Source: https://law.justia.com/cases/federal/appellate-courts/F2/439/895/337193/
Timestamp: 2020-02-25 22:54:04
Document Index: 255087846

Matched Legal Cases: ['§ 270', '§ 375', '§ 375', '§ 270', '§ 408', '§ 270']

United States for the Use of R. W. Vaught Co., a Corp. and R. W. Vaught Co., a Corp., Appellees, v. F. D. Rich Co., Inc., a Corp., American Surety Co. of New York, a Corp., United States Fidelity & Guaranty Co., a Corp. and General Reinsurance Corp., a Corp., Appellants, 439 F.2d 895 (8th Cir. 1971) :: Justia
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United States for the Use of R. W. Vaught Co., a Corp. and R. W. Vaught Co., a Corp., Appellees, v. F. D. Rich Co., Inc., a Corp., American Surety Co. of New York, a Corp., United States Fidelity & Guaranty Co., a Corp. and General Reinsurance Corp., a Corp., Appellants, 439 F.2d 895 (8th Cir. 1971)
U.S. Court of Appeals for the Eighth Circuit - 439 F.2d 895 (8th Cir. 1971) March 9, 1971
Rehearing En Banc Denied and Rehearing Denied March 30, 1971
COPYRIGHT MATERIAL OMITTED John A. Biersmith, Dana B. Badgerow, Kansas City, Mo., and Lawrence Gochberg, Stanford, Conn., for appellants; Biersmith & Walsh, Kansas City, Mo., of counsel.
R. W. Vaught Company (Vaught), individually and as use plaintiff, brought the instant action under the Miller Act, 40 U.S.C. § 270a et seq., for recovery of unpaid amounts claimed to be due it by the prime contractor, F. D. Rich Company, Inc. (Rich), and its sureties1 for labor and materials furnished as a subcontractor on a government project under two separate subcontracts. The district court, sitting without a jury, rendered judgment favorable to the use plaintiff which provided for the following: Judgment against all defendants for the sum of $152,268.67, representing the amounts due and owing the subcontractor by the prime contractor on the two subcontracts; judgment against all defendants for the $43,688.87 for extra work performed by the subcontractor apart from his obligations under the subcontracts; judgment against all defendants for interest at the rate of six per cent per annum on these amounts from the date of demand for payment; judgment against the sureties only for ten per cent of the principal amounts, plus reasonable attorney's fees, representing a penalty for vexatious refusal to pay claims pursuant to Missouri law (Mo.Ann.Stat. § 375.420).
Vaught, a mechanical contractor specializing in plumbing and heating installations, contracted with Rich to install the plumbing, heating and air conditioning for a contract price of $1,100,000 and, under a separate subcontract, agreed to do certain sheet metal work for a contract price of $46,000. Following completion of the subcontract work and acceptance thereof by the government, prime contractor Rich refused to pay Vaught the ten per cent "retainage" on each of the subcontracts and the last "estimate" on the larger subcontract. The prime contractor and its sureties refused payment to Vaught on the ground that the subcontractor had not furnished and paid for all material and labor which it had agreed to furnish for the contract price, and that Vaught's delays in performance of the mechanical subcontract had resulted in damages to the prime contractor in a sum exceeding the unpaid balance on the contracts. The principal dispute on this appeal concerns Vaught's performance of its obligations under the mechanical subcontract, specifically whether that performance justified the defendants' refusal to pay sums claimed due Vaught under the subcontracts. Rich specifically relies upon Article XXIV of its subcontracts with Vaught which authorizes the prime contractor to withhold funds otherwise due a subcontractor and apply them toward payment of damages sustained at the hands of a subcontractor.2
The appellants raise the following contentions on this appeal: (1) The district court failed to make sufficient findings of fact as required by Fed. R. Civ. P. 52(a) to furnish an appropriate basis for this court to properly review the issues presented on appeal; (2) the district court erred in concluding that defendant Rich had failed to establish that Vaught's failure to timely perform the mechanical subcontract delayed completion of the project to Rich's damage; (3) the district court erred in awarding the plaintiff the full amount remaining on its contract price with Rich as the balance due when Vaught's own creditor-material suppliers and subcontractors remained unpaid and were asserting Miller Act claims against the prime contractor; (4) the district court erred in allowing additional sums for "extra work" since Vaught failed to comply with the procedures set forth in the subcontract to establish entitlement to extra compensation; (5) the district court erred in assessing damages by way of a penalty, including attorney's fees, against the defendants-sureties for vexatious refusal to pay under Missouri law; and (6) the district court erred in awarding Vaught prejudgment interest under Missouri law.
