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WYMARD v. MCCLOSKEY & CO.

December 22, 1960

N. L. WYMARD and George, L. Stark, Receivers of Kemmel & Co., Inc., Debtor
v.
McCLOSKEY & CO., Inc.



The opinion of the court was delivered by: WOOD

This is a suit on a contract for money due and owing Kemmel & Co., Inc. by McCloskey & Co., Inc. *fn1" The plaintiffs are the receivers of Kemmel, having been appointed by the Court on March 2, 1960. It appears that the primary cause of the bankruptcy of Kemmel has been the defendant's refusal to pay Kemmel the alleged debt.

The defendant has moved to stay this suit pending the outcome of certain arbitration procedures provided for in the contract between the parties: According to the contract, plaintiffs may not resort to the courts until the arbitration procedures have been exhausted.

 I. History of the Case

 The United States Government required the construction of housing units at Fort George G. Meade in Maryland, and selected as the principal contractor to perform the work Anthony P. Miller, Inc. On June 27, 1957, the United States, the Fort George G. Meade Defense Housing Corporation Number I, and Anthony P. Miller, Inc., entered into a contract for this construction. *fn2" Anthony P. Miller, Inc., subcontracted the construction work to McCloskey. On July 15, 1957, McCloskey and Kemmel entered into a contract -- the subject of this suit -- whereby Kemmel agreed to perform all the painting work on the housing units. *fn3"

 The housing contract contained plans and specifications for the painting work, designating the type of paint to be used and the manner of its application. The subcontract between Kemmel and McCloskey referred to and incorporated by reference those provisions of the housing contract pertaining to the painting specifications. *fn4" The subcontract provided that McCloskey would pay Kemmel the sum of $ 290,000 for the painting job. The method of payment was spelled out in some detail. On the 25th day of each month, Kemmel was to submit to McCloskey an itemized estimate of the work done and the materials furnished for that month and submit a bill accordingly. On the 15th day of the following month, McCloskey agreed to pay Kemmel 90% Of the itemized bill. The balance due was to be paid by McCloskey within thirty days from the completion of the project.

 On or about May 1, 1958, Kemmel began work on the housing project. After the interior painting for the first group of housing units had been completed, the representatives of the Contracting Officer concluded that the painting was not giving the type of results intended. After some negotiation, the specifications of the housing contract with respect to the painting were changed, and the amount to be paid the principal contractor for the entire job was also changed accordingly. *fn5" McCloskey and Kemmel then orally agreed that Kemmel would continue the painting work under the new specifications and that Kemmel would be compensated therefor on a costplus basis. (We consider this step an important link in the chain of events.) No specific and amount over and above the original contract price was agreed on as between Kemmel and McCloskey for the now more extensive and expensive painting. Nor was any agreement made with respect to the manner of payment under the new cost-plus arrangement. Apparently, the parties considered the provisions of the subcontract as to the manner of payment to be still in force.

 The information we have as to what transpired as Kemmel proceeded with the painting under the changed specifications is meager; we know that McCloskey made some payments to Kemmel, amounting in toto to $ 530,297.32, and that Kemmel claimed over $ 400,000 in addition. As these unpaid balances mounted, Kemmel finally presented this dispute to the Contracting Officer as hereafter related.

 'Article XIII

 '13:01. In case of any dispute between the Principal Subcontractor and the Subcontractor in regard to matters arising out of this Subcontract * * * the same shall be submitted to and decided by the Contracting Officer, in accordance with the Disputes Clause of the General Provisions of the Housing Contract, being Paragraph 8 thereof.'

 and

 'Article III

 '3:01. No alterations shall be made in the work except upon the written order of the Principal Subcontractor (McCloskey) and the amount to be paid by the Principal Subcontractor * * * by virtue of such alterations shall be stated in said order. Any dispute arising between the Principal Subcontractor and the Subcontractor (Kemmel) as to the amount to be paid * * * shall be determined in accordance with ...


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