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May 13, 1963

N. L. WYMARD and George L. Stark, Receivers of Kemmel and Co., Inc.

The opinion of the court was delivered by: WOOD

We have before the Court an action by the Receivers of a bankrupt painting contractor to recover money allegedly owed by the McCloskey and Co., Inc., to Kemmel and Co., Inc., *fn1" for painting work performed by the bankrupt on a housing project at Fort George G. Meade, Maryland in 1958-1959.

The gist of the action concerns whether this work was performed on a cost-plus basis after great difficulties were encountered by Kemmel in the course of the contract.

 We make the following Findings of Fact and Conclusions of Law:

 1. Kemmel is a painting contractor incorporated and existing under the laws of the Commonwealth of Pennsylvania.

 2. McCloskey is a general contractor incorporated under the laws of the State of Delaware.

 3. 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 to construct 1000 housing units at Fort George G. Meade, Maryland. *fn2"

 4. Anthony P. Miller, Inc., the eligible builder, subcontracted the construction work to McCloskey and by resolution of its board of directors recognized McCloskey as principal subcontractor with complete responsibility for the work.

 5. 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 1000 housing units. *fn3"

 6. The original consideration agreed upon between the parties was $ 290,000.00, and actual work was begun by Kemmel in May of 1958. This contract was subject to the same completion date of May, 1959, contained in the housing contract.

 7. In the fall of 1958, Kemmel ran into difficulty in painting the interiors of a group of houses known as the 49-B houses. The plaster walls of these houses were water sensitive to the specified latex paint which had a water base.

 8. This paint was approved by the Government and prepared by outside manufacturers for use by Kemmel.

 9. When two coats of this paint were applied, the outcome was splotchy and blurred. The brush marks were magnified many times and it produced a distorted finish.

 10. This condition prevailed throughout the project and was attributable to the quality of the plaster which resisted the applications of many varieties of paint which were tested repeatedly to find a satisfactory brand to paint the interiors.

 11. McCloskey examined the buildings and ordered Kemmel to sandpaper the plaster walls and apply a spackling compound to produce an even surface. The sanding and spackling of these newly plastered walls were not required by the original specifications.

 12. Other problems were encountered by Kemmel as the work proceeded. Additional spackling was required when many baseboards were found separated from the walls. Large numbers of Philippine mahogany doors which had been previously painted and stored were found to be damaged. The veneer had fallen off as many as 600 of these doors and they had to be replaced or reglued. These doors were varnished as many as six times by Kemmel. Kitchen doors (250) of a cork composition had to be spackled.

 Floors had buckled in many of the houses and plaster which had frozen during the winter fell from the walls, necessitating repainting work not called for in the original specifications. Also, nine to ten thousand door frames had to be repainted by Kemmel, because of poor paint applied by the manufacturer.

 13. Many of the homes had been completed before the roads were constructed and dust and dirt had collected on the exteriors of the houses. Kemmel had to repaint all of these houses throughout the camp. As many as 50 men were employed on Saturdays and Sundays to complete this repainting as ordered by McCloskey.

 14. A 'man day' in the painting trade comprises eight hours and Kemmel originally estimated that it would take 42 men 5600 man days to complete the work. As unforeseen problems arose the work force was increased pursuant to orders from McCloskey until 170 to 180 men were employed by Kemmel and approximately 19,821 man days were consumed in concluding the painting work.

 15. When these difficulties became more and more frequent, Mr. John Kemmel, President of Kemmel, contacted Mr. M. H. McCloskey, President of McCloskey, by telephone on January 26, 1959. Subsequently, on February 28, 1959, John Kemmel met with M. H. McCloskey in Philadelphia and related his problems concerning the painting and financial needs to him. M. H. McCloskey assured John Kemmel that he, McCloskey, would solve the problem and see that Kemmel was paid in full.

 16. The aforesaid problems did not abate and another meeting was held in March of 1959 at the job site, in the office trailer of McCloskey. Present were M. H. McCloskey, John Kemmel, Thomas McCloskey and James McCloskey, all officers and executives of the parties. Also present were the various supervisors of the respective companies. At this meeting the painting problems were considered and John Kemmel stated that the extra work was costing him large sums in added labor costs. M. H. McCloskey agreed to pay Kemmel's weekly payroll less ten percent and M. H. McCloskey remitted a $ 10,000.00 check the following day for this purpose.

 17. This payroll arrangement continued for the next few months when another meeting was held in June of 1959, at the job site. The completion date for the project had passed and it had been extended for another month.

 At this meeting Kemmel's financial problems and the unforeseen additional work were again discussed. M. H. McCloskey assured John Kemmel that if he would employ more men he would take care of Kemmel's money situation. This promise was made because the interest and penalties against McCloskey were skyrocketing and he was losing money daily because all of the subcontractors had run into trouble and the entire project was in jeopardy.

