Al Smith's Plumbing & Heating Service, Inc. v. River Crest, Inc.

• Decision Date: 07 December 1978
• Docket Number: No. 9493,9493
• Citation: 365 So.2d 1122
• Court: Court of Appeal of Louisiana — District of US
• Parties: AL SMITH'S PLUMBING & HEATING SERVICE, INC. v. RIVER CREST, INC., General Contractors.

Page 1122

365 So.2d 1122

AL SMITH'S PLUMBING & HEATING SERVICE, INC. v. RIVER CREST, INC., General Contractors.

No. 9493.

Court of Appeal of Louisiana, Fourth Circuit.

Dec. 7, 1978.

Rehearing Denied Jan. 16, 1979.

Lemle, Kelleher, Kohlmeyer & Matthews, William R. Forrester, Jr., New Orleans, for Al Smith's Plumbing & Heating Service, Inc., plaintiff-appellant.

Phelps, Dunbar, Marks, Claverie & Sims, Eileen Gleason Shaver, New Orleans, for Fidelity & Deposit Co. of Maryland, third party defendant-appellant.

John P. Nelson, Jr., Irving H. Koch, New Orleans, for River Crest, Inc., defendant-appellee.

Before LEMMON, STOULIG and SCHOTT, JJ.

STOULIG, Judge.

This appeal involves claims and counter claims between River Crest, Inc., a general contractor, and Al Smith's Plumbing & Heating Service, Inc. (Smith), his plumbing/roofing subcontractor, that arise from the alleged failure to perform the subcontracts.

As background, River Crest, Inc., agreed to construct an apartment complex for the Housing Authority of New Orleans (HANO), a federal agency, for $471,900. River Crest projected its direct costs to complete this job at $400,519; its overhead at $40,050 (10%); and its profit at $31,331. Signed June 6, 1974, the contract called for completion in 270 days; however, when delays were encountered in obtaining building permits, HANO granted a 45-day extension. Work commenced August 25, 1974 and at that time it was anticipated the job would be finished by June 1, 1975. Unfortunately River Crest erred. The job was accepted December 8, 1975 at a direct cost (labor and material for all subcontracts) of $498,570.72, which, in addition to washing out the profit and overhead River Crest had planned to cover with the contract price, also resulted in a $26,670.72 out-of-pocket loss. Needless to say when the plumbing and roofing subcontractor filed this lawsuit, River Crest was ready with a reconventional demand.

Initially, Smith filed suit against River Crest for $28,021.05, the balance due for work performed under both subcontracts and for damages in the sum of $20,000. Smith alleged it walked off both the plumbing and roofing jobs before completion because River Crest arbitrarily withheld payment for work that had been completed under both agreements.

River Crest answered denying these assertions and reconvened for damages caused by the alleged breach of Smith, specifically (1) cost of completion of the plumbing and roofing subcontracts; (2) loss of profit; (3) additional overhead and demurrage that accrued due to a long delay in completion and attorney fees. Fidelity and Deposit Company of Maryland (Fidelity), Smith's performance bond underwriter, was also joined as a party defendant under its solidary liability with the defaulting contractor.

The bonding company denied responsibility and alternatively pleaded a limitation of liability to $65,500, the amount bonded.

After a five-day trial, the district judge concluded Smith had actively breached both contracts although it did not act in bad faith in so doing and awarded these damages:

                Cost to complete plumbing contract      $35,800.00
                Cost to complete roofing contract         3,024.00
                Joist repair                              1,418.00
                Wage violations by Smith                  1,175.00
                Loss of profit (initially anticipated)   32,000.00
                                                        ----------
                                                        $73,417.00
                

The judgment limited Fidelity's liability to $65,500 of this amount. Both defendants in reconvention were cast for $2,500 attorney fees. Fidelity obtained a third party judgment against Smith indemnifying it for any sums it must pay out because of rendition of the judgment on the reconventional demand. Smith and Fidelity have appealed; River Crest has answered the appeal.

