Cearfoss Brothers v. Harvey Harris

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, for the
use and benefit of PCC
Construction Components,
Incorporated; PCC CONSTRUCTION
COMPONENTS, INCORPORATED,
Plaintiffs,
v.
HARVEY HARRIS CONTRACTORS,
INCORPORATED; JAMES W. ANCEL,
INCORPORATED, HARTFORD ACCIDENT No. 96-1042
AND INDEMNITY COMPANY;
HARRIS/ANCEL JOINT VENTURE II,
Defendants-Appellees,
v.
CEARFOSS BROTHERS CONSTRUCTION
COMPANY, INCORPORATED, a/k/a
Cearfoss Brothers Company,
Incorporated,
Third Party Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(CA-95-123-A)
Argued: June 3, 1997
Decided: July 23, 1997
Before RUSSELL, MURNAGHAN, and MOTZ, Circuit Judges.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Robert Anthony Klimek, Jr., KLIMEK, KOLODNEY &
CASALE, P.C., Washington, D.C., for Appellant. Roger Cavenaugh
Jones, HUDDLE & JONES, P.C., Columbia, Maryland, for Appel-
lees. ON BRIEF: Karen Chalmers Coe, KLIMEK, KOLODNEY &
CASALE, P.C., Washington, D.C., for Appellant.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Harris/Ancel Joint Venture II (Harris/Ancel) obtained a contract
with the National Park Service for the rehabilitation of a maintenance
yard near National Airport. After being awarded the contract, Harris/
Ancel subcontracted with Cearfoss Brothers Construction Company,
Inc. (Cearfoss) to supply and to erect seven preengineered buildings
and one preengineered building owned by the National Park Service.
The subcontract provided for progress payments. Payment by the
National Service to Harris/Ancel was a condition precedent to Harris/
Ancel's obligation to pay Cearfoss.
After completing some of the work, Cearfoss requested payment
from Harris/Ancel. Harris/Ancel refused to pay Cearfoss stating that
Cearfoss had failed to comply with the contractual conditions for pay-
ment. Thereafter, Cearfoss walked off the job, and Harris/Ancel ter-
minated Cearfoss' subcontract for default. Subsequently, Cearfoss
sued Harris/Ancel for damages. The district court concluded that
Cearfoss had failed to comply with the terms of the contract and
entered judgment in Harris/Ancel's favor.
2
I.
FACTS AND PROCEDURAL HISTORY
The National Park Service awarded a contract to Harris/Ancel Joint
Venture II1 (Harris/Ancel) for the construction of the George Wash-
ington Memorial Parkway Maintenance Center (hereinafter "the Proj-
ect"). The Project required the installation of seven prefabricated
metal buildings, which the Prime Contract specified were manufac-
tured by Star Building Systems (Star).
On October 11, 1993, Harris/Ancel entered into a further subcon-
tract with Cearfoss Brothers Construction Company, Inc. (Cearfoss),
a local distributor for Star.2 Cearfoss' subcontract was for a fixed
amount of $676,000.00. Article 5 of the subcontract provided:
5. PRICE AND PAYMENT
The Subcontract price shall be paid in partial payments,
when received by the Contractor from the Owner, to the
Subcontractor for payment of work in place and material on
jobsite. Payment from the Owner is a specific condition pre-
cedent to the Contractor's obligation to pay the Subcontrac-
tor ...*** The Contractor is entitled to proof of payment for
labor, material and services used before payment is due ***
The Subcontractor shall itemize the Subcontract price as a
basis for establishing value of work complete, and partial
payments. Subcontractor agrees that it will not be paid by
the Contractor for work and materials in place until ten (10)
days after the Contractor's receipt of payment from the
Owner. If the Contractor withholds making payment to the
Subcontractor until the Subcontractor has complied with the
aforesaid terms and conditions, the Subcontractor shall still
diligently proceed with the work as required.
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1 James W. Ancel, Inc. entered into a partnership with Harvey Harris
Contractors, Inc. to form the joint venture.
2 In turn, Cearfoss subcontracted the majority of its work to material
suppliers, Star, and labor subcontractors, such as PCC Construction
Components, Inc. (PCC), a plaintiff in the action below.
