North Attleboro v. Hartford Fire

Opinion

USCA1 Opinion

April 29, 1994        [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

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No. 93-1685

                          NORTH ATTLEBORO ARMS REALTY TRUST,

                                Plaintiff, Appellant,

                                          v.

                           HARTFORD FIRE INSURANCE COMPANY,

                                 Defendant, Appellee.

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                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. Joseph L. Tauro, U.S. District Judge]
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                                 ____________________

                                        Before

                                 Breyer, Chief Judge,
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                            Coffin, Senior Circuit Judge,
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                            and Torruella, Circuit Judge.
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            Guy E. Guarino for appellant.
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            Raymond A. LaFazia with whom Gunning, LaFazia &  Gnys, Inc. was on
            __________________           ______________________________
        brief for appellee.

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BREYER, Chief  Judge.  The plaintiff  in this case
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             (the  "Developer")  is a  real  estate  trust  that hired  a

             Contractor to build condominiums.  The Developer says that a

             Subcontractor  -- a  maker  of exterior  walling systems  --

             defaulted on  its contract  to supply the  condominiums with

             "curtain  walls."   And,  it has  sued that  Subcontractor's

             surety, The Hartford Fire Insurance Company, for damages.  

                       The district court, trying  both the facts and the

             law,  found that the Developer suffered no harm -- at least,

             none  that legally entitles it to  an award of damages.  The

             Developer  now appeals, basically asking us to find that the

             court's factfinding  was "clearly erroneous."   Fed.R.Civ.P.

             52(a).    The  district  court's  findings,   however,  have

             adequate  record  support;  and,  we  therefore  affirm  its

             judgment.

                       We have  read the record in  a light appropriately

             favorable  to  the winning  party,  defendant  Surety.   See
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             Capt'n Mark v. Sea Fever Corp., 692 F.2d  163, 166 (1st Cir.
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             1982).  So read,  the record reveals the  following relevant

             background facts:

                       1)   In  a contract  dated  December 2,  1987, the
                            Subcontractor promised  the Contractor (which
                            in turn was  controlled by the  Developer) to
                            provide  curtain  walls  for the  condominium
                            building for a total price of $339,655. 

2)   As of June  or July, 1988,  the Subcontractor
                            had substantially completed the job.  Several
                            months  later,  on  November  4,   1988,  the
                            Contractor's    architect    provided     the
                            Subcontractor  with a  "punch  list" of  five
                            items to be corrected (such as "rust  stains"
                            on certain walls,  "misalignment" of  certain
                            panels, "incomplete trim" around some sliding
                            doors,  etc.)    About  ten days  later,  the
                            architect  sent an  expanded  list  of  eight
                            items.

                       3)   On November 18, 1988, the Subcontractor wrote
                            back that  the work  on the punch  list "will
                            cost  approximately  $3,000   to  $4,000   to
                            remedy."  But, it would not perform that work
                            until  the  architect   released  its   final
                            payment  (which  it  estimated  to  be  about
                            $31,000).  It pointed  out that the architect
                            retained  an  additional  $34,000  (otherwise
                            belonging to the  Subcontractor) as  security
                            for  performance; and,  it  agreed  that  the
                            architect need  not release this  money until
                            all  the  work  was   complete.    In   early
                            December,   the   Developer   wrote  to   the
                            architect that the punch list work "ha[d] not
                            been started,"  that it would  require 24  of
                            the  units  "to  be  plumbed  out"  (removing
                            existing  dry wall), and that this would cost
                            $2,200 per condominium unit.   A month later,
                            the Developer  wrote to  the Surety that  the
                            Subcontractor was in "default."

                       4)   Ten  months  later,  in  November  1989,  the
                            Developer's  counsel  wrote  to   the  Surety
                            stating that the  Subcontractor's failure  to
                            cure the punch  list defects  meant that  the
                            Developer could not 

                                 conclude closings of
                                 fifty-four      (54)
                                 units   which   were
                                 under        written
                                 purchase   and  sale
                                 agreements      with
                                 third parties.   

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He   added  that   these  "damages   are  not
                            speculative," and that he would  like to work
                            with the Surety "in acquiring  a settlement."
                            Counsel  wrote  further  letters,  threatened
                            legal  action,  and  then, in  preparing  for
                            litigation   in   September  1990,   had  the
                            architect  draw  up   a  final  repair   cost
                            estimate totalling roughly $345,000.  

