Catholic University v. Bragunier

• Decision Date: 03 July 2001
• Docket Number: No. 1009,1009
• Citation: 139 Md. App. 277,775 A.2d 458
• Parties: THE CATHOLIC UNIVERSITY OF AMERICA, v. BRAGUNIER MASONRY CONTRACTORS, INC.
• Court: Court of Special Appeals of Maryland

775 A.2d 458

139 Md. App. 277

THE CATHOLIC UNIVERSITY OF AMERICA, v. BRAGUNIER MASONRY CONTRACTORS, INC.

No. 1009, Sept. Term, 2000.

Court of Special Appeals of Maryland.

July 3, 2001.

James B. Sarsfield (Hamilton and Hamilton, LLP, on the brief), Washington, DC, for appellant.

Christopher R. West (James A. Johnson and Semmes, Bowen & Semmes, on the brief), Baltimore, for appellee.

Argued before SALMON, DEBORAH S. EYLER and THEODORE G. BLOOM (Ret'd, Specially Assigned), JJ. DEBORAH S. EYLER, Judge.

In a garnishment proceeding by Bragunier Masonry Contractors, Inc. ("Bragunier"), appellee, against The Catholic University of America ("The University"), appellant, the Circuit Court for Montgomery County entered judgment in favor of Bragunier and against the University for $381,136.35. The University has appealed; the questions it presents are best stated after a recitation of the pertinent facts.

FACTS AND PROCEEDINGS¹

In October of 1987, the University contracted with Edward M. Crough, Inc. ("Crough, Inc.") for it to serve as the general contractor for a dormitory construction project on the University's campus, in Washington, D.C. (the "North Residence Village Project"). Crough, Inc., was a Maryland corporation with its principal place of business in Rockville, Maryland.

Crough, Inc., and the University signed a written contract for the North Residence Village Project entitled "Construction Manager Agreement." Crough, Inc. subcontracted the masonry work for the North Residence Village Project to Bragunier. Bragunier performed the masonry work as required but received only 90% of the agreed price from Crough, Inc. The remaining 10% ($211,742.42) owed to Bragunier was withheld by Crough, Inc. as "retainage" and was not paid, even after the project was fully completed in 1990.

In the meantime, also in the late 1980's, some members of the University's Department of Architecture came up with an idea that led to another building project on campus. Their idea was to renovate an abandoned gymnasium and turn it into a new home for their Department. They drew up plans for what came to be known as the "Old Gymnasium Project" and presented them to Reverend William J. Byron, S.J., then President of the University.

Father Byron set about trying to raise funds for the Old Gymnasium Project. To that end, he met with Edward M. Crough, the sole stockholder and President of Crough, Inc. Mr. Crough, an alumnus of the University, had been a past benefactor. Father Byron showed Mr. Crough the plans for the Old Gymnasium Project and suggested that he make a donation to the University to fund it; in return, the University would name the newly renovated gymnasium the "Crough Center for Architecture."

After a series of meetings, Mr. Crough considered the means by which to make such a gift to the University. He and his advisors explored an outright gift of monies, a gift in trust, and a gift paid into a joint bank account. None of these vehicles was satisfactory to Mr. Crough and to the University. Eventually, Mr. Crough decided to make the donation as a gift in-kind from Crough, Inc.: the company would donate the construction materials and services for the Old Gymnasium Project and in that way "gift" the building to the University. Mr. Crough communicated his decision to Father Byron. No writing memorializing the gift was made at that time, however.

Thereafter, on June 3, 1988, Mr. Crough and Richard M. Johnson, Vice President, on behalf of Crough, Inc., and Father Byron and Sue D. Pervi, Vice President of Administration, on behalf of the University, executed a "Construction Manager Agreement" ("CMA") for the Old Gymnasium Project. The CMA, which was similar to that used for the North Residence Village Project, was 45 pages long, with seven pages of attachments. It was divided into two parts: Part "A," "Consulting Construction Management Services Prior to Complete Construction Contracts Award," and Part "B," "Construction Management Services and Construction of General Condition Items During Project Construction." In Article 6 of Part A, the construction manager's compensation was listed as "0." In Article 16.1-16.2 of Part B, the CMA stated that upon written option by the University to authorize services under Part B and performance of the work, the total fee for the construction manager would be $300,000. In addition, on the same basis, the University would pay the construction manager, as reimbursement for "General Condition Items," a fee not to exceed $179,000. Finally, the construction manager was to be paid monthly, "upon receipt of Request For Payment," a sum equal to the cost of all separate contractors' contracts awarded and materials purchased for the construction of the Old Gymnasium Project, not to exceed $2,670,000. The total of those three figures (listed in the CMA as the "total Guaranteed Maximum Price" or "GMP") came to $3,149,000.²

Work on the Old Gymnasium Project got underway in 1988. Throughout the time the project was in progress, no payment requisitions were submitted to the University by Crough, Inc., and no payments were made by the University. The absence of demand and payment was as expected, given Mr. Crough's representation that he was donating the work and materials for the project to the University. Nevertheless, Crough, Inc. carried on its books, as an account receivable, $3,149,000 for the Old Gymnasium Project.

