Opinion ID: 267450
Heading Depth: 1
Heading Rank: 3

Heading: Autrey and Goad.

Text: 28 Plaintiffs Autrey and Goad were the carpentry subcontractors. Under the subcontract they were to receive the total sum of three hundred ninety-eight thousand, four hundred forty and 50/100 dollars ($398,440.50), 20 29    payments to be made in monthly installments of 90 per cent of the value of the work completed in the building, leaving a balance of 10 per cent of the value of the completed work at all times unpaid, which balance shall be paid upon acceptance of the work of Williams and Dunlap Construction Company, Inc. by the Owner. (Subcontract, Article XII.) 30 Attached to the subcontract was a breakdown schedule for payment to Autrey and Goad. The schedule broke the carpentry work to be performed by them into items and, for progress-payment purposes, each subcontractor was to be paid under its contract on an item completion basis. Each item was assigned a fixed value for payment purposes, the unit price, less 10% retainer under terms of contract. Appendix, p. 112. 31 Article XIII of the subcontract provided that 32    the Contractor shall file its schedule of completed work with Williams and Dunlap Construction Company, Inc. before the last day of each month, and payment on such schedule, provided same shall be found to be correct by Williams and Dunlap Construction Company, Inc. shall be due on or about the fifteenth of each month. 33 The district court found that as of December 31, 1957, the subcontract had been terminated and that the fault was mutual and both parties were guilty of a breach of contract. See 210 F.Supp. at 507. We disagree that there was a mutual breach of contract. 34 Autrey and Goad commenced performance of the work under their subcontract in April 1957. They continued to work in the performance of the subcontract until December 20, 1957. The first five schedule draws were submitted, approved by the defendant prime contractor and paid. The first three were paid on or about the fifteenth of the month; the last two payments were delayed but no one was very angry yet. Then the Air Force began to tighten up on approval requirements, noting through various letters which appear in the record that too many deficiencies were being carried forward without correction. 210 F.Supp. at 505. 35 The sixth schedule draw was submitted on October 31, 1957 for $78,360.03. See Defendant's Exhibit 4(b) 11. It was approved by Williams and Dunlap but was not paid on or about November 15. The Federal Housing Administration approved the work on or about November 25. In the interval and before FHA approval the prime contractor advanced $18,500. The prime contractor deducted $7,000 from the balance due because of its conclusion that Autrey and Goad had failed to nail up certain cornice material and sheathing shown by a field check not to be in place. However, Autrey and Goad refused to accept the check in the reduced amount. But, subsequently on November 27, the prime contractor mailed to the Guaranty Bank a check in the amount of $52,814 to be paid on Autrey and Goad's account. See 210 F.Supp. at 506-07. The district court found that the prime contractor was obligated to pay the draw for $78,360.03 since the prime contractor had found the draw to be correct, and that the $7,000 deduction constituted a breach of contract. 210 F. Supp. at 507. 36 The seventh schedule draw was submitted on November 30, 1957 for $29,522. It was not acted upon by the prime contractor and was not paid at all. When Autrey and Goad were not paid on or about December 15, they reduced their work force to five men and, on December 20, they formally notified the prime contractor that they would do no further work until such time as this subcontractor has been paid its November estimate, which estimate was due on about the 15th day of December. 210 F. Supp. at 507. The prime contractor replied on December 27 that since Autrey and Goad were not manning the job, the prime contractor would man the job beginning Monday, December 30, pursuant to Article XXIV of the subcontract. 21 This letter was answered on December 28 and the prime contractor was advised that if it placed any men on the job it would do so at its own expense. The prime contractor was also advised that Autrey and Goad would continue to maintain personnel on the job to accept payments and to correct any defects in its work and that they were ready, willing and able to complete its contract when the prime contractor brought its obligations to a current status. 37 The prime contractor took over the carpentry contract and Autrey and Goad demanded the balance allegedly due under the subcontract ($137,416.39). A civil action was filed and Autrey and Goad sought judgment for $312,000. The prime contractor claimed that it spent some $157,000 to complete the work required by the subcontract. 38 The district court found that the defendant prime contractor was guilty of a breach of the subcontract by not having paid in full and on or about November 15 the full amount of Autrey and Goad's sixth schedule draw, which was submitted on October 31 and found to be correct by the prime contractor. See 210 F. Supp. at 507. The court also found that plaintiffs Autrey and Goad breached the contract by not properly manning the job after December 15, 1957. The court entered judgment for Autrey and Goad in the amount of $26,937.33, together with interest. 