Heyl & Patterson Intern., Inc. v. F. D. Rich Housing of Virgin Islands, Inc.

Decision Date19 October 1981
Docket Number81-1193,Nos. 80-2749,s. 80-2749
Citation663 F.2d 419
PartiesHEYL & PATTERSON INTERNATIONAL, INCORPORATED, Appellee, v. F. D. RICH HOUSING OF the VIRGIN ISLANDS, INCORPORATED and F. D. Rich Housing Corporation, Appellants. F. D. RICH HOUSING OF the VIRGIN ISLANDS, INCORPORATED, as assignee of F. D. Rich Housing of Puerto Rico, Incorporated, Appellant, v. GOVERNMENT OF the VIRGIN ISLANDS, Appellee.
CourtU.S. Court of Appeals — Third Circuit

Lawrence Gochberg (argued), Gochberg & Berkman, Stamford, Conn., for appellants.

Donald M. Bouton, Acting Atty. Gen., Edward A. Wascoe (argued), Asst. Atty. Gen., Dept. of Law, Charlotte Amalie, V. I., for appellee, Government of the Virgin Islands.

Daniel M. Curtin, Pittsburgh, Pa. (argued), Geoffrey W. Barnard, Isherwood Barnard & Diehm, Christiansted, St. Croix, U. S. V. I., for appellee, Heyl & Patterson, Inc.

Before SEITZ, Chief Judge, and HIGGINBOTHAM and VAN DUSEN, Circuit Judges.

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

With flare and kindled hope, on October 1, 1973, the Government of the Virgin Islands signed a contract with a developer to build up to 300 houses "for families of low and moderate income" at Estate Nazareth. The parties stressed that the "need for housing in St. Thomas, Virgin Islands" was This case involves an appeal from the consolidated trial of two breach of contract actions. In Heyl & Patterson International, Inc. v. F. D. Rich Housing of the Virgin Islands, Inc., and F. D. Rich Housing Corporation, Memorandum Opinion, No. 75-785 (D.V.I. May 23, 1980), (hereafter Heyl and Rich), the district court entered judgment in favor of appellee Heyl and against appellant Rich in the amount of $262,398.01, plus costs of $2,668.25, attorney's fees of $21,000.00 and prejudgment interest of $841.50, and dismissed all third party claims by appellant Rich against the Virgin Islands Government. In F. D. Rich Housing of the Virgin Islands, Inc. as Assignee of F. D. Rich Housing of Puerto Rico v. Government of the Virgin Islands, Memorandum Opinion, No. 76-62 (D.V.I. May 23, 1980), (hereafter Rich and The Government), the district court granted judgment in favor of appellee Government and dismissed all claims by appellant Rich against the Government.

so acute that it must be "constructed as expeditiously as possible." Now more than eight years later, instead of having at the site housing for the poor and those of moderate income, there has been built this extensive law suit, which some would call either a "lawyer's paradise" or a "litigation nightmare." After a gubernatorial election and resulting changes of government administrations, the parties now, instead of laying bricks for housing, are espousing subtle theories of contract, procedural, constitutional, and municipal law while placing the blame on the "other person" in this breach of contract action. There are claims now for hundreds of thousands of dollars because of purported breaches of contract by either the Government and/or the developer. During the eight year interim, not one house has been built pursuant to this contract, not one poor or moderate income person has benefitted by the Government's past expenditures, and in recent years the major project has been an intense legal skirmish in the district courthouse between the developer, the contractor and the Government. Because of the multi-faceted claims, charges and defenses, we are now obligated to sort out esoteric legal doctrines and probably to write with too much detail. Yet, in doing so, we probably thereby mask the tragic consequences which failures of this type cause the intended beneficiaries-families of low and moderate income, for in many ways the latter are the victims of what has been at best a fiasco.

Appellant's arguments are clearly not frivolous and appellant has sustained a significant economic loss. Nevertheless appellant has failed to tip the scales sufficiently in its favor to warrant reversal. With some disquietude we will affirm the district court's judgments in both cases.

I. FACTS

On October 1, 1973, the Government of the Virgin Islands, in pursuit of its goal to provide much needed moderate income housing for the Virgin Islands, entered into a written agreement with appellant Rich for the development and construction of a moderate income housing project (hereafter the Agreement) under Title 29 of the Virgin Islands Code, Public Planning and Development.

