In re Chantilly Const. Corp.
| Decision Date | 08 January 1985 |
| Docket Number | Bankruptcy No. 82-01571-A,Adv. No. 83-0303-A. |
| Parties | In re CHANTILLY CONSTRUCTION CORPORATION, Debtor. CHANTILLY CONSTRUCTION CORPORATION, Plaintiff, v. JOHN DRIGGS COMPANY, INC., and The Aetna Casualty and Surety Company, Defendants. |
| Court | Bankr. V.I. |
Robert G. Watt, David C. Romm, Watt, Tieder, Killian & Hoffer, McLean, Va., for debtor.
Stephen J. Johnson, Andrew D. Ness, Lewis, Mitchell & Moore, Vienna, Va., for defendant, John Driggs Company, Inc.
John F. Mardula, Vienna, Va., for John Driggs Co., Inc. and the Aetna Casualty and Surety Co.
MARTIN V.B. BOSTETTER, Jr., Bankruptcy Judge.
This matter arises upon the filing of a motion for summary judgment by John Driggs Co. ("Driggs"), defendant herein. On June 14, 1983, Chantilly Construction Corporation ("Chantilly" or "debtor") filed a multi-count complaint against Driggs. The genesis of debtor's complaint concerns a construction contract on Interstate Highway I-66 ("I-66") that Driggs entered into as a prime contractor with the Virginia Department of Highways and Transportation ("VDH&T"). Chantilly was one of several subcontractors hired by Driggs on the I-66 project.
In a previous opinion, the Court has examined in detail the relationship between Driggs and Chantilly pursuant to Chantilly's motion to disqualify defendant's counsel because of a perceived conflict of interest. In an extensive opinion entered on April 25, 1984, this Court denied debtor's motion. In re Chantilly Constr. Corp., 39 B.R. 466, 473 (Bankr.E.D.Va.1984). The ruling here, however, requires that we review once again some of the history of this case.
On December 1, 1977, Driggs entered into a construction contract with the VDH&T for work to be performed on a section of I-66. Four days later, Driggs contracted with Chantilly as one of eight subcontractors eventually hired for the project. Under the terms of the subcontract, Chantilly was to construct a box culvert. Various aspects of the entire project were delayed, and the instant parties initially attributed the delays to each other. However, on March 15, 1982, Chantilly and Driggs entered into a Release, Liquidation and Consolidation Claim Agreement ("Claim Agreement"). In the Claim Agreement, Chantilly and Driggs agreed to mutually release each other from any claims arising from the I-66 project and to look to the VDH&T for additional compensation as the entity ultimately responsible for the delays.
As this Court held previously, the Claim Agreement indicates the parties intended that Driggs be responsible for presenting to the VDH&T the position of all of the subcontractors with respect to their entitlement to recover damages resulting from the delay. In re Chantilly Constr. Corp., 39 B.R. at 472. Each of the subcontractors was responsible for presenting and supporting its individual amount of damages claimed. Id. The total amount of the consolidated claim was $11,136,832.00. Chantilly's claim of $341,842.00 constituted 30.6% of the total consolidated claim.
In the latter part of 1982, the VDH&T denied responsibility for any compensation pertaining to Chantilly's portion of the consolidated claim. The VDH&T indicated that the work to be performed in Chantilly's subcontract was completed approximately on schedule. On January 14, 1983, Driggs and all of the subcontractors, including Chantilly, attended a meeting with the Commissioner of the VDH&T. During that meeting, the president of the debtor made a presentation concerning Chantilly's portion of the consolidated claim. Four days later, the VDH&T met with Driggs and Chantilly to discuss further Chantilly's claim. After the VDH&T requested some additional information, the vice-president of the debtor met over a two-day period with Driggs and Driggs' attorney to supplement the entitlement aspect of Chantilly's claim. Chantilly also submitted to the VDH&T, through Driggs, additional material to support the amount of damages claimed. Thereafter, Driggs accepted a settlement offer from the VDH&T on the consolidated claim in the amount of $4,700,000.00. In the settlement, the VDH&T allotted to Chantilly the amount of $2,440.00, approximately 0.7% of the amount claimed by Chantilly.
The origin of debtor's complaint sub judice is the claimed breach of both the construction subcontract and of the Claim Agreement. The Claim Agreement was entered into by Driggs and all of the subcontractors on the I-66 project. Only in one instance, not relevant to the instant matter, was the agreement modified in any way. The Claim Agreement evidences the agreement of Driggs and the several subcontractors on the I-66 project to mutually release each other from claims stemming from the project and to proceed in a cooperative manner against the VDH&T.