             After the Surety refused to pay,  the Developer brought this

             diversity  action, arguing,  among  other  things, that  the

             Surety broke its surety  contract requiring it "promptly" to

             "remedy" any "default," and seeking damages in the amount of

             the repair and completion costs ($345,000).

                       After a  trial, the district  court concluded that

             the Developer had failed  to prove its case.  The court said

             that  although  it  accepted Developer's  sole  witness (the

             architect) as competent to testify on the matter of damages,

             it need not "credit"  his opinion.  Specifically,  the court

             rejected the architect's $345,000  correction-cost estimate,

             which in the court's view was "an extraordinary amount," and

             which  (by  what  seemed  to  the  court  "an  extraordinary

             coincidence") amounted to  the entire curtain  wall contract

             price.   The court found  "more immediate" problems  for the

             Developer  in the  fact that,  even if  one assumed  that it

             would cost  $345,000 to  dismantle portions of  the building

             and then make  the punch  list repairs, that  cost would  so

             vastly exceed "any resulting benefit" that it would "involve

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unreasonable  economic  waste."  (internal  quotation  marks

             omitted).   In such circumstances, the  court concluded that

             the  proper  measure  of  damages was  (1)  the  Developer's

             reasonably incurred actual costs, or (2) the loss of  market
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             value (e.g., the difference between  the market value of the
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             structure-as-promised and the market value of the structure-

             as-constructed).   See generally Concannon  v. Galanti,  202
                                ___ _________ _________     _______

             N.E.2d  236,  238  (Mass.  1964);  Restatement  (Second)  of
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             Contracts     348(2) &  cmt. c  (1979);  John D.  Calamari &
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             Joseph  M.  Perillo, Contracts    14-29,  at 633-36  (3d ed.
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             1987).  Because  the record lacked any concrete  evidence as

             to either, the plaintiff was not entitled to any recovery.

                       On appeal, the Developer argues at length that the

             district court erred in  its factfinding.  But, on  the all-

             important  issue  of  loss  suffered  as  a  result  of  the

             Subcontractor's  (alleged)  default,  the Developer's  brief

             contains virtually  no  citations to  the record.   We  have

             reviewed  the  record  independently,   but  have  found  no

             significant evidence  tending to  show "lost unit  sales" or

             sales  "at  reduced  prices,"   or  any  other  evidence  of

             diminished market value.   Indeed, the one  person who would

             seem to have been qualified to testify about the market loss

             caused by the alleged  defects in the walling system  -- the

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Developer's trustee,  Alfred Pace,  Sr. -- did  not testify.

             We, like the  district court, can find no  concrete evidence

             of  loss, other  than  the evidence  about  the $345,000  in

             correction costs,  which figure the district  court found to

             be  both (1)  unbelievable  and (2)  an  improper basis  for

             recovery.  We must respect the district court's  decision to

             reject the architect's  opinion.  See Dedham Water Co., Inc.
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             v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 457 (1st Cir.
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             1992).    We also  agree with  the  district court,  for the

             reasons it stated, that the $345,000 is not a legally proper

             measure of damages.  See Restatement (Second) of Contracts  
                                  ___ _________________________________

             348(2)  &  cmt.  c.    Of  course,  we  recognize  that  the

             Subcontractor itself  conceded  that it  would cost  roughly

             $3,000 to $4,000 as  of November 1988 to complete  the punch

             list items, and that, with minor exceptions, they were never

             completed.  But, as  far as we  can tell, the Developer  did

             not  seek recovery for  those costs, and  the Developer does

             not  argue for those  specific costs on  appeal.    Thus, we

             need not consider  in this context  whose fault it  actually

             was that the punch list corrections were never made.

                       The   district   court    also   held   that   the

             Subcontractor's refusal  to make  the punch list  repairs in

             November  1988  did not  amount  to  a "default,"  for  that

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failure represented  a reasonable refusal not  to proceed in

             the absence of a further payment, to which the Subcontractor

             was entitled.  The record more than adequately supports this

             finding.   And,  in its  light, we  agree with  the district

             court that there was  not sufficient evidence of "rascality"

             by the Surety to  support a chapter 93A  claim.  Levings  v.
                                                              _______

             Forbes & Wallace,  Inc., 396 N.E.2d  149, 153 (Mass.  1979).
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             The finding  of  no proven  damages  is also  sufficient  to

             warrant judgment for the Surety on the Developer's remaining

             claims.

                       The judgment of the district court is

                       Affirmed.
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