Southern States Masonry, Inc. v. J.A. Jones Constr. Co.

Southern States Masonry, Inc. v. J.A. Jones Constr. Co.

Opinion

 [*199]  These disputes between general contractors and subcontractors arose after the owner of the 1984 Louisiana World's Fair, Louisiana World Exposition, Inc. (LWE), filed for bankruptcy before having fully paid its general contractors. In each case, LWE entered into a construction contract with a general contractor. The general contractor, in turn, subcontracted out portions of the work. After LWE failed, the subcontractors demanded payment for the work they had satisfactorily completed. The contractors, relying on certain provisions in the subcontracts, refused to make final payment. The Fifth and Fourth Circuit Courts [**2]  of Appeal ruled in favor of the general contractors in the respective cases, holding that the effect of the payment provisions in the subcontracts made payment by the owner to the contractor a suspensive condition to the contractor's obligation to make payment to its subcontractor. ¹ [**3]  In effect, the rulings of the Courts of Appeal  [*200]  relieved the general contractors of making further payments to the subcontractors because LWE had defaulted in paying them. We granted writs of review ² and now reverse both Court of Appeal judgments. Our conclusion is that the contract provisions reciting essentially that the subcontractor would receive payment after receipt of payment by the general contractor from the owner (the so-called "pay when paid" clauses) are not suspensive conditions, but rather terms for payment which only delay the execution of the respective general contractors' obligations to make payment, and then only for a reasonable period of time.

In the Southern States Masonry case, J. A. Jones Construction Company (Jones) entered into a construction contract with LWE on October 1, 1982. Jones, in turn, entered into a subcontract with Southern States Masonry (Southern) on October 6, 1983, wherein Southern agreed to furnish concrete masonry work on the International Pavilion, the U.S. Pavilion, and the Amphitheatre. ³ 

Jones was paid by LWE for work billed and completed only through March, 1984. LWE's insolvency has prevented Jones' receipt of a portion of the contract price due them from LWE. After LWE filed for a Chapter 11 reorganization, Jones filed a proof of claim in the bankruptcy proceedings and has taken other steps in an effort to recover the remaining contract payment, but to date without avail.  [**4]  ⁴ 

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