U.S. for Use and Ben. of Lochridge-Priest, Inc. v. Con-Real Support Group, Inc.

• Decision Date: 10 January 1992
• Docket Number: CON-REAL,LOCHRIDGE-PRIES,INC,No. 90-8633,90-8633
• Citation: 950 F.2d 284
• Parties: 37 Cont.Cas.Fed. (CCH) P 76,254 UNITED STATES of America for the Use and Benefit of, Plaintiff-Appellee, Cross-Appellant, v.SUPPORT GROUP, INC., Defendant-Appellant, Cross-Appellee, and St. Paul Mercury Insurance Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 284

950 F.2d 284

37 Cont.Cas.Fed. (CCH) P 76,254

UNITED STATES of America for the Use and Benefit of LOCHRIDGE-PRIEST, INC., Plaintiff-Appellee, Cross-Appellant, v. CON-REAL SUPPORT GROUP, INC., Defendant-Appellant, Cross-Appellee and St. Paul Mercury Insurance Company, Defendant-Appellant.

No. 90-8633

Summary Calendar.

United States Court of Appeals,

Fifth Circuit.

Jan. 10, 1992.

Michael F. Pezzulli, Pezzulli & Assoc., Carol E. Farquhar, Dallas, Tex., for defendant-appellant, cross-appellee.

David Earl Cherry, Fred M. Johnson, Jr., Pakis, Cherry, Beard & Giotes, Waco, Tex., for plaintiff-appellee, cross-appellant.

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

Before GOLDBERG, KING and GARWOOD, Circuit Judges.

GOLDBERG, Circuit Judge:

In this Miller Act case, contractor Con-Real Support Group, Inc. and its Miller Act surety St. Paul Mercury Insurance Company present four primary arguments on appeal: first, whether the district court erred in finding that the subcontractor Lochridge-Priest, Inc. provided Con-Real with additional work; second, whether the district court erred in finding that Con-Real delayed L-P's performance of its work under the subcontract; third, whether the district court erred in calculating prejudgment interest; and, fourth, whether the district court erred in awarding attorney's fees to L-P.

I. BACKGROUND

Con-Real Support Group, Inc. ("Con-Real") contracted with the United States, acting through the Small Business Administration, to renovate two buildings at the Veterans' Administration Medical Center in Waco, Texas. As required by 40 U.S.C. § 270a(a), Con-Real secured a payment bond from St. Paul Mercury Insurance Company ("St. Paul"). Con-Real subcontracted certain mechanical work ("Subcontract") to Lochridge-Priest, Inc. ("L-P").

L-P substantially completed the work required by the Subcontract on January 15, 1990, seven months after the June 25, 1989 date set by the government. L-P sued Con-Real and St. Paul on the Miller Act payment bond and also brought state law contract and quantum meruit claims. Con-Real and St. Paul counterclaimed for breach of contract and delay damages.

The district court entered judgment against Con-Real and St. Paul based on its findings that Con-Real failed to pay L-P $117,976.01 for amounts billed by L-P under the Subcontract and $1,682.00 for plumbing fixtures replaced by L-P because Con-Real caused the premature installation of the initial fixtures. The district court also held that L-P owed Con-Real $8,950.28 in damages for breach of contract for failing to perform certain work under the Subcontract. The parties do not challenge these portions of the court's judgment. ¹

The district court also entered judgment against Con-Real and St. Paul based on its findings that Con-Real required L-P to perform work in addition to that specified in the Subcontract: specifically, Con-Real demanded the submission of excessive data and the digging of an underground oxygen line.

Con-Real delayed L-P with its changes to the plumbing design, obstructed L-P's testing of heating and air conditioning equipment, and failed to provide L-P with proper sink vanity tops. Reasoning that L-P's delay claims were "for damages incurred due to disruptions and interference with its work," the district court held that L-P could recover these "delay expenses" from Con-Real, but not from Miller Act surety St. Paul. The court also awarded L-P prejudgment and postjudgment interest on the joint judgment against Con-Real and St. Paul on the Subcontract and additional work claims, and on the judgment against Con-Real on the delay claim. The court subsequently granted L-P's motion for attorney's fees on its state law contract claim against Con-Real.

Con-Real and St. Paul present four key issues on appeal. ² We reverse the district court's judgment as to L-P's delay claim and prejudgment interest, affirm the judgment in all other respects, and remand for further proceedings consistent with this opinion.

