Court Opinion

ID: 43134
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:52:20+00
Date Added: 2024-06-11T14:57:01.741737
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT          FILED
                       ________________________ U.S. COURT OF APPEALS
                                                  ELEVENTH CIRCUIT
                            No. 04-10918               August 23, 2005
                                                   THOMAS K. KAHN
                      ________________________
                                                       CLERK

                 D. C. Docket Nos. 00-02642-CV-GET-1
                         & 01-00028-CV-GET

00-CV-2642

FIRST NATIONAL INSURANCE
COMPANY OF AMERICA,

                                                          Plaintiff-Counter
                                                          Defendant-Cross
                                                       Claimant-Appellant,

                                versus

D.P.S. INDUSTRIES, INC. (GA),

                                                         Defendants-Third
                                                            Party-Plaintiff
                                                        Counter-Claimant
                                                        Counter-Defendant
                                                          Cross-Defendant
                                                                Appellant,

DAVE PARRISH, SR.,

                                                          Defendant-Third
                                                            Party-Plaintiff
                                                        Counter-Claimant
                                                        Counter-Defendant
                                                                Appellant,
PRAVIN R. SHAH, Individually

                                                                      Counter-Defendant,

CHEOAH CONSTRUCTION COMPANY INC.,

                                                                       Third-Party
                                                                       Defendant-Counter
                                                                       Claimant-Appellee,

BOARD OF EDUCATION OF THE
CITY OF ATLANTA, as the school
district in the name of Atlanta
Independant School System,

                                                                             Third-Party
                                                                            Defendant-Counter
                                                                             Claimant.
----------------------------------------------------------------------------------

01-CV-28
CHEOAH CONSTRUCTION COMPANY, INC.,

                                                                        Plaintiff-Appellee

                                          versus

FIRST NATIONAL INSURANCE
COMPANY OF AMERICA

                                                                         Defendant-Third
                                                                           Party-Plaintiff
                                                                       Counter-Defendant
                                                                               Appellant,

D.P.S. INDUSTRIES, INC. (GA),

                                                                        Third-Party

                                              2
                                                           Defendant-Counter
                                                           Claimant-Fourth
                                                               Party-Plaintiff
                                                           Counter-Defendant
                                                                   Appellant,

DAVE PARRISH, SR.,

                                                           Third-Party
                                                            Defendant-Fourth
                                                               Party-Plaintiff
                                                           Counter-Defendant
                                                                   Appellant,

BOARD OF EDUCATION OF THE
CITY OF ATLANTA, as a school
district in the name of
Atlanta Independant School
System,

                                                                 Fourth-Party
                                                                  Defendant,

PRAVIN R. SHAH,

                                                           Counter-Defendant.

                       ________________________

                Appeal from the United States District Court
                   for the Northern District of Georgia
                     _________________________

                            (August 23, 2005)

Before EDMONDSON, Chief Judge, BIRCH and COX, Circuit Judges.

                                     3
PER CURIAM:

      This appeal arises from a contract entered into between D.P.S. Industries,

Inc. (GA) (“DPS”), and the Board of Education of the City of Atlanta (“the School

Board”) for the performance of certain work in preparation for the construction of

a new school. DPS and the surety on its statutory payment bond, First National

Insurance Company of America (“FNIC”), appeal the district court’s ruling that

$275,000 paid by the School Board to DPS’s subcontractor, Cheoah Construction

Company, Inc. (“Cheoah”), does not apply to reduce the amount owed to Cheoah

by DPS. Additionally, Dave Parrish, Sr., the President of DPS, appeals the district

court’s judgment against him because Cheoah asserted no claim against Parrish.

Upon review of the record and the arguments of the parties, we conclude that the

district committed error in including the $275,000 in the damages award to

Cheoah, and we REVERSE and REMAND to the extent necessary to correct this

error. Additionally, we VACATE the district court’s judgment to the extent that it

includes Parrish.

                               I. BACKGROUND

      On or about 29 April 1999, DPS, a contractor, entered into a General

Contract For Sitework (“the Contract”) with the School Board. Under the

Contract, DPS agreed to perform certain site preparation work for the construction

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of a new school in Atlanta (“the Project”). DPS, as principal, and FNIC, as surety,

executed a statutory payment bond in connection with the Project.

