United States v. Southern Construction Company

• Decision Date: 03 August 1961
• Docket Number: No. 14239.,14239.
• Citation: 293 F.2d 493
• Parties: UNITED STATES of America for the Use and Benefit of Samuel J. PICKARD, d/b/a Pickard Engineering Company v. SOUTHERN CONSTRUCTION COMPANY, Inc., and Continental Casualty Company.
• Court: U.S. Court of Appeals — Sixth Circuit

293 F.2d 493 (1961)

UNITED STATES of America for the Use and Benefit of Samuel J. PICKARD, d/b/a Pickard Engineering Company v. SOUTHERN CONSTRUCTION COMPANY, Inc., and Continental Casualty Company.

No. 14239.

United States Court of Appeals Sixth Circuit.

August 3, 1961.

COPYRIGHT MATERIAL OMITTED

Edward Gallagher, Washington, D. C. (Gracey, Buck, Maddin & Cowan, Nashville, Tenn., by John K. Maddin, Jr., Nashville, Tenn., on the brief), for appellant.

William J. Harbison, Nashville, Tenn. (Trabue, Minick, Sturdivant & Harbison, Nashville, Tenn., Hull, Willingham, Towill & Norman, Augusta, Ga., Harry S. McCowen, Atlanta, Ga., on the brief), for appellees.

Before MILLER, Chief Judge, CECIL, Circuit Judge, and BOYD, District Judge.

SHACKELFORD MILLER, Jr., Chief Judge.

This action was filed under the provisions of the Miller Act, Section 270b, Title 40 United States Code Annotated, in the name of the United States of America for the use of Samuel J. Pickard doing business as Pickard Engineering Company, against the appellees, Southern Construction Company, Inc., hereinafter called Southern, and Continental Casualty Company, surety on its performance bond, to recover on a construction contract alleged by Pickard to have been breached by Southern.

Southern Construction Company was the prime contractor on a project for the rehabilitation of certain barracks at Fort Campbell, Tennessee. On May 5, 1955, Pickard entered into a subcontract with Southern to do all the plumbing and heating required in the specifications of the prime contract at the contract price of $50,000.00. The complaint alleged that under the subcontract Southern failed to make the required progress payments to Pickard as the work progressed; that without justification it withheld funds from the plaintiff for long periods of time, rendering it impossible for plaintiff to meet its payment obligations to its suppliers, labor and materialmen; that despite the failure of Southern to abide by the contract, plaintiff prosecuted the work to substantial completion but received from Southern only one progress payment in the amount of $13,000.00. Plaintiff sued for the specified contract price of $50,000.00 less this payment of $13,000.00.

Under the subcontract Pickard was required to furnish a performance bond to Southern in the amount of $50,000.00, guaranteeing faithful performance of the subcontract. Pickard was unable to furnish the required performance bond on this project, and remained unbonded throughout the course of this work. Work began on the contract by Pickard in May or June 1955 and continued until December 16, 1955.

Simultaneously with the performance of the work at Fort Campbell, Tennessee, Pickard was performing similar work on much larger subcontracts which he held with Southern for rehabilitation of barracks at Fort Benning, Georgia. Pickard's primary supplier for both the Fort Campbell project and the Fort Benning project was the Atlas Supply Company.

On October 7, 1955, there was executed a supplemental agreement between Pickard and Southern, which recited that Pickard held three subcontracts with Southern at Fort Benning and one subcontract for work at Fort Campbell; that Pickard had been unable to obtain performance bonds on the various jobs; that Southern had been holding certain funds due him in lieu of said bonds; and that Pickard was in need of funds with which to complete the jobs and to pay other bills. Under this agreement Southern waived the provision requiring payment for performance bonds and Pickard waived all claims against Southern as a result of the withholding of any funds due Pickard on requisition in lieu of bond. Pickard further authorized Southern to withhold all other and further payments on work completed or to be completed during the course of said jobs, until the completion of each job by Pickard and the final acceptance and payment thereof by the Army to Southern, excepting payments therein agreed to be made, "plus additional payments which will be made by Southern either jointly to Pickard and to subcontractors or materialmen, or to Pickard, as Southern is paid on requisitions which include labor and/or material furnished by such subcontractors and/or materialmen."

After October 7, 1955, and prior to December 16, 1955, when Pickard withdrew from the job, Southern received from the Government two payments, one on October 17, 1955, in the amount of $12,002.46 and one on November 4, 1955, in the amount of $15,512.95. Southern failed to pay appellant or his suppliers or materialmen as it received these payments from the Government, as required by the contract.

