HUTCHESON, Circuit Judge.
This is an appeal from a judgment finding the primary contractor on a government construction project and its surety liable to the supplier of a subcontractor
Shepard S. Silberblatt was involved in several construction projects for the United States. In 1960 Mr. Silberblatt entered into a contract with the United States for the construction of five housing projects totaling 800 family units at Fort Hood, Texas. S. S. Silberblatt, Inc. [hereinafter called Silberblatt, Inc.] was the prime contractor for this contract.
Arcotex Painting Contractors, Inc. [hereinafter called Arcotex] was a subcontractor on the construction contract. Lambert Corporation [hereinafter called Lambert] supplied paints and painting materials to Arcotex for the five housing projects. Lambert delivered to Arcotex at its Fort Hood warehouse for use on the five housing projects $120,585.37 worth of paints and painting materials. Deliveries were made from March 4, 1961, through July 6, 1962. Lambert was not aware of the five separate housing corporations and had no control of or knowledge of the particular project in which the paints and painting materials were used; it merely supplied these items for the one construction project.
In February, 1962, Lambert advised Arcotex that further shipments would cease because of non-payment of the then due balance. Silberblatt, Inc. contacted Lambert. At the request of Silberblatt, Inc. and upon its guarantee of Arcotex's obligations,
At the outset we acknowledge our general agreement with the result reached by the court below. The appellants [Silberblatt, Inc. and Travelers] do not suggest that Lambert's claim does not represent materials furnished for and used in the Fort Hood projects. Rather appellants rely on the technical defense (albeit an honest one) that Lambert has failed to comply with the notice provisions imposed on it by the bonds and thus cannot recover from appellants. Only one construction contract, one prime contractor (Silberblatt, Inc.), one surety (Travelers), and one subcontractor (Arcotex) were involved. Had there been only one bond covering this contract and these parties Lambert would be entitled to recover. The technical defense asserted arises because of a proliferation of corporations created by and for these parties, and the resultant multitude of bonds. It seems unjust to allow an admittedly valid claim to be avoided by such manipulations. Be that as it may, no suggestion has been made in this Court or in the court below that the formal aspects of this transaction should be disregarded and set aside. Thus we must view the transaction in the form in which it was cast by the parties.
Appellant Silberblatt, Inc. employed five corporations for the development of the five projects composing the one construction contract. Each corporation executed a separate bond covering the project assigned to that corporation. Each bond covered only the materials furnished for the project covered by it. For Lambert to recover against a particular bond it must show that the amount owing it represents materials used in the project covered by that bond. This Lambert sought to do by showing that the amount owing it represents materials furnished for and used in the last project, thus entitling it to recover on the bond for the last project. Appellants claimed Arcotex paid for all materials used in the last project by directing Lambert to apply to current purchases (i e., the materials used in the last project) the payments made after March 18, 1962. Appellants contended the amount owing Lambert represents materials used in some earlier project and thus recovery cannot be had under the bond for the last project. In legal principle appellants' argument is sound. A debtor making a voluntary partial payment of his indebtedness to a creditor may direct to which portion of the indebtedness the payment shall be applied, and the creditor must apply the payment as directed or return it.
We hold these findings and conclusions are insufficient bases upon which to rest the district court's judgment and that the case must be remanded for further findings. Fed.R.Civ.P. 52(a) requires that "in all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specifically and state separately its conclusions of law thereon * * *." The purpose of this rule "is to aid the appellate court by affording it a clear understanding of the ground or basis of the decision of the trial court". 2B Barron & Holtzoff, Federal Practice & Procedure Sec. 1121, p. 481 (Wright ed. 1961); see 5 Moore, Federal Practice Sec. 52.06 , p. 2653 (1964). Findings of fact must be made in sufficient detail and exactness "to indicate the factual basis for the ultimate conclusion" reached by the court.
Our action here is confined to a remand for further findings. We do not (and we note the court below did not) pass upon whether timely notice of default was waived by the letter of February 28, 1962, from Silberblatt, Inc.; or whether this letter rendered Silberblatt, Inc. liable to Lambert as the guarantor of Arcotex's obligations; nor do we reach any of the other issues presented by appellants. All of these questions will be considered by the district court, which should where necessary make specific findings of fact and conclusions of law as to each of them, as required by Fed.R.Civ.P. 52(a).
The judgment is vacated and the cause remanded.
Dear Mr. Lambert:
Receipt is acknowledged of yours of Feb. 26, 1962 with regard to your account with Arco-Tex Painting Contractors, Inc. at both of the above-captioned projects.
As explained to you over the telephone, I have assured you that you will receive payment for all materials delivered and used at the above projects, provided that prices are found to be satisfactory. However, I have made no undertaking to pay you immediately against your open account until such time as I have had an opportunity to go over the matter with you and Mr. Abriss on my next visit to Fort Hood, which I expect to be sometime in the early part of March. This was agreeable to you.
I believe this would work to our mutual advantage, since, although we have never undertaken to guarantee the obligations of Arco-Tex, we will, in your case, make an exception; understandably, we cannot undertake to release funds until we know and can agree on exactly what is involved.
We are as anxious as you to clarify the entire problem to avoid the continuance of an area of uncertainty, and you need have no doubts that the writer will personally attend to the matter within the time indicated.
Bonds Issued For: Number Completion of Units Date _________________ ________ ____________ Fort Hood Housing Corp. No. 6 100 Oct. 26, 1961 Fort Hood Housing Corp. No. 7 222 Dec. 6, 1961 Fort Hood Housing Corp. No. 8 150 Feb. 21, 1962 Fort Hood Housing Corp. No. 9 170 Apr. 18, 1962 Fort Hood Housing Corp. No. 10 158 July 6, 1962
To the same effect, see National Bank of the Commonwealth of New York City v. Mechanics' Nat'l. Bank, 94 U.S. 437, 24 L.Ed. 176 (1876); O'Dell v. United States, 326 F.2d 451 (10th Cir. 1964); Compagnia Maritima La Empresa, S.A. v. Pickard 320 F.2d 829 (5th Cir. 1963); Burton Swartz Land Corp. v. Commissioner of Internal Revenue, 198 F.2d 558 (5th Cir. 1952); Lehigh & H. R. Ry. v. Commissioner of Internal Revenue, 36 F.2d 719 (2d Cir. 1929), cert. denied, 281 U.S. 748, 50 S.Ct. 353, 74 L.Ed. 1160 (1930); Phillips v. Herndon, 78 Tex. 378, 14 S.W. 857 (Tex.1890); Carey v. Ellis, 46 S.W.2d 1012 (Tex.Civ.App. — San Antonio 1932); Johnson v. Cox, 270 S.W. 892 (Tex.Civ.App. — Waco 1925). See 40 Am.Jur. Payment Sec. 110, pp. 792-93 (1942); 70 C.J.S. Payment, § 52, pp. 257-259 (1951).