Full opinion text
HUNTER, District Judge. PREFACE Plaintiff in each case is a subcontractor who had entered into a written contract with Williams & Dunlap Construction Company, Inc., to perform portions of the work incident to the construction of the England Air Force Base Housing Project located at Alexandria, Louisiana. Defendants in each case are: (1) Williams & Dunlap Construction Company, Inc., a corporation duly and legally organized and existing under and by virtue of the laws of the State of Texas; (2) Williams & Dunlap, a partnership, a legal entity formed, created, established, and existing under the laws of the State of Louisiana, which is a partnership composed of H. E. Williams, Jr., a citizen of the state of Texas, and B. F. Dunlap, a citizen of the State of Texas; (3) St. Paul Fire and Marine Insurance Company, a corporation organized and existing under and by virtue of the laws of the State of Minnesota and qualified to do business in the State of Louisiana. For the purposes of these suits defendants do not urge any technical distinction between the corporation and the partnership of Williams & Dunlap, and by the consent of all, the corporation, the partnership and the individuals as members thereof are considered one and the same. St. Paul is the surety on Williams & Dunlap’s bond given under the Capehart Act (42 U.S.C.A. § 1594) to secure payments for all labor and material furnished in the construction of the project. The bond is in the amount of $4,774,200. At the time of trial there was some disagreement and uncertainty in the few federal cases on the subject as to whether the payment bond, approved as required by the Capehart Act, comes within the Miller Act, 40 U.S.C.A. § 270a et seq., where as here the United States is not named the sole obligee. We held, in Autrey & Goad v. Williams & Dunlap, D.C., 185 F.Supp. 802, that the Miller and Capehart Acts are in pari materia and that the intent of Congress was to require but one such bond for military personnel housing projects, subject to the approval of that bond by the Secretary of Defense or his designee. Subsequently, the Fifth Circuit, in Lasley et al v. United States for Use of Westerman, 285 F.2d 98, agreed that an action by a subcontractor against the prime contractor on a Capehart bond was subject to the provisions of the Miller Act. We find that the district courts of the United States have original jurisdiction of suits brought by a subcontractor against a prime contractor and his surety for labor done and materials furnished on a Capehart government contract without the necessity for diversity of citizenship. Jurisdiction also exists under the provisions of 28 U.S.C.A. § 1352. The cases were tried to the court and consumed thirty actual trial days. The transcript consists of 4,782 pages. The record contains thousands of exhibits. We will not attempt a consolidated statement of the cases inasmuch as each case differs from the other factually. The parties in general do not contest the legal principles advanced by each other. Instead, each insists that the legal principles advanced by the other are completely without application under the existing facts. We have never encountered a case where factual disagreement is so complete. Exhaustive briefs have been filed. Each accuses the other of arguing factual conclusions for which there is no support in the record. Illustrative is this quote from the opening paragraph of plaintiffs’ reply brief: “In reading the brief filed by the defendants, plaintiffs are certain that the court was impressed with its utter disregard of the record of evidence in this case. The court will note the spurious arguments, virgin testimony, and unfounded statements having no support in the record.” “The Court will also recognize the difficulty in answering a brief prepared with no regard for the record * * Counsel for defendants, in their strong advocacy, make these typical observations : “Arguments and claims made by plaintiffs in their briefs can easily be demonstrated to be inaccurate and in most instances at variance with the credible testimony of witnesses * * “Plaintiffs in brief say that Au-trey testified * * *. Plaintiffs fail to state that where this alleged testimony appears. This is not what Autrey testified to.” “Plaintiffs state that it is undisputed in the record that they had been paid a total of $264,792 for both extras and contract. This is not true.” “Plaintiffs state the record is full of testimony of defendants that most of this completion cost was brought about by arbitrary and unreasonable requirements of the government. Plaintiffs cite pages 3333 and 3346-3455. First, the testimony cited on page 3333 is not on this subject at all.” ' “Plaintiff resorts to an inaccurate statement as to what is shown in the record; that is, that Mr. Goad put the tile work in the Fleur de Lis Motel, in Mr. Downs’ house, and Webb Air Force Base for Henry E. Williams and B. P. Dunlap. Plaintiffs again conveniently fail to cite where such alleged facts appear in the record.” “Plaintiff states that the draw for January 14, 1958 shows carpentry complete except for $8,000 and that it is approved by Captain Peterson. This is not true.” “We do make this observation as to plaintiff's brief: through the entire discussion of the alleged failure to prepare the site, not one single reference to any testimony or evidence is given; it consists only of conclusions as to what is supposed to be in the record.” It is apparent that the six or seven lawyers who have lived with this case cannot even agree as to what the record and documents say. The task this case presents to the Court and counsel is appreciated. Before taking up the cases individually we will relate pertinent provisions of the prime contract and the subcontracts. HOUSING CONTRACT The prime contract is found in the record as Exhibit P-1 and Exhibit D-l.l. It contemplates the construction of 202 buildings, 303 building units, at England Air Force Base, Alexandria, Louisiana. The project is identified as FHA Project No. 059-81002 Air 1. As a prerequisite to the award of the contract, Williams & Dunlap formed a partnership and caused to be organized a corporation (England Air Force Base Housing, Inc.). Williams & Dunlap secured a mortgage loan agreement between England Air Force Base Housing, Inc. and the First National Bank of Dallas, Texas under which the construction of the project was to be financed. The contract is between the United States, represented by the “Contracting Officer”, Williams & Dunlap, and England Air Force Base Housing, Inc. Williams & Dunlap is referred to in the housing contract as “eligible builder.” England Air Force Base Housing, Inc., is referred to as “mortgagor builder” and “owner.” The government is referred to as “Department.” The First National Bank is referred to as “mortgagee builder.” The contract includes many provisions and we relate here to only a few which the parties deem of particular' import. Article 11(3) provides that the. units will be constructed to the satisfaction of the owner and the contracting officer. Article III (4) provides that the owner shall pay to the eligible builder for performance under the contract the total of $4,774,200. Article IV deals with advances of money under the contract and provides that the