The Agreement, executed by the Commissioner of Housing and Community Renewal (hereafter the Commissioner of Housing) and signed by the Governor of the Virgin Islands, Melvin H. Evans, called for the construction, in two phases, of 320 housing units at Estate Nazareth, St. Thomas, Virgin Islands. One hundred units were designated for immediate construction during Phase I. The 220 unit Phase II was scheduled to be under way within two years of the contract date. Each phase was scheduled for completion two years after the start of construction. The Government was to sell the land at Estate Nazareth to Rich for $7,000 per acre, including the cost of stipulated site improvements. Site improvements were specified as all work more than five feet from the exterior of constructed units, including but not limited to sewers, paved roads, parking areas, grading, walks, lighting, electrical service, drainage, and sewer systems.

The selling price of two-bedroom units was set at $22,050.00, three-bedroom units at $23,525.00 and four-bedroom units at $25,200.00. To secure its obligation to buy unsold units, the Government agreed to set up a $250,000.00 escrow fund for purchasing such units and making site improvements. The $92,400.00 which Rich agreed to pay for the land at Estate Nazareth also was to be deposited in this fund. An escrow fund, however, was never actually established by the Government.

Quit claim deeds for Estate Nazareth were delivered by the Government to Rich on August 21, 1974. Rich received a Notice to Proceed with Phase I from the Commissioner of Housing on August 22, 1974. Thereafter, on August 28, 1974 Rich engaged Heyl to act as general contractor for Phase I of the proposed development. The agreement between Heyl and Rich required Heyl to "substantially complete" all work within one year of receiving a Notice to Proceed from Rich. If Heyl failed to do so liquidated damages of $150.00 per day were to be paid by Heyl to Rich.

Rich's contractual obligation required it to pay Heyl monthly progress payments which were set at ninety per cent of the contract sums allocable monthly to labor and materials and equipment used and in storage. Payments were contingent upon Rich receiving certificates of payment from the project architect after he had approved Heyl's applications for payment. Heyl began billing Rich in November, 1974 and by April 30, 1975 had billed Rich for $270,848.31. No payments in fact were ever made by Rich to Heyl.

Several weeks after concluding its agreement with Rich, Heyl received Notice to Proceed as of September 20, 1974. Although Heyl assembled labor, equipment and materials to begin work on the project, construction could not proceed because the requisite building permit was not issued by the Government. The Virgin Islands Planning Office cited insufficient design information as its reason for rejecting efforts by Rich and subsequently Heyl to obtain the permit.

In December, 1974 Rich agreed to delay Heyl's "proceed date" until January 6, 1975, and received from the Government an indefinite extension of its own proceed date until a building permit was issued. Rich then notified Heyl that the Government's delay in processing the building permit was affecting its financial arrangements and causing a delay in its processing of contract payments. Despite approval of the housing development plan by the Virgin Islands Planning Office on January 2, 1975, and its recommendation that a building permit be issued, the permit remained unissued. Citing unresolved questions about Government funding for project improvements, the Commissioner of Public Works informed Heyl in a letter dated April, 1975 that no permit could be issued.

Meetings in April and August, 1975 between Rich and the Government, including then Governor Cyril King, who, in January, 1975, had succeeded Governor Evans in office, failed to move forward what until then, with the exception of $50,000.00 advanced by the Department of Housing to the Department of Public Works for preliminary road construction, was largely a "paper" project. Realization of the project became even more unsure when Governor King objected to certain design features of the units, the density of the project and a number of contract provisions which he thought unfairly burdened the Government. In September, 1975, the Government of Cyril King disavowed responsibility for "alleged 'unobserved' agreements consummated years prior to assuming office." 1 Shortly

thereafter Heyl, having received no payments on its contract, brought suit against Rich in district court for breach of contract. Rich followed by asserting third party claims and a separate breach of contract action against the Government.

II. RICH v. THE GOVERNMENT

Because it was Rich's 1973 agreement with the Government which precipitated both actions, we begin with Rich's claims against the Government rather than Heyl's breach of contract action against Rich.

A. The Pleadings Maze

At the outset we are confronted with a strenuously pressed procedural objection that either the Government did not move to amend its answer to assert the defenses on which it ultimately won below, or that it was an abuse of discretion by the trial court to allow belatedly the challenged amendments. The pleading style and trial tactics of the Government were not a model of expedition and clarity, but apparently the trial judge grasped the issues and the appellant should have as well. Nevertheless we must trace...

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