Arlington Towers Land Corp. v. John McShain, Inc.
| Decision Date | 03 April 1957 |
| Docket Number | 1072-56.,Civ. A. No. 2797-55 |
| Citation | 150 F. Supp. 904 |
| Parties | ARLINGTON TOWERS LAND CORPORATION et al., Plaintiffs, v. JOHN McSHAIN, Inc., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Ellis Lyons (of Perlman, Baldridge, Lyons & Browning), Washington, D. C., Milton Gould and Alvin M. Stein (of Gallop Climenko & Gould), New York City, for plaintiffs.
Charles B. Murray, George Shea, Washington, D. C., for defendants.
Identity of the Parties.
The plaintiff Arlington Towers Land Corporation is a Virginia corporation formed for the purpose of acquiring title to a tract of land consisting of some 18 acres located in northern Virginia, adjacent to the District of Columbia. It was incorporated on October 15, 1953. Plaintiffs First Arlington Towers Corporation, incorporated on November 15, 1953, Second Arlington Towers Corporation, incorporated on March 3, 1954, Third Arlington Towers Corporation, incorporated on December 23, 1953, and Fourth Arlington Towers Corporation, incorporated on October 4, 1953, are Virginia corporations individually organized for the erection and operation of apartment and commercial buildings upon the tract of land held by the Arlington Towers Land Corporation. All of the issued and outstanding stock of the building corporations is owned by the Land Corporation, while the preferred stock of the building corporations is, or was at the time of the filing of this suit, owned by the Federal Housing Administration. The plaintiffs, Walter P. McFarland, Edward Johnson and John Loughran, are the owners of all of the issued and outstanding stock of the Land Corporation. The plaintiff William J. Kress is, or was at the time of the filing of this action, the secretary of the Land Corporation.
The defendant John McShain, Inc. is a Delaware corporation engaged in the building and construction business. Defendant John McShain is the president and principal figure in John McShain, Inc. Defendant George F. Shea is an attorney in the District of Columbia who represented John McShain, Inc. as attorney during a part or all of the time involved in the transactions which are the subject of this suit. The defendant, the Pennsylvania Company for Banking and Trusts, although named as a defendant in the action, was not served in this case.
Factual Background Leading to These Proceedings.
In 1949, the O'Driscoll Construction Corporation assembled several parcels of land which ultimately became the 18 acre tract acquired by the Arlington Towers Land Corporation. These parcels were assembled by the O'Driscoll corporation to enable it to construct the apartment development known as the Arlington Towers project. The O'Driscoll Corporation took various steps in the interest of this development which led to the filing of applications for insured mortgages with the Federal Housing Administration in 1951. The O'Driscoll group attempted to secure from the Federal Housing Administration insured mortgages which would permit the construction of the project under section 608 of the National Housing Act, 12 U. S.C.A. § 1743.
In the fall of 1951, the O'Driscoll group abandoned the Arlington Towers project because they were unable to arrange the financing necessary to the project and financing required by the Federal Housing Administration. Because of their accumulated investment in the project, the O'Driscoll group attempted unsuccessfully to sell the project, and in the course of these efforts attempted unsuccessfully to interest the McShain corporation in the project.
In the summer of 1952, Mr. Paul Hauck, General Superintendent for the McShain corporation in the Washington area, talked to the plaintiff Walter P. McFarland about the Arlington Towers project, told him some of the background of the project, and suggested that McFarland attempt to interest some friends in undertaking the financing of the project which McShain might then build. McFarland, thereafter, consulted the architects who had designed the project for O'Driscoll, consulted the Federal Housing Administration, and initiated a long course of activities which ultimately resulted in the financing of the project. In order to assist in perfecting the financing arrangements, the McShain corporation through John McShain furnished McFarland with letters indicating that McShain had an agreement with McFarland to build the project for $18,000,000. McShain agreed further to take other steps, discussed in more detail hereafter, to assist McFarland in acquiring the land from the O'Driscoll group, in securing the necessary financing, and guaranteeing the completion of the project. The negotiations, studies and planning for the project extended from the summer of 1952—probably the latter part of June of that year—until December 17 or 18, 1953, at which time a contract was executed between the Arlington Towers Land Corporation and John McShain, Inc. A copy of this contract is attached hereto and identified as Court Exhibit No. 1. It was supplemented by a letter dated December 21, 1953, also attached hereto and identified as Court Exhibit No. 2, and a further agreement dated December 18, 1953, copy of which is attached hereto and identified as Court Exhibit No. 3.