eligible builder should submit applications for payment on FHA Form 2448 on or before the first day of each month to be processed by the mortgagor builder (owner) to mortgagee (First National Bank) subject to approval of the contracting officer. Article V provides that the eligible builder finance the construction under its building and loan agreement with the First National Bank of Dallas. Article XXI provides that the eligible builder (Williams & Dunlap) pay all expenses, all obligations and guarantee the discharge of all the duties of the mortgagor builder (England Air Force Base Housing, Inc.). Article XIV provides for the submission of progress draws upon the approval of the contracting officer. These draws, as a practical matter, had to go the following route: First, to the contracting officer; then to the architect-engineer; then back to the contracting officer; then to the First National Bank in Dallas; then to the Federal Housing Commissioner in Shreveport, and then by him back to the bank. Then, and only then, did Williams & Dunlap get its money. SUBCONTRACT After the execution of the housing contract, Williams & Dunlap entered into various subcontracts for the performance of the work it was obligated to do. Among these subcontracts are the seven subcontracts involved in this litigation. These subcontracts were all prepared by Williams & Dunlap, and were mimeographed copies of standard subcontracts used by Williams & Dunlap in subbing out the work. Except for the description of the work to be performed by the individual subcontractors, the subcontracts are identical. All provide for payments in monthly installments based on schedules agreed upon between Williams & Dunlap and the subcontractor. Article I of each contract provides that in case of any conflict between the provisions of the subcontract and the provisions of the housing contract, the provisions of the subcontract will control. Article II reads as follows: “It is intended that this contract cover all phases of the work as referred to in the plans and specifications ; however, if any work has not been covered by the plans and specifications or this contract that relate directly or indirectly to this phase of the work, it shall be the responsibility of this Contractor to carry out any and all labor and material to conclude every phase of this hereinabove referred to work. There shall be no extras in any form presented to Williams and Dunlap Construction Company, Inc. Contractor shall be governed by the instructions of the Architect, the Engineer, the Contracting Officer and the U. S. Air Force to the same extent insofar as the same relates to work covered hereby as Williams and Dunlap Construction Company, Inc. is governed and the Contractor is obligated to follow such instructions and shall do so without delay. Any disputes between Contractors shall be arbitrated between Contractors involved and Williams and Dunlap Construction Company, Inc. and any decision reached by Williams and Dunlap Construction Company, Inc. shall be final.” Article VI reads: “The Contractor shall be bound, to Williams and Dunlap Construction Company, Inc. for all the terms and provisions of the housing contract and of the general and special conditions of the specifications in the same manner that Williams and Dunlap Construction Company, Inc. is bound to the Owner, with like force and effect and in all respects as if the same were set out in full herein and attached hereto. (Italics ours.) “If the Contractor varies without written authority from the plans and specifications, drawings and detail, Williams and Dunlap Construction Company, Inc. shall have the right and power at all times to order the work objected to removed or replaced, or to receive from the Contractor in payment, a sum of money equivalent to the difference in value of the work performed and that required by the plans and specifications, drawings and details, it being at the option of Williams and Dunlap Construction Company, Inc. to take either course.” Article VII reads: “The Contractor shall effectually secure and protect its work and shall bear and be liable for all loss or damage of any kind which may happen to the work or any materials to be incorporated therein at any time prior to the final completion and acceptance thereof. “Williams and Dunlap Construction Company, Inc., shall not be responsible for any damage done to the work or property of the Contractor, unless such damage shall be caused by the direct negligence of Williams and Dunlap Construction Company, Inc.” Article VIII reads: “The Contractor shall, at its own cost, amend and make good any defects in its work, which may appear within twelve months after the completion of its contract. Should the Contractor refuse or neglect to amend aud make good such defects within a reasonable time after receiving notice to do so, then Williams and Dunlap Construction Company, Inc. shall have the right and power to make good such defective work at the expense of the Contractor.” (Italics ours.) Article XI reads: “The progress and completion of the work, including all changes which may be made in accordance with the above provisions, shall be conducted with all possible dispatch. The Contractor waives the requirement of a written notice and agrees to note the progress of this work, so that it shall know when it is possible to begin the installation of its work and shall have all of its materials to be incorporated, designed, purchased, manufactured, assembled and ready for installation whenever the condition of the building shall permit of such installation. “The Contractor shall, when requested so to do, furnish proof satisfactory to Williams and Dunlap Construction Company, Inc. that all preliminary arrangements of the Contractor have been made or entered into to enable the Contractor to promptly begin the work contracted for herein. “It is understood that it is not incumbent upon the Williams and Dunlap Construction Company, Inc. to notify the Contractor when to begin, when to cease, or when to resume work, and all materials and all labor shall be furnished at such time as shall be for the best interest of all contractors concerned to the end that the combined work of all may properly and fully complete on contract time, time being the essence of this contract.” Article XII reads in pertinent part as follows: “ * * * 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 tipon acceptance of the work of Willicums and Dunlap Construction Company, Inc. by the Owner * * (Italics ours.) Article XIII reads: “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 cmd Dunlap Construction Company, Inc. shall be due on or about the fifteenth of each month. (Italics ours.) Article XIV reads: “Before making the above payments, Williams and Dunlap Construction ■Company, Inc. reserves to themselves the right to demand and receive duly receipted bills for all materials and labor in any way entering into this work, and written releases from all parties having claims against the work.” Article XV reads: “If at any time there shall be evidence of any lien or claim for which, it is established, Williams and Dunlap Construction Company, Inc. or ■Owner, or property of the Owner or the improvements, might become liable and whieh is chargeable to the ■Contractor, Williams