Rehearing Denied March 30, 1954.
[77 Ariz. 108] Clarence E. Houston and Edwin R. Powell, Tucson, for appellant.
Evans, Hull, Kitchel & Jenckes, by Norman S. Hull and Ralph J. Lester, Phoenix, for appellees.
Action on a promissory note by plaintiff-appellant, Pioneer Constructors, to which defendants-appellees, Symes and Cobble, counterclaimed alleging failure of consideration, overcharges, fraud, and missrepresentation. [77 Ariz. 109] Verdict was given for the
defendants on their counterclaim for $10,000 and for plaintiff for the balance of its note remaining due and amounting to $3,000. Judgment was entered for appellee for the difference.
Defendants formed a partnership in order to build low-cost houses. Negotiations between the parties began in March, 1948. Plaintiff represented to defendants that it could build the type of houses agreed upon for less than $2,700, an amount which defendants had paid to one Bromon for the construction of a model house to use in making sales in the tract, and plaintiff's first estimate, not including a contractor's fee, was at $2,323 per house; subsequently plaintiff submitted a second estimate of $2,550 per house. The parties executed a written contract which reads in part:
'1. The First Party (plaintiff) will furnish all the materials and labor and construct for the Second Party (defendants), one or more houses in accordance with the attached plans and specifications, total cost of all materials and labor necessary for completion and approval not to exceed $3100.00 per unit.
'2. The Second Party will pay to the First Party the actual cost of said material and labor for each of said houses * * * plus the sum of Two Hundred Seventy-five * * * Dollars for each and every said house so constructed.
* * *
* * *
'5. It is understood and agreed that the Second Party will pay to the First Party all actual expenses incurred by the First Party in connection with the construction of said houses * * *. It is further understood and agreed that the First Party will not charge the Second Party for office supplies, office labor, equipment maintenance, or depreciation, or similar items of overhead, nor will the First Party charge the Second Party any flat fee or percentage for overhead.' (Emphasis supplied.)
The $3,100 maximum was placed in the contract at the insistence of a bonding company after the contract was otherwise executed.
Sixty-eight houses were completed in November and December, 1948; of these, sixty-six were one-bedroom houses, the remaining two containing two bedrooms.
In August, 1948, after the project was approximately four months under construction, the bonding company requested a cost breakdown on the houses; this company was interested in the total costs of the houses, including items in addition to costs plaintiff was, at that time, incurring. Defendants informed the plaintiff of this, and the plaintiff complied with a breakdown based on the costs per house. This was [77 Ariz. 110] identified and introduced in evidence. The exhibit shows that of a $3,061.58 actual total cost per house, plaintiff's costs were only $2,734.03; this is undisputed; yet, when plaintiff completed the job, it had charged defendants with $3,064 per one-bedroom house, contractor's fees of $275 being charged separately and not being included in this figure, the same not being in issue here. The difference between what plaintiff charged and plaintiff's cost breakdown amounting, therefore, to $330 per house, constituting an ostensible overcharge of more than $21,000 on the sixty-six one-bedroom houses.
Before relations were terminated between the parties hereto, defendant, Symes, discovered a number of obvious overcharges on items of material purchased by plaintiff and charged to the job, which were never used. These overcharges totaled $8914 and were called to plaintiff's attention on January 20, 1949, whereupon the plaintiff credited defendants with said amount. Subtracting the credits received ...