I. W. Berman Properties v. Porter Bros., Inc.

• Decision Date: 08 September 1975
• Docket Number: No. 216,216
• Citation: 344 A.2d 65,276 Md. 1
• Parties: I. W. BERMAN PROPERTIES v. PORTER BROTHERS, INC.
• Court: Maryland Court of Appeals

Page 1

276 Md. 1

344 A.2d 65

I. W. BERMAN PROPERTIES v. PORTER BROTHERS, INC.

No. 216.

Court of Appeals of Maryland.

Sept. 8, 1975.

Richard I. Kovelant, Annapolis and Audrey E. Melbourne, Laurel (Melbourne, Fried & Goldman, Laurel, and Joseph G. Finnerty, Jr. and Piper & Marbury, Baltimore, on the brief), for appellant.

Glenn W. Trimmer, Baltimore (Robert W. Fox and Rollins, Smalkin, Weston & Andrew, Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., and SINGLEY, SMITH, DIGGES, LEVINE, ELDRIDGE and O'DONNELL, JJ.

O'DONNELL, Judge.

This controversy presents questions of whether the parties-the owner and a contractor-to two separate contracts for the construction, respectively, of a group of stores and of a parking deck in a shopping center, agreed to a novation of contract, whether in a suit at law to recover the monies owed, the contractor was properly allowed prejudgment interest and whether interest upon the judgment entered was allowable upon the interest included in the judgment.

I. W. Berman Properties (Berman), the appellant, the owner of the shopping center in Laurel, Maryland, planned to erect a third section of that shopping center and construct thereon a single tier parking deck. Porter Brothers, Inc. (Porter), the appellee, which had previously constructed a building in the shopping center for the appellants had had constructed other improvements elsewhere for Berman was contacted. Following negotiations over a period of from four to six months the parties entered into two separate written contracts, both dated June 9, 1970.

The first contract-for the construction of the parking deck-provided that the appellee would perform such work in consideration of the payment to it of '(a) sum equal to 5% of all construction costs incurred by the Contractor from his Sub-Contractors and also from all work performed by the Contractor's field crews.' This agreement was amended on June 21, 1970 to provide that the total costs to be paid by the owner, including the contractor's (cost plus) fee would not exceed 'in the aggregate' the sum of $210,389. While the construction of the parking deck was underway, on January 11, 1971 additional work in the amount of $8,211 was authorized, thus fixing the owner's total liability under that contract at $218,600. The second contract-for the construction of an appurtenant section of stores in the shopping center also provided that the appellee be paid on a cost-plus basis-'(a) sum equal to 10% of all construction costs incurred,' etc.

Both contracts on the standard form of the American Institute of Architects, contained identical provisions pertaining to the schedule of payments to the appellee. Porter was to deliver to Berman's architect, between the first and seventh of each month, a statement 'showing in detail and as completely as possible all monies paid out by him on account of the cost of the work during the previous month for which he is to be reimbursed.' Upon approval, the architect was to 'promptly issue certificates to the Owner for all such (payments) as he approves, which certificates (were) payable on issuance.'

The appellee began work on the store construction shortly after the execution of the agreement on June 9, 1970; construction on the parking deck began shortly after the execution of the amended contract on July 21, 1970. During the course of construction certain problems developed between Berman and Porter in regard to the allocation of costs to the respective projects and the documentation of those costs. Berman was apprehensive about the ultimate costs of both projects. Discussions ensued between the parties in the late fall of 1970 concerning the possibility of combining both projects and making them the subject of a new contract. During the period December 3 to 10, 1970, after the store drawings had been completed, Porter undertook to 'firm up' the proposals received from its subcontractors in order to better ascertain the estimated final total costs under both contracts. After meetings held on December 8 and 10, 1970, Porter, after consultation with Berman's project manager, submitted a 'work sheet' to Berman under which, as an 'educated guess'-'because of all the unknowns and variables,' it set forth a budget estimate in the total amount of $840,300 for completion of both construction projects. Both the appellant and appellee agree that this proposal was not accepted by the appellant; Mr. Berman felt that the amount was excessive and there was no 'upset price' specified. ¹ On December 19, 1970, the parties met again, at which time Berman, hoping to reduce costs, deleted certain items from the project, namely: some macadam paving, the substitution of tile for carpeting, the deletion of a wiring system for music and the elimination of planting and landscaping.