and Dunlap •Construction Company, Inc. shall have the right to retain out of any payment then due, or thereafter to become due, an amount sufficient to completely indemnify both or either of them against any claims or liens.” Article XVII reads: “No partial payment made for work under this contract shall be conclusive evidence of the performance, either wholly or in part, of this contract, and the final payment shall not be construed to mean an acceptance of defective work or improper materials.” Article XXIII reads: “In the event, during the progress of this contract, any strike or boycott or other interference or stoppage of work occurs on the project which is attributable to Contractor, or his employment practices or his relationship with his employees, or to the fact that such employees do or do not belong to a labor union, or to the fact that Contractor is not following any rules or regulations relating to labor, then and upon such occurrence which by reason of such a cause attributable to Contractor, Williams and Dunlap Construction Company, Inc. shall upon giving 48 hours notice have the option and privilege to remove such cause and correct such situation and if required, to remove Contractor from the Project and to complete such work on the basis of current market prices as to labor, materials, and equipment, charging such completion costs against the Contract, and hold Contractor and the surety liable for any loss incurred in such connection.” (Italics ours.) Article XXIV reads: “Should the Contractor at any time refuse or neglect to supply a sufficiency of properly skilled workmen or material of proper quality, or fail in any respect to prosecute the work with promptness and diligence, or fail in the performance of the agreements herein contained, the Williams cmd Dunlap Construction Company shall be at liberty, after 48 hours written notice to the Contractor, to provide any such labor or materials and to deduct the cost thereof from any money then due, or thereafter to become due to the Contractor under this contract. This also gives Williams and Dunlap Construction Company, Inc. the use and possession of all materials, tools and appliances thereon, in the finishing out of the work to be done by the Contractor. Further, if the Contractor’s foreman or employees shall refuse or neglect to comply with the requirements of the contract, or if they shall be riotous, disrespectful, intemperate, disorderly or otherwise objectionable to Williams and Dunlap Construction Company, Inc. he shall forthwith be discharged by the Contractor and shall not be again employed on any portion of the work. The Contractor shall be liable for any and all employees employed by him.” (Italics ours.) It is appropriate in this preface to note some of the legal principles which should guide the Court and also to make findings of fact that are applicable to all cases. All agree: (1) that the rights and liabilities of the parties under the contracts as to all issues not involving the interpretation or coverage of the Miller Act itself are governed by the law of the State of Louisiana; (2) that the subcontractors had the obligation to complete the work called for in their respective subcontracts in accordance with the plans and specifications and in good and workmanlike manner; (3) that the prime contractor had the duty to prepare the site to receive the work of the subcontractor; to properly coordinate the work of the various subcontractors; to provide competent and adequate supervision of the overall project; to furnish materials necessary in sufficient quantities and to schedule deliveries so as to enable the subs to proceed with their work in an orderly manner. There is disagreement as to the meaning of Article XIII of the subcontract concerning progress payments: “ARTICLE XIII. 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.” Defendants’ position is that progress payments were due the subs only when the various trade payment units were performed in a good and workmanlike manner, such as would reasonably be approved, and accepted by the government inspectors and when the actual draws were approved by the Air Force and F.H.A. Plaintiffs’ position is that they were to-file their schedule of completed work with Williams and Dunlap before the last day of each month and that unless Williams- and Dunlap made objections prior thereto-the payments should be forthcoming on or about the 15th day of each month. We are in accord with neither. The provision means precisely what it says: “ * * * 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 day of each month.” Our construction is 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. Plaintiffs’ charge that Williams and Dunlap breached the various subcontracts and damaged them by: (a) Failing to prepare the site to receive the sub’s work. (b) Failing to coordinate the work of the various subs. (c) Failing to provide competent and adequate supervision of the overall project. (d) Failing to furnish materials in sufficient quantities and at appropriate times. The evidence on this phase of these cases is bitterly disputed and cannot be reconciled. There was mud, inconvenience, bickering — but the record is such that I have no way of telling with any degree of reliability how much, if any, actual damage was sustained as a i'esult. No serious protest (except by Jinks) was made at the time of these alleged incidents of breach. All parties rocked along until the government inspectors began to tighten up on approval requirements. Then the cash ceased to flow and pandemonium now reigned. In each case except Jinks (Civil Action No. 7627) we find as a fact that the plaintiffs have not proven the fact that Williams and Dunlap breached the contracts in particulars (a), (b), (c) and (d) aforesaid. ATTORNEYS’ FEES The recovery of interest, costs and attorneys’ fees is governed by the law of Louisiana (Illinois Surety Co. v. John Davis Co., 244 U.S. 376, 37 S.Ct. 614, 61 L.Ed. 1206; Caldwell Foundry & Machine Company, Inc., etc. v. Texas Const. Company, 5 Cir., 237 F.2d 705. Two Louisiana statutes are to be considered. The first is LSA-R.S. 9:3902, which reads: “If the surety on a bond fails to pay his obligation and it becomes necessary for the creditor to sue thereon, the latter shall be entitled to ten per cent attorney’s fees on the amount recovered, provided he has employed an attorney for the purpose, has made written amicable demand on the principal and surety and thirty days have elapsed from their receipt thereof without payment being made, and the full amount claimed in the demand is recovered.” This statute is not controlling because we 'have not allowed any plaintiff “the full .amount claimed in the demand * * * ”. (Kozlowski v. Fowler, La.App., 71 So.2d 246). The second is LSA-R.S. 22:658: “All insurers issuing any type of contract other than those specified in R.S. 22:656 and 22:657 shall pay the amount of any claim due any injured including any employee under •Chapter 10 of Title 23 of the Revised Statutes of 1950 within sixty days .after receipt of satisfactory proofs • of loss from the insured, employee or .any party in interest. Failure to •make such payment within sixty days .after receipt of such proofs and demand therefor, when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of 