In re Northup-Johnson, Inc.

• Decision Date: 30 November 1981
• Docket Number: Bankruptcy No. 79-00918G.
• Citation: 15 BR 767
• Parties: In re NORTHUP-JOHNSON, INC. a Maryland Corporation, Debtor.
• Court: U.S. Bankruptcy Court — District of Maryland

15 B.R. 767 (1981)

In re NORTHUP-JOHNSON, INC. a Maryland Corporation, Debtor.

Bankruptcy No. 79-00918G.

United States Bankruptcy Court, D. Maryland.

November 30, 1981.

Philip J. McNutt, Bethesda, Md., Trustee.

Barbara Sarshik, Washington, D.C., for The Law Company.

Richard H. Gins, Washington, D.C., for debtor.

HENRY D. EVANS, Bankruptcy Judge.

STATEMENT OF FACTS

The basic facts of this matter are undisputed. Northup-Johnson, Inc. (henceforth Northup-Johnson) contracted with Forestville Associates to do the site grading work on a shopping mall. Northup-Johnson began work on the site in late 1978 and worked on it periodically until July 13, 1979, when it left the job. In early 1979 Northup-Johnson requested and was paid Ninety-Three Percent (93%) of its contract price, but in May of 1979 it requested payment of Ninety-Eight Percent (98%) of the total contract and that payment was never made. In addition to its contract work, Northup-Johnson performed certain mining and mixing extras pursuant to an agreement under which The Law Company absorbed Sixty-Five Percent (65%) of the charges and Northup-Johnson assumed the other Thirty-Five Percent (35%). On May 29, 1979, Northup-Johnson filed for relief under Chapter XI of the Bankruptcy Act.

Subsequently, The Law Company and Forestville Associates filed claims against Northup-Johnson. The Trustee objected to these claims and filed counterclaims. Forestville Associates assigned its claims to The Law Company and the proceedings were consolidated. The Law Company's claim is in the amount of Three Hundred Fifty-Three Thousand Three Hundred Sixty-One and 46/100 Dollars ($353,361.46) plus attorney's fees incurred since January 31, 1981. The Trustee's counterclaim is in the amount of Thirty-Nine Thousand Six Hundred Thirty-Two and 88/100 Dollars ($39,632.88). The Law Company has admitted Twenty-Five Thousand Seven Hundred Sixty-One and 37/100 ($25,761.37) of that amount.

CONCLUSIONS OF LAW

At the commencement of the trial on the merits, Judge Goldburn ruled that if any post-petition damages were established, they would be treated as a priority claim (Tr. at 4).

The questions that arise from these undisputed facts are: (1) whether The Law Company has standing to sue Northup-Johnson although The Law Company was not a signatory of the contract; (2) which party breached the contract; (3) whether the breach was the proximate cause of damage to the non-breaching party, and (4) what the amount of damages was.

The Law Company has standing to sue in this matter. Sections 3, 8, 9, 10, 13, 14, 15, 18, and 23 of the trade contract outline The Law Company's rights and obligations. Most specifically, § 3 of the trade contract allows The Law Company to terminate the contract, complete Northup-Johnson's work, and charge Northup-Johnson with the costs of completion, if Northup-Johnson breached the contract. It is this last contractual right that The Law Company seeks to enforce in this proceeding. Because The Law Company was mentioned specifically in the contract and was to receive direct benefits under the contract, it was an intended third-party beneficiary and could, under Maryland law, sue although it was not a signatory. See Spates v. Spates, 267 Md. 72, 77, 296 A.2d 581 (1972).

Even if The Law Company were not a third-party beneficiary of the original contract, Forestville Associates assigned its rights to The Law Company. Under Maryland law, a party can assign a cause of action ex contractu to another party even if the assignee is not a party to the agreement, is not in privity with the signatories, and the original contract itself was not assignable because it involved personal services. See DuPont de-Bie v. Vredenburgh, 490 F.2d 1057, 1060 (D.Md.1974); Motor Vehicle Security Fund v. All Coverage Underwriters, Inc., 22 Md.App. 586, 614, 325 A.2d 115 (1974).

The next question is whether Northup-Johnson breached the contract when it left the job on July 13, 1979, or whether The Law Company breached the contract earlier when it refused to pay Northup-Johnson up to Ninety-Eight Percent (98%) of the contract price. As the Trustee points out, in order to enforce a contract right, the complaining party must substantially perform under the contract. In this case, The Law Company had paid up to Ninety-Three Percent (93%) of the contract price, thereby showing substantial performance and cooperation. Delay in paying a later installment where the amount of work done is disputed is not a breach of the contract, especially when The Law Company contended that the site had deteriorated and that, therefore, more than Five Percent (5%) was disputed.

Breach occurred when Northup-Johnson left the job site on July 13, 1979. The Trustee admits that the work was not totally complete at that time, although the actual degree of completion is in dispute.

The breach occurred when Northup-Johnson left the job site without completing its contractual duties. The Law Company was forced to hire additional personnel and machinery to complete the site grading. Damages in the form of completion costs were proximately caused by Northup-Johnson's failure to complete its job. The Trustee attempted to establish that excessive rainfall, rather than Northup-Johnson's breach, caused the damage on the site. Northup-Johnson's responsibility was to complete its grading work properly, and the contract contained no allowances for weather conditions. Cf. Gamble v. Woodlea Construction Co., Inc., 246 Md. 260, 265, 228 A.2d 243 (1967) (contract clause providing for unusual...