Opinion
February 8, 2008.
Appeal from Roanoke County Circuit Court — CH05-532.
Kevin P. Oddo, Esq. LeClair Ryan Flippin Densmore 10 S. Jefferson Street, Suite 1800 Drawer 1200 Roanoke, Virginia 24006
John M. Sperati, Esq. Steven D. Hedges, Esq. Nexsen Pruet Adams Kleemeier P. O. Box 3463 Greensboro, North Carolina 27402
Dear Counsel
Plaintiff electrical subcontractor and Defendant general contractor entered into a contract whereby Plaintiff agreed to complete all of the necessary electrical work, from commencement of the job through the "substantial completion date," on a grocery store being built by Defendant at a local shopping center. The substantial completion date is a term of art that refers to the date when a building project has been completed to the point that other contractors and employees can come into the store, install fixtures such as shelving, refrigeration units and other electrical devices, and complete the myriad tasks necessary to ready the store for its grand opening. The contract contemplated a six-month term from commencement to the substantial completion date. The contract also included the drawings and specifications needed to construct the store. In addition, Plaintiff entered into a second contract with Defendant to install the electric wiring, lights and fixtures for two shops being built adjacent to the grocery store.
The general contractor was responsible for setting the overall schedule as well as the weekly schedule for the various subcontractors to follow, so that the building could be finished on time. This was an important duty because subcontractors had to complete certain tasks in a timely manner before other subcontractors could come in and complete their next scheduled work. The job had to be done in sequence. The various subcontractors had to appear and finish their work assignments in a certain order. For example, the painter could not paint the ceiling until the ceiling had been installed. A plan had to be formulated for the delivery of equipment and materials, otherwise, if delivered too early, they could be in the way of, and damaged by trades trying to complete their phase of the construction. Similarly, before the floor could be poured, excavation, plumbing and electrical work that was to be under the concrete floor had to be finished. Walls, ceilings, windows and doors had to be installed so that temporary heaters could be set up. Everything had to be efficiently scheduled and the schedule had to be enforced, or the job would fall apart.
The job fell apart. The initial commencement of the project was delayed because of unsuspected geologic conditions. The plumber went into bankruptcy and quit the job. The windows and doors for the front of the store arrived at least six weeks late. Materials purchased for the job and stored on the job site were stolen. Changes were made in the project and contrary to the contract, work was done without change orders being prepared in advance. These problems caused disputes and delays. The roof was not installed in a timely manner. Almost six months into the project, the project engineer for the grocery store wrote to the general contractor and advised them that the substantial completion date would have to be changed because the front of the store was not yet closed in, portions of the roof had not been installed, there was no heat, the drywall work was only partially completed and the tile work had not yet started. Errors in the plans were discovered and work had to be redone. The date for pouring concrete was delayed so that less damage would be done to the finished floor before the store opening. Sometimes the grocery store project manager would tell the subcontractors about changes and work he wanted done without going through the general contractor. Fixtures arrived and were stored on the job site before they could be installed, causing subcontractors to slow down and work around them. All sorts of other problems, too numerous to list, kept cropping up and causing delays. The entire project was behind schedule. The substantial completion date had been extended. As a result of all of this, even though the entire project took a greater time to complete than was originally contemplated, the work required of the subcontractors became compressed and had to be done in less actual time than they had been originally given. A domino effect occurred causing all of the trades to fall behind. In some instances, because of the major delays in the construction, the grocery store project manager would tell the subcontractors about changes and work he wanted done, without going through the general contractor. This caused confusion and arguments to occur, concerning whether the subcontractors would be paid for work not requested by the general contractor.