3
On March 28, 1994, by letter addressed to Star, Harris/Ancel, Cear-
foss, and Star entered into a "Joint Check Agreement" whereby the
parties agreed that Harris/Ancel would issue a joint check payable to
Cearfoss and Star. The letter directed Star to provide invoices for
work and materials on or about the 25th of each month. The invoices
were to be provided concurrently by Star to both Harris/Ancel and
Cearfoss.
On August 29, 1994, Cearfoss submitted an Application and Certif-
icate for Payment. Harris/Ancel returned the Application unpaid to
Cearfoss stating that Cearfoss' Application was submitted too late to
receive payment, and additionally, Cearfoss had failed to provide
"any back-up for the monies invoiced." On September 23, 1994, Cear-
foss resubmitted its Application and Certificate for Payment in the
amount of $422,244.00. On October 14, 1994, Harris/Ancel informed
Cearfoss that it would not pay the invoice and listed the following
reasons: (1) Cearfoss had failed to provide a certified payroll of its
workers; (2) Cearfoss had failed to provide a certificate of insurance
as required by Article 363 of the subcontract; (3) the exterior wall pan-
els had not been installed; (4) Cearfoss' refusal to clean oil spills cre-
ated by it; (5) Harris/Ancel's purchase of materials and provision of
"front monies" to enable the project to proceed; (6) the presence of
deteriorated materials; (7) Cearfoss' failure to provide additional
manpower on site; and (8) Cearfoss' failure to provide an on-site
superintendent. As a result in its October 17, 1994, requisition to
National Park Service (the Owner), Harris/Ancel did not include any
sums for the account of Cearfoss. On October 19, 1994, Harris/Ancel
acknowledged receipt of Cearfoss' certified payroll report, but its
position on payment to Cearfoss remained unchanged.
On October 20, 1994, Cearfoss advised Harris/Ancel that unless
Cearfoss received payment of the $422,244.00 immediately, Cearfoss
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3 Article 36 provides:
This subcontract must be executed by the Subcontractor and
returned to the Contractor within fifteen (15) days of its receipt
by the Subcontractor. Until the subcontract is executed and
returned to the Contractor, along with any required bonds and
Certificates of Insurance, the Contractor has a right to withhold
any payment due the Subcontractor.
4
would cease all work on the Project effective the next day.4 By letter,
dated October 21, 1994, Harris/Ancel took strong exception to Cear-
foss' threat to cease work on the Project, and advised Cearfoss that
any such stoppage would be considered a breach of the contract, and
Harris/Ancel would proceed to terminate the subcontract for default.
True to its word, on October 21, 1994, Cearfoss ceased work on the
Project.
Thereafter, on October 27, 1994, in accordance with Article 135 of
the subcontract, Harris/Ancel advised Cearfoss that its subcontract
would be terminated for default after the close of business on Novem-
ber 1, 1994. Cearfoss did not return to the Project to cure its alleged
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4 Cearfoss also reported that PCC, its subcontractor, refused to deliver
any more materials or to provide any further work.
5 Article 13 provides:
The following events determined by the good faith judgment of
the Contractor shall be deemed a breach of this Agreement by
the Subcontractor: failure to expeditiously prosecute and com-
plete the whole or any part of the work in accordance with the
current Schedule of Progress and/or directions from the Contrac-
tor; failure to pay for labor and material, payroll taxes, contribu-
tions or insurance premiums; interference with the performance
of work by others for any reason; ... or any other material failure
to fulfill obligations of this Subcontract or of the Prime Contract
concerning the Subcontractor's work or responsibilities. If the
Subcontractor breaches the Subcontract, the Contractor may ter-
minate Subcontractor's right to proceed upon three (3) days writ-
ten notice. *** Subcontractor and its surety shall continue to be
liable for all costs to complete and any damages and expenses
including reasonable counsel fees, liquidated damages assessed
by Owner and other liabilities which may result from the default
and breach without waiver of any rights or remedies available to
the Contractor, including the right to setoff and collection of any
funds which may be due Subcontractor under other subcontracts
with Contractor. If the Contractor wrongfully exercises its
default option under this Article, the Subcontractor's remedy
shall be solely and exclusively under Article 28, Termination for
Convenience.
