Lincor Contractors, Ltd. v. Hyskell

692 P.2d 903, 39 Wash. App. 317
CourtCourt of Appeals of Washington
DecidedDecember 24, 1984
Docket10420-9-I
StatusPublished
Cited by23 cases

This text of 692 P.2d 903 (Lincor Contractors, Ltd. v. Hyskell) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lincor Contractors, Ltd. v. Hyskell, 692 P.2d 903, 39 Wash. App. 317 (Wash. Ct. App. 1984).

Opinions

Williams, J.

— This appeal involves the financing and construction arrangements for a building which was never built. The Superior Court, in its judgment against the financing company, Continental, Inc., awarded money damages to the owner, a partnership of Robert L. Hyskell and others d/b/a Lynnwood Pacific Industrial Center, for breach of contract and to the contractor, Lincor Contractors, Ltd. for tortious interference with the construction contract. Continental appeals and Lynnwood Pacific cross-appeals. We reverse and remand on the issue of Lynnwood Pacific's damages.

The facts are that Lynnwood Pacific purchased on contract a building site in Lynnwood upon which to construct an office complex. It contracted with Lincor, a general contractor, to design and build the project.

As Lynnwood Pacific had limited assets, Lincor assisted it in obtaining 100 percent financing for the project by contacting Continental, a commercial mortgage lender, for both a construction loan and permanent financing. Based upon Continental's assurance that the construction loan would be made, Lynnwood Pacific borrowed $100,000 from Rainier National Bank to make a balloon payment on the real estate contract. Continental then negotiated, and Lynn-wood Pacific accepted, a commitment for permanent financing of $1.8 million from Union Mutual Life Insurance Company. After reviewing several loan applications from Lynnwood Pacific, the construction budget and contract, and a project appraisal, Continental agreed to provide the construction loan. Lynnwood Pacific then authorized Lincor to begin construction.

Shortly thereafter, Continental told Lynnwood Pacific [320]*320that no funds would be disbursed until Lincor was removed as the general contractor. Lynnwood Pacific discharged Lincor but was unable to find another builder. Continental did not provide the construction money, the Union Mutual commitment expired, and the project dissolved. Litigation which developed among the parties was consolidated for trial.

The principal issue on appeal concerns the method employed by the trial court in assessing the damages sustained by Lynnwood Pacific because of Continental's withholding of the construction loan proceeds, thus effectively terminating the project.

The trial court found that the project could have been completed by April 1979 as contemplated in the construction contract at a cost of $1,996,622, but that to construct the complex after judgment would cost an additional $397,342.70 for increased interest and an additional $282,920.74 for increased construction expenses. The trial court also found that Lynnwood Pacific was entitled to $254,987.79 for lost rent caused by the delay, $40,753.97 for interest paid to Rainier National Bank, $51,722.45 for interest paid to Mr. Petropoulous, the beneficiary of a deed of trust on the property, and $59,750 for loan fees paid to Continental.

These findings were carried into the judgment against Continental on the theory that after judgment Lynnwood Pacific would complete the project. To fix the damages upon what the cost would be to build after judgment with the attendant assessment of the additional interest cost, lost rent and inflation loss is a fundamentally erroneous method of computation leading only to conjecture and surmise. Rather, the following applies:

The purpose of awarding damages for breach of contract is neither to penalize the defendant nor merely to return to the plaintiff that which he has expended in reliance on the contract. It is, rather, to place the plaintiff, as nearly as possible, in the position he would be in had the contract been performed. He is entitled to the [321]*321benefit of his bargain, i.e., whatever net gain he would have made under the contract. Munson v. McGregor, 49 Wash. 276, 94 Pac. 1085 (1908); Herbert v. Hillman, 50 Wash. 83, 96 Pac. 837 (1908); Herrett v. Wershnig, 170 Wash. 417, 16 P. (2d) 608 (1932); Hardinger v. Till, 1 Wn. (2d) 335, 96 P. (2d) 262 (1939); Williston on Contracts, § 1338; McCormick on Damages, § 137.
The plaintiff is not, however, entitled to more than he would have received had the contract been performed. If the defendant, by his breach, relieves the plaintiff of duties under the contract which would have required him to spend money, an amount equal to such expenditures must be deducted from his recovery. Gould v. McCormick, 75 Wash. 61, 134 Pac. 676 (1913); Robbins v. Seattle Peerless Motor Co., 148 Wash. 197, 268 Pac. 594 (1928); Rathke v. Roberts, 33 Wn. (2d) 858, 207 P. (2d) 716 (1949); Restatement, Contracts, §§ 329, 333, 335; McCormick on Damages, § 143.

Platts v. Arney, 50 Wn.2d 42, 46, 309 P.2d 372 (1957).

In measuring Lynnwood Pacific's damages, three additional rules are applicable:

(1) Damages must be proved with reasonable certainty or supported by competent evidence in the record. Iverson v. Marine Bancorporation, 86 Wn.2d 562, 565, 546 P.2d 454 (1976).

(2) Damages for a lender's breach of a contract to loan money are recoverable if they were reasonably in the contemplation of the parties when the contract was made, are the natural and proximate results flowing from the breach, and were proved with reasonable certainty. Larson v. Union Inv. & Loan Co., 168 Wash. 5, 12, 10 P.2d 557 (1932).

(3) In the case of construction contracts, special problems have been encountered in putting the injured party in the pecuniary position he would have enjoyed had the contract been properly performed by the builder. These special problems have led to the creation of special rules for measuring damages in such cases. Eastlake Constr. Co. v. Hess, 102 Wn.2d 30, 39, 686 P.2d 465 (1984).

[322]*322With these precepts in mind, the consequences of Continental's breach are:

Loss of Contemplated Building

Lynnwood Pacific presented no evidence that it would procure another loan, hire another contractor and construct another building.1 Thus, it did not sustain its burden of proof that any increased interest or construction costs would be incurred. Because these costs were neither proven with reasonable certainty nor supported by competent evidence in the record, the trial court erred in awarding damages for these items. See Iverson, at 565.

But, Lynnwood Pacific has suffered a loss. When the contract was made, the parties contemplated that Lynn-wood Pacific would use the loan from Continental to construct the building. As a natural and proximate result of Continental's breach, Lynnwood Pacific could not construct the building. Lynnwood Pacific's equity in the building can be proven with reasonable certainty. See, e.g., findings of fact 5, 63, 42. Thus, Lynnwood Pacific is entitled to an award of damages, see Larson, at 12, measured by its loss of equity, see St. Paul at Chase Corp. v. Manufacturers Life Ins. Co., 262 Md. 192, 278 A.2d 12, 35-37, cert. denied,

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Lincor Contractors, Ltd. v. Hyskell
692 P.2d 903 (Court of Appeals of Washington, 1984)

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Bluebook (online)
692 P.2d 903, 39 Wash. App. 317, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lincor-contractors-ltd-v-hyskell-washctapp-1984.