Opinion
No. CL11-153.
September 14, 2011.
Appeal from City of Salem Circuit Court.
Travis A. Knobbe, Esq., Douglas T. Stark, Esq., Spilman, Thomas Battle, PLLC, Roanoke, Virginia.
J. Scott Sexton, Esq., Joshua C. Johnson, Esq., Gentry, Locke, Rakes Moore, Roanoke, Virginia.
Dear Counsel:
Plaintiff Building Contractor sued Defendant Husband and Wife Owners for unpaid extras that were added to their custom built home at Owners request. They contracted to have their house constructed for the total price of $1,354,500.00, on land Owners had already purchased. Their construction contract contained the following language:
The Contractor shall not begin any extra Work for which the Contractor will seek additional compensation unless it has received a written change order request signed by the Owner. It is agreed that the Owner also may order such extras, additions, alternatives or other modifications in the Work hereunder by written change order request signed by the Owner and the Contractor. No extra work will be paid for unless in writing signed by the Owner and the Contractor.
Plaintiff Contractor claims that at the request of the Owners, without either party signing a change order, it completed the home and an additional $605,693.90 worth of work on the project. The additional work included, but was not limited to, building a retaining wall, installing turret windows, adding an outdoor entertainment area with a pool, custom carpentry in the kitchen, adding and upgrading electrical and lighting in various portions of the house, decks and curtilage, and increasing the width of the exterior arches.
Owners have paid $1,575,000.00 of Contractor's $1,960,193.90 demand. That is $220,500.00 more than their original contract and is for changed or extra work on their house. Contractor claims that they still owe an additional $385,193.90 for the extras and changed work. Owners have refused to pay. Owners do not deny that they requested the extra work, or that the work was done, or that there is anything wrong with the completed construction project. Instead they argue that they should not have to pay the additional sum the Contractor is asking for the additional work and materials because:
1. There are no signed change orders as required by the contract.
2. There was no waiver of the signed change order requirement.
3. The Statute of Frauds prevents payment because the project took more than one year and requests for the additional work performed were not in writing and signed by the parties.
4. Since Owners paid some money over the amount called for in the contract, and because of certain statements made by the parties, and because of the headings on various documents, their additional payment amount to an Accord and Satisfaction.
5. There was a novation.
6. Contractor is not entitled to a quantum meruit claim because the contract is specific on the question of compensation for extra work. Owners contend that quantum meruit cannot be claimed where there is a written contract that speaks to compensation for extra work. By failing to insist on written and signed change orders, Contractor waived his right to payment.
7. The ad damnum should be reduced to the amount or close to the amount Owners paid.
8. Contractor's pleadings do not state with certainty that there was a ". . . mutual intent to modify the written contract by clear, unequivocal and convincing evidence."
Defendant Owners' responses to Contractor's Complaint were made in the form of two Special Pleas in Bar, a Motion to Reduce Plaintiff's Ad Damnum and Demurrer as to the Amounts Claimed. Plaintiff Contractor denies all of Owners legal argument and requests leave of Court to file amended answers and/or argument to some of Owner's responses. Both sides filed written memoranda and made oral argument.
FAILURE TO SIGN WRITTEN CHANGE ORDERS
Defendant Owners argue that Plaintiff Contractor waived his right to compensation for the $385,193.90 worth of extra and changed work completed on Owner's home because Contractor failed to obtain written change orders as required by the construction contract. Owners cite Main v. Department of Highways, 206 Va. 143 (1965) and Pennsylvania Electric Coil, Ltd. v. City of Danville, 329 Fed. Appx. 399 ( C.A. 4 2009) as authority for this proposition. These are public procurement cases and have no application whatsoever to the present controversy between Contractor and Owners.
The failure of the parties to enter into written and signed change orders is by no means fatal to Plaintiff's claims. Private contracting parties can mutually agree to modify provisions of their contract. That mutual agreement can be shown by parol evidence, by evidence of additional writings, or by the conduct of the parties. It is clear from the pleadings and from the argument of counsel that both parties mutually ignored the change order provision of the contract. Owners routinely requested additional and changed work done on their new house and Contractor routinely complied with their request. Owners have paid for some of the additional or changed work. Contract provisions can be modified or waived by the conduct of the parties. Cardinal Development Co. v. Stanley Construction Co. Inc., 255 Va. 300 (1998). In this case that is especially true where the conduct of the parties shows a clear and unequivocal intent to modify the terms of their written contract.
In the alternative, Owners' argument that Contractor should not recover because of the failure to comply with the change order provision, is not correct. Actually, the failure to prepare and sign change orders results in no written agreement having been reached between the parties about the extra work. Because there is no written agreement about the extra or changed work, Contractor cannot claim payment under that original written contract, nor can he insist on the original written contract's formula for payment. Instead, any payment to Contractor would be governed by whatever the parties' additional oral or modified agreement might be. If no such valid and enforceable agreement existed as to the details of payment, the law will imply a contract. "It is a general rule of law that he who gains the labor or acquires property of another must make reasonable compensation for the same. Hence, when one furnishes labor to another under a contract which, for reasons not prejudicial to the former, is void and of no effect, he may recover the value of his services on a quantum meruit." Hendrickson v. Meridith, 161 Va. 193 , 198 (1933).