      In May 1999, DPS subcontracted with Cheoah to complete certain work

required by the Contract. Cheoah came to believe that it had not been paid

sufficiently by DPS for work it had completed. After Cheoah failed to obtain

payment from DPS or by asserting a claim against FNIC pursuant to the statutory

bond, it initiated direct negotiations with the School Board.

      In a letter dated 23 December 1999, the School Board informed DPS that it

“ha[d] paid DPS for a substantial portion of the work performed by Cheoah upon

the Project,” Exh. 2-57 at 2, that DPS ha[d] in turn failed and refused to release

these payments to Cheoah,” id., and that the School Board could thus “no longer

trust or have confidence that DPS [would] fulfill its payment obligations to

Cheoah,” id. at 3. Accordingly, the School Board notified DPS that it would issue

joint checks made payable to both DPS and Cheoah “for all remaining and

outstanding funds payable to DPS for work performed by Cheoah in accordance

with the contract documents,” id., and that if DPS failed to endorse properly the

joint checks, it would discharge the payment obligation by issuing direct payments

to Cheoah “pursuant to the terms of the Contract Documents, including but not

limited to Articles 14 and 32 of the General Conditions,” id. Additionally, the

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School Board informed DPS that it had issued one such joint check for $50,000.

The School Board stated that if DPS did not endorse the check within 72 hours, it

would “issue payment directly to Cheoah, discharging this portion of DPS’s

payment obligations to Cheoah . . .” Id.

      In a letter dated 27 December 1999, the School Board informed DPS that

DPS owed Cheoah an additional payment of $225,000 and that it had issued a joint

check for that amount. Again, the School Board threatened to pay Cheoah directly

if DPS failed to endorse the joint check within 72 hours. Exh. 1-218 at 3. The

letter further stated that “[t]he payment of an additional $225,000 [to Cheoah]

coupled with the $50,000 referenced in [the 23 December] letter represents full,

complete and final payment for all labor, materials and work furnished, delivered,

and performed by or on behalf of Cheoah upon the Project as approved and

authorized by the [School Board].” Id.

      DPS refused to sign off on any joint checks to Cheoah. Exh. 1-184 at 5. On

27 December 1999, the School Board made a direct payment to Cheoah in the

amount of $50,000. On 29 December 1999, it made another direct payment to

Cheoah in the amount of $225,000. In connection with these payments, Cheoah’s

authorized representatives executed a document entitled “PARTIAL RELEASE &

PAYMENT OF CONTRACT FUNDS” (“the School Board / Cheoah Release”).

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The School Board / Cheoah Release provided, inter alia, that “[t]he [School Board]

shall pay Cheoah, for work performed by Cheoah upon the Project, approved and

authorized by the [School Board], a substantial portion of which has already been

paid to DPS, directly if necessary, the lump sum of $275,000, in exchange for the

covenants, representations, promises, and release contained herein.” Exh. 2-7 ¶ 27,

at 4. It specifically reserved to Cheoah all claims or causes of action which

Cheoah had against DPS or Parrish.

      Litigation ensued between Cheoah, DPS, Parrish, FNIC, and the School

Board. By 1 July 2003, the remaining claims pending for trial that are relevant to

this appeal were Cheoah’s claims against DPS for breach of contract and against

FNIC for liability pursuant to the payment bond for unpaid amounts allegedly

owed to it for its work on the Project as DPS’s subcontractor, and DPS and

Parrish’s counterclaim against Cheoah for breach of contract, indemnity, and

litigation expenses.1 On 20 January 2004, the district court commenced a bench

trial on these claims.

      After the close of all of the evidence, DPS and FNIC argued that the School

Board’s two payments to Cheoah totaling $275,000 should be counted as payments

to Cheoah for its work on the Project and should thus reduce the amount owed to

      1
       The pre-trial procedural history is complex, and we only discuss the
procedural history relevant to this appeal.

                                          7
Cheoah. However, the district court ruled that Cheoah was “entitled to retain the

$275,000 without restriction or any other deductions or credits.” R11 at 669. It

then directed that judgment be entered for Cheoah for $294,481.80.