12% damages on the total amount of the loss, payable to the insured, or to any of said employees, together with all reasonable attorney’s fees for the prosecution and collection of such loss, or in the event a partial payment or tender has been made, 12% of the difference between the amount paid or tendered and the amount found to be due and all reasonable attorney’s fees for the prosecution and collection of such amount. Provided, that all losses on policies covering automobiles, trucks, motor propelled vehicles and other property against fire and theft, the amount of the penalty in each of the above cases shall be 25% and all reasonable attorney’s fees.” This is applicable only when failure to pay is found to be arbitrary, capricious, or without probable cause. We find that except in United Installation, Civil Action No. 7542, the failure to pay was not capricious, was not arbitrary and was not without probable cause. We proceed to the individual cases. CIVIL ACTION NO. 7228 R. L. AUTREY AND A. L. GOAD, INDIVIDUALLY AND d/b/a AUTREY AND GOAD CONSTRUCTION COMPANY V. WILLIAMS & DUNLAP, A PARTNERSHIP, ET Al. Autrey and Goad were the carpentry subcontractors. There was no other carpentry contract at any time. The subject contract appears in the record as Exhibit P-2 and Exhibit D-2.4. Under the terms and conditions of the Autrey and Goad subcontract, Williams and Dunlap agreed to pay to Autrey and Goad the total sum of $398,440.50. Attached to and made a part of the contract was a breakdown schedule for payments. This trade payment breakdown broke the carpentry phase of the work into items, and it was agreed that Autrey and Goad would be paid specified amounts as set out in the contract .for each item of completion. This progress draw schedule was simply a devise to permit the subcontractors to draw against the completion of the entire contract, and if the work included in progress payments was subsequently found deficient, the contractor was not foreclosed from requiring correction simply because this work had been listed in the progress payments. This is spelled out in Article XVII of the subcontract which is quoted in the preface hereto. Later, certain extras were authorized in the amount of $5,565.50 so that the total amounted to $404,006. Autrey and Goad came to Alexandria, Louisiana on or about the 14th day of April, 1957 for the purpose of commencing the performance of the work. They continued to work in the performance of their contract until December 20, 1957 (D-71.39). On that date they reduced their work force to five (5) men and demanded payment of allegedly past due draws. On December 30th Williams and Dunlap invoked Article XXIV of the subcontract alleging that the job was not being properly manned (D-71.24). The position of Autrey and Goad is that they were “run off the job.” Autrey and Goad say that Williams and Dunlap breached its contract by: (a) Failing to prepare a site to receive the work of the subcontractor. (b) Failing to furnish coordination of the project to facilitate the work of the subcontractor. (e) Failing to supervise the work to facilitate the orderly procedure and progress of the job. But they concede that regardless of this, they continued performance until the contract was wrongfully terminated. Considering the whole record, we reiterate that plaintiff has not proven that Williams and Dunlap breached its contract in any of these particulars. What about progress payments? Defendant’s position is that progress payments were due the subcontractors only when the various trade payment units were performed in a good and workmanlike manner such as would be reasonably approved and accepted by the government inspectors, and further, that the draws were not actually due until the work was approved for payment by the Air Force and the FHA. Plaintiff, on the other hand, insists that it is entitled to have the contractor make these payments in strict compliance with their interpretation of Article XIII of the subcontract, which is to the effect that Autrey and Goad would file its schedule of completed work with Williams and Dunlap before the last day of each month, and that payment on such schedule, provided no errors are pointed out by Williams and Dunlap, should be due on the 15th of each month. We disagree with both parties and reiterate what we said. in the preface, speaking of Article XIII: The provision means precisely what it says: “payment on such schedule provided, same shall be found to be correct by Williams and Dunlap shall be due on or about the fifteenth day of each month.” Silence on the part of Williams and Dunlap is not to be interpreted as a finding of correctness. Affirmative approval was required. Now, let us examine the record. The first draw was submitted on May 31, 1957; it was found to be correct and was paid on June 13, 1957. The second draw was submitted on June 29th, found to be correct, and paid on July 18th. The third draw was submitted on July 31st, found to be correct, and paid on August, 13th. At this stage of construction, the work was proceeding well and everybody seemed happy. No one at this stage of the game was complaining too much about, the mud, lack of materials, deficiencies, inconveniences, etc. The real trouble was to come. The fourth draw was submitted on August 31st. It was approved by Williams and Dunlap and was not paid until September 25th. This delay was necessary to permit Autrey and Goad to secure a release from its bonding company on an assignment that it had made to the Guaranty Bank of Alexandria. Autrey and Goad’s fifth draw, submitted September 30th, was found correct by Williams and Dunlap, but was not approved by the FHA in Shreveport until October 22nd, and payment was not made until October 25th. There had been some delay in making these last two payments, 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. The position of the Air Force was set forth in Captain Peterson’s letter of September 24, 1957 (D-7.-20). This letter is important to show really what happened here. It reads: “24 September 1957” ■“Williams & Dunlap England AFB Housing, Inc. England Air Force Base, La.” ■“Dear Mr. Williams: “Your attention is invited to the provisions of Clause 6 to the General Provisions of the Housing Contract which outlined specifically that defective materials and workmanship must be corrected without delay. “I am aware that you have been notified ■on numerous occasions that faulty workmanship and materials have been allowed to remain uncorrected even after repeated notification by the architect engineer inspectors of this fact. I have instructed the chief inspector to require that all workmanship and material comply with all provisions of the drawings and specifications. The air force will insist that all workmanship be satisfactorily corrected and all rejected materials shall be satisfactorily replaced with proper material well in advance of our proposed acceptance inspection. “Request you give this matter your personal attention inasmuch as work on certain units has progressed to the final stages of construction and should soon be ready for final acceptance by the Air Force. The Air Force will not accept any material, installation, and workmanship which is not satisfactory to the architect inspector and in