Sweeney Co. v. Engineers-Constructors, Inc.

823 F.2d 805
CourtCourt of Appeals for the Fourth Circuit
DecidedJuly 20, 1987
DocketNo. 86-2670
StatusPublished
Cited by4 cases

This text of 823 F.2d 805 (Sweeney Co. v. Engineers-Constructors, Inc.) 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
Sweeney Co. v. Engineers-Constructors, Inc., 823 F.2d 805 (4th Cir. 1987).

Opinion

ERVIN, Circuit Judge:

This case concerns the justification necessary for and the damages flowing from the termination of a construction subcontractor by the general contractor. Appellants Engineers-Constructors, Inc., Renten-bach Constructors, Inc., and Federal Insurance Company (collectively “RCI”) appeal the decision of the district court, sitting without a jury, that RCI wrongfully terminated a subcontractor, appellee Sweeney Company of Maryland (“Sweeney”), on a construction job in Richmond, Virginia. [806]*806The district court also found against RCI on its counterclaim against Sweeney and its bonding company, United States Fidelity & Guaranty Company, for breach of Sweeney’s subcontract arising from Sweeney’s alleged failure to carry out assigned work and to staff the project within the terms of the subcontract. The court entered judgment in favor of Sweeney in the amount of $261,347. This appeal followed. We vacate the judgment for the subcontractor, Sweeney. We remand for more detailed findings of fact on the extent of Sweeney’s obligations under the subcontract and a more explicit statement of the amount that RCI owes for the termination, if it is deemed wrongful on remand.

I.

This construction dispute arose over work done on the Medical Hospital of Virginia, North Hospital, a part of Virginia Commonwealth University. The project involved the renovation of the twelve-floor North Hospital and construction of a new tower beside the old hospital, so that the facilities would appear from the inside to be one structure. RCI was the general contractor for the $20 million project. Federal Insurance Company issued a payment bond on behalf of RCI. Sweeney was awarded a $1.3 million subcontract for the construction and installation of drywall, acoustical ceiling, spray fire proofing and other miscellaneous work.

The terms of RCI’s contract with Virginia Commonwealth University were incorporated by reference in the subcontract between RCI and Sweeney, which was dated August 3, 1983. The subcontract also provided for the event of termination:

5. TERMINATION: If the Subcontractor fails, refuses or neglects to carry out the work of the Subcontractor as defined herein in accordance with this Subcontract Agreement and the Contract Documents or otherwise to perform in accordance with this Subcontract Agreement and fails within five (5) days after receipt of written notice to commence and diligently and promptly continue to correct such default in performance, the Contractor may without prejudice to any other remedy it may have, terminate this Subcontract Agreement....

App. 373. On August 30, 1985, RCI terminated Sweeney’s subcontract. The events that transpired between the awarding and the termination of the subcontract are the subject of radically different accounts by the parties in this case. We turn to the district court’s memorandum opinion for the light it sheds on the facts.

The project appeared to the district court to be marked from the beginning by “bickering among the subs and RCI, poor coordination by RCI, under-manning by Sweeney, threats to terminate by RCI, delays caused in part by jurisdiction over disputes between subs, recriminations in general, and RCI’s inability to establish a sequential work pattern.” App. 351. The problems reached a peak in January of 1985 when RCI was ready to terminate for what RCI perceived to be poor performance by Sweeney. Sweeney continued on the job despite the threat of termination. The district court found that “Sweeney’s contract with RCI had not been breached by Sweeney” as of January, 1985. App. 351-52.

The district court concluded that RCI knew, by 1985, that it was not going to make an acceptable return on the project. RCI grew vexatious. “During 1985, RCI was beginning to realize that it might take a substantial financial loss on the project, so it began posturing and looking for a scapegoat, its efforts to allocate blame having been limited to fingering Sweeney as its application to the owner for time extensions plus its other claims will attest.” App. 352. “RCI’s efforts to put the blame on Sweeney completely culminated with its formal termination of Sweeney in August of 1985.” Id.

This short, troubled history of the relationship between the parties in this case colored the district court’s view of the evidence offered by each party to justify its actions. In particular, the district court was not persuaded by RCI’s internally-generated documentation of alleged problems with Sweeney’s performance. “Prior to the official termination, RCI commenced [807]*807doing those things that it considered necessary to firmly saddle Sweeney with fault. This included energizing Mike Gibson to come on the job; his assignment was basically to identify every piece of corrective work needed on the project to get owner acceptance and then establish a back-charging code that would put it in Sweeney’s column.” Id. The district court “attached very little, if any, credibility to evidence generated by RCI in its post-Sweeney termination salvage operation, and this is so because no effort was made to identify fault on the part of RCI and other subs for conditions which were obviously jointly created or done exclusively by parties other than Sweeney.” App. 353.

In contrast to the minimal credibility given to RCI’s documentation of Sweeney’s shortcomings, the district court viewed as substantially reliable the periodic progress reports and requests for payments submitted to the owner by RCI on behalf of Sweeney. These requisitions were approved by the owner’s architect and then paid by the owner; together, they indicate that approximately ninety-five percent of Sweeney’s work had been cleared for payment. The district court expressed the view that “while obviously a requisition is not a final approval of work, it nevertheless is the best indication that we have by trained people that what is being done is what the owner has expended taxpayer money for.” App. 355. Both the owner and RCI held back a portion of the periodic payments in reserve, as allowed by the contract, but RCI’s actions with regard to these payments led the district court to believe that RCI was “squirrel[ling] the money” at the same time it was claiming that Sweeney’s work was defective. App. 356.

The district court held that RCI terminated Sweeney without justification, therefore breaching the contract between the parties. Although Sweeney’s performance, according to the district court, “left a lot to be desired,” the reason for Sweeney’s shortcomings was found primarily to be the failure of RCI properly to coordinate the work between the various subcontractors. App. 353.

The district court awarded damages to Sweeney without clearly explaining the basis of the award. The court said: “The only figures that I have any confidence in at all are the $193,014.00 and $68,333.00 for a total of $261,347.00. Interest will be at the federal rate and will run on that from September 1, 1985.” App. 354. This was not the amount that Sweeney asked for in its complaint. The court felt that Sweeney was not entitled to its full request for damages because “without breaching its contract with RCI, Sweeney, like everyone else on the job, was performing so marginally that the project was doomed.” The court went on to enumerate problems with Sweeney’s performance. App. 353-54.

II.

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