that Nard's partners had no objection to this arrangement as indeed he so testified. Nard said that his partners knew that he was building his home out of the expected gain on this job, that this was to be his share of the project and in effect his procedures amounted to nothing more than anticipating his profit.
Armour complains with some justification that the defendants did not comply with the spirit of the certifications which were filed as a prerequisite to progress payments -- and in some instances with the letter as well. But again, Armour accounting was lax also, particularly in the light of its knowledge of Nard's inadequate controls and unorthodox methods. Furthermore, the letters of certification showed clearly that all of the progress payments were not going to subcontractors but that substantial amounts were being credited to Three Rivers' account and this despite the unusually large 15 percent retainage.
All in all, as the testimony unfolded during the two and a half week trial, it became obvious that this was a classic case of breach of contract by both parties and that it would be impossible for any judge or court to evaluate with any degree of accuracy the degree to which the increase in the ultimate cost of the building was attributable to each of the offending parties.
Certain it is that Nard has no claim for any profits because his own breaches of the contract did much to bring about the unhappy result. On the other hand, although Armour did its part in producing the debacle and eventually paid more for the plant than originally anticipated, it does have a substantial functioning structure which generally appears to have been fairly well constructed and designed and which is operating at an efficiency rate far above the older structure which it was to replace.
The situation then would seem to fall within the general rule that neither party is entitled to damages where both breach the contract or, as expressed in some situations, neither is entitled to recover in the absence of measurable benefit to one of the parties.
However, this does not end the matter because there is some accounting due between the parties, not because damages are payable but because there are some items of restitution which must be considered.
According to the exhibit prepared by plaintiff's accountant who examined Three Rivers records,
that organization was paid $395,101.00 by Armour in addition to the amounts which the partnership disbursed to the subcontractors who worked on the job.
This should be awarded to Armour. Indeed during the trial, defendant conceded that plaintiff was entitled to a "credit" for funds in this category. To fail to require restitution of this money would be in effect to award a profit to the defendants.
A second category involves the monies paid on "E.W.A. 40" invoices which were used to finance the residences and represent funds transmitted to the defendants by Armour which it had a right to assume were being used for the payment of bills incurred in the construction of the meat plant.
The letters of certification accompanying the defendant's progress payment requests represented that the checks issued to subcontractors and suppliers contemporaneously with the certifications were for "work and/or materials supplied the Armour job". Obviously that statement was inaccurate when some of the checks included sums for work on the Nard and Scott residences, and it is true that Armour was misled into believing that the subcontractors' accounts were current. Whether this practice was fraudulent as the plaintiff contends or merely an ill-advised anticipation of profit, or as the defendant contends, mere negligence, is not determinative.
There was a diversion of funds received from the plaintiff which should be rectified, despite the fact that Armour is not entitled to damages as such for breach of the contract.
The accountant who testified for the plaintiff expressed his opinion that $205,900.00 had been paid to McCully-Smith Inc. on "E.W.A. 40" invoices by Three Rivers. We accept that opinion and conclude that that sum should be awarded to the plaintiff.
In addition, since the Lendoll Company was paid in error by Armour for some $36,000.00 of brick work on the Nard residence through a Three Rivers billing on the Armour plant, that money should also be restored.
Furthermore, evidence at the trial established that $33,213.00 was paid to Penn Plumbing Company by Armour for work actually performed at the Nard house. This, too, should be reimbursed.
The plaintiff also claimed various other sums said to be for work on the Nard residence for which Armour had paid. The proof for some of these claims was inadequate and in some instances Armour had properly utilized self help in recouping from the subcontractors involved so that no further amounts are owing.
To summarize, Armour is entitled to restitution of the following items:
1. $395,101.30 the amount received by Three
Rivers in excess of payments
2. 205,900.00 payments made on "E.W.A. 40".
3. 36,000.00 Lendoll Corp. -- brick work.
4. 33,213.00 Penn Plumbing work.
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