5
default. Accordingly, on November 2, 1994, Harris/Ancel terminated
Cearfoss' subcontract for default.6
On January 25, 1995, PCC filed a claim against Harvey Harris
Contractors, Inc.; James W. Ancel, Inc. and Hartford Accident and
Indemnity Company in the United States District Court for the East-
ern District of Virginia, pursuant to the Miller Act, 41 U.S.C. § 270a
and 270b, et seq. Subsequently, Harris/Ancel filed a counterclaim
against PCC and PCC filed a third-party complaint against Cearfoss.
On April 14, 1995, Cearfoss filed a crossclaim against Harris/Ancel.
On May 8, 1995, Harris/Ancel answered the crossclaim and filed a
counter crossclaim against Cearfoss. Also on May 8, 1995, the district
court entered an order (1) dismissing with prejudice PCC's action
against Harris/Ancel, (2) dismissing with prejudice Harris/Ancel's
counterclaim against PCC, and (3) dismissing with prejudice PCC's
action against Cearfoss. The result of these procedural mechanisms
was that only Harris/Ancel's counterclaim against Cearfoss and Cear-
foss's crossclaim against Harris/Ancel remained. Therefore, the dis-
trict court treated Cearfoss as the plaintiff and Harris/Ancel as the
defendant.
On September 19, 1995, in a ruling from the bench, the district
court found that Cearfoss breached its subcontract and was not enti-
tled to any damages. After reviewing Harris/Ancel's claim for dam-
ages, the district court awarded Harris/Ancel damages in the amount
of $31,702.37. On September 29, 1995, Cearfoss filed a Motion for
Amendment of Findings and Judgment. On November 29, 1995, the
district court denied the motion. The district court ordered Cearfoss
to pay Harris/Ancel's attorneys' fees in the amount of $22,802.22. On
December 29, 1995, Cearfoss lodged its appeal with this court.
II.
DISCUSSION
Essentially, the instant dispute arises from Article 5 of the subcon-
tract. Harris/Ancel claims that it was entitled to withhold payment to
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6 Subsequent to Cearfoss' contract termination, Harris/Ancel paid in
full each and every subcontractor of Cearfoss.
6
Cearfoss because Cearfoss did not comply with the terms of the sub-
contract. Specifically, Harris/Ancel contends that Cearfoss failed to
submit the proper documentation to support its request for payment.
In contrast, Cearfoss argues that the condition precedent to progress
payments to Cearfoss was extinguished by virtue of Harris/Ancel's
failure to request payment for Cearfoss' services from the National
Park Service.
We review the district court's findings of fact for clear error and
its legal conclusions, de novo. See Sara Lee Corp. v. Kayser-Roth
Corp., 81 F.3d 455 (4th Cir. 1996).7
A.
The district court found that Harris/Ancel was excused from apply-
ing to the National Park Service for payment for Cearfoss' services
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7 Harris/Ancel also challenges the court's jurisdiction over this appeal.
Harris/Ancel previously filed a motion to dismiss the appeal on the
grounds that Cearfoss' Notice of Appeal stated that it appealed from the
district court's order denying its Motion for Amendment of Findings and
Judgment, which is not a "final decision" subject to appeal. A panel of
this court denied the motion.
While it is true that the Notice of Appeal does state as Harris/Ancel
has indicated, it is quite obvious that Cearfoss' counsel made a mistake.
More importantly, Harris/Ancel has not demonstrated that it is in any
way prejudiced by Cearfoss' counsel's inadvertence. In fact, in its reply
to Cearfoss' opposition to its Motion to Dismiss, the only prejudice iden-
tified by Harris/Ancel was its assertion that it would suffer prejudice by
being required to brief a case for which the court did not have jurisdic-
tion. In fact, the court does have jurisdiction, so Harris/Ancel's prejudice
disappears.
Finally, Rule 3(C) of the Appellate Procedure is laced with language
suggesting flexibility. See also Gadson v. Chater, 60 F.3d 821 (4th Cir.
1995) (Table) ("Technical precision is not required in a notice of appeal
provided the filing functions to notify the court and the opposing party
of an intent to appeal a judgment."). Harris/Ancel would be hard pressed
to argue that Cearfoss' Notice of Appeal did not adequately convey
Cearfoss' intent to appeal the judgment entered by the district court on
September 19, 1995.