The electrician was the subcontractor who suffered the most from the delay and subsequent speed up was the electrical contractor. These electricians were the first on the job because they had to initially install temporary power in order for other trades to begin
the construction project. They then had to remain on the job so that when a portion of the work was completed by another subcontractor, the electricians could step in and place conduit, wire and fixtures in appropriate locations to allow the next phase of the project to go forward. Almost without exception, the electrical contractor had to rely on all of the other subcontractors to complete their work on time so that they themselves could keep up with the schedule. Also, when all of the other subcontractors were finished, the electricians still had work to do. They had to come back into the store and do the final wiring and correct the damage done to the electrical circuits by the other subcontractors. Because this was near or after the rescheduled substantial completion date, other electricians hired by the storeowners were present trying to wire and install fixtures. Also present were people constructing shelving and installing other electrical equipment such as cameras, stoves and ovens, cash registers, computers, and delivering consumer goods for sale. Before the store opened the food products and consumer goods designated for ultimate sale to the public had to be delivered and put in place. All of these various tradesmen and their goods, equipment and fixtures were in the way of, and interfering with, the electrical subcontractor's speeded up work schedule.
As a result of all of this, Plaintiff believed that it was impossible for them to complete the electrical work as required, due to the compressed time and accelerated schedule. Based on Plaintiff's understanding of the terms of the original contract that granted additional consideration if the work was compressed, Plaintiff made a request for a change order that would allow them to hire another electrical contractor to help them cope with the accelerated schedule and conclude their work rapidly. Defendant denied the request for a change order, hired the same electrical contractor that Plaintiff had arranged to hire, as well as others, and required them to assist Plaintiff in concluding the job. Defendant then declared that the cost of the additional electrical contractors would be charged against Plaintiff, because Plaintiff was at fault for not completing their contractual duties in a timely manner.
The law of North Carolina governs the contracts, which were drafted by Defendant general contractor. Both sides argue that the other breached the agreement first. Plaintiff claims that Defendant unilaterally extended the contract beyond the original twenty-six weeks; defaulted in its duty to properly supervise the job thereby causing work schedules to be compressed; failed to pay for additional work it had requested; and refused to pay the promised extra compensation for the accelerated work schedule. Defendant's position is that Plaintiff was in violation of the terms of the contract because it did not put enough men on the job to keep up with the work, thereby creating major delays. As a result of this defalcation by Plaintiff, Defendant contends that it was required to hire additional subcontractors, at great expense, to finish the electrical work. Both sides have requested money judgments, attorney fees, and pre-judgment and post-judgment interest.
CONTRACT
Central to a determination of whether either side breached the contract is the need to understand it. Defendant drafted the agreement, so if it is ambiguous, the ambiguities
will be construed against them and in favor of a reasonable construction placed on it by the Plaintiff. That is the law in both Virginia and North Carolina. See Martin Martin, Inc. v. Bradley Enterprises, Inc., et al 256 Va. 288, 291 (1998), Novacare Orthotics Prosthetics East Inc., v. Speelman, 137 N.C. App. 471, 476 (2000) and Jones v. Palace Realty Company, 226 N.C. 303, 305-306 (1946). In this case, Plaintiff was particularly concerned about an acceleration of the job schedule if other subcontractors fell behind and caused a whipsaw or domino effect, so that Plaintiff would have a large amount of work that had to be compressed into a smaller time frame. Plaintiff very clearly addressed that problem in its June 8, 2004 letter. The reply from Defendant is dated July 2, 2004 and made an addendum to the parties contract. It purports to speak to the issues raised by Plaintiff, but uses different, although similar language.
Where Plaintiff talks about the compression of the job schedule, Defendant refers to an acceleration of the schedule. Defendant claims that they intended the word acceleration to refer only to those circumstances where the job was speeded up so that it would be completed in less than twenty-six weeks, and not to a speeded up work schedule caused by the job falling behind. It is possible to place that construction on the language used, however that would ignore the correspondence. It is also possible to conclude that the parties intended, or at least the Plaintiff reasonably believed from the language used, that acceleration of a work schedule and compression of a work schedule meant doing the same amount of work in a shorter period of time, and if that occurred, Plaintiff would receive additional compensation.
Plaintiff's construction is reasonable, especially in light of the correspondence. It results from the Defendant drafter's use of questionable and ambiguous language in the preparation of the addendum to the contracts. The contracts will be construed against the Defendant's interpretation and in favor of the meaning argued by the Plaintiff. In these contracts, the occurrence of a compressed or accelerated work schedule that calls for Plaintiff to complete its various jobs in a lesser period of time constitutes a change in the scope of the contract, and calls for additional compensation to be paid to Plaintiff.