In October of 1989, the Old Gymnasium Project was timely completed by Crough, Inc. and was accepted by the University. The renovated building was named the "Crough Center for Architecture," as promised.

In late 1989, at about the time the Crough Center was finished, Mr. Crough suffered a decline in his health, and his company began to experience severe financial difficulties.³ The financial problems most likely were caused by a severe downturn in the economy, particularly in the construction and real estate sectors.

Because of Mr. Crough's health problems, the day-to-day management of Crough, Inc. was put in Mr. Johnson's hands. When the Old Gymnasium Project had been ongoing, Mr. Johnson had prepared payment requisitions for the project and had given them to Mr. Crough to submit to the University. However, because Mr. Crough was donating the project to the University, he did not forward the requisitions. He did not tell Mr. Johnson that, though.

By February 1990, Crough, Inc. was in a dire financial crisis. On February 12, Mr. Johnson and other representatives of Crough, Inc. met with Father Byron and others from the University. Mr. Johnson told Father Byron that Crough, Inc. was experiencing serious cash flow problems and had been unable to pay a total of $1,257,000 to several of the subcontractors that had worked on the Old Gymnasium Project. Mr. Johnson then inquired as to why payments had not been forthcoming from the University on the project. Father Byron responded that the Old Gymnasium Project had been a gift from Mr. Crough, through his company, for which the University owed nothing. Mr. Johnson informed Father Byron that Crough, Inc.'s financial circumstance was such that it could not afford to designate the Old Gymnasium Project as a gift; in fact, the company needed approximately $2 million dollars to pay the subcontractors on the project and meet its other cash flow obligations. Mr. Johnson asked Father Byron to have the University pay that sum.

Father Byron took Mr. Johnson's request to the Executive Committee of the University's Board of Trustees. The Executive Committee agreed to lend Crough, Inc. $1,257,000 so it could pay the money it owed to the subcontractors on the Old Gymnasium Project. It declined the request for funds beyond that sum.

On February 28, 1990, Father Byron and Mr. Crough met privately. Mr. Crough gave Father Byron a signed letter stating that "it is now and always has been my intention to pay for the total cost of the renovation of the old gymnasium as a gift to the University." Father Byron gave Mr. Crough several two-party checks, totaling $1,257,000, made out to Crough, Inc. and to each of the unpaid subcontractors on the Old Gymnasium Project. Mr. Crough agreed to repay the University that sum, over 12 years, with principal payments of $100,000 a year; to assign an interest he held in a limited partnership to the University, as collateral for the loan; and to revise his will to make a testamentary gift to the University of any balance due and owing on the principal sum at his death. Father Byron then presented Mr. Crough with a document entitled "Construction Manager Affidavit and Final Release of Claims and Lien Waiver," which Mr. Crough executed on behalf of Crough, Inc.

On September 25, 1991, Bragunier filed in the Circuit Court for Montgomery County a breach of contract action against Crough, Inc., to recover the $211,742.42 that it had failed to pay on the masonry subcontract for the North Residence Village Project. On December 12, 1991, the court granted summary judgment in favor of Bragunier and entered judgment against Crough, Inc., for the sum sought, plus $5,000 in attorney's fees.

On July 31, 1992, in an effort to enforce Bragunier's judgment against Crough, Inc., Bragunier's lawyer, Richard McGrory, Esquire, contacted and spoke with Mr. Johnson. Mr. McGrory learned in the course of that conversation about Mr. Crough's in-kind gift of the Crough Center to the University, through Crough, Inc. He also learned about the Final Release of Claims and Lien Waiver that Mr. Crough had given the University, on behalf of Crough, Inc., in February 1990.

At some point in time that is not disclosed in the record, Crough, Inc. became financially non-viable to the point that it ceased operating as a business. According to the evidence, Crough, Inc. never recovered from the financial problems it began to experience in late 1989.

On November 29, 1994, in its breach of contract action against Crough, Inc., Bragunier filed a request...