39 The defendant prime contractor contends that it did not breach its contract with Autrey and Goad. It contends that since it had power to approve or disapprove any of the draws submitted, it had power to approve partially by withholding some $7,000 from the sixth schedule draw; it urges that the sixth draw was not approved for payment on November 15, as the district court states, but that the record reflects that the draw was stamped for approval on November 26, after FHA approval, and paid on November 27. The latter contention draws into question the construction of Article XIII, which is of substantial importance to the outcome of the present actions. 40 The prime contractor's construction of Article XIII is that the subcontractor is not entitled to payment on a draw submitted until his work has been approved by the several government agencies and administrative branches, e. g., the Federal Housing Administration. It argues that the only way the prime contractor could obtain approval of its draws was to have the work approved by the Government, and certainly it was not going to `accept' the work until it was known that it was accepted by the Government. 41 The subcontractor's construction of Article XIII is, in essence, that Autrey and Goad were required to file their schedule of completed work with the prime contractor before the last day of each month and that unless the prime contractor pointed out errors prior thereto, payment on the draw schedule was due on or about the 15th of the month. 42 The district court was in accord with neither. Its construction was that silence on the part of Williams and Dunlap is not to be interpreted as a finding of correctness. Affirmative approval was required. Of course, if there were no deficiencies there would be an obligation to act. 210 F.Supp. at 502. 43 We agree with the district court that the subcontractors' monthly draw payments of ninety per cent of the value of the work completed did not depend upon acceptance of his work by the several government agencies and administrative branches. We note that the only reference to acceptance of work by a person other than the prime contractor, as a condition of payment to the subcontractor, concerns payment of the ten per cent balance; such balance [of 10 per cent of the value of the completed work] shall be paid upon acceptance of the work of Williams and Dunlap Construction Company, Inc. by the Owner. (Subcontract, Article XII.) 44 Furthermore, we think that Article XIII required the prime contractor to take action concerning the correctness of the subcontractors' schedule of work completed between the time it was submitted, before the last day of each month, and the time payment was due, on or about the 15th of the following month. We agree with the district court that a finding of correctness of the schedule of completed work and resulting payment on or about the 15th of the month did not foreclose the contractor from requiring defective work or improper materials to be corrected. 22 In this connection, we note that Article XII provides that ten per cent of the value of the work completed shall be retained from the monthly draws. The ten per cent retainage was to insure the correction of defective work or improper materials. 45 Therefore, we hold that the prime contractor breached its contract with Autrey and Goad by not acting upon the seventh draw, submitted on November 30, 1957 for $29,522 and which should have been paid on or about December 15 if found correct. 46 As noted earlier, the district court found that Autrey and Goad breached their contract by failing to maintain the job properly after they did not receive payment on or about the 15th of December. The court noted that Autrey and Goad were obligated under Article XXI (the arbitration clause) 23 to proceed under the written orders of Williams and Dunlap to complete the work. We think it doubtful that the arbitration clause contemplates a situation such as this where the prime contractor fails to take any action approving or disapproving the schedule of work completed by the subcontractor. But even if the arbitration clause does apply, we think it was the duty of the prime contractor to invoke it by notifying Autrey and Goad that a controversy existed as to payment on the seventh draw and by issuing written orders to Autrey and Goad. Therefore, we find that Autrey and Goad did not breach the contract by failing to man the job properly. By this action and subsequent communication to the prime contractor notifying it that no further work would be done on the project, and demanding the balance due under the subcontract. Autrey and Goad treated the breach as final. 47 We think Autrey and Goad are entitled to the unpaid installments of the contract price that may have become due and payable as a contract debt for work completed. In addition, they are entitled to money damages caused by the total breach of the contract by the prime contractor. These damages include all other unpaid installments of the contract price, less the cost of completion of the work, including correction of defective work, that is saved to the subcontractor by reason of the repudiation of the prime contractor, with additional compensation for any other injury that could not be reasonably avoided by the subcontractor and that the prime contractor had reason to foresee when the contract was made. See 5 Corbin, Contracts § 1094, at 509 (1964 ed.). 24 Where the cost of completion cannot be shown with any reasonable degree of certainty, the subcontractor should be given judgment for the amount of his expenditures, without regard to the cost of completion, unless the prime contractor shows that part of these expenditures were imprudent and unreasonable; in such a case, the judgment should not include the imprudent and unreasonable portion of the expenditures. 5 Corbin, op. cit., supra, § 1094, at 513. 48