Although more extensive findings are certainly helpful in a case as complex as this, the district court's memorandum opinion sufficiently outlines the basis and underlying grounds for its decision, which is all that is required. Christensen v. Great Plains Gas Company, 418 F.2d 995, 1000 (8th Cir. 1969); Freeman v. Gould Special School District, 405 F.2d 1153, 1156 (8th Cir.), cert. denied, 396 U.S. 843, 90 S. Ct. 61, 24 L. Ed. 2d 93 (1969); Manning v. Jones, 349 F.2d 992, 996 (8th Cir. 1965). See also, Glassman Construction Company v. United States for Use and Benefit of Clark-Fontana Paint Co., 421 F.2d 212 (4th Cir. 1970) (Miller Act case); Seligson v. Roth, 402 F.2d 883 (9th Cir. 1968). Appellant Rich, who presented the trial court with 156 proposed findings, misconstrues the requirements of Rule 52(a), Fed. R. Civ. P. The trial court need not make specific findings on all facts and evidentiary matters brought before it, but need find only the ultimate facts necessary to reach a decision in the case. Skelly Oil Co. v. Holloway, 171 F.2d 670, 673 (8th Cir. 1948). See generally, 5 Moore, Federal Practice ¶ 52.05 [1] (2d ed. 1969).
Prime contractor Rich introduced no convincing evidence that Vaught had agreed in fact to any completion date earlier than that fixed by the general contract. Rich recognized that Vaught's "calculated" completion date of October 8, 1964, did not promise performance. Whether Vaught actually delayed performance of the mechanical subcontract, and whether that delay, if any, produced damage to Rich represent questions of fact to be resolved by the trier of fact. Appellants fail to demonstrate that these findings of the trial court were clearly erroneous. Accordingly, we sustain these determinations under the mandate of Rule 52 (a), Fed. R. Civ. P.
The district court determined the merits of both disputes in favor of the subcontractor. It found that Vaught had installed manholes at elevations specified in the plans. It further determined that the contract terms required Vaught to connect plumbing only to fixtures and equipment furnished by the government. The court absolved Vaught from responsibility for not making plumbing connections to kitchen equipment supplied by another subcontractor who had specifically agreed to install such equipment "complete with all trimmings * * * and fittings necessary for proper operation * * *." These determinations, if deemed findings of fact, are not "clearly erroneous", Fed. R. Civ. P. 52(a), or if deemed conclusions of law, cannot be said to be illogical, unsound or improper interpretations of the contractual language in question. See United States for Use of Planet Corp. v. MacDonald Construction Co., 417 F.2d 687 (8th Cir. 1969); Franchi Construction Company v. United States, ex rel. Consolidated Comstock Co., Inc., 392 F.2d 717 (5th Cir. 1968).
We, too, reject appellant Rich's contention that Vaught's alleged failure to comply with all procedures specified in the subcontract before performing any extra work bars recovery. Vaught complied substantially with the relevant provisions of Article IX under the circumstances. It notified Rich that it would not proceed with the work except for additional compensation. When the prime contractor refused to acknowledge the work as extra and refused to issue a change order, Vaught performed under protest. Contract provisions of the kind embodied in Article IX serve to protect the paying party to a construction contract from unknown, unanticipated or excessive charges made for work which a contractor or subcontractor may deem as an extra. These provisions are not, however, intended as a shield barring legitimate claims for extra work performed with the knowledge, consent or acquiescence of the paying party. The notice requirements of such contractual provisions may be waived by the party for whom the work is done. Generally, performing such work at the order of the party sought to be charged justifies an award of additional compensation under circumstances similar to those in the instant case. See Sam Macri & Sons, Inc. v. United States, for Use of Oaks Const. Co., 313 F.2d 119 (9th Cir. 1963). See generally, Annot., 2 A.L.R.3d 620 (1965).
