-Skinner $114,446 under the subcontract, Construction sought a judgment in the amount of only $91,940.*fn7 Brooks-Skinner counterclaimed for the balance owing it under the subcontract, $114,446, and denied any liability to Construction based on the delay. There was a general verdict in favor of Brooks-Skinner in the amount of $68,925,*fn8 and Construction appealed.
At the trial, Brooks-Skinner introduced certain documents evidencing the profit made by Construction from the SEA Project. In addition, Brooks-Skinner elicited from several witnesses testimony concerning the same topic, as well as Construction's general profitability and solvency. On this appeal Construction maintains, inter alia, that the evidence regarding its profits was irrelevant, that it tended to prejudice the jury, and that its admission therefore constituted reversible error.*fn9
The theory offered by Brooks-Skinner at trial to establish the relevancy of the challenged evidence is contained in the following statement by Brooks-Skinner's trial counsel:
"But your honor, if this project happened to be the most profitable project for a corporation that has been running in the red, I think it certainly shows that they didn't sustain the loss that they are attempting to show . . . ."*fn10
And again, in his summation to the jury, counsel repeated that "the amount of profit goes to whether or not these damages were actually sustained."*fn11 In other words, Brooks-Skinner contended at trial -- and repeats the argument here -- that evidence of an overall profit on the SEA Project tended to disprove Construction's allegation that it actually suffered a loss because of ...