By a letter dated the same day, addressed to Porter and signed by Vincent Leahy, general manager of the appellant, Berman wrote as follows:

'As a result of our meeting today we agreed to proceed as follows:

'1. Both the building and parking lot deck will be combined and treated as one job and the total cost to be $810,000.00 tops. Whatever has been paid to date to you is to be credited against this price.

'2. We will receive monthly detailed accountings as we have in the past.

'3. Any additions to the work requested and or approved by us will be added at a cost plus ten percent basis and any deletions from the work will be deducted in the same way.

'4. At the end of the job after a complete accounting on a total cost of the job plus ten per cent, any savings on the above $810,000.00 will be passed on to us.' (emphasis added)

The construction continued, apparently without any reference to the proposal set forth in the letter of December 19, 1970 with the appellee periodically submitting its bills and supporting documents, and the architect approving the payments up until June, 1971, when the parking deck had been constructed and the 'shells' of the stores had been erectee, but the tenants had not yet been secured. There was no further work for Porter to perform. When Porter in that month submitted its last invoices and made a request for payment, Berman refused to pay, and Porter instituted suit in the Circuit Court for Prince George's County on January 25, 1972. After extensive pleadings the case was tried in that court before Judge William B. Bowie, without the intervention of a jury, under a second amended declaration filed on August 13, 1974, in which the appellee alleged hat the appellant had breached its contracts by refusing to pay as provided in the two separate agreements, alleged that it had performed all the conditions of the contracts and had properly submitted its applications for payment. It requested that interest be allowed on the unpaid balances from August 1, 1971.

It was stipulated between the parties, prior to trial, that the total costs for the construction of both projects did not exceed $848,018.03 and that Berman had paid Porter, up until June 1971, a total of $771,417.71.

Judge Bowie rejected the appellant's contention that a novation had resulted from the letter of December 19, 1970, finding that the terms of that letter never had been accepted by the appellee.

The trial court further found that a balance was due the appellee of $34,324.08 under its contract for the construction of the parking deck, and that it was due $42,276.24 under tis contract to construct the stores-a total of $76,600.32. Allowing interest as prayed at the rate of 6% per year from August 1, 1971, (amounting to $13,788.00), judgment nisi was entered on August 28, 1974 in favor of the appellee in the total amount of $90,388.32, with interest from date and costs. ²

In their direct appeal here, the appellant strenuously argues: (a) that the trial court erred in concluding that there was no subsequent agreement between the parties which amounted to a novation, thereby extinguishing the two prior contracts, (b) the trial court erred in not permitting the appellant's architect to testify that the plans were sufficiently complete to enable the builder to ascertain the costs, (c) that the lower court abused its discretion in awarding pre-judgment interest and (d) that the award of pre-judgment interest coupled with the award of interest on the judgment had the effect of compounding the interest and exceeding the legal rate of interest.

(a)

Basically, the appellant argues that the lower court should have given credibility to its witnesses, rather than those of the appellee, and should have found as a fact that there was a subsequent agreement between the parties, modifying the original two contracts. Their factual argument, set out in their brief, is as follows:

'(The) intent to enter into a new agreement, as well as the existence of the new agreement was evidenced by the following: First, both parties acknowledged that problems existed as to the proper allocation of costs and materials between the deck construction and store construction. Second, both parties acknowledged discussions concerning the combination of these two related projects into one agreement. Third, Porter secured final sub-contractor proposals during December 3-10, 1970, so that a new agreement could be entered into. Fourth, a proposal was submitted to Berman for a lump sum price of $840,000.00, which proposal was rejected by Berman because the price was too high and Berman desired an 'upset' figure. Fifth, a meeting was subsequently held wherein Berman deleted certain work from the store construction and made 'allowances for certain work yet to be performed.' Sixth, a meeting was held on December 19, 1970, wherein Berman discussed with Porter an upset price of $810,000.00 for the project. Seventh, the confirmatory letter was prepared and sent by Berman stating the agreement reached by the parties. Eighth, Porter's failur to reject this letter or otherwise indicate its non-acceptance. Ninth,...