 18. This additional work performed by Kemmel was originally done pursuant to written work orders signed by supervisory personnel of McCloskey. After July of 1959, when the additional painting work continued to increase at an accelerated pace, McCloskey issued oral work orders and declined to sign any written directions for this work.

 19. On July 15, 1959, when the situation continued to deteriorate, another meeting between McCloskey and Kemmel was held at the job site. Present were M. H. McCloskey, with his officers and supervisory personnel, and John Kemmel, with his supervisor, R. M. Hummel.

 The parties made a tour of some 600 of the houses which had fallen plaster, defective baseboards and replaced unpainted doors which were not the fault of Kemmel. M. H. McCloskey became very upset with these conditions and he directed Kemmel to repaint these houses after the defects were remedied. He further stated to John Kemmel that he would pay everything to get the job done on a cost-plus basis.

 20. After this meeting Kemmel employed more men as directed by McCloskey. The painters were working on weekends and legal holidays to complete this work.

 21. On October 10, 1959, the parties met again at the job site to consider the exteriors of the houses which had become dirty from the dust of the unpaved roads. Kemmel was ordered to repaint these dirty exteriors even after they had been painted with the specified number of coats.

 22. The work was finally completed in November, 1959, some six months after the original completion date of May, 1959, and the parties continued to have financial meetings to determine the amount which Kemmel was entitled to under the modified contract.

 23. On December 3, 1959, McCloskey submitted change orders 7 and 8 (Ex. D-6, D-7), in the sum of $ 23,262.57, to Kemmel for approval as full payment for the additional work performed by Kemmel. These change orders were drawn pursuant to proposals submitted by Kemmel in March and July of 1959 to amend the contract. Kemmel never accepted these change orders in view of the fact that subsequent to his submission of the proposals the unforeseen difficulties continued to occur even after September of 1959. These change orders only reflect a segment of the work ultimately performed by Kemmel to complete the contract.

 24. All of the additional work performed by Kemmel was done pursuant to M. H. McCloskey's blanket order to get the job done and forget the cost.

 25. M. H. McCloskey, himself, never objected to the number of additional men employed by Kemmel, and, further, he never objected to the workmanship or materials used by Kemmel. In fact, there never was any question raised in regard to the various invoices submitted to McCloskey. This is corroborated by the voluntary payment of $ 62,282.24 made by McCloskey on behalf of Kemmel to the Union Welfare Fund and various trade creditors, even after this suit was instituted.

 26. McCloskey in the course of the contract made direct payments to Kemmel in the sum of $ 530,297.62.

 27. Anthony P. Miller, Inc., at the request of McCloskey, and for and on behalf of Kemmel, presented by letter dated October 30, 1959, to the District Engineer, as the Contracting Officer, of the Army Department, in Baltimore, Maryland, the dispute between McCloskey and Kemmel involving a claim in the amount equal to $ 586,130.00, predicated upon and including the items and amounts of the invoice of Kemmel to McCloskey dated October 30, 1959 for the painting work alleged by Kemmel to have been performed upon the housing project in excess of that prescribed by the specifications for painting under the housing contract as amended.

 28. This $ 586,130.00 when added to the original contract price of $ 290,000.00 equals a sum of $ 876,000.00, which is approximately the amount of cost and profit allowable which from the evidence we find McCloskey agreed to pay to Kemmel.

 29. The contracting officer felt that he lacked jurisdiction to consider the claim because there was no privity of contract between the Government and McCloskey and Kemmel.

 In our prior decision in this case we held that the matter before the Board of Contract Appeals was whether Anthony P. Miller, Inc., had the right to have the housing contract amended to give Miller the right to receive from the Government additional sums of money for work performed under the changed specifications. While the question in this case is whether Kemmel has the right to recover additional sums from McCloskey under the orally modified subcontract. We reached the conclusion that the matter before the Board of Contract Appeals was not an arbitration of the dispute between Kemmel and McCloskey. Wymard v. McCloskey and Co., Inc., D.C., 190 F.Supp. 420, 423, 426, aff'd. per curiam 292 F.2d 839 (3 Cir., 1961). 30. We find the following charges for the work performed by Kemmel to be established by the evidence: Labor $ 525,622.97 (NT141) Profit @ 10% 52,562.29 (10%-NT491) Overhead @ 15% 78,843.44 (15%-NT491) Taxes and insurance 47,834.36 (NT452) Material 95,430.45 (NT163) Handling charge @ 10% 9,543.05 (10%-NT491) Welfare Fund 15,857.30 (NT152) Labor Travel expense 38,232.37 (NT141) Total $ 863,926.23


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