Nest & Totah Venture, LLC v. Deutsch, s. 09–CV–1149

• Decision Date: 01 December 2011
• Docket Number: Nos. 09–CV–1149,10–CV–261.,s. 09–CV–1149
• Citation: Nest & Totah Venture, LLC v. Deutsch, 31 A.3d 1211 (D.C. 2011)
• Parties: NEST AND TOTAH VENTURE, LLC, Appellant/Cross–Appellee, v. Daniel DEUTSCH, et al., Appellees/Cross–Appellants.
• Court: D.C. Court of Appeals

31 A.3d 1211

NEST AND TOTAH VENTURE, LLC, Appellant/Cross–Appellee,

v.Daniel DEUTSCH, et al., Appellees/Cross–Appellants.

Nos. 09–CV–1149

10–CV–261.

District of Columbia Court of Appeals.

Argued Jan. 25, 2011.Decided Dec. 1, 2011.

Roger D. Luchs, with whom Richard W. Luchs, Washington, DC, was on the brief, for appellant/cross-appellee.

Thomas F. Murphy, with whom Robert E. Greenberg, Washington, DC, was on the brief, for appellees/cross-appellants.

Before FISHER, Associate Judge,^* REID, Associate Judge, Retired,^** and TERRY, Senior Judge.REID, Associate Judge, Retired:

This case involves a contract for the purchase and build-out of a dental office in a condominium building, a lawsuit for breach of contract, a counterclaim for construction coordination fees, and a motion for attorneys' fees. Appellant, Nest & Totah Venture, LLC (“NTV”), appeals the trial court's finding of its liability for breach of contract, and the court's decision regarding the award of construction coordination fees. Appellees, Drs. Daniel Deutsch, Marc Doctors, and Sherman Telis, partners in the Washington Center for Dentistry, PC (collectively, “WCD”), cross-appeal the trial court's decision pertaining to the award of attorneys' fees. For the reasons stated below, we affirm the judgment of the trial court with respect to the breach of contract and construction coordination fees, but we remand its judgment regarding the award of attorneys' fees, with instructions to award WCD the total sum of $100,000 in attorneys' fees,—that is, the additional sum of $56,907 which it subtracted from the contract's $100,000 liability cap, without prejudgment interest.

FACTUAL SUMMARY

Events Prior to WCD's Lawsuit

The record reveals that NTV owns a condominium building located at 1430 K Street, in the Northwest quadrant of the District of Columbia. On June 6, 2006, NTV (represented by its founder and manager, Nicole T. Totah) and WCD (represented by Dr. Deutsch) executed a Purchase and Sale Agreement (“contract”) for Unit 800 (“Unit”) to house WCD's dental practice. The units in the building were sold in “shell form,” which meant that they were unfinished at the time of purchase. Under Section 7.8 of the contract, a purchaser could elect to build out the unit (“Purchaser Build Option”), or could choose to have NTV build out the unit (“Seller Build Option”). WCD selected the Seller Build Option on June 19, 2006.¹

Although WCD selected the Seller Build Option, it preferred its own contractor, the John Valentine Company (“Valentine”), due to Valentine's experience in building out dental offices. Consequently, Dr. Deutsch met with Karen Powell (Valentine's owner) and Ms. Totah to work out an agreement that would allow Valentine to act as the general contractor for the Unit. The parties agreed that Valentine would perform all of the general contractor duties for the WCD job. To accomplish this end, Valentine would subcontract with NTV's general contractor, Kfoury Construction Group (“Kfoury”), and Kfoury would retain its role as the Designated Contractor. Valentine and WCD memorialized their arrangement in a letter agreement, dated October 22, 2006, approving certain costs.² However, neither NTV nor Kfoury entered into a contract with Valentine. NTV and Kfoury executed their agreement in November 2006, for the Build–Out Work for the WCD Unit; this agreement specified that “[t]he Contractor [Kfoury] shall achieve Substantial Completion of the entire Work not later than February 1, 2007.” Drs. Deutsch, Doctors, and Telis signed (on November 10, 2006) a letter dated November 2, 2006, which stated, in part: “Please indicate your approval and agreement with [NTV] executing a contract with Kfoury Construction Group to construct the Build–Out Work for Unit 800....” (“November Addendum”).

The Build–Out Timeline extended from August 21, 2006 through February 1, 2007, when the Build–Out Work was to be “Substantially Complete.” ³ However, as the construction work unfolded, the February 1, 2007 substantial completion date became an issue. On January 2, 2007, WCD sent NTV a letter stating that the February 1, 2007 substantial completion date was no longer realistic, as the Build–Out Work would not likely be complete by then. Instead, WCD advised that it “anticipate[d] a Closing Date on or about February 28, 2007.” ⁴ On January 17, 2007, NTV replied to WCD, pointing out that WCD was responsible for any delays in the substantial completion of the Build–Out Work beyond February 1, 2007. NTV alleged that “[t]he build [-]out was scheduled to be completed by February 1, 2007 per the [contract],” and if not, WCD would be “responsible for the delay and ... required under the [contract] to pay [NTV's] costs resulting from the delay.” ⁵ WCD's refusal to do so, NTV alleged, would result “in default [.]” If the Unit was complete, NTV contended that WCD “must close or ... be in default of the [contract].”

