Thomas D. Horne, Judge
Wayne G. Cyron, Esquire
James G. Smalley, Esquire
100 N. Pitt Street
Suite 200
Alexandria, Virginia 22314-3134 William H. Atwill, Jr., Esquire
101 N. King Street
P.O. drawer 741
Leesburg, Virginia 20178-0741 Gentlemen:
Michael and Robin Bono entered into a contract with W.M. Foley Construction Company (Foley) for the construction of a custom home on a lot owned by Mr. & Mrs. Bono located in eastern Loudoun County, Virginia. The instant litigation followed a termination of work by Foley prior to the completion of the project. Trial of the case occupied many days. Upon the completion of the evidence, the Court indicated that it would notify the parties of its decision. The instant letter opinion expresses the findings of the Court that are to be memorialized by a Final Order.
This case is before the Court on the Amended Motion for Declaratory Judgment filed by W. M. Foley Construction Corporation and the Third Amended Counterclaim filed by Michael Bono and Robin Bono, his wife. Foley asks the Court to determine that it rightfully terminated its construction contract with the Bonos and, in addition, is entitled to an award of damages in an amount of not less than $500,000.00 against the defendants.
Contrariwise, by way of the Third Amended Counterclaim, Mr. and Mrs. Bono contend that Foley breached the terms of the construction contract; and that they are entitled to recover damages as a result of plaintiff's abandonment of the project.
In addition to damages arising out of the construction of the home, both parties seek to recover substantial attorney's fees and costs. The construction contract provides, in pertinent part, that should a dispute arise, the prevailing party would be entitled to recover in addition to damages for a breach, "attorney's fees, court costs and any other reasonable fees and expenses related to the enforcement of the contract".
On September 10, 2003, the parties executed a contract for the construction of a home located at 101 Chimney Ridge Place, Potomac Falls, Virginia. At the time, Foley was an experienced builder specializing in custom home construction. The contract provided for a start date of no later than September 30, 2003. Foley agreed to build the home for $1,212,800.00 inclusive of items specifically identified in attachments to the contract. Payment was to be made in accordance with a draw schedule included as an attachment to the contract. That schedule provided for nine draws.
By letter dated July 13, 2004, Foley notified Mr. and Mrs. Bono that it was terminating work on the home. Citing various provisions of the contract, Foley outlined what it asserted were a series of material defaults that justified a cessation of work on the project. Included among these stated reasons were the following: a failure by Mr. and Mrs. Bono to provide complete and accurate building documents in a timely way; a failure by the Bonos to make timely selection of items from the Milestone Selection Schedule; the on-site interference by the Bonos with work on the project; the performance by Mr. Bono of unauthorized work on the home; the delay of work occasioned by the failure to provide adequate plans; and the failure by the Bonos to provide adequate assurances of their ability to pay the remaining amount due in accordance with the terms of the contract.
At the time plaintiff ceased work on the project, the total contract price, including change orders was $1,361,814.28. There had been six draws. One aspect of the lengthy record of proceedings consists of conflicting evidence relating to the relationship between the contractor and the owners respecting the conduct of work on the project.
It is undisputed that contract design documents prepared by Robert Sastro, registered architect, were not detailed. This deficiency was recognized and addressed by the terms of the contract. For example, the contract provides, among other things:
…[c]ontractor strongly urges Owner to have Architect add the specific details, dimensions, etc. for all areas that are of particular concern for the Owner to the plans. Lacking the specific details, Contractor, as a last resort, will 'scale' the non-dimensional areas and use his best judgment as to the details which are not clearly defined. It is understood by the Owner that 'scaling' plans to determine dimensions is the least professional approach and is deemed by all competent professionals-Architects and Contractors alike, to be lacking and not an exact measuring process. Scaling allows for measurements in feet not inches or fractions thereof. Unless the Owner and/or their Architect has provided clear, concise and easily interpreted plan dimensions and details, then the Owner accepts, without reservation, the Contractor's interpretation and his carpentry subcontractor' s interpretaion of plans. If the Owner does not like the result of said interpretation then any tear out and rebuild will be charged to the Owner a Change Order including subcontractors cost, administrative costs, materials, supervision and overhead and profit of 15%.
The parties agreed that the construction contract expressed, "…the final and entire Agreement between the parties." Mr. and Mrs. Bono had paid all six of the draws due in a timely fashion, at the time of termination.
Based upon a review of the conflicting evidence introduced during this lengthy proceeding, the Court does not conclude that plaintiff was justified in terminating the construction contract for the reasons given in the July 13, 2004, letter. The expectations of the parties are expressed in the contract and contract documents. The Court must look to the provisions of the contract and the actions of the parties, rather than their opinions, to determine liability and damages.
The parties had agreed to proceed with the construction of the home utilizing the plans and specifications that were included with the contract, and to furnish those plans and specifications that were within the contemplation of the parties at that time. Plaintiff was provided documents that while lacking in detail, nevertheless, were deemed adequate by the parties.
Specific items within the agreed upon plan of construction were signaled out for selection by the owners. This being a custom home by design, the owners would have a greater say in the materials going into the project. The evidence of timing of the selections on the Milestone Selection Schedule does not support a finding that would justify the contractor walking away from the agreement. While frustrating to the contractor, any delays in making selections were adequately explained by Mr. & Mrs. Bono. Mrs. Bono described their process as a "loosy-goosy" selective process. This may be an apt description of the project given the disparate opinions about the manner in which the project progressed.
