Board of Sup'rs of Fairfax County v. Ecology One, Inc.

• Decision Date: 09 June 1978
• Docket Number: Nos. 770268,770269,s. 770268
• Citation: Board of Sup'rs of Fairfax County v. Ecology One, Inc., 245 S.E.2d 425, 219 Va. 29 (1978)
• Parties: BOARD OF SUPERVISORS OF FAIRFAX COUNTY and H. L. Rust Company v. ECOLOGY ONE, INC., et al. Record
• Court: Virginia Supreme Court

Page 425

245 S.E.2d 425

219 Va. 29

BOARD OF SUPERVISORS OF FAIRFAX COUNTY and H. L. Rust Company v. ECOLOGY ONE, INC., et al.

Record Nos. 770268, 770269.

Supreme Court of Virginia.

June 9, 1978.

David T. Stitt, Asst. County Atty., Daniel Webster Coon, Washington, D. C. (Frank B. Perry, III, Frederic Lee Ruck, County Atty., Leslie J. Roos, Asst. County Atty., Phillips, Kendrick, Gearheart & Aylor, Arlington, on brief), for plaintiffs in error.

Guy O. Farley, Jr., Fairfax (Farley, Harrington & Sickels, Fairfax, on brief), for defendants in error.

No brief for Republic Ins. Co., defendant in error.

American Ins. Ass'n (John M. Edsall, Alexandria, Stanley C. Morris, Jr., Roger E. Warin, John D. Alkire, Washington, D. C., Steptoe & Johnson, Washington, D. C., on brief), amicus curiae for defendant in error.

Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, HARMAN, POFF and COMPTON, JJ.

I'ANSON, Chief Justice.

This action was instituted by the Board of Supervisors of Fairfax County (County) against Ecology One, Inc., a residential housing development corporation, Forrest W. Stout, Edward Gwathmey, Jr., Buford W. Duke, Jr., R. David Winesett, Jr., and James J. Hricko, all hereinafter referred to collectively as Ecology, and Republic Insurance Company (Republic) to recover judgment jointly and severally against Ecology as principal, and Republic as surety on a bond, as a result of Ecology's alleged breach of its contract with the County to construct streets and drainage facilities in a residential subdivision Ecology was developing in Fairfax County.

Pursuant to Rule 3:10(a), Rules of Court, Republic filed a third party motion for judgment against H. L. Rust Company (Rust) alleging that Rust would be indebted to Republic if the County obtained a judgment against it in this proceeding.

The case was heard by a jury but, at the conclusion of the County's evidence, the trial court sustained the motion of Ecology and Republic to strike the County's evidence and summary judgment was entered accordingly. The County and Rust filed separate petitions for appeal, which we granted and consolidated for hearing.

The evidence shows that Ecology was the subdivider and developer of Rainbow, a residential subdivision. Pursuant to a County ordinance and State statute concerning subdivisions and approval of plats relating thereto, Ecology entered into a contract with the County on May 9, 1973, in which it agreed to construct the public streets and drainage facilities as shown on its plats and plans of the Rainbow subdivision in accordance with the County and State standards. The contract provided that Ecology would complete the public improvements by May 9, 1976. Ecology also executed a bond on May 9, 1973, as principal, with Republic as surety and the County as obligee, in the amount of $172,000 guaranteeing the performance of its contract with the County.

On March 1, 1974, Ecology obtained a construction loan from Rust which was secured by a deed of trust on certain lots within the Rainbow subdivision. In August 1974, Rust made an additional loan to Ecology in an attempt to shore up what appeared to be problems with cost overruns which were preventing the completion of residences and public improvements in the subdivision.

In October 1974, a county public utility inspector was assigned to the subdivision to make necessary inspections. He testified that "there was very little activity" at the job site at that time; that there were no approved plans present at the construction site and there did not appear to be adequate supervision for construction of the streets and drainage facilities; that in the early months of 1975, the level of activity within the subdivision had deteriorated to the point where work had come to a complete halt on both the public and non-public improvements; that during this period of time, electricity and telephone service for the job headquarters had been cut off; and that it was necessary to issue notices to Ecology for its violation of the siltation and erosion control requirements, which it never remedied.