On January 22, 2007, Ms. Totah sent a letter to Charles Joch, WCD's architect, requesting that he inspect the Unit and provide a written opinion by January 26, as to whether the Unit “will be substantially complete by February 1, 2007.” On January 26, after performing his inspection, Mr. Joch notified Ms. Totah that he did not consider the space to be Substantially Complete. Ms. Totah then requested that her own architect, Aaron Thoren, inspect the space to determine whether it was Substantially Complete. Mr. Thoren performed his inspection on January 31, 2007, and sent a memorandum to Ms. Totah notifying her that he considered the Unit Substantially Complete. NTV promptly requested that WCD proceed to closing on February 6, 2007. On February 6, 2007, WCD's attorney sent a letter to Ms. Totah objecting to the Closing Date as premature, as the Unit was not secure, thereby preventing WCD from installing its dental equipment. Ms. Totah claimed that NTV's carrying costs would be $56,907 if it extended the Closing Date to February 28, 2007. The parties agreed that WCD would place $56,907 in an escrow account while they worked to resolve “the dispute over whether substantial completion ha[d] occurred or the respective parties' liability for delay damages under the contract....” The parties agreed on February 9, 2007, that they would proceed to closing on February 28, 2007, regardless of whether the space was Substantially Complete at that time. The parties closed the sale of the Unit on March 1, 2007.

WCD's Lawsuit and NTV's Counterclaim

WCD brought an action in Superior Court against NTV alleging breach of contract. WCD asserted that NTV breached the contract when it demanded that WCD close prior to the substantial completion of the Unit, as “[n]either the base building nor the Unit was at a state of Substantial Completion as of February 1st.” WCD sought to recover the escrow funds, lost opportunity costs, nominal additional damages, attorneys' fees pursuant to the contract's provisions pertaining to the prevailing party, litigation costs, and prejudgment interest.

NTV counterclaimed, alleging, in part, that WCD breached Section 9.1 of the contract by failing “to settle on the[ ] purchase of the Unit within five days of receipt of notice from Defendants that construction of the Unit was substantially completed.” NTV stated that WCD's failure to close caused it to incur a month's worth of “carrying charges,” totaling $60,479.56. Further, NTV alleged that WCD breached § 7.10(c) of the contract by failing to provide a full accounting of the Build–Out Costs for which it had agreed to pay NTV 5% in construction coordination fees. NTV sought damages “in the amount of $60,479.56, 5% of its build-out costs as set out in the [c]ontract, interest at the statutory rate, from February 1, 2007, reasonable attorneys['] fees, and costs.”

The Trial

The evidence at trial was voluminous, consisting of seven days of testimony before the Honorable Judith Macaluso, and the introduction of numerous exhibits. WCD presented as its witnesses Dr. Deutsch, Charles Joch, its architect; Ms. Powell, and Delmar Joseph Luce, its construction expert. NTV called as its witnesses Sally Levitt, an interior designer of medical and dental offices and WCD's project manager for the interior design of the Unit; Ms. Totah, Dr. Deutsch, and Aaron Thoren, NTV's architect. The testimony primarily concerned two major issues: (1) substantial completion—what constitutes substantial completion under the contract documents and modifications, the agreed upon date for substantial completion, the certification of completion by the architect, and the relationship between what NTV called Kfoury work and nonKfoury work to substantial completion; and (2) the construction coordination fees due and owing to NTV.

The Trial Court's Decision

In an extensive twenty-one page decision and order of judgment, the trial court concluded that NTV breached its contract with WCD by “(1) prematurely declaring the project was Substantially Complete, (2) demanding that WCD proceed directly to closing, and (3) requiring WCD to place funds in escrow as a condition to closing on March 1, 2007.” The court dismissed NTV's counterclaim as it related to WCD's alleged breach “based upon failure to close on time....” The court awarded WCD the escrow funds plus interest, and 80% of its attorneys' fees, because it was the “substantially prevailing party.” However, the court found that WCD was liable to NTV “for 5% of certain build-out costs,” which were “unrelated to the controversy existing at the time the escrow fund was established.”

ANALYSIS

In reviewing judgments rendered from bench trials, “we address legal issues de novo ”; and although we may review the trial court's factual findings, we will reverse those findings “only if they are ‘plainly wrong or without evidence to support [them].’ ” Jemison v. National Baptist Convention, USA, Inc., 720 A.2d 275, 281 (D.C.1998) (alteration in original) (quoting D.C.Code § 17–305(a) (1997)); see also ...