Tennessee Asphalt Co. v. Purcell Enterprises, Inc.

• Decision Date: 26 January 1982
• Citation: 631 S.W.2d 439
• Parties: TENNESSEE ASPHALT COMPANY, Plaintiff-Appellant, v. PURCELL ENTERPRISES, INC., et al., Defendants-Appellees.
• Court: Tennessee Court of Appeals

Page 439

631 S.W.2d 439

TENNESSEE ASPHALT COMPANY, Plaintiff-Appellant, v. PURCELL ENTERPRISES, INC., et al., Defendants-Appellees.

Court of Appeals of Tennessee, Eastern Section.

Jan. 26, 1982 Permission to Appeal Denied by Supreme Court April 5, 1982.

George F. Legg, of Stone & Hinds, P. C., Knoxville, for plaintiff-appellant.

Kelley Hinsley, of Noe, Hinsley & Sempkowski, Morristown, for Purcell Enterprises, Inc.

Wayne K. Houser, Jr., Asst. Atty. Gen., Knoxville, for defendants-appellees; William M. Leech, Jr., Atty. Gen., Knoxville, of counsel.

OPINION

FRANKS, Judge.

The principal issue on appeal is whether a party to a construction contract calling for performing of labor and furnishing materials over a period of time may abandon the contract and recover for services and material furnished where the other party has violated a provision requiring payments at specified times during the progress of the work.

In 1977, defendant, Purcell Enterprises, contracted with the State of Tennessee to construct a road across Clinch Mountain in Grainger County. Defendant subcontracted with plaintiff, Tennessee Asphalt Company, for the paving work required under the contract with the state. Plaintiff began paving work in September, 1978, and continued to December, 1978, when the work was interrupted due to unfinished excavating and weather. Plaintiff submitted estimates for completed work, which represented approximately 9.65 per cent of the total paving required under the contract, and subsequently Purcell was paid $167,508.58 by the state based on plaintiff's estimates.

Under the subcontract, defendant agreed to pay Tennessee Asphalt as follows:

7. Subcontractor shall, on or before the last day of each month, file his estimate for materials and labor furnished for the preceding month, and upon said estimate being certified or accepted as correct by the Owner (State of Tennessee), the Contractor shall pay the amount covered by said estimate to the Subcontractor within two days after the receipt of money covered by said estimate paid the Contractor by the Owner. Retainage, however, in 7% per cent of each estimate shall be retained by the Contractor and the same shall not be due and payable to the Subcontractor until the Subcontractor's full compliance with this contract and until two days following receipt of the retainage by the Contractor from the Owner.

It is undisputed that plaintiff performed work and supplied materials in the amount of $180,116.75 and the payment by the state to defendant represented 93 per cent of the total value of labor and materials expended by plaintiff on the project. ¹ It is further undisputed that defendant did not pay the amount covered by the estimate to the subcontractor within two days or at any time subsequent to payment by the state to the contractor.

On August 3, 1979, plaintiff filed suit for damages for breach of the contract and defendant filed a counterclaim for damages alleging plaintiff's failure to complete the paving as a breach.

The case was tried before the chancellor without a jury and the chancellor awarded plaintiff judgment in the amount of $196,935.13, including interest. ² Subsequently, the chancellor ordered a new trial on the grounds the court was dissatisfied with the theories set forth in the pleadings, concerned that the court proceedings would interfere with an investigation of road building contractors under the federal anti-racketeering laws and concerned the trial was tainted by collusion between the parties. The chancellor then recused himself at the request of plaintiff.

The case was retried before a designated chancellor, who awarded plaintiff $87,042.70. ³ In arriving at the judgment, the chancellor stated:

Gentlemen, the Court further finds that the defendant, Purcell Enterprises, did fail to pay to the plaintiff such monies as were received from the State of Tennessee for work and materials which they have furnished and had done on this particular project.

The Court further finds that Mr. Ratliff for and on behalf of Tennessee Asphalt Company did use this failure to pay as a basis for not proceeding with the contract in order to relieve himself, of his own testimony-relieve the corporation based on his own testimony of a loss of $400,000.00.

The Court further finds that both the plaintiff and the defendant ... has and will suffer a loss of $515,000.00 (in) completing this contract with the State as a result of the plaintiffs not going forward with its part of the contract as originally entered into. The Court feels and so finds that the actions of both parties contributed to the loss of each other, and the termination of the contractual relationship between the parties during the course of their dealings with each other.