In the meantime, Ecology had defaulted on the payments of its loans to Rust and a foreclosure sale was held on April 2, 1975. Rust was the only bidder on the property. Eight of the lots were improved in various stages of construction and nine were unimproved. Four houses in the subdivision had been completed and were occupied notwithstanding the fact that the streets were surfaced with gravel only, and drainage facilities were practically nonexistent.

At the time of the foreclosure, street improvements were 60 percent complete. After the foreclosure sale, an official of Ecology told the county's public utility inspector that "the street work (was) what did them in." Ecology made no attempt whatsoever to complete any public improvements after the foreclosure. It took the position that it was divested of control over the work to be performed in the areas it had dedicated to public use.

Relying on the complete lack of activity on the part of Ecology with respect to the public improvements within the subdivision, the abandonment of the job site, and the deteriorating conditions at the site, the officials of the County concluded that Ecology had no intention of performing its obligations under its contract. So on June 25, 1975, the County filed this action against Ecology and Republic on the performance bond.

After obtaining title to the lots sold at the foreclosure sale, Rust applied for permits to complete the work on the houses in order to minimize its loss. The County refused to issue the permits to Rust unless it agreed to complete the street and drainage improvements within the subdivision in accordance with the standards stipulated in the county's contract with Ecology. Three months after the County instituted this action against Ecology and Republic to recover on the performance bond, the County issued permits to Rust conditioned upon its completion of the street and drainage work in the subdivision. The County also assigned to Rust any money received by it in the pending action against Ecology and Republic, not to exceed the amount actually spent by Rust. Rust completed the street and drainage facilities in accordance with the requirements in Ecology's contract with the County at a cost of $171,725.03, which all the parties to this action stipulated was reasonable. At no time did Ecology or Republic perform, or offer to perform, the work after the foreclosure sale.

The trial court, in sustaining Ecology's and Republic's motions to strike plaintiff's evidence, held (1) that the County had not made out a prima facie case with respect to the question of anticipatory breach of contract; and (2) that the assignment to Rust was invalid. The court further held that the surety bond was "an indemnifying bond and was not a penal or forfeiture bond."

The County contends the trial court erred in holding as a matter of law that it had not made out a prima facie case showing that Ecology had abandoned the Rainbow subdivision at the time this action was instituted.

In order to maintain a cause of action for an anticipatory breach of contract, it is not necessary that there be an unequivocal or positive expression of abandonment if the acts and conduct of the obligor evince an intent wholly inconsistent with the intention to perform its contract. Roehm v. Horst, 178 U.S. 1, 8, 20 S.Ct. 780, 44 L.Ed. 953 (1900).

Under the law in Virginia, the abandonment of a contract will give rise to an action for anticipatory breach. We said in Mut. R. Fund Ass'n v. Taylor, 99 Va. 208, 37 S.E. 854 (1901) that:

"(W)hen one party to a contract has entirely abandoned it, or has absolutely refused to perform it, the other party may elect to sue on it without waiting for the time of performance to arrive." 99 Va. at 213, 37 S.E. at 855-56.

Whether there has been an abandonment of a public works contract depends on the particular facts and circumstances of each case. 13 E. McQuillin, Municipal Corporations, § 37.144 (3d ed. Rev. 1971).

Generally, whether the repudiation of a contract is sufficiently positive or unequivocal to give rise to a cause of action for anticipatory breach is a factual question for the jury's determination. Palmiero v. Spada Distributing Company, 217 F.2d 561, 565 (9th Cir. 1954).

In the present case, there was ample evidence from which the jury could have reasonably concluded that Ecology had abandoned its contract, because it had neither the intention nor ability...