Mobile Turnkey Housing, Inc. v. Ceafco, Inc.

• Decision Date: 18 September 1975
• Citation: 294 Ala. 707,321 So.2d 186
• Parties: MOBILE TURNKEY HOUSING, INC., a corporation and Commercial Contractors, Inc., a corporation v. CEAFCO, INC., a corporation By and Through Max E. Miller, as its Trustee. SC. 470.
• Court: Alabama Supreme Court

Page 186

321 So.2d 186

294 Ala. 707

MOBILE TURNKEY HOUSING, INC., a corporation and Commercial Contractors, Inc., a corporation v. CEAFCO, INC., a corporation By and Through Max E. Miller, as its Trustee.

SC. 470.

Supreme Court of Alabama.

Sept. 18, 1975.

Rehearing Denied Nov. 6, 1975.

Donald F. Pierce, G. Hamp Uzzelle, III, Mobile, for appellants.

Bert S. Nettles, Mobile, for appellee.

ALMON, Justice. ^*

Respondents appeal from an adverse decree in a suit by a subcontractor against the general contractor.

In late 1968 the Mobile Housing Authority, pursuant to a program sponsored by the Housing and Urban Development Office (HUD), began to solicit bids for a housing project to be built in Mobile. The contract for 'Jesse Thomas Homes,' as the development was called, was awarded to Mobile Turnkey Housing, Inc. (Tunkey). Turnkey was incorporated by Commercial Contractors, Inc. (Commercial) for the sole purpose of developing this project. The Mobile Housing Authority transferred title to the property to Turnkey. Turnkey contracted with Commercial to act as general contractor in the construction of the project. Commercial sub-contracted with Ceafco, Inc. (Ceafco), the complainant, to do the grading and site work on the project.

Ceafco encountered soil that could not be compacted to the required density, a situation which could only be corrected by bringing in large amounts of borrow fill. The trial court found that because of the encounter with bad sub-soil Ceafco ceased work on the project on May 15, 1969.

A meeting between representatives of Ceafco and Commercial was held on May 19, 1969, at which, according to the court's findings, Commercial orally agreed to bear this extra expense. (This oral promise was disputed by Commercial.) Ceafco went back to work and Commercial submitted a request to HUD for the extra cost--$110,715.00. The Atlanta office of HUD refused this request, but the work continued and the site work was completed about the first of January, 1970.

Throughout the summer payments for the work were made to Ceafco on a periodic basis. About once a month Ceafco received payment for the work they had completed up to that point. Each time Ceafco received payment they executed a 'receipt and lien waiver' which stated that Ceafco waived and released any right they might have to file a lien against the property for work done up to the last date of payment.

Ultimately the entire project was completed and the property was conveyed back to the Mobile Housing Board. Upon Commercial's refusal to reimburse Ceafco for the extra cost, Ceafco brought this suit.

As originally brought this lawsuit joined three respondents: Turnkey, Commercial and The Mobile Housing Board. However, Ceafco later amended its complaint to strike the Mobile Housing Board.

Ceafco's complaint, as later amended, bases a claim for relief on the oral agreement allegedly made between Ceafco and Commercial on May 19 and seeks to establish a lien in the amount of $110,715.00 on the property. After the commencement of the suit, but before the case went to trial, Caefco filed a petition for bankruptcy, and Ceafco is now maintaining this suit through its trustee.

In their answer, Commercial and Turnkey set out the following defenses to the complaint:

1. that Ceafco had received full payment under the contract of February 20, 1969;

2. that the 'receipt and lien waiver' forms that Ceafco executed each time it received a periodic payment constituted waivers releasing Commercial from any liability on any claim connected with the project;

3. that the contract of February 20 stated that it was the entire agreement and any changes to it would have to be in writing (Art. XV of Contract), and that Commercial would not be liable for any extra work or material without written order (Art. IV of Contract); and

4. that, because Ceafco was already legally bound to provide borrow fill under the original contract of February 20, 1969, there was no consideration for any oral promise that might have been made between Ceafco and Commercial at the meeting of May 19.

The trial judge told the advisory jury in his charge that the doing of an act which you are already legally obligated to do is not sufficient consideration to support a contract. But an exception to this rule exists when due to unforeseen and extraordinary difficulties in performance the law must sustain the promise based upon standards of honesty and fair dealing.

Following these instructions the jury returned interrogatories to the effect that the new promise to pay by Commercial to Ceafco was supported by adequate consideration and there was not a valid release of all claims by Ceafco supported by adequate consideration.

In its final decree the court found as follows:

'Sixth: That while the Court considered and finds said written contract of February 20, 1969, to be unambiguous and required Ceafco to perform the work for which the new promise to pay additional money was made, it further finds that the respondent Commercial Contractors, Inc., made a new promise to Ceafco, Inc., to pay it additional money for the additional backfill material or borrow, and that such new promise was supported by a valid consideration; that the instant fact situation constitutes an exception to the general rule that a promise to pay additional compensation for the doing of that which the promise is already legally bound to do or perform is insufficient consideration for a valid and enforceable contract; that the instant fact situation properly comes within the 'unforeseeable difficulties exception'; that the Court recognizes the equities of the promise of respondent Commercial Contractors, Inc., to , ceafco, Inc. for additional compensation based upon what the Court finds to have been extraordinary and unforeseeable difficulties in the performance by Ceafco, Inc. of the said written contract of February 10, 1969; and that in the circumstances of this case the Court sustains the consideration for said new promise, based upon standards of honesty and fair dealing and affording adequate protection against unjust or coercive exactions. (E.g. Pittsburgh Testing Laboratory v. Farnsworth & Chambers Co., C.C.A.10th, 251 F.2d 77).

'Ninth: The Court finds that the respondents were not guilty of any misrepresentations and therefore Ceafco is not entitled to any recovery on that aspect of its bill of complaint alleging legal fraud. . . .'

Upon these findings, the court ordered that a judgment in the amount of $112,929.75 be entered against Commercial in favor of Ceafco, and decreed that a lien in this amount be placed upon monies owed by Turnkey to Commercial.

From this decree of the circuit court Commercial and Turnkey have appealed.

We view the dispositive issue to be whether the trial judge was in error in finding consideration for the new promise to pay additional money simultaneously with a finding that the original sub-contract covered the additional work encountered.

We set out certain portions of the subcontract:

'Article I--Sub-contractor shall furnish all labor, materials and equipment and perform all work necessary to complete the following part or parts of the work of the General Contractor in all respects as is therein required of the Contractor, and all work incidental thereto, namely:

'I. Job requirements of site work including:

'(a) On-site excavation

'(b) Furnishing and placing borrow fill

'(m) It is agreed that this Subcontractor will be responsible for bringing the subgrade to within 1/10th of a foot, plus or minus, in all areas including areas under building (subgrade under buildings means 8 inches below finished floor elevation).

'II. It is agreed that time is of the essence in this contract and subcontractor agrees to pursue the work in accordance with General Contractor's schedule.

'Article II--(a) Contractor shall have the same rights and privileges against the Sub-contractor herein as the Owner in the General Contract has against Contractor.

(b) Sub-contractor acknowledges that he has read the General Contract and all plans and specifications and is familiar therewith and agrees to comply with and perform all provisions thereof applicable to the work to be performed by Sub-contractor.

'EXHIBIT A

'VI. It is...