On December 16, 1955, Pickard's men left the job at Fort Campbell, Tennessee, and were never heard from again. No notice of any sort was given by Pickard, his foremen or any representative on his behalf of the withdrawal, the purpose thereof, or the reasons therefor. At the time when Pickard withdrew from the Fort Campbell project, the work required there under his subcontract was from 96% to 98% completed. Southern completed the work at Fort Campbell and obtained final settlement from the United States Government in April 1956.

Shortly after Pickard left the work at Fort Campbell he also left the Fort Benning project.

On October 7, 1955, when the supplemental agreement was executed, and continuously thereafter to the time when Pickard left the Fort Campbell job there was an unpaid balance in the amount of $34,520.00 on the account to the Atlas Supply Company for materials furnished by Atlas at Fort Campbell. In addition to this amount, Atlas Supply Company was claiming a balance due it from Pickard in the sum of $104,000.00 on the Fort Benning job. Southern did not dispute the amount of the Atlas account at Fort Campbell. However, it disputed the Fort Benning claim of Atlas in its entirety. In August 1956 a conference was had between Southern officials and representatives of the Atlas Supply Company, as a result of which Southern paid to Atlas Supply Company in August 1956 the sum of $35,000.00 and obtained from Atlas a complete release of all liability of Southern on Pickard's accounts, both at Fort Benning, Georgia, and Fort Campbell, Tennessee.

At the time when this payment was made by Southern to Atlas, Atlas had consolidated its accounts against Pickard, and was carrying them as one consolidated account. Atlas credited the $35,000.00 payment against this single account, so that Pickard received full credit for this payment on his indebtedness to Atlas. Neither Southern nor Atlas at the time of this payment specifically undertook to allocate the $35,000.00 payment, or any part thereof, to one project or the other. It was a single indivisible payment applicable to both projects.

Pickard gave no credit to Southern for this payment on either job, and his books did not reflect the payment. There is no evidence that Pickard knew of the payment in August 1956 at the time when it was made. In April 1957, however, Pickard's attorneys were advised by the attorney for Southern that this payment had been made, and that the same had not been allocated by Southern either to the Fort Campbell project or to the Fort Benning project.

In December 1956 Pickard filed suit in the District Court for the Middle District of Georgia against Southern and the Continental Casualty Company on both the Fort Benning contract and the Fort Campbell project. Southern filed an answer and counterclaim, in which it alleged that it had paid to Pickard sums in excess of the total contract between the parties and sought judgment for such excess. Included in the counterclaim at this time was the $35,000.00 payment hereinabove referred to.

In April 1957, however, Pickard filed the present action in the United States District Court for the Middle District of Tennessee on the Fort Campbell project only, and this part of Pickard's claim was subsequently eliminated by amendment from the action pending in the District Court in Georgia. The action in the District Court in Tennessee was filed for "jurisdictional" reasons, in that the Miller Act provides that every suit instituted under its provisions "shall be brought * * * in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere, * * *." Section 270b(b), Title 40 United States Code Annotated.

In the trial of the Fort Benning case in Georgia in March 1959, Pickard introduced certain exhibits in which he purported to list all of the payments made by Southern to him or on his behalf at Fort Benning, and to give credit for the same. He did not include the $35,000.00 payment made to Atlas by Southern in August 1956. Southern listed on exhibits filed in that case the payments made by it to Pickard or on his behalf on the Fort Benning job, for which Southern claimed credit. The $35,000.00 payment made to Atlas was not claimed in these exhibits. The District Judge stated that the record in the Georgia case showed that the $35,000.00 payment to Atlas was not submitted to nor considered by the jury in the trial of the Fort Benning case. He found as a fact that this fund had not been litigated or adjudged by the District Court in Georgia, and that credit for it was neither given by Pickard nor claimed by Southern in the previous proceedings between the parties in that court. The District Judge stated in his findings of fact that although the $35,000.00 was included in the original counterclaim filed by Southern in the Fort Benning case, it was, prior to the trial in that case, "dropped" from Southern's counterclaim in that case, has been included by Southern as part of its counterclaim and defense in the present case, and that Southern claims credit for $34,520.00 thereof toward the contract price of the Fort Campbell project. We are unable to tell from the record before us whether the original counterclaim in the Georgia suit was amended after the Tennessee suit was...