compliance with the housing plans and specifications. In general the workmanship of all mechanics working on the project could be improved upon with particular emphasis on wallboard installation, interior trim, and kitchen cabinet installation.” “Yours truly, s/ Max D. Peterson Max D. Peterson Captain, USAF Procurement Officer.” Again, on October 14, 1957, Captain Peterson wrote Williams and Dunlap, emphasizing again what was said in the letter of September 24th: “14 October 1957 “Williams & Dunlap England AFB Housing, Inc., England Air Force Base, La.” “Dear Mr. Williams:” “A legal interpretation of Clause 6 “Inspection” and Article IV “Payments from Mortgage Proceeds” of the Housing contract has been made by Headquarters, Tactical Air Command. The Air Force may not approve any item in the applicable trade payment breakdown for which an application for advance payment has been requested if any rejected workmanship or material has not been satisfactorily replaced or repaired within a reasonable time. “The inspection clause clearly indicates that these rejected portions must be cor-reeled at once. However, it will be the responsibility of the contracting officer to determine the reasonable length of time that has been allowed after notification of the defect before it will be cause for exclusion from the request for advance payment from mortgage proceeds. “Your attention is invited to the possibility that a major portion of an advance payment request could be disapproved depending on the uncorrected deficiencies for each item of the trade payment breakdown. “Yours truly, s/ Max D. Peterson Max D. Peterson Captain, USAF Procurement Officer” On November 15th Williams and Dunlap wrote all subcontractors a registered letter (D-7.18): “November 15, 1957” “All Subcontractors Capehard Housing Project England AFB, Louisiana.” “Gentlemen : “We are attaching herewith a copy of letter received from Base Procurement Officer, which quotes from a letter received on October 8, 1957 from Frederick T. Aneitta, Col. USAF, Dep. Director of Installation. For your information our draw was almost disapproved this month due to the lack of completing deficiencies as reported. For example, Williams, Dunlap and Young was to be penalized $51,000.00 and the brick work approximately $40,000.00. “What the attached letter says is that all phases of work (such as carpentry, plumbing, painting, insulation, electrical, utilities, etc.) shall be turned down in its entirety if one or more deficiency reported by the inspectors is not corrected. “In view of this, and to insure our monthly draw, we guaranteed the Air Force that all deficiencies reported shall be started to correct within 48 hours of receipt of the deficiency report and shall not cease until completion, no excuse accepted except for weather. This problem of deficiencies has reached an acute stage and it was suggested that the drastic action of withholding all monthly draw requests on all of the items (such as plumbing, electrical, etc.) be enforced until such deficiencies were met and completely finished to the full satisfaction of the inspector. “We have been advised by Captain Peterson that the inspectors have the authority and responsibility to dictate and interpret the plans and specifications together with the process of ways of doing the job to the satisfaction and best interest of the Air Force and the contractor. “To sum it up, our draw will not be approved unless deficiencies, have been corrected. In aceeordance with the attached letter the Air Force has the authority to withhold approving certain phases of work, if one or more deficiencies warrants this action. Therefore, as mentioned above all deficiencies shall be started to correct within 48 hours after receipt thereof.” “Yours truly, WILLIAMS AND DUNLAP CNST. CO., INC. s/ H. E. Williams, Jr. H. E. Williams, Jr. Autrey and Goad’s sixth draw was submitted on October 31st in the amount of $78,360. It was approved by Williams and Dunlap and under the subcontract should have been paid on or about November 15th. FHA approval was received on or about November 25th. In the interval and before FHA approval, Goad was advanced $18,500. Williams and Dunlap made a unilateral decision that $7,000 should be deducted from the balance due because of their conclusion that Autrey and Goad had failed to nail up certain cornice material and sheathing shown by field check not to be in place. Mr. Autrey refused to accept the check in the reduced amount. However, subsequently on November 27th Williams and Dunlap mailed to the Guaranty Bank a cheek in the amount of $52,814 to be paid on Autrey and Goad’s .account. The Court feels that under Article XIII, Williams and Dunlap, once having found the $78,360 to be correct, was obligated to pay it in full on or about November 15th. The seventh draw was submitted on November 30, 1957 for $29,522 and if found correct by Williams and Dunlap •should have been paid on or about December 15th. It was not acted upon by Williams and Dunlap. It was not paid at •all. Basically, it is the November draw which brought about the termination of this contract between the parties. Williams and Dunlap’s given reason at the trial for not paying the seventh draw was that through November Autrey and Goad liad been paid all they were entitled to by simple arithmetic. Mr. Grossman testified (Tr. 3250-51): “THE COURT: Where did they stand, then, in the percentage of completion as compared to what they had been paid for ? “THE WITNESS: When we finally received approval of the November work, they had 73.4% of their total work approved. They had already been paid 73.8%.” Because they were out of funds and unable to meet their payroll, Autrey and Goad reduced their force until they had only five men on the job, and then on December 20th they formally notified Williams and Dunlap that they would do no further progress work “until such time as this subcontractor has been paid its November estimate, which estimate was due on about the 15th day of December.” (D-71.39.) On December 27th Williams and Dunlap wrote to Autrey and Goad advising them that they were not manning the job, and that they were going to man the job with their own personnel beginning Monday, December 30th and were invoking Article XXIV of the contract (D-71.24). This letter was answered on December 28, 1957 by Mr. Methvin and he advised Williams and Dunlap that if they placed any men on the job it would have to be so at Williams and Dunlap’s own expense. Also, Mr. Methvin told Williams and Dunlap 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 Autrey and Goad was ready, willing and able to complete its contract if and when Williams and Dunlap brought its obligations to a current status (D-71.17). Williams and Dunlap proceeded to take over the carpentry contract. Autrey and Goad made demand for the balance allegedly due under the subcontract ($137,-416.39). Subsequently suit was filed and plaintiff seeks judgment for $312,000. Williams and Dunlap claims that it spent some $157,000 to complete. As of December 31, 1957 the subcontract between the parties had been terminated and we find that fault was mutual and that both were guilty of a breach. Williams and Dunlap was guilty of a breach in not having paid in full and on or about November 15th the full amount of