Salem Engineering and Const. Corp. v. Londonderry School Dist., 80-503
| Decision Date | 12 May 1982 |
| Docket Number | No. 80-503,80-503 |
| Citation | 122 N.H. 379,445 A.2d 1091 |
| Parties | , 4 Ed. Law Rep. 764 SALEM ENGINEERING AND CONSTRUCTION CORPORATION v. LONDONDERRY SCHOOL DISTRICT. |
| Court | New Hampshire Supreme Court |
James A. Connor, Manchester, by brief and orally, for plaintiff.
Soule, Leslie, Bronstein & Zelin, Salem (Barbara F. Loughman, Salem, on brief and orally), for defendant.
This is an action for breach of a building construction contract. The Trial Court (Wyman, J.) approved a Master's (Mayland H. Morse, Jr., Esq.) report which found the defendant, Londonderry School District, liable to the plaintiff, Salem Engineering and Construction Corporation, in the amount of $275,000 for direct and consequential damages resulting from the defendant's failure to pay the balance due under its contract. We affirm the award of direct damages but reverse the award of consequential damages.
In February 1977, the plaintiff construction company entered into a standard American Institute of Architects contract with the defendant school district. According to the terms of the contract, the plaintiff was to construct an addition to the Londonderry High School for the sum of $2,530,500. The contract required the plaintiff to complete the construction substantially by June 1, 1978, and the conditions of the contract provided that "[a]ll time limits ... are of the essence ...."
Numerous delays occurred during the course of the construction. At the start of the construction, the plaintiff encountered unexpected ground conditions which impeded the progress of the work. Further delay resulted from the issuance of several change orders and from the tardy delivery of heating, ventilating, and air conditioning (HVAC) units. Although certain HVAC units arrived at the construction site in February 1978, the plaintiff intended to install the units at a later date and sent them to Lawrence, Massachusetts for storage. Shortly thereafter, a truck carrying the HVAC units from Lawrence back to the construction site crashed into a highway overpass, destroying three of the units. Replacement units did not arrive until June 27, 1978. Finally, additional delay resulted when a dispute arose concerning the electrical subcontractor's responsibility for the HVAC wiring. As a consequence of these events, the plaintiff failed to complete the project by the June 1, 1978 deadline, and the work continued through the summer of 1978.
After the June 1, 1978 deadline had passed, the electrical subcontractor became embroiled in a second dispute with the plaintiff. The subcontractor alleged that it had not received payments from the plaintiff for several months. Thus, on June 9, 1978, the electrical subcontractor walked off the job. Six days later, the subcontractor returned to work when the defendant, over the plaintiff's protests, began to issue joint checks payable to the subcontractor, its bonding company, and the plaintiff.
In view of the delays in the construction work, school officials believed that the building would not be ready for occupancy on September 8, 1978, the date originally planned for the opening of school. Consequently, on August 26, 1978, they decided to postpone the opening of school until September 18. Although various work continued through December of 1978, a certificate of substantial completion was issued on September 5, 1978.
The defendant seasonably paid the plaintiff $2,418,363 of the aggregate contract sum, which had increased to $2,597,963 as a result of the incorporation of several change orders into the original contract. In November of 1978, the plaintiff requisitioned payment of the remaining $179,600 of the contract price. The defendant, however, claimed that it had incurred damages from the late opening of school and from defects in the construction work, and refused to pay the requested sum.
During the fall of 1978, the financial condition of the plaintiff company deteriorated. According to the master's findings, the New England Merchants Bank discontinued the plaintiff's $250,000 line of credit in December 1978. The bank applied approximately $221,000 from the plaintiff's bank accounts, against the plaintiff's outstanding loans. This action resulted in the nonpayment of numerous payroll checks which the plaintiff had written earlier against the depleted accounts. The termination of the plaintiff's line of credit virtually destroyed its ability to obtain bonding for future construction projects.
The plaintiff brought suit against the defendant, claiming that the defendant had wrongfully withheld the balance due under the contract, and that this action proximately caused the loss of its line of bank credit and its ability to obtain bonding. The defendant denied these allegations and sought to set off against its remaining obligation various damages, including losses allegedly resulting from the delay in the opening of school.
The master found that the defendant had improperly issued the joint checks, and that the plaintiff was chargeable neither for failing to comply with the June 1 deadline, nor for the delay caused by the destruction of the HVAC units. The master ruled that the defendant's retention of funds constituted a breach of the contract and that the plaintiff was entitled to recover the amount withheld. Although he specifically found that the defendant's actions had not caused the loss of the plaintiff's line of credit, the master awarded the plaintiff $100,000 as consequential damages for harm to its professional reputation and for deterioration in its ability to maintain "a going concern status." The master found that the opening of school could have occurred on schedule, and that the defendant had acted unreasonably in delaying the opening. He attributed the late opening solely to the defendant's actions, and rejected its claims for set-off.
The superior court entered a decree in accordance with the master's report. The court denied the defendant's motion to set aside the verdict, and the defendant brought this appeal.
The defendant first challenges the master's award of consequential damages. The defendant argues that the award of consequential damages was invalid because the proper measure of damages for breach of a contract to pay money is the contract price plus interest. In the alternative, the defendant argues that even if the consequential damages were permissible, the plaintiff was not entitled to these damages because they were not reasonably foreseeable at the time of the contract.
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