Appellants have not conceded that Smith actively breached the subcontracts, but they have not urged reversal of that part of the judgment holding Smith liable for the amounts River Crest paid to Crescent City Plumbing and Flat Top Roofers to finish both the plumbing and roofing contracts. Nor do they challenge the amounts.

The evidence fully supports the active breach conclusion reached by the trial judge. Not only did Smith fail to complete the plumbing required, but his workmen additionally complicated matters by substandard performance. To illustrate, in installing plumbing stacks Smith's workmen cut large holes in the supporting floor joists that seriously weakened the structure. In one instance a 2-by-12-inch joist was cut to 2 by 1/2 inches. Eventually many joists had to be repaired or replaced by a carpenter hired by the general contractor. Additionally ventings for the gas heaters and the water heaters were improperly installed. Further Smith used P traps throughout when the contract called for drum traps, and this required River Crest to renegotiate this item with HANO before its acceptance.

From the evidence it appears Smith ran into financial difficulties in the course of performance and River Crest assisted with generous payments until it reached a point where it was concluded the stage of completion lagged way behind the percentage of the contract price previously advanced. Therefore we conclude Smith breached the agreement when it walked off the job without cause and affirm the completion costs awards itemized above. Without prolonged discussion we also affirm the $1,418 allowed for remedial work because the need to repair joists is apparent and the cost incurred undisputed. Fidelity is only solidarily liable for the expenditure to complete the plumbing contract and it did not bond the roofing job.

We next consider the loss of profit item. In this connection it is also relevant to discuss three items River Crest seeks to have added to its judgment by this court, namely: (1) $12,108 additional direct job maintenance expense incurred because the job was not concluded until approximately four months ¹ after the scheduled completion date; (2) $3,584 demurrage for which HANO billed River Crest; and (3) additional superintendent costs of $3,898.54. All of these damages of necessity must stem from the breach by Smith if it and its surety are to be held liable for them.

It is interesting to note that in written reasons for judgment the trial court found as a fact:

" * * * (T)hat by far, the greatest cause of the delays encountered during the construction are attributable to numerous reasons. For example, delays were encountered in the delivery of materials. Furthermore, Crescent City Plumbing, the replacement subcontractor, caused many such delays which are well documented in the job logs. And River Crest itself contributed to the delay in the project completion by its failure to replace Smith timely. River Crest's contention that Smith's actions caused a loss of momentum which in turn caused the delays has no merit. * * * "

There is nothing in the record to establish how much of the delay in completion is solely attributable to Smith. Warren Rodick, a federal inspector charged with responsibility of inspecting this job for the agency, testified at one point that the plumbing contractor was directly responsible for a delay of approximately three months. On cross-examination he admitted this was a "wild guess." He also found that long after Smith was gone there was inadequate supervision and an insufficient number of skilled workmen on the job. Steven Sears, general job superintendent for River Crest, produced a log that he kept while this construction was in progress and from this it can be noted that other subcontractors were not performing within the time frame the general contractor had projected. Many trial hours were devoted to pointing out that Smith still had not completed the structural roughing-in stage by March 13, 1975, the day plaintiff's men walked off the job. It has been argued that this in itself was sufficient to shut down the job for several months. However, before the walls could be closed the electrical roughing-in also needed completion. We know from Sears' log that the electrical work in Building A (one of the two buildings covered by the contract) started January 6, 1975, and there is no evidence as to the date the electrical roughing-in work was completed or that its performance was delayed by Smith's default.

Like anything involving the federal government, this contract required exhaustive record keeping and paper work. For example, we know from the evidence that each subcontractor had to keep and turn in wage and hour logs so that HANO officials, in the spirit of benevolent paternalism, could make sure each worker was properly paid. From the Sears' log and the wage and hour tallies, it would appear that River Crest could have precisely reconstructed which subcontractor caused what delay. The silence as to timeliness of performance by all other subcontractors on the project is conspicuous.

We also make this same observation with respect to the cost of completion. River Crest has records of the total costs to perform the...