Although, the unhappiness and expressions of displeasure marked the relationship between the contractor and owners as work progressed, to a neutral observer, these expressions do not suggest interference justifying termination and abandonment of the work. Mr. Bono went to the job site and because he was unhappy with certain electrical work, he made what he perceived to be corrections. After initially expressing ignorance as to the source of the work, he admitted to having done the unauthorized manipulations to the electrical circuitry. The contractor corrected Mr. Bono's unauthorized work of the electrical system, and Mr. Bono made payment. The Court finds such a claim does not justify termination under the totality of the circumstances surrounding the issue.
Lastly, the Court does not find that the refusal by Mr. & Mrs. Bono to furnish a personal financial statement to be unreasonable within the contemplation of the agreement. Under the circumstances the furnishing of the HUD-1 was objectively reasonable. At the time of the request, the Bonos were current in payments due under the draw schedule and change orders. The statement demonstrated adequate funding for the project and was furnished at the suggestion of counsel.
Overall, the reasons given to terminate may reflect frustration of the builder with the owner, and vice versa, but neither frustration nor personal animus is justification for abandoning the contract. This frustration of the builder would appear reactive to a project undertaken that would yield 22 binders containing 10,000 pages of documents reflecting work on the project before the instant suit was filed. However, although frustration with a client and with a project may be a stimulant for change, it does not rise to the level of legal justification.
In terminating work and abandoning the project, Foley breached the contract. Accordingly, the counter-claimants are entitled to recover damages arising from such breach. The Bonos had paid all draws and change orders and none of the purported delays had impacted financially on Foley in an adverse way. Mr. & Mrs. Bono did, as Mrs. Bono stated, what was required of them when asked.
Completion and corrective work on the home was performed under a construction management agreement with MB Visnic, Inc. Payment to Visnic was upon a fixed fee. These costs are identified in exhibits received into evidence. Terry Sutton, Vice President and Treasurer of Foley Construction, prepared an analysis of the costs identified by Visnic.
The Court finds Ms. Sutton's testimony to be persuasive as to adjustments to the costs identified by Visnic and thus, subject to consideration in a determination of the damages recoverable by Mr. & Mrs. Bono. Based upon her review of the documents supplied by Visnic, she has determined the adjusted cost to complete at $328,320.00. The Court finds that the evidence does not support a post hoc apportionment of the Visnic fee between cost of completion, upgrade, and correction. Foley cannot rewrite the agreement between Visnic and the Bonos to provide for such an algebraic allocation.
Pre and post-termination direct payments to vendors and suppliers by Mr. and Mrs. Bono should be added to the costs of completion ($131,650.22). Additional deductions in the amount of $19,697.00 from the cost to complete are taken for change order work not to be completed by Foley.
The total paid by Mr. & Mrs. Bono to Foley is $1,058,008.28. Including change orders, the contract price of the job is $1,361,814.28. This leaves a balance of $303,806.00 remaining on the contract.
As noted, the adjusted cost to complete is $328,320.00. To this should be added the pre and post-termination direct payments by the Mr. & Mrs. Bono in the amount of $131,650.22. From this total is subtracted the $19,697.00 for work not to be completed by Foley. This leaves a total cost to complete of $440,273.00. Based upon the balance due on the contract of $303,806.00, this would fix damages relating to cost to complete at:
$136,467.00
Excepting the roof repairs, masonry, and corrective work to the exterior veneer, the Court finds that the remainder of the work performed on the job was completed in a good and workmanlike manner consistent with the standards in the industry and the contemplation of the parties within the terms of the contract. Roof repair includes the following: repair of trusses in the attic, replacement of the EPDM roof, stone and stoop repairs, application of stucco to the exterior, copper roof repair, roof sheathing replacement, and chimney flashing. The total of all such corrections for which damages are to be recovered by the counterclaimants is:
$100,281.00
The brick veneer to the home is inconsistent with the contract terms or sample wall constructed by the contractor. As to the brickwork, the Court accepts the testimony of the counterclaimants' masonry expert and finds that the application of the stucco was a reasonable alternative and calculated to minimize the damages resulting from the work performed. Similarly, the roofing is neither consistent with good building practices or of the quality agreed upon by the parties. Counterclaimants should not be required to rely upon sheathing that is glued on to their house, or an EPDM roof that will only accommodate the ethereal footfalls of the squirrels.
Counterclaimants are entitled to recover construction interest carrying costs and the costs to refinance the original construction loan. Roanoke Hospital v. Doyle and Russell, 215 Va. 796 (1975). Thus, the counterclaimants may recover as damages construction interest carrying costs in the amount of:
$ 17,386.41
In addition they may recover as damages' costs to refinance the original construction loan in the amount of:
$ 19,550.36
As previously noted, the construction contract contains an integration clause. Counterclaimants suggest that they are entitled to recover interest resulting from an "overpayment" of $466,000.00. This number represents the difference between amounts paid to Foley by Mr. and Mrs. Bono and by Foley to its vendors and suppliers under the contract. On argument they would suggest that the Court might take 15% for profit and overhead from that sum as compensation. The Court finds no support for this under the terms of the contract. The instant action arises out of a contract and not tort.
Accordingly, the Court will dismiss the claim of Foley, and award damages to Mr. and Mrs. Bono in the amount of:
$273,684.77
Interest on sums due shall be adjusted to the date of the entry of the Final Order. Any funds held by Foley may be paid to the Bonos and the amount of the judgment reduced accordingly.
Consistent with the provisions of the contract, as prevailing parties, counterclaimants shall submit an affidavit of fees and expenses related to the enforcement of their claim.
Mr. Atwill may draw a Final Order consistent with this opinion to which counsel may note their exception.
Very truly yours,
Thomas D. Horne, Judge