II. DISCUSSION

A. Extra Work Provided by L-P.

Con-Real challenges several of the district court's findings of fact regarding extra work provided by L-P. Con-Real argues that the record does not support the district court's findings that Con-Real required L-P to provide excessive submittal data on VAV boxes and sound attenuators and that Con-Real required L-P to perform additional work in hand-digging an underground oxygen line. (Am.F.Fact 14-16) We have reviewed the record in its entirety, and although we agree with Appellant that the evidence supports more than one inference, we find no clear error in the district court's findings. ³

B. Delay by Con-Real.

Con-Real disputes the district court's findings of fact that Con-Real delayed L-P with plumbing design changes, obstructed L-P's testing of heating and air conditioning equipment, and failed to provide L-P with proper sink vanity tops. (Am.F.Fact 13, 17, 19) Con-Real asserts that L-P at least partially caused these delays, and thus cannot recover against Con-Real. As with the findings regarding extra work provided by L-P, the record supports the district court's findings of fact on these issues concerning Con-Real's delays. ⁴

We shift our attention to the district court's conclusion of law that "claims for delay expenses are not recoverable against a Miller Act surety." After the district court entered its amended findings of fact and conclusions of law and the parties in this case filed their briefs, we decided United States ex rel. T.M.S. Mechanical Contractors, Inc. v. Millers Mut. Fire Ins. Co. v. The Craftsmen, Inc., 942 F.2d 946 (5th Cir.1991). Joining the District of Columbia and Eleventh Circuits, in Millers Mutual we held that a subcontractor can recover " 'out-of-pocket costs of delay' " from a Miller Act surety. Id. at 952 (citing United States ex rel. Pertun Constr. Co. v. Harvesters Group, Inc., 918 F.2d 915, 918 (11th Cir.1990)). In awarding delay expenses against a Miller Act surety, however, the district court must first determine that the subcontractor did not cause the delay, ⁵ then carefully limit the recovery to "costs actually expended in furnishing the labor or material in the prosecution of the work provided for in the contract." Id. (emphasis in original). It has definitely been decided that delay expenses can be recovered against a Miller Act surety under the conditions set forth in Millers Mutual. We thus reverse the judgment as to liability for L-P's delay expenses and remand to allow the district court to apply Millers Mutual.

C. Calculation of Prejudgment Interest.

The district court awarded prejudgment interest on L-P's Miller Act claim against the surety, St. Paul, and on L-P's state law claims against the contractor, Con-Real. After the district court reconsiders the issue of liability for L-P's delay expenditures, it will necessarily recalculate the prejudgment interest on the two judgments. We consider separately the liability of the Miller Act surety for prejudgment interest on the Miller Act claim and the liability of the contractor for prejudgment interest on the state law claims.

1. Judgment based on the Miller Act Claim.

Although federal law governs the scope of the remedy available to a Miller Act claimant, including the amount of prejudgment interest, state law injects itself into the analysis because the Miller Act does not provide "standards for the allowance of prejudgment interest." United States ex rel. Ga. Elec. Supply Co. v. United States Fidelity and Guar. Co., 656 F.2d 993, 997 (5th Cir.Unit B 1981); see United States ex rel. Canion v. Randall & Blake, 817 F.2d 1188, 1193 (5th Cir.1987) (citing F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 128, 94 S.Ct. 2157, 2164, 40 L.Ed.2d 703 (1974)). Courts thus "look to state law 'as a matter of convenience and practicality.' " Georgia Electric, 656 F.2d at 997 (citation omitted). In this case, we must refer to Texas law to ascertain the standard for assessing prejudgment interest against a Miller Act surety. When the parties have not agreed on an interest rate, as in this case, Texas law allows "six percent interest per annum ... on all accounts and contracts ascertaining the sum payable, commencing on the thirtieth (30th) day from and after the time when the sum is due and payable." Tex.Rev.Civ.Stat.Ann. art. 5069-1.03 (Vernon 1987).

The issue is when prejudgment interest awarded on a Miller Act claim based on a breach of contract theory begins to accrue--at what point in time did the sums comprising the judgment amount against the surety become "due and payable" to L-P? The district court consulted Texas law, reasoned that "[t]he Miller Act provides that the subcontractor shall be paid in full 'ninety days after the day on which the last of the labor was done or performed by the [the subcontractor] or material was furnished or supplied by [the subcontractor],' " and determined that each bill became "due and payable" one hundred and twenty days after its billing date. See 40 U.S.C.A. § 270b(a) (West 1986). The court thus awarded L-P six percent interest per annum on the judgment against Con-Real and St. Paul on L-P's Miller Act claim and the judgment against Con-Real on L-P's state law claims, beginning one hundred and twenty-one days "after the billing for each specific item" and running until the date of judgment.

Con-Real and St. Paul argue that the Subcontract entitled L-P to final payment by Con-Real only after Con-Real received final payment from the government, and point out that the record does not reveal whether Con-Real ever received final payment from the government. Appellants assert that the district court erred in calculating interest without reference to when the payments became due under the terms of the Subcontract. L-P assumes that Con-Real and St. Paul's argument challenges only the calculation of prejudgment interest on L-P's Miller...