Autrey and Goad’s schedule draw which was submitted on October 31st. After having found it correct, they had no right to retain $7,000 therefrom. They were also guilty of fault and negligence in helping to develop the situation where the sub found itself unable to meet its payroll. Autrey and Goad was the originator of the incorrect completion estimates, but Williams and Dunlap was or should have been thoroughly aware of the situation and yet they approved these estimates up until the November 30th one. The November 30th estimate was not approved by Williams and Dunlap in the final analysis they say they did not pay it because nothing was due. This is in truth an admission that they had approved erroneous and' incorrect progress completion schedules. Then, too, we believe Williams and Dunlap was at fault in another particular. This is in relation to the furnishing of materials. We reiterate our conclusion that plaintiffs have not proven a breach or specific damage in this particular, but we do believe that the record on this subject suffices to show that there was a shortage of siding, windows and cornice materials and that this was one of the reasons for the deficiencies and the incompleteness, and the subsequent failure of FHA to pay timely to Williams and Dunlap, who at the time were saying in effect to Autrey and Goad: “When we get ours, you get yours.” We conclude that Article XIII did not require Williams and Dunlap to point out defects or pay the estimate within fifteen days, but in view of what had occurred previously it was only natural that Autrey and Goad would expect the November payment on or about the 15th of December. By waiting until mid-December to call attention to the deficiencies Williams and Dunlap left Autrey and Goad, to say the least, in a bind. Autrey and Goad breached the subcontract by not properly manning the job after December 15, 1957. They were obligated under Article XXI to proceed under the written orders of Williams and Dunlap to complete the work. Article XXI reads:. “If at any time any controversy shall arise between Williams and Dunlap Construction Company, Inc. and the Contractor with regard to any matter or thing involved in this contract, and which the parties hereto do not promptly adjust and determine, or which the Architect cannot decide to the satisfaction of both parties hereto, then the written orders of Williams and Dunlap Construction Company, Inc. shall be followed and said controversy shall be decided by arbitration at the end of the work, and before final settlement is made between Williams and Dunlap Construction Company, Inc. and the Contractor.” We appreciate that because of financial reasons they were forced to reduce their work force to five men but this is no excuse under the contract. We are impressed by the fact that they had already drawn from the job for non-job expenses some $45,000 (D-63, Tr. 4156-4224). During the short time they were on the job, Mr. Goad drew $11,535 .and Mr. Autrey drew $11,263. Each bought a brand new station wagon and then sold it to the partnership. Other expenses charged to the job included (1) $511.61 at the Holiday Inn for social dinners; (2) $799.50 for telephone bill; (3) Penley and Company (clothing store), $523.95; (4) $313.28 for the Diners’ Club— some $200 they say they spent dining government (state) officials (Tr. 4213); (5) $1,015.11 to Selber Bros, (a clothing store in Shreveport). Having found a mutual breach, we endeavor to ascertain the status of the parties as of December 31, 1957. The total contract price, plus extras, was $404,006. Williams and Dunlap had paid Autrey and Goad $267,414.60. This left a total balance due under the contract of $136,591.40. We find from the government inspection report (D-5.8),. made after Au-trey and Goad left the job and from Grossman’s testimony and from a compilation of Autrey and Goad’s request for payment, and from the daily foreman’s reports, that there was carpentry work not done having a draw value of approximately $77,000. Subtracting this amount there would remain a balance due of $59,591.40. From this must be subtracted the amount of $2,941.50 which was paid for Autrey and Goad to others by Williams and Dunlap. This leaves a balance due of $56,649.90. On December 18th, Autrey and Goad were advised by Williams and Dunlap that as a result of one of the inspections by the Air Force certain deficiencies existed in a particular house and that many of these defects existed in six or eight houses located in the south end. The Air Force had advised Williams and Dunlap that they did not plan to enter each house and make an inspection until Autrey and Goad had corrected the defects in those houses insofar as they might exist. It seems that there were some 17 defects in the first house inspected, which were as follows (D-71.19): “1. Kitchen cabinet and lavanette doors not installed. "2. Broom closet and linen closet doors and hardware not installed. “3. Clothes hanger rods in closets not installed. “4. Door guides for closet doors (sliding) not installed. “5. Screens on sliding doors and windows not installed. “6. Push plates on swinging door installed too low, should be 50" to center. “7. Door trim and jambs do not fit floor in many of the doors. “8. Base boards: “a. Split at lint trap. “b. Base cut around washer-drain half in wall, not a finished job. “c. None to left of kitchen door leading to foyer. “d. Split to right of front door. “e. Nails not set and puttied throughout bldg. “f. None to left of bath # 2 door. “g. Does not fit wall to left of sliding door. 9. Bath # 2: Jamb on shower room opening warped; wall between shower room and bath room not square. 10. Foyer closet doors not adjusted, drag floor. 11. Wedges behind jamb of closet, bed room # 3 left ragged and not trimmed out. 12. Window does not work well in bed room # 3. 13. Jambs to both bath doors do not fit to tile floor leaving a rodent hole. 14. Sliding windows not adjusted to keep them from coming out of tract at top in several cases. 15. Closet shelves not nailed and finished; center support not plumb. 16. Sheet rock out too large for bed room light fixtures and both exhaust fans. “17. Outside: “a. Nails protrude through roof sheathing, exposed. “b. Nails showing, near misses, through rafters in roof overhang. “c. Shake siding and top trim not moulded out. “d. Wood strips under windows not well fitted especially on front at bed room # 1. “e. 2x4 screen in front not anchored properly. “f. Shake nailing missed nailing strips in areas on front and back; shakes not nailed (brads) at mitered corners. “g. Nails piercing nailing strips in storage room should be bent over. “h. Some nailing of the Up-son boards in car port inadequate. “i. Excessive gap under storage room doors. “j. Sole plate overhangs foundations approx. 1 inch around storage room. “k. Screws left out of right jamb on glass sliding door. “1. Screen door to car port warped and screen broken lower panel. “m. Shingle shakes not well fitted over kitchen door leaving a rodent hole.” On December 21st they were informed of deficiencies existing in a number of other houses as follows (D-71.20): 1. Door Jambs too short. 2. All doors not fitted tight. 3. Closet shelves not nailed and hanger rod not installed. 4. Wood doors not installed in kitchen and bath as required. 