Austin v. Parker

• Decision Date: 08 April 1982
• Docket Number: No. 79-2948,79-2948
• Citation: 672 F.2d 508
• Parties: Jack AUSTIN, d/b/a Jack Austin & Associates, Plaintiff-Appellee Cross Appellant, v. D. R. PARKER and J. A. McAlpin, d/b/a M&M Construction Co., et al., Defendants-Appellants Cross Appellees. . Unit A *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 508

672 F.2d 508

Jack AUSTIN, d/b/a Jack Austin & Associates, Plaintiff-Appellee Cross Appellant, v. D. R. PARKER and J. A. McAlpin, d/b/a M&M Construction Co.,

et al., Defendants-Appellants Cross Appellees.

No. 79-2948.

United States Court of Appeals, Fifth Circuit.

Unit A ^*

April 8, 1982.

Michael S. Fawer, Matthew H. Greenbaum, New Orleans, La., for defendants-appellants cross appellees.

Stockwell, Sievert & Viccellio, Emmett C. Sole, Lake Charles, La., for plaintiff-appellee cross appellant.

Appeals from the United States District Court for the Western District of Louisiana.

Before BROWN, WISDOM and RANDALL, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

This diversity appeal presents a number of factual issues as well as questions of contract law for our decision. Although we affirm many of the findings and conclusions of the distinguished trial judge, we find that he erred in a few respects, and so we remand for reconsideration to that extent.

I. Facts

In April, 1972, Jack Austin contracted with the U.S. Army Corps of Engineers to construct an 88-building, 260-unit family housing project at Fort Polk, Louisiana, for the sum of $5,746,830. Austin, an Oklahoma City, Oklahoma contractor, had extensive experience in the construction business and had acted as prime contractor on many large construction projects.

This housing project was situated in the middle of a dense pine forest, approximately one mile from the base. Because of its location, the job necessitated significant site work and preparation by a subcontractor, including general excavation and pouring of concrete slabs, curbs and gutters. No source of electricity existed at the site, a point which has engendered substantial controversy.

Austin initially contemplated having his own people perform the rough carpentry, i.e. the framing on the buildings. In early 1972, D. R. Parker approached Austin with an offer to do that work. Parker possessed considerable experience in the construction industry but relatively little experience as a subcontractor. For some time prior to contacting Austin, he had pondered using an automated, computer tape controlled framing machine for subcontracting carpentry work. In January 1972, he offered to purchase such a machine from General Construction Automation. Not long afterwards, he and James McAlpin, a home builder along the Mississippi coast, decided to pool their resources in order to bid on certain construction projects, using the automated framing machine. Parker and McAlpin eventually worked together on three projects: one in Norfolk, Virginia, one at Keesler Air Force Base, and this one at Fort Polk.

Parker arranged to show a film portraying the operations and advantages of the prefab machine to Austin. His Madison Avenue approach so impressed Austin that he arranged for Parker to show it to members of the Corps of Engineers, who would have to approve the subcontracting, as it would result in Austin's own employees' performing less than 25% of the work, a minimum required by the prime contract. The Corps, too, was impressed and agreed to the arrangement. The prefab machine would largely have obviated the problem of a scarcity of skilled carpenters in the Fort Polk area.

Parker and McAlpin then discussed their bid with Austin. Parker stated that with the prefab machine they would only need about 45 people to complete the job. As he boasted he could "build at least a building every day, every shift", it would require between five and six months.

Parker gave Austin an estimated price $486,011 for the subcontracting, based, significantly, not on the cost of using the prefab machine but rather on the cost of stick-building (with electric-powered hand tools) the entire project. Parker explained that he preferred to rely upon this conservative approach rather than to depend upon a money-saving mechanism that had not yet been proven. Austin's calculations for his own workers had produced an estimated price some $40,000 higher.

Although impressed with the automation, Austin observed that the prefab machine would require significant electric power, and electric power was one commodity in very short supply at the job site. Although the contract obligated him to run a transmission line from the post to the project, it would be some time before he installed the line. Austin told Parker that if he and his people worked as fast as they asserted, they would have completed half or more of the work before Austin could get any electricity to the area. Parker, no doubt anxious to secure the contractual plum, reiterated that this lack would not cause a big problem. In fact, he told Austin, he had generator sets he would bring to the cite to power the equipment. The record shows that other subcontractors provided their own sources of electricity.

