Ballou v. Basic Construction Co.

407 F.2d 1137
CourtCourt of Appeals for the Fourth Circuit
DecidedMarch 6, 1969
DocketNos. 12453, 12454
StatusPublished
Cited by16 cases

This text of 407 F.2d 1137 (Ballou v. Basic Construction Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ballou v. Basic Construction Co., 407 F.2d 1137 (4th Cir. 1969).

Opinion

SOBELOFF, Circuit Judge:

This litigation illustrates the predicament which may arise when a loss must be assigned to one or more of the parties, none of whom had full power or responsibility to avert it.

Basic Construction Company, the general contractor for the erection of Community Hospital in Roanoke, Virginia, sued Fidelity and Casualty Company of New York, the surety on a performance bond given by a subcontractor, Virginia Prestressed Concrete Corporation. Fidelity then brought third party actions against Virginia Prestressed, the architects, and the hospital. Virginia Prestressed, in turn, counterclaimed against Basie Construction and crossclaimed against the architects and the hospital.

Full use of discovery in the District Court resulted in the production of hundreds of exhibits and extensive testimony in the form of depositions, admissions, and answers to interrogatories. Basic, the hospital, and the architects then moved for summary judgment on all claims asserted against them by Fidelity and Prestressed. These motions were granted, and after a hearing on damages the court entered judgment for Basic against Fidelity on its bond for [1139]*1139$488,928 plus interest and costs. Judgment over was entered against Prestressed on Fidelity’s claim for indemnity; the hospital and architects were awarded their costs.

Prestressed appeals from the judgments entered against it in favor of Basic, Fidelity, the hospital and the architects. Fidelity appeals only from the judgment against it in favor of Basic.

The District Court stated in granting the motions for summary judgment that the facts underlying this litigation are not in dispute. Basie Construction was the general contractor on a seven million dollar contract for the construction of Community Hospital. Basic entered into a subcontract with Virginia Prestressed for the fabrication and delivery of precast concrete columns. Fidelity became surety for Virginia Prestressed on a performance bond for $498,000, the amount of the subcontract.

The subcontract required the production of 200 concrete columns, designed to constitute a facade when set in fifty-column tiers around the four sides of the hospital. The columns, fabricated by pouring concrete over longitudinal steel reinforcing bars, were required by the contract to be made “in strict conformity” with the contract specifications. These called for a two inch cover of concrete over the steel bars, with permissible tolerance of plus or minus one half inch.

Virginia Prestressed began performance in the summer of 1964, and by December had made and installed the first tier of fifty columns. At that time, it was discovered that some of the columns contained improperly positioned steel bars, and that as a result those columns did not have the requisite minimum concrete cover. On December 28, 1964, the architects rejected forty-one of the first fifty columns and directed Basic to have them replaced.

Under the specifications applicable to both the prime contract and the subcontract, the architects had the right to determine the acceptability of work, to reject defective material or workmanship, and to have such work replaced by the contractor without charge. They were also responsible for interpreting the contract documents on all questions involving the execution of the work, subject to arbitration.

When the defects became known, Basic argued that the condemned columns should be accepted notwithstanding the fact that they failed to meet minimum requirements. It obtained experts at its own expense to convince the architects or the hospital that a lesser cover was acceptable because of the high quality of concrete used in the columns. The architects adhered to their position that one and one half inches was the minimum acceptable cover, and the hospital refused to alter the contract requirements without the architects’ approval.

Failing to persuade either the architects or the hospital to accept the columns, Basic demanded arbitration, as provided in the contract. The precise question the parties submitted to the arbitrator was which of the 139 columns already fabricated by Prestressed “comply with the contract documents, as correctly construed.” He found that the contract clearly required at least one and one half inches of cover and that 45 of the 139 columns fully complied with the contract requirement. Basic accepted the 45 columns and served notice on Prestressed to replace the others and complete the contract.

Prestressed had stopped work in December 1964 when the defects were first discovered. Arbitration took place in May 1965. By the time Basic requested replacement of the columns, Prestressed was no longer financially able to complete the contract. When this became apparent, Basic declared Prestressed in default. Prestressed later went 'into bankruptcy.

Basic relet the subcontract, and it has been stipulated for the purposes of the suit that Basic suffered damages in excess of one million dollars as a result of Prestressed’s default. Basic called on [1140]*1140Fidelity to pay the face amount of the performance bond, and when Fidelity refused suit was instituted.

Since the terms of the performance bond measure the obligations of Fidelity by those of Prestressed, the same defenses are asserted by both. In the District Court they argued alternatively: first, that the contract was substantially performed by Prestressed; second, that it was impossible of exact performance; and third, that Basic is estopped from relying on any breach that may have occurred. The District Court rejected the defenses and granted summary judgment. Prestressed and Fidelity maintain in this court that summary judgment was inappropriate because, in their view, all three defenses raise genuine issues of fact which should be determined only after a full trial.

I.

Appellants contend that the District Judge refused to consider the merits of their defense of substantial performance, and that he erroneously held that the arbitrator had decided the issue and that his decision could not be relitigated. The District Court's opinion, however, clearly indicates that the court considered and rejected the defense on the merits.

The court stated that substantial performance is an equitable doctrine, intended to prevent unjust enrichment, which allows a contractor who has not complied with a contract in every detail to recover for work done which enriches the other contracting party. Since in the instant case the non-complying columns were neither accepted nor used by the owner, there is no question of unjust enrichment and the court concluded that the doctrine was not available as a defense'.

We agree with the reasoning of the District Court. The doctrine of substantial performance does not constitute a complete defense to liability for breach of contract, but is designed rather to prevent total forfeiture by a contracting party who is guilty of only trivial breaches of contract. The doctrine is essentially a rule of damages, allowing the breaching party to recover for benefits conferred on the other party, but reducing his recovery by any damages which his breach may have caused. See Kirk Reid Co. v. Fine, 205 Va. 778, 139 S.E.2d 829 (1965); Mann v. Clowser, 190 Va. 887, 59 S.E.2d 78 (1950).

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Bluebook (online)
407 F.2d 1137, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ballou-v-basic-construction-co-ca4-1969.