5. Sliding door guides. 6. Base nails not set in base and not good fit to walls. 7. Nails in overhang to be chipped off. 8. Clean up inside and out. 9. Many holes in sheet rock cut too large for elec, fixtures. House # 148 — Above 9 defects. House # 128 — Above 9 defects. House # 129 — Abóve 9 defects and trim needs replacing in kitchen. House # 131 — Above 9 defects and trim not complete in kitchen and closet and storage door won’t close. House # 132 — Above 9 defects. House # 133 — Above 9 defects. House # 134 — Above 9 defects. House # 136 — Above 9 defects. House # 137 — Above 9 defects. House # 139 — Above 9 defects. House # 150 — Above 9 defects. House # 152 — Above 9 defects, and install storage door. House # 154 — Above 9 defects. House # 155 — Above 9 defects. House # 156 — Above 9 defects. House # 160 — Above 9 defects. House # 162 — Above 9 defects and screen door repair. House # 163 — Above 9 defects. House # 164 — Above 9 defects. The Court is satisfied that in addition to the carpentry work not done that various defects and deficiencies existed on work that had already been done and that it was necessary for Williams and Dunlap to spend a considerable amount of money to correct these deficiencies. Williams and Dunlap have endeavored to prove that they spent $157,000 completing the job, which would mean that in addition to the new work for which we have already credited them ($77,000), corrective work and other chargeable expenses thereto amounted to some $80,000. We will not allow this credit to Williams and Dunlap because we do not believe the proof is sufficient that all of this should have been charged to Autrey and Goad. On February 10, 1958 counsel for Williams and Dunlap, referring to Autrey and Goad’s subcontract, advised the Guaranty Bank and Trust Company that “there will be approximately $31,000 left in the contract after payment has been made to the Guaranty Bank, to Thompson and to Clark. An additional $8,000 is estimated as being the amount necessary to complete the work, leaving an estimated balance of $23,000 * * (D-71.8.) We do not accept the intimations of outrageous padding, feather bedding, profiteering, etc., but we will not allow Williams and Dunlap credit for the entire amount. We do believe, however, that their proof suffices to permit them credit for the ten per cent retainage that they had possession of out of the payments previously made. This retainage amounted to $29,712.57 (9/10-267,414.6; 1/10-29,712.57). Crediting this amount against the $56,649.90 leaves a balance due Autrey and Goad of $26,937.33. CONCLUSION There should be judgment in favor of R. L. Autrey and A. L. Goad, doing business under the assumed name and style of Autrey and Goad Construction Company, and against defendants, Williams and Dunlap Construction Company, Inc.; Williams and Dunlap, partnership composed of H. E. Williams, Jr. and B. F. Dunlap; and St. Paul Fire and Marine Insurance Company, in solido, in the amount of $26,937.33, together with interest thereon from July 8, 1958 until paid. Counsel for defendant in his reply brief prays that the Court proceed to take up the matter of its counterclaims We feel that what has been said here adequately disposes of those claims. CIVIL ACTION NO. 7233 H. E. LUTHER V. WILLIAMS & DUNLAP, A PARTNERSHIP, ET AL. H. E. Luther was the subcontractor for the masonry work. His contract appears in the record as P-7. Luther was required to furnish the mortar, wall ties and labor incident to the completion of the masonry work. The brick and holiday stone were to be furnished by others. Payment was to be made on the basis of $59.00 per 1,000 face brick and $118.00 per 1,000 for holiday stone. Luther began work during the last days of August, 1957. He says that he was run off the job on December 23, 1957. The defendant says that he abandoned the job on that date by refusing to return to work in spite of adequate financial and other arrangements offered him. Luther claims-that Williams and Dunlap breached its contract with Mr. Luther in the following particulars: (a) In failing to timely make progress payments as called for under the subcontract. (b) In failing to advance the weekly payrolls as they were obligated to do under the contract. (c) In failing to furnish materials timely and in quantities necessary to permit Luther to proceed with his work in an ordinary manner. (d) In ordering Mr. Luther off the job on December 23, 1957. From the outset, Mr. Luther had no money whatsoever with which to meet his weekly payrolls. These had to be advanced by Williams and Dunlap. He came on this job without money and with debts. His contract provided that he would be paid monthly on or before the 15th day of the month based on items of completion submitted to Williams and Dunlap. His special arrangement (collateral agreement) with Williams and Dunlap provided that he would write his payroll checks at the end of each week, and Williams and Dunlap would give to him a reimbursement check in the amount of Luther’s net payroll. This included $200 per week for Luther personally. At the end of the month Williams and Dunlap was to pay Luther the difference between the weekly payrolls made by Williams and Dunlap and the amount due Luther under his progress schedule, less 10 per cent retention. Out of this monthly draw he was to pay all debts incurred on or as a result of this job. The record reveals that Luther never received any of this additional pay — that is, money in addition to his payrolls, because he had failed to pay his own obligations after being notified to bring his accounts current, and as a result of this, direct payments in Luther’s behalf had to be made to his creditors. Other amounts were properly retained to allow for clean up and washing down. The record convinces us that Luther had received all that was due him through November 30th and at the time of the termination of this subcontract. However, even allowing to him all the work he claims to have had in place on December 23, 1957, there was still not enough credit to pay the debts incurred. In addition the government had filed a tax lien on Luther (social security withholding, etc.). This lien was served on Williams and Dunlap and in effect bound them not to pay any profit directly to Luther. The Court finds specifically that Williams and Dunlap did not fail to advance the weekly payrolls as they were obligated to do, and that Williams and Dunlap did not fail in its obligation to furnish materials timely and in quantities necessary to permit Mr. Luther to proceed with his work in an orderly manner. The Court does feel that Williams and Dunlap’s action in terminating Mr. Luther’s employment as of December 23, 1957, was wrongful. The letter of termination was written on December 20th and reads as follows: “WILLIAMS & DUNLAP CONSTRUCTION COMPANY, INC. P. 0. Box 7225 Dallas, Texas “December 20, 1957 “Gist, Murchison, & Gist 918 Foisy Avenue Alexandria, Louisiana “Re: H. E. Luther “Gentlemen: “In partial reply to your letter of December 19 addressed attention Mr. D. P. Dunlap, we wish to advise that it is our contention that Mr. Luther does not have enough funds accrued to his account as earned under contract to cover the expenses you have set forth in your letter. “We further advise it is not our