Reid v. MILES CONSTRUCTION CORPORATION

• Decision Date: 11 September 1962
• Docket Number: No. 16887.,16887.
• Citation: 307 F.2d 214
• Parties: Gary H. REID and Trinity Universal Insurance Company, Appellants, v. MILES CONSTRUCTION CORPORATION and Great American Indemnity Company of New York (Defendants) and Banco Land Company et al. (Intervenors), Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

307 F.2d 214 (1962)

Gary H. REID and Trinity Universal Insurance Company, Appellants, v. MILES CONSTRUCTION CORPORATION and Great American Indemnity Company of New York (Defendants) and Banco Land Company et al. (Intervenors), Appellees.

No. 16887.

United States Court of Appeals Eighth Circuit.

August 21, 1962.

Rehearing Denied September 11, 1962.

William Andress, Jr., Dallas, Tex., made argument for appellants and A. L. Barber, of Barber, Henry, Thurman & McCaskill, Little Rock, Ark., with him on the brief.

Edward Lester and Robert Shults, of Wright, Lindsey, Jennings, Lester & Shults, Little Rock, Ark., made argument for appellees and filed brief.

Before VOGEL and RIDGE, Circuit Judges, and DEVITT, District Judge.

DEVITT, District Judge.

This is an appeal from a judgment of the District Court in favor of the defendants on their counterclaim for damages resulting from the claimed breach of a construction subcontract in connection with the building of a Capehart Housing Project at the Little Rock, Arkansas, Air Force Base.

Diversity of citizenship and the requisite amount in controversy are established.

One of the appellants, Gary H. Reid, a masonry subcontractor, originally instituted a declaratory judgment action against the prime contractor, Miles Construction Corporation, one of the appellees, to determine whether Miles had breached its subcontract by underpaying a progress payment.

Subsequently, the pleadings on both sides were amended so that Reid sought recovery of damages against Miles and its surety for the claimed breach of the subcontract, and Miles and its subsidiaries sought by counterclaim to recover against Reid and his surety for damages allegedly occasioned by Reid's refusal to complete the subcontract.

The District Court entered judgment for the defendants for the amount asserted in their counterclaim, representing the cost of completion of the subcontracts, plus, in the case of Trinity Universal Insurance Company, the statutory penalty of 12% and reasonable attorneys' fees. This appeal followed.

The principal issue is one of fact — who breached the contract, Reid or Miles? Judge Young, the trial Judge, found that Reid did. Here is his reasoning in support of that finding and of his determination as to the extent of damages, as set out in an unreported memorandum decision:

"It is unnecessary to state in detail the dealings between these parties, or to decide many of the issues urged by the parties, for in the view of the court the determination of which party had breached its contract on September 17, 1958, the date Reid refused to further perform because of the alleged underpayment of his August 25, 1958 monthly estimate, decides this action, and this determination depends in turn upon whether Reid had been underpaid for his masonry work and brick inventory on September 17, 1958.

"The amount that Reid insists that he was underpaid on his monthly estimate of August 25, 1958 has fluctuated considerably through the various stages of this suit. On September 13, 1958 Reid protested by letter to Miles Construction Corp. that he had been underpaid $5,388.74 on this estimate, and this was the figure asserted in the original complaint, filed September 17, 1958. In an amendment to such complaint, filed December 3, 1959, Reid stated `On the August estimate, however, due September 10, 1959, defendant defaulted, and failed to pay plaintiff the amount of his estimate, the total payment made to plaintiff on such date being more than $7,000.00 short of the amount due and owing to him.\' Reid testified at trial that Miles Construction Corp. reduced by $4,887.00 two of the three inventory estimates that he submitted, and states in his post-trial brief that `(s)ubstantially, this is the action which brought on the law suit\'. However, also at trial, Reid testified that he had been underpaid by $6,002.00 over the whole contract up to September 17, but in his post-trial brief now figures the total contract underpayment at $3,779.44. This last figure, which the court will take as the amount Reid insists that he was underpaid on his subcontract, was developed as follows:

                  "12 units with fireplaces at $90.00 ...... $10,800.00
                  880 units at $75.933 .....................  66,821.04
                  Total due on Construction of 892 units ...  77,621.04
                  Miles-Fairfax retainage (10%) ............   2,810.00
                  Contract increase to cover union dues ....     447.00
                  Inventory estimate — Aug. 25, 1958 .......  13,692.15
                  Total due Reid as of Sept. 17, 1958 ......  94,570.19
                  Total payments to Reid — Sept. 17, 1958 ..  90,790.75
                                                             __________
                  Shortage asserted ........................ $ 3,779.44
                                                             __________
                

"The court finds, however, that there was no such underpayment, either in this last claimed amount or in any greater amount. The amount due Reid under his theory of payment, using the number of housing units that the record shows to have been complete as of August 25, 1958, is as follows:

                  "12 units with fireplace at $ 900.00(sic) .. $ 10,800.00
                  842 units at $ 75.933 ......................   63,935.59
                  Total due on Construction of 854 units .....   74,735.59
                  Miles-Fairfax retainage (9½%) (Note 1)        2,670.00
                  Contract increase to cover Union
                    Dues .....................................      447.50
                  Contract increase to cover extra work              90.84
                  Inventory estimate — Aug. 25, 1958 .........   13,692.15
                                                               ___________
                    Sub-total ................................ $ 91,636.08
                  Less charge for roof-stain correction ......      212.11
                                                               ___________
                  Total due Reid as of September 17
                    1958 ..................................... $ 91,423.97
                  Total payments to Reid — Sept. 17, 1958 ....   91,238.25
                    Less 0.5% maintenance retainage ..........      140.00
                                                               ___________
                                        (Note 1)
                                                               $ 91.098.25
                                                               ___________
                    Difference ..............................  $    325.72
                                                               ===========
                

"Note 1. The evidence indicates that Miles-Fairfax paid Reid the total retainage of $2,810.00 due under that part of his subcontract, but that Reid gave his check for $140.00 to Miles-Fairfax to cover the 0.5% maintenance escrow that was to be held for one year, so that Reid in net effect received the 9.5% retainage due for Miles-Fairfax when that section of the project was complete and accepted, as his contract provided. Although Miles-Hawthorne was complete as of September 17, 1958, the government had not, as of that date, released the contract retainage, so that Reid was not entitled to any other retainage amounts; by his amended complaint Reid abandoned his claim for Miles-Hawthorne retainage.

"Two points may be noted as to this tabulation. First, Reid claimed that he did not complete any units after August 25, 1958, so that the number of completed units as of September 17, 1958, was the number for which payment was due. While the record is not in total harmony as to the units complete on September 17 — 888, 892 or 896 are figures used at various times in the record — it is clear that Reid\'s workmen were on the job a substantial number of hours in the period between August 25 and September 17, contrary to Reid\'s testimony, and the court does not accept his testimony that no units were completed after August 25. The figure of 854 units complete as of August 25, 1958 stands without contradiction from any other witness or exhibit.

"Second, in making this tabulation the figure of $13,692.15 was used as the amount due Reid on his inventory estimate. However, under any theory of amounts due Reid per unit the five joint ventures had only obligated themselves to pay 75% of inventory on hand for which suppliers had been paid — a normal requirement to avoid materialmen\'s liens. Reid had over $20,000.00 of unpaid invoices for brick as of September 17, 1958, including brick for which payment was requested on August 25, 1958, so that proper reduction of his certified inventory estimate would show payment by an amount substantially in excess of that to which he was entitled under his own theory.

"Additionally, there is every indication that the asserted underpayment of the August 25, 1958, progress payment was not the cause of Reid\'s decision to refuse further performance of his subcontract. Reid\'s bid on the project was substantially below any other masonry bid; he originally planned to use non-union Mexican labor, in large part, coupled with practices not sanctioned by the local union, plans which went awry when the union

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