The trial court, having determined that the connecting of kitchen equipment did not fall within the scope of the mechanical subcontract, properly held Rich liable to pay for this work. See United States v. Smith, 256 U.S. 11, 41 S. Ct. 413, 65 L. Ed. 808 (1921); John A. Johnson & Sons v. United States, to Use of Baltimore Brick Co., 153 F.2d 534 (4th Cir.), cert. denied, 328 U.S. 865, 66 S. Ct. 1372, 90 L. Ed. 1636 (1946); Ross Engineering Co. v. Pace, 153 F.2d 35 (4th Cir. 1946).
Under existing Missouri law, commercial sureties, such as the defendant sureties in the instant case, constitute insurers subject to the penalty provisions of § 375.420. Camdenton Consol. School Dist. No. 6 of Camden County ex rel. W. H. Powell Lumber Co. v. New York Casualty Co., 340 Mo. 1070, 104 S.W.2d 319 (1937); Goffe v. National Surety Co., 321 Mo. 140, 9 S.W.2d 929 (1928). Section 375.420, however, is penal in nature and must be strictly construed. Western Casualty & Surety Co. v. Southwestern Bell Tel. Co., 396 F.2d 351, 356 (8th Cir. 1968); Duckworth v. United States Fidelity & Guaranty Co., 452 S.W.2d 280, 287 (Mo.App.1970). The sole ground asserted to sustain the penalties rests upon the trial court's finding that the defendant sureties failed to investigate plaintiff's claims because "they had a solvent principal." On this issue, the trial court concluded:
In order for a plaintiff to recover for vexatious refusal to pay, he must produce evidence which shows that the refusal was wilful and persistent and without reasonable cause as the facts would appear to a reasonable and prudent person before trial. Duckworth, supra, 452 S.W.2d 280, 287; Hughes v. Great American Ins. Co., 427 S.W.2d 266, 271 (Mo.App.1968). No evidence of that nature has been produced in the instant case. The mere finding by the trial court here that the sureties failed to investigate the claims and relied upon a solvent principal will not, by itself, justify the assessment of vexatious damages where the record demonstrates that the principal presented a reasonable, albeit unsuccessful, defense. Where there is an open question of fact or law determinative of the insured's liability, the insurer, acting in good faith, may insist on judicial determination of such questions without subjecting itself to penalties for vexatious refusal to pay. Cohen v. Metropolitan Life Ins. Co., 444 S.W.2d 498 (Mo.App.1969). Applying Missouri law to the circumstances in the instant case, we find no justification for the assessment of vexatious damages and reverse the trial court's award on this point.
We have, in other cases, recognized that such interest, as authorized under state law, becomes part of the amount "justly due" Miller Act claimants under 40 U.S.C. § 270b. See Aetna Casualty and Surety Company v. United States for Use and Benefit of R. J. Studer & Sons, 365 F.2d 997, 1007 (8th Cir. 1967); National Union Fire Ins. Co. of Pittsburgh, Pa. v. D & L Const. Co., 353 F.2d 169, 177 (8th Cir. 1965), cert. denied, 384 U.S. 941, 86 S. Ct. 1462, 16 L. Ed. 2d 539 (1966); D & L Construction Co. v. Triangle Elec. Supply Co., 332 F.2d 1009, 1013 (8th Cir. 1964).
We consider the applicable Missouri Code provisions in the light of the contract between the parties. Mo.Ann. Stat. § 408.020 authorizes creditors "to receive interest at the rate of six per cent per annum, when no other rate is agreed upon, for all moneys after they become due and payable,* on written contracts, and on accounts after they become due* and demand of payment is made * * *."
As we have already noted, in part III of this opinion, the subcontract specifies that "no payment shall be considered to be due and payable"* to the subcontractor so long as his own obligations incurred in his performance of the subcontract remain unpaid. We think this contract provision serves to take this case outside the purview of the Missouri statute governing pre-judgment interest. Accordingly, the trial court erred in its allowance to the plaintiff of pre-judgment interest.
Defendant-appellants American Surety Company of New York, United States Fidelity & Guaranty Company and General Reinsurance Corporation executed performance and payment bonds as sureties for prime contractor Rich, as required under the Miller Act, 40 U.S.C. § 270a
" [A] breach by the second party [subcontractor] of any contract, may at the option of the first party [prime contractor], be considered a breach of all contracts; and in that event the first party may terminate any or all of the contracts so breached, or may withhold moneys due or to become due on any such contracts, and apply the same toward payment of any damages suffered on that or any other such contracts."
For reversal in part, appellants shall bear 75 per cent of costs taxable on appeal. Fed. R. App. P. 39(a)