Austin, Parker and McAlpin and representatives of the Corps of Engineers held several meetings during the spring about the framing work. In early June 1972, Austin, and D. R. Parker Co. and J. A. McAlpin d/b/a M&M Construction Co. (collectively M&M) agreed upon the price, scope of work, and other relevant details. Following the Corps' approval, Austin sent a standard subcontract form to Parker and McAlpin.

M&M then set out to gather a crew of experienced carpenters in the Gulfport, Mississippi area, which would form the nucleus of the workforce; remaining needs they would fill locally. Parker advised Austin that he intended to man the job with between 30-35 men and that with the machine in full swing, 26-30 would suffice. By the end of June, M&M had formed a crew, expecting to begin work on or about July 4. Parker was in charge of all administrative matters, while McAlpin would run the job with Dan Boyce as his assistant.

Due to other subcontractors' construction delays, M&M did not report until about July 24. A labor disturbance interrupted work the following week, so M&M did not really settle in until August 7.

During the slowdown, Austin and McAlpin discussed the electricity problem yet again. Their recollections differ. Austin testified that he told McAlpin categorically that M&M would have to supply its own source of power, but McAlpin denies that interpretation.

Austin made the first disbursement to M&M promptly and in full. He refused to make any more payments until M&M secured a performance bond, a pre-requisite for the written contract.

During the month of August, Austin several times asked Parker about the bond. Each time, Parker told Austin that he would have it in a few days. Toward the end of the month, Parker admitted to Austin that he was having trouble securing a bond. His bonding company could not write a bond in excess of $250,000 per project. Dan Cohen, the Miami, Florida representative of International Surety Underwriters, Inc. (ISU), agent for Parliament Insurance Co. of Chicago, Illinois, suggested that they write two bonds and separate the single contract into two contracts. Austin, Parker and McAlpin agreed to split the contract in two, with one contract of $250,000 and one of $236,011. The split divided the buildings into two groups according to their schedule of completion, to conform to the total amount of each bond. Of 88 buildings, the first 47 fell within the $250,000 contract, the remaining 41 in the $236,011 contract. By accident, two buildings, number 87 and 66 were omitted altogether. Austin, noticing the omission, added the two to the end of the $236,011 contract. Building 87, in fact, properly belonged in the other contract.

Parker's insurance agent told Austin that he had authority to write two bonds to secure two such contracts. Austin's attorney in Oklahoma City advised that that proposal was satisfactory. Some technical details delayed effectiveness until about September 8.

Then another problem arose. Parker and McAlpin complained to Austin of materials shortages that, they claimed, impeded their progress. Of the 20 buildings that M&M worked on, half could not be completed in one continuous process ¹ because of a lack of windows, exterior doors, cornice material, blackboard, siding, four by fours, two by tens, column supports, soffit, soffit trim, and frieze board. By letter of September 17, Parker brought the problem to Austin's attention. Austin acknowledged that some materials arrived behind schedule, but, having timely submitted his orders, denied responsibility. In a letter of November 25, he also countered that Parker never gave specifics about the shortages, despite frequent requests, and added that even after late materials arrived, they sat, unused, for weeks.

While Parker complained about the lack of materials, Austin counter-complained about what M&M did with the materials they had. Poor quality workmanship was endemic to this project. The organization and quality of workmanship of M& M's forces was "very poor", according to the testimony of two engineers with the Corps. Austin continually found it necessary to inform M&M of its poor workmanship. ² Indeed, Parker, tacitly acknowledging the poor quality of some of the work, relieved McAlpin of "all direct responsibility on (the) framing contract" and brought in a new man, Jack Williams to "straighten this job out."

The much-heralded and ballyhooed automated prefab machine in fact never was used. Work proceeded instead by the stick-building method, using about 15 carpenters from Mississippi supplemented by local labor.

By the end of October, the generators supplying power for M&M's employees were burning out at a rapid rate, and some 30 men were involved in costly "backending", i.e., going back to finish or repair work on buildings that they had worked on previously. M&M alleged that the backending resulted from materials shortages; Austin responded that M&M's poor workmanship necessitated much patching and repairing before the work was satisfactory, and that this backending-for the cost of which he, of course, was not liable-was the source of M&M's...