7
because "given the nature of a Miller Act case, that is where the con-
tractor is dealing with the Federal Government, it's well within a con-
tractor's right and, in fact, obligation to ensure that improperly or
inadequately documented bills are not being submitted to the Federal
Government." While the district court found that certificates of insur-
ance were required by the subcontract, and that Cearfoss had not sub-
mitted the required certificates, the district court stated that "the far
more telling one in my mind is the failure to provide invoices. I find
that the simple itemization of labor and materials supplied by the
plaintiff was not sufficient, and itemization is not an invoice." There-
fore, the district court concluded that Cearfoss breached the subcon-
tract by not providing Harris/Ancel with invoices to support its
payment for services rendered and materials used.
As for the Cearfoss' walking off the job, the district court also con-
cluded the Cearfoss breached the subcontract by ceasing work on the
Project. The district court noted that under the plain language of Arti-
cle 5, a subcontractor is required diligently to proceed with work on
the Project, even if a pay dispute exists between the subcontractor and
the contractor. Cearfoss did not do so, and hence, breached the sub-
contract. With respect to that breach, the district court found that
Harris/Ancel acted appropriately in terminating the subcontract. Thus,
the district court found that due to its breach, Cearfoss was not enti-
tled to any damages.
Cearfoss attacks the district court's reasoning on a number of
grounds. First, Cearfoss claims that the documentation submitted by
it to Harris/Ancel was sufficient to qualify as"proof of payment" as
required by the subcontract. Second, Cearfoss maintains that the Joint
Check Agreement modified Article 5 of the subcontract. As a result
of this modification, Cearfoss contends, Harris/Ancel assumed
responsibility for payment to Star, and thus, Cearfoss could not pro-
vide proof of its payment to Star. Third, assuming the documentation
was insufficient, Cearfoss maintains that Harris/Ancel did not timely
notify Cearfoss that its documentation was defective.
B.
The controversy stems over invoices. Cearfoss claims it complied
with Article 5, while Harris/Ancel maintains the Cearfoss did not. No
8
doubt exists that Cearfoss did not submit invoices from Star with its
requests for payment. Cearfoss did, however, submit an itemization
of its labor and materials with its request. The district court, as
recounted above, found that the itemization submitted by Cearfoss
was inadequate under the terms of Article 5. This finding cannot be
said to be clearly erroneous.
A review of Cearfoss' Applications for Payments demonstrates that
those requests do not contain any level of specificity, but rather
recount general sums in categories. While after submission of its first
Application, and Harris/Ancel's rejection of that Application for fail-
ure to provide invoices, Cearfoss submitted another Application
which included work done per building, the Application still did not
include any breakdown of hours, time involved, materials used, or
other such customary items.
In fact, in its September 15, 1994, letter to Cearfoss, Harris/Ancel
stated that the Application was being rejected because back-up docu-
mentation for monies invoiced was not provided. Examples of the
required specificity, Harris/Ancel noted were "cost per building, labor
and material for structural steel, wall panels, roof panels, etc." Cear-
foss' Application did not include such a breakdown. Thus, the district
court's finding the Cearfoss' request for payment did not include the
proper "proof of payment" documentation is not clearly erroneous.8
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8 Cearfoss also makes another related argument. Cearfoss argues that
even if its Applications suffered from the lack of back-up documentation,
Harris/Ancel was required to submit Cearfoss' application for payment
to the National Park Service, and was not excused from doing so. Cear-
foss' argument is based on the prevention doctrine, which provides that
"one who unjustly prevents the performance or the happening of a condi-
tion of his own promissory duty thereby eliminates it as such a condi-
tion." Thus, Cearfoss argues that since Harris/Ancel failed to submit
Cearfoss' Application for payment, Cearfoss was excused from comply-
ing with the invoice requirement. As the district court found Harris/
Ancel is entitled as the Contractor to exercise its discretion in determin-
ing whether a payment application is properly submitted. Moreover,
Harris/Ancel presented testimony at trial that the government would not
accept Cearfoss' Application without the accompanying back-up
invoices. Thus, the district court's finding that Harris/Ancel was excused
9
C.
Alternatively, Cearfoss argues that it was not required to submit
invoices for materials from Star because the Joint Check Agreement
modified Article 5.9 Cearfoss claims that the Joint Check Agreement
required Star to submit invoices directly to Harris/Ancel, and then
Harris/Ancel would cut a joint check to both Cearfoss and Star.