Debtor's complaint originally listed six counts, five against defendant Driggs and the sixth against the Aetna Casualty and Surety Company under a payment bond. Subsequent to filing its complaint, debtor agreed to the dismissal of Count VI against the insurance company. We will, therefore, address the remaining five counts against Driggs seriatim.
In Count I of its complaint, Chantilly alleges that Driggs breached the construction subcontract between the parties. Debtor alleges that Driggs failed to adequately supervise the construction site and failed to coordinate the prompt removal of active, subsurface sanitary lines and subsurface utility lines. In Count II of its complaint, Chantilly alleges that Driggs breached the Claim Agreement by failing to present Chantilly's claim to the VDH&T in good faith. In Count III, Chantilly alleges that Driggs further breached the Claim Agreement by failing to make a fair and reasonable payment to Chantilly from the $4.7-million settlement negotiated with the VDH&T.
Count IV of debtor's complaint contains allegations that Driggs failed to pay for the full value received from Chantilly's performance. In Count V of its complaint, Chantilly alleges that by failing to pay a reasonable amount for Chantilly's claim Driggs breached a fiduciary duty owed to the debtor as its agent having the responsibilities for submitting and supporting debtor's claim to the VDH&T.
Initially, Chantilly argues that Driggs may not cite as a defense to any of the counts of the complaint the mutual release contained in the Claim Agreement. Debtor's position is based on its allegation that Driggs breached the Claim Agreement by failing to present Chantilly's claim to the VDH&T in good faith. In response, Driggs states that the Claim Agreement is a severable contract. Thus, even if a breach of Driggs' obligation to argue Chantilly's entitlement to damages occurred, that breach would have no effect on the validity of Chantilly's release of all claims against Driggs arising from the subcontract. Driggs asserts that the Claim Agreement illustrates the intent of the parties first to settle their differences and mutually release each other and second to proceed thereafter only against the VDH&T.
Driggs maintains further that the parties exchanged part performances as agreed equivalents. Driggs paid Chantilly $14,539.02 as the balance due on the subcontract price of $482,953.05, and each party released the other. Driggs argues that this portion of the Claim Agreement constituted "agreed equivalents" and maintains that the release remains enforceable even assuming that Driggs failed to perform under some other portion of the Claim Agreement. Driggs correctly asserts that Virginia law has adopted such an analysis. See American Chlorophyll, Inc. v. Schertz, 176 Va. 362, 372-73, 11 S.E.2d 625 (1940).
Chantilly also questions the good faith of Driggs in entering into the Claim Agreement. The Claim Agreement premised that the parties agreed that all of the claims Chantilly was presenting through Driggs arose solely from VDH&T action or inaction. Yet, when questioned, Mr. John Driggs who signed the Claim Agreement on behalf of defendant indicated that he believed Chantilly was responsible for much of the delay. Moreover, Chantilly asserts it was never informed that Driggs had a position other than that indicated in the Claim Agreement. Additionally, Chantilly argues that certain phrases in the Consolidation Agreement such as "Driggs agrees to pursue . . . relief . . . to the extent commensurate with good contract administration" or "in accordance with sound contract administration" must be evaluated in light of the surrounding circumstances to determine what the parties intended by the use of the words "good" and "sound". See Western Geophysical Co. v. Bolt Assocs., Inc., 285 F.Supp. 815 (D.Conn.1968).
Driggs responds to the latter two points in the following manner. Initially, with respect to the "good faith" argument, Driggs maintains that Mr. Driggs' personal opinion at the time of the execution of the Claim Agreement is irrelevant. Driggs argues that an unexpressed state of mind is immaterial because the acts and words of a party reasonably interpreted to manifest an intent to agree are the essential elements for the formation of a contract. Secondly, Driggs distinguishes the Western Geophysical case cited by Chantilly. In the cited case, a party was to use "best efforts to use and promote worldwide licensing and use. . . ." The District Court found the phrase to be so vague and open-ended that parole evidence was required to determine the scope of the intended obligation. Id. at 818. Driggs argues that its obligation to pursue the consolidated claim "to the extent commensurate with good contract administration and optimum recovery on the claims as a whole" is of a much narrower scope and parole evidence is not required.
Count I—Driggs' Alleged Breach of the Subcontract.
Instead of addressing the merits of debtor's allegations in the first count of the complaint, Chantilly's memorandum in opposition to the summary judgment motion contains...
To continue reading
Request your trial