responsibility to pay Mr. Luther’s bills but, as required by our contract, it is Mr. Luther’s responsibility to present us with paid bills for all labor and material and taxes at any time we might require in order that he might make a draw against his contract. “We have requested that Mr. Luther present us with these paid bills and consider that if he fails to present us with these paid bills that he has breached his contract, specifically, the provisions of Article 14. If these bills are not presented to us by 9 AM Monday, December 23, we shall consider Mr. Luther’s contract breached and shall man the job with men in our own employ charging the cost thereof against Mr. Luther’s contract. “Yours truly, WILLIAMS AND DUNLAP CONST. CO., INC. By: s/ K. D. Grossman, Jr. K. D. GROSSMAN, JR.” Williams and Dunlap said they terminated the contract because Luther was not paying his bills, but there is nothing therein which would permit Williams and Dunlap to terminate for that reason. The only recourse open to Williams and Dunlap under the subcontract was to retain out of any payment then due, or thereafter to become due, an amount to sufficiently and completely indemnify Williams and Dunlap. Article XIV of the contract reads as follows: “Before making the above payments, Williams and Dunlap Construction Company, Inc. reserves to themselves the right to demand and receive duly receipted bills for all materials and labor in any way entering into this work and written releases from all parties having claims against the work.” Article XV reads as follows: “If at any time there shall be evidence of any lien or claim for which, if established, Williams and Dunlap Construction Company, Inc. or Owner, or property of the Owner or the improvements, might become liable and which is chargeable to the Contractor, Williams and Dunlap Construction Company, Inc. shall have the right to retain out of any payment then due, or thereafter to become due, an amount sufficient to completely indemnify both or either of them against any claims or liens.” The Court repeats that under these two provisions, Williams and Dunlap was within its rights in retaining the money, but they had no right to terminate Luther because he was not paying his bills. Having decided that Williams and Dunlap did unlawfully terminate this contract, we next turn our attention to the question of damages suffered by Luther. The measure of damages for breach of contract is governed by Article 1934 of the LSA-Civil Code. This article sets forth that the amount of damage due for the breach should be the amount of the loss sustained by the breach and the profit of which one has been deprived. The Court finds that Luther was not making any profit off this job and that he did not sustain any loss by the breach. Williams and Dunlap, Inc., did him a favor by relieving him of a contract upon which he was going deeper in debt all the time. Had they not terminated him for invalid reasons, they could have proceeded under Article XXIV, given the required notice, and had a valid counterclaim. The total contract price was $83,077.63. Luther was paid $41,550.55. $6,975.14 was paid to others on his behalf. Williams and Dunlap contends that it cost them $71,178.73 to complete this work. The cost to Williams and Dunlap, and Luther, of completing this $83,077.63 contract was in excess of $109,000. Of greater import is the status of the contract as of December 23,1957: Mr. Luther was losing money. By projection of the itemization above he actually would have lost some $16,500. He did not have this to lose. He did not have this to start with. The truth is that Mr. Luther was in bad financial condition from other jobs when he took this one. For some reason, whether it is underbidding or through his own mismanagement (we do not know), this was a losing proposition for Luther. It is true that when a contractor is discharged unlawfully he can, in a suit for damages, recover the profits that he might have made or any damage that he suffered. But here, he suffered no damage because he was losing and would have continued to lose. When Luther left the job he left behind two pick-up trucks, two mixers, wheelbarrows, scaffold boards, mud boards, scaffold jacks and some miscellaneous equipment. This was all confiscated by Williams and Dunlap. Williams and Dunlap did not properly terminate the contract and was therefore not within its rights in confiscating this equipment. What is the value of the equipment? The only testimony on that subject is by Luther himself. The Court finds that $1,500 would be a fair award for the value of this equipment. Accordingly, there should be judgment in favor of plaintiff and against defendants in the amount of $1,500, with legal interest thereon from date of judicial demand until paid. On this record the counterclaims would fail. Article VIII is not applicable because the subcontractor had not completed its contract. The termination notice was not for good cause under Article XXIV. CIVIL ACTION NO. 7235 UNITED STATES OF AMERICA FOR THE USE AND BENEFIT OF C. L. CONNER AND JOE A. BROWNFIELD V. WILLIAMS AND DUNLAP CONSTRUCTION COMPANY, INC., ET AL. Conner and Brownfield was the concrete subcontractor. Their contract appears in the record as P-3. They seek to recover their final estimate and for damages allegedly caused by specified acts of Williams and Dunlap. Williams and Dunlap, on the other hand, asserts that plaintiff failed to fully perform its contract by reason of not doing its work in a good and workmanlike manner. Williams and Dunlap insists they expended $37,195.05 to complete this subcontract and that Conner and Brownfield owes them $24,762.85. We find plaintiff has not proven that defendant: (1) failed to make timely progress payments; (2) failed to properly supervise and coordinate the work; (3) failed to timely and adequately furnish materials; (4) failed to provide reasonable and accessible work areas; (5) insisted that Conner and Brownfield keep men and supervisory personnel on the job disproportionate to the sequence and stage of the construction. Did Conner and Brownfield substantially perform their contract? The question of whether or not there has been substantial performance is a question of fact under the law of Louisiana (Airco Refrigeration Service, Inc. v. Fink, Supreme Court of La., Dec. 11, 1961, 242 La. 73, 134 So.2d 880). Among the facts to be considered are the extent of the defect, the degree to which the purpose of the contract is defeated, the difficulties involved in remedying the defects, and the use or benefit to defendant of the work-performed. We conclude and find as a fact that there was substantial performance of the subcontract by Conner and Brownfield. Conner and Brownfield are therefore entitled to recover the full contract price (including the agreed to extras), less the amount that was necessary to correct deficiencies so as to bring the subcontract performance into exact compliance (Airco Refrigeration Service, Inc. v. Fink, supra; Town & Country Contractors v. Henderson, 231 La. 131, 90 So.2d 863; Canulette & Son v. Clesi, La.App., 39 So.2d 853; Jerry Ice Co. v. Col-Flake Corp., D.C., 174 F.Supp. 21, affirmed 5 Cir., 278 F.2d 508). Plaintiff does not quarrel with the doctrine of substantial compliance as set out by the Louisiana