The cost of this cause, Gentlemen, I think should be divided between the parties. I think there is a lot to be said on both sides and against both sides. I suppose technically in deciding the case this way the cross complaint probably fails as a matter of law, and that in arriving at the damages I have offset one against the other. (Emphasis supplied.)

The assertion of fact that both parties suffered $515,000.00 loss under the contract is an error. There is no evidence plaintiff suffered any loss; the $515,000.00 figure was mentioned by defendant's witness to the effect that defendant's losses in completing the contract would be approximately $515,000.00.

The conclusions in arriving at the judgment are inconsistent. Defendant was apparently awarded a set-off in excess of $100,000.00 on the labor and materials provided by plaintiff. No explanation for the amount is given; however, the trial court, in unmistakeable terms, dismissed defendant's counterclaim for damages based on plaintiff's failure to continue performance. The applicable rule on an inconsistent judgment is stated in 89 C.J.S. Trial § 636, at 468-9:

A judgment will not be supported by findings of fact which are antagonistic, inconsistent, or contradictory as to material matters, unless the evidence is such that the judgment can be said to be clearly right regardless of the findings. Likewise, a judgment will not be supported by conclusions of law which are at variance with the findings of fact or which are inconsistent with each other, unless the judgment is in accordance with the correct conclusion of law from the facts found. However, the courts endeavor to reconcile findings which appear to be contradictory, so as to uphold the judgment if possible, and in order to do so will construe the findings as a whole and liberally in favor of the judgment; but the rule cannot be used to uphold findings that are inconsistent with each other. (Footnotes omitted.)

Assuming, arguendo, defendant was entitled to damages due to plaintiff's failure to perform, the set-off is not supported by the evidence. The only evidence concerning defendant's damages is Purcell's testimony and he calculated the losses on materials as $417,508.39 and estimated defendant's total losses to be $500,000.00 or $515,000.00. Accordingly, we cannot reconcile the inconsistencies in the judgment.

On appeal, plaintiff initially argues the chancellor improperly granted a new trial. We do not agree. A trial judge has broad discretion in granting a new trial. Holmes v. Wilson, 551 S.W.2d 682 (Tenn.1977); Young v. Reliance Elec. Co., 584 S.W.2d 663 (Tenn.App.1979). Where a trial judge is dissatisfied with the verdict he may set it aside and grant a new trial. Hime v. Sullivan, 188 Tenn. 605, 221 S.W.2d 893 (1949). The chancellor advanced sufficient reasons to grant a new trial and acted within his discretion.

The issue thus becomes whether the plaintiff breached its contract with defendant by refusing to continue performance due to the non-payment of the stipulated payments contained in the contract. Both parties rely on United States for the use and benefit of Pickard v. Southern Construction Company, Inc., 293 F.2d 493 (6th Cir. 1961); modified on other grounds, 371 U.S. 57, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962), which purports to apply Tennessee law, and states in pertinent part:

In a building or construction contract calling for the performing of labor and furnishing of materials covering a long period of time and involving large expenditures, a stipulation for payments on account to be made from time to time during the progress of the work must be deemed so material that a substantial failure to pay would justify the contractor in declining to proceed. Under such circumstances the contractor cannot be expected to finance the operation to completion without receiving the stipulated payments on account as the work progresses. (Citations omitted.)

This statement embodies the majority rule. Guerini Stone Company v. P. J. Carlin Construction Co., 248 U.S. 334, 39 S.Ct. 102, 63 L.Ed. 275 (1919); United States for the use and benefit of Building Rentals Corporation v. Western Casualty & Surety Company, 498 F.2d 335 (9th Cir. 1974); Pickens County v. National Surety Co., 13 F.2d 758 (4th Cir. 1926); Segan Construction Corp. v. Nor-West Builders, Inc., 274 F.Supp. 691 (D.Conn.1967); United States for the use and benefit of F. E. Robinson Co. of N.C., Inc. v. Alpha-Continental, 273 F.Supp. 758 (E.D.N.C.1967); Spitalny v. Tanner Constr. Co., 75 Ariz. 192, 254 P.2d 440 (1953); Brady Brick & Supply Co. v. Lotito, 43 Ill.App.3d 69, 1 Ill.Dec. 844, 356 N.E.2d 1126 (1976); Aerostatic Engineering Corp. v. Szczawinski, 1 Mass.App. 141, 294 N.E.2d 521 (1973); Integrated, Inc. v. Alec Fergusson Electrical Contractors, 250 Cal.App.2d 287, 58 Cal.Rptr. 503 (1967); Pittman Construction Company v. Housing Authority of New Orleans, 169 So.2d 122 (La.App.1964); East Crossroads Center, Inc....