      Before the entry of judgment, DPS and FNIC moved the district court to

reconsider its ruling and apply the $275,000 payments by the School Board to

Cheoah as payment for Cheoah’s work on the Project, thereby reducing the

judgment to the sum of $19,481.80. The district court denied the motion and

entered judgment for $294.481.80 against DPS, FNIC, and Parrish. DPS, FNIC,

and Parrish timely appealed.

                                II. DISCUSSION

      On appeal, DPS, FNIC, and Parrish advance two main arguments. First,

DPS and FNIC contend that the district court erred in concluding that the $275,000

payments by the School Board to Cheoah should not be applied to reduce the

amount owed to Cheoah for its work on the Project. Second, Parrish avers, and

Cheoah concedes, that the district court erred by entering judgment against Parrish

because Cheoah asserted no claim against him.

      Because this is a diversity action, we look to the substantive law of Georgia

to determine the correct measure of damages for a breach of contract. See Erie

R.R. Co. v. Tompkins, 304 U.S. 64, 79, 58 S. Ct. 817, 823 (1938). Under Georgia

                                         8
law,

             The measure of damages in the case of breach of contract is the
             amount which will compensate the injured person for a loss which a
             fulfillment of the contract would have prevented or the breach of it
             entailed. In other words, the person injured[] is, so far as it is possible
             to do so by a monetary award, to be placed in the position he would
             have been in had the contract been performed.

New Amsterdam Cas. Co v. Mitchell, 325 F.2d 474, 476 (5th Cir. 1964); accord

Accent Walls, Inc. v. Parker, 292 S.E.2d 509, 510 (Ga. Ct. App. 1982); Fratelli

Gardino, S.p.A. v. Caribbean Lumber Co., 587 F.2d 204, 209 (5th Cir. 1979)

(applying Georgia law and looking to “the amount of money that will make the

injured party whole” to determine breach of contract damages). Accordingly, a

damages award may not place the injured party in a better position than it would

have occupied had the breach of contract not occurred. Geriner v. The Branigar

Org., Inc., 489 S.E.2d 305, 306-07 (Ga. 1997), overruled on other grounds, Lee v.

Green Land Co., Inc., 527 S.E.2d 204, 205 (Ga. 2000).

       In this case, Cheoah received from the School Board two payments totaling

$275,000 for its work on the Project. Ruling that Cheoah was entitled to retain the

$275,000 payments without restriction, the district court did not apply these

payments to reduce the amount due to Cheoah for its work. Thus, under the

district court’s judgment, Cheoah will receive $275,000 from DPS in addition to

the $275,000 it has already received from the School Board. Both payments are

                                           9
for the same work. Cheoah will thus earn more money than it would have had the

Subcontract not been breached. Because this result contravenes Georgia law, we

conclude that the district court erred in holding that the $275,000 paid to Cheoah

by the School Board did not reduce the amount owed to Cheoah on the Project.2

                               III. CONCLUSION

       We conclude that Cheoah’s damages should be reduced by the $275,000

paid to it by the School Board. Accordingly, we REVERSE and REMAND the

district’s judgment for proceedings consistent with this opinion. Additionally, we

VACATE the district court’s judgment as to Parrish because Cheoah did not assert

a claim against Parrish in this case.

       2
         We find unpersuasive all of Cheoah’s arguments to the contrary. First, we reject
Cheoah’s contention that DPS should be judicially estopped from arguing on appeal that “it
suffered damage as a result of the School Board payment to Cheoah” because of its settlement
with the School Board. Brief of Appellee at 16. Not only does DPS not advance this argument
on appeal, the settlement between DPS and the School Board is irrelevant to the amount owed to
Cheoah for its work on the Project. Second, we reject Cheoah’s arguments that DPS has no
standing to assert claims for its benefit under the Cheoah / School Board release because it is not
a third party beneficiary of the release. This argument has no bearing on DPS’s claim that
Cheoah is not owed for work performed on the Project for which it was already paid. Third,
Cheoah’s argument that the district court based its ruling on the $275,000 payment on its
decision that Cheoah’s “pass-through” claims are barred supports has no merit. The district
court’s ruling did not increase the amount owed to Cheoah for work on the project.

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