Hence, Cearfoss argues that it was relieved of its obligation to submit
material invoices because the Joint Check Agreement mandated Star
to deal directly with Harris/Ancel. Cearfoss contends that "[i]n light
of the Joint Check Agreement it was impossible for Cearfoss to pro-
vide proof of payment for Star, since [Harris/Ancel], not Cearfoss,
would be paying for materials by issuing a joint check to Star and
Cearfoss." Appellant's Brief, at 15.
First, the Joint Check Agreement makes no mention of modifying
Article 5 of the subcontract. Second, the Joint Check Agreement
explicitly requires Star to submit invoices to both Harris/Ancel and
Cearfoss. Thus, Cearfoss' argument that it could not provide invoices
to Harris/Ancel is contradicted by the very language of the Joint
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from submitting Cearfoss' incomplete application for payment is not
clearly erroneous.
As an aside, Cearfoss' argument suffers from another flaw in that
before Harris/Ancel is required to apply for payment from the National
Park Service, Cearfoss must submit the invoices, thus Cearfoss' submis-
sion of the invoices is a condition precedent to Harris/Ancel's submis-
sion for payment.
Finally, as for Cearfoss' argument that Harris/Ancel did not provide
them with timely notice of the deficiencies with its invoices, that argu-
ment too must fail. The record bears out through testimony at trial, and
the written correspondence, that Harris/Ancel timely notified Cearfoss of
the problems with its invoices. Indeed on direct examination, David
Cearfoss stated that he told his brother, Gary, to make sure all the proper
paper-work was submitted to Harris/Ancel, after David Cearfoss' con-
versation with Harris/Ancel.
9 Cearfoss has correctly noted that the district court did not address this
issue.
10
Check Agreement upon which it seeks to rely.10 Third, Cearfoss
included within its application for payment, work performed and
materials supplied by Star. While Harris/Ancel ultimately would pay
Star by way of a joint check issued to Cearfoss and Star, Harris/Ancel
would still be required to have invoices of Star's work to submit with
Harris/Ancel's requisition to the National Park Service. As Cearfoss
never submitted those invoices, its application was incomplete, and
Harris/Ancel had no duty to request payment for Cearfoss' services.11
D.
Finally, Cearfoss claims that it walked off the job because it was
not being paid. Even assuming the validity of Cearfoss' dispute with
Harris/Ancel, which is not valid as a result of Cearfoss' failure to pro-
vide invoices, the subcontract plainly and unequivocally provides that
even in the event of a pay dispute, the subcontractor shall "diligently
proceed with the work required." As the district court correctly found,
Cearfoss' walking off the job before completion of the Project
breached the subcontract.12 As such, Cearfoss was not entitled to any
damages.13
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10 During the trial, Star's invoices were produced. Harris/Ancel claims
that an examination of those invoices reveals that Cearfoss was engaged
in overbilling. Of course, Cearfoss denies that it engaged in any overbil-
ling practices. The district court did not address this issue as its resolu-
tion was not required, and neither do we.
11 Cearfoss notes in its reply that Harris/Ancel never asked for the Star
invoices when it returned Cearfoss' Application for Payment. A review
of the letters sent by Harris/Ancel does in fact support Cearfoss' position.
Harris/Ancel never specifically requested the invoices from Star as part
of the necessary documentation needed to complete Cearfoss' Applica-
tion. Despite Harris/Ancel's failure specifically to request the Star
invoices, Cearfoss still cannot prevail, as the district court's finding that
Cearfoss' invoices, apart from the lack of the Star invoices, were insuffi-
cient is not clearly erroneous.
12 The district court's finding that Harris/Ancel properly exercised its
option under the contract to terminate Cearfoss' subcontract is also not
clearly erroneous. Harris/Ancel properly provided Cearfoss with an
opportunity to cure its default and provided Cearfoss with three business
days as required under the contract.
13 Harris/Ancel also spends the last portion of its brief arguing that
Cearfoss is not entitled to damages consisting of lost anticipated profits.
The district court also did not address this point, and we need not either.
As Cearfoss breached the subcontract by walking off the job, Cearfoss
is not entitled to damages.
11
III.
CONCLUSION
In sum, the district court's finding that Cearfoss breached the sub-
contract by failing to provide invoices with its requests for payment
is not clearly erroneous. Accordingly, the district court is
AFFIRMED.
12