STATUTE OF FRAUDS
Defendant Owners also argues that any unwritten agreement between the parties is unenforceable because it is in violation of the Statute of Frauds. This is so, they contend, because the construction project has extended longer than one year, and § 11-2 (8), Code of Virginia (1950), as amended, requires contracts not to be performed within a year to be in writing. That is a mistaken understanding of that portion of the Statute of Frauds. In reality, a contract that may be performed by either side within one year is not within the Statute of Frauds. In other words, if the possibility exists that an oral contract could be performed within one year, then the Statute of Frauds does not prevent its enforcement. Reed v. Gold, 102 Va. 37 (1903). In this case, such a possibility existed.
In the alternative, when a contract has been partially performed by the party contending that an oral agreement is valid, the Statute of Frauds is not a bar to its enforcement. "The acts relied on as part performance must be consistent with no theory other than the existence of the alleged oral contract." Pair v. Rook, 195 Va. 196, 207-208 (1953). In the instant case, Contractor alleges and argues that all his work and materials were in furtherance of the oral contract modifications. There are no allegations to the contrary. The Statute of Frauds is not a valid defense to the enforcement of an unwritten contract, whether it be for extra work or not, that has been fully performed as alleged by the Contractor.
CLEAR, UNEQUIVOCAL AND CONVINCING EVIDENCE STANDARD
Defendant Owners contend that Contractor's pleadings do not state with certainty that there was a ". . . mutual intent to modify the written contract by clear, unequivocal and convincing evidence." Owners cite the case of Cardinal Dev. Co. v. Stanley Constr. Co. Inc., 255 Va. 300 (1998) for that proposition. Succinctly, Defendant Owners have misinterpreted Cardinal. Evidence is what is presented at trial to prove what is alleged in the pleadings. In Cardinal, the court discusses the type of evidence that was presented at the trial of that case. The court held that ". . . there is clear, unequivocal, and convincing evidence in the record which shows that Cardinal and Stanley Construction intended to modify the terms of their contract and that Cardinal agreed to pay for the additional work that Stanley Construction had performed." Id at 306. Cardinal deals with the trial of the case and not the pleadings.
Rule 1:4 of the Rules of the Supreme Court of Virginia, subsection D, covers the general provisions for pleadings. Subsection D states that "Every pleading . . . shall be sufficient if it clearly informs the opposite party of the true nature of the claim. . . ." Plaintiff Contractor's complaint clearly informs Defendant Owners of the true nature of its claim.
ACCORD AND SATISFACTION
"An accord and satisfaction is a method of discharging a contract or cause of action, whereby the parties agree to give and accept something in settlement of the claim or demand of the one against the other, and perform such agreement, the `accord' being the agreement and the `satisfaction' its execution or performance." Owen v. Wade, 185 Va. 118 , 124 (1946). Defendant Owners claim to have accomplished an accord and satisfaction by novation, thereby resolving all matters in controversy between the parties.
"Novation is defined as a mutual agreement among all parties concerned for discharge of a valid existing obligation by the substitution of a new valid obligation on the part of the debtor or another." Dere v. Montgomery Ward Co. Inc., 224 Va. 277, 280 (1982). Plaintiff Contractor's argument denies the existence of any such agreement. Defendant's argument and logic requires that the Court accept Plaintiff's exhibits to be something other than what Plaintiff claims them to be. A novation is never presumed. It is a new contract. It requires that ". . . the debtor intends his offer as a satisfaction of the demand and such intention is clearly made known to the creditor and accepted by the creditor in accordance with the debtor's intention." Virginia-Carolina Electrical Works, Inc v. Cooper, 192 Va. 78, 81 (1951). The level of proof to cause a trier of fact to find a novation must be clear and satisfactory. Dere at 281. That is just another way of saying that Defendant Owner must prove that a novation exists by clear and convincing evidence.
At the very least, presentation of evidence that an accord and satisfaction occurred between the parties by novation would take almost the same amount of time as would the trial of the entire case. Defendant's claim of accord and satisfaction through a novation is really nothing more than an affirmative defense to Plaintiff's allegation that Defendant Owners breached their contract. It is not sufficient to bar the case from going forward.
AD DAMNUM
Defendant Owners have filed a Motion to Reduce Plaintiff's Ad Damnum and Demurrer as to Amounts Claimed. What they mean is that if a trier of fact accepts Defendant's conclusions as to the meaning of certain of Plaintiff's exhibits, which is contrary to Plaintiff's argument as to why the exhibits were filed, and by taking some of Plaintiff's allegations out of context, it is possible to conclude that Plaintiff is not owed anything, or in the alternative, that he is owed several hundred thousand dollars less than he sued for. Therefore, Defendants conclude that the Plaintiff's ad damnum should be reduced or eliminated entirely.
The Court is not persuaded by Defendant's reasoning on this point. To the extent that Defendants believe that this theory should be pled as an affirmative defense, they may certainly do so. It falls within the province of a jury to determine its merit. The Court declines to use it as a shortcut to limit Plaintiff Contractor's case.
CONCLUSION
For all of the reasons set forth above, the Court denies Defendants' pleas in bar, demurrer and motion to reduce ad damnum. Defendant's request for attorney fees is likewise denied. Counsel for Plaintiff should prepare an appropriate order, incorporating this letter opinion by reference, and present it for entry after first obtaining endorsement of counsel.