As a result of the execution of the contract of December 18, 1953, the Federal Housing Administration issued final commitments for insured mortgages covering the construction of Arlington Towers units Four, Three and One. The Chemical Bank and Trust Company of New York issued "Over and Above Loan" commitments, the Teachers Insurance and Annuity Association of New York made commitments covering advances on a mortgage covering the ground involved in the project, and other formalities being completed, the McShain corporation undertook the construction of the buildings embraced in these three contracts.
Some delay occurred in the completion of the formalities relating to the construction of that segment of the project embraced in the agreements relating to Second Arlington Towers Corporation, the reasons for the delay being one of the contested points in the case.
The McShain group collaterally contended that a commercial building identified hereafter as commercial building "C" was not embraced in the Master Contract, or other agreements, between the parties. The plaintiff McFarland contends now that in the elimination of commercial building "C" he understood that he was to receive credit from McShain for the cost of the building. Commercial building "C" was not built, and its status in the agreements and understandings between the parties is one of the principal issues in the case. Ultimately, the plaintiff McFarland and the plaintiffs, Edward Johnson and John Loughran, executed a further document dated April 28, 1954, which document was also executed by McShain, and which related to the construction of the Second Arlington Towers unit. A copy of this document is attached to this opinion and is identified as Court Exhibit No. 4. Thereafter, the Federal Housing Administration financing and other financing having been completed, the McShain Company undertook the building of the Second Arlington Towers unit with commercial building "C" eliminated.
As the construction progressed, a series of disputes arose between the parties, which disputes insofar as they are pertinent to the case are identified hereafter and are treated individually. In general terms, these disputes related to the addition to or deletion from the buildings of items referred to in the basic plans and specifications; to the alleged failure of the workmanship and materials to meet the standards required by the plans and specifications; to delay in the completion of First Arlington Towers; to failure of McShain to complete the units within the time required by the agreements; to the failure of McShain to correct defective work enumerated in a series of "Punch Lists" drawn up by the plaintiffs, and to refusal on the part of McShain to pay certain sums growing out of mortgage discounts.
After the present suit was filed, the parties selected an Arbitrator to determine the reasonable value of the additions and deletions; and upon the filing of the arbitration award, the plaintiffs moved to set the award aside on various grounds.
In the meanwhile, the defendants had filed, on November 28, 1955, in the Eastern District of Virginia, an action seeking to recover the sum of $275,000 represented by a note made by the Land Corporation on April 29, 1954. This action was transferred from the Eastern District of Virginia and consolidated with the present case for the purpose of trial.
During the course of the present trial, the Court, over defendants' objections, permitted the plaintiffs to amend their complaint by adding thereto a claim against the defendant McShain in the amount of $154,439.71 representing an assignment to the plaintiffs of a balance due by McShain to E. C. Ernst, Inc. for electrical work installed by that corporation in the Arlington Towers project.
Contentions of Parties in the Present Suit.
The plaintiffs filed this action on June 25, 1955.
The issues to be determined by the Court, as agreed to by counsel in a pretrial order filed on November 15, 1956, are as follows:
1. Have the four Federal Housing Administration projects been completed?
2. Was the Supplemental Agreement of April 28, 1954 valid, or is it void by reason of threats and coercion in its procurement, and lack of consideration?
3. Is the award of the Arbitrator allowing the Land Corporation net credit for changes made during construction to be vacated or modified, and are plaintiffs entitled to additional credit for incomplete work?
4. Is McShain liable as guarantor for the payment of financing fees in connection with the permanent mortgages of the building corporations?
5. Are plaintiffs entitled to set-off, or credit, for the nonconstruction of "C" building?
6. Are plaintiff...
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