CONTRACT MODIFICATION
Despite the existence of a written contract, the parties mutually ignored several of its provisions. It was obvious by the way that they dealt with each other throughout the majority of their contractual relationship that they had, in fact, modified the contracts by their actions. For example, neither one of them paid any real attention to the change order provisions of the contracts. The Defendant never prepared a written change order asking Plaintiff to perform extra work or telling them to change the scheduled work. Instead, they routinely orally instructed Plaintiff to do the extra or changed work, and Plaintiff complied. Thereafter, when the work was done to the satisfaction of Defendant, Plaintiff would prepare a written change order or memorandum for payment. Plaintiff had no reason to think that this custom or pattern of practices with Defendant would not continue, despite the fact that the written contract stated that Plaintiff's extra work would only be compensated if authorized in advance and in writing by an officer of Defendant's
corporation. In fact, this alternate practice was encouraged by the actions of Defendant general contractor when they continued, throughout the term of the contract, to orally request that Plaintiff do extra work, and when they continued to process and initially pay the change orders long after the Plaintiff completed the extra work. An example of this is Plaintiff's Exhibit number 6, stipulated to be a valid change order. It failed to satisfy the requirements of the contract as it was neither signed by an authorized officer of Defendant nor issued prior to the work being done. In fact, the work was first orally requested, completed, and a written change order form was not processed until four months after the request. Thereafter Plaintiff was properly paid.
Similarly, Defendant acknowledged receiving Plaintiff's Exhibits 3, 8, 9, and 10, which were documents submitted by Plaintiff as change orders for additional work they had done at Defendants request. However, contrary to their regular practices, Defendant refused to honor them claiming that they did not comply with the written terms of the contract and were not approved in advance. Notwithstanding that refusal to accept and pay the change orders for the extra work they had requested, Defendant applied for and actually received payment from the grocery store owner for much of that extra work. Defendant just kept the money. They did not pay Plaintiff for that extra work.
There are other examples of the parties disregarding the written terms of their contracts. Plaintiff filed suit in this Court and Defendant answered and made its own claims, all in derogation of their written contract's mandatory arbitration clause. Although neither side made a written waiver of arbitration, the Court accepts their actions as a contract modification in the form of a de facto waiver of arbitration.
Under North Carolina law, while the provisions of a written contract are generally enforced, they can absolutely be waived or modified by the conduct and actions of the parties. "The provisions of a written contract may be modified or waived by a subsequent parol agreement, or by conduct which naturally and justly leads the other party to believe the provisions of the contract are modified or waived. This principal has been sustained even where the instrument provides for any modification of the contract to be in writing. It has likewise been sustained where a contract contained a provision to the effect that `No salesman or agent of the company shall have a right to change or modify this contract.'" Whitehurst v. FCX Fruit Vegetable Service, Inc., 224 N.C. 628, 636 (1944). The concept of contract modification by the conduct and actions of the parties has been applied to written contracts involving change orders, just like in this case. See Son-Shine Grading, Inc. v. ADC Construction Company, 68 N.C. App. 417 (1984) and W. E.Garrison Grading Company v. Piracci Construction Co., 27 N.C. App. 725 (1975). Contract provisions can also be modified or waived by conduct of the parties under Virginia law, especially if the conduct shows a clear and unequivocal intent to modify the terms of the written contract. Cardinal Development Co. v. Stanley Construction Co., 255 Va. 300 (1998). In the present case, Plaintiff was induced, through the actions and urging of Defendant general contractor, to believe that the contract had been modified regarding change orders. The Court accepts those modifications.
NOVATION
Defendant claims that a novation occurred between the parties at their January 19, 2005 meeting, when all of the subcontractors were present and the revised building schedule was discussed. It was the position of Defendant that all of the subcontractors generally, and Plaintiff specifically, agreed to the revisions that speeded up the building schedule. That evidence was in direct contradiction to the testimony of Plaintiff's president who said that they never agreed to the accelerated schedule, but only stated that they would do their best to try to meet the new timetable.
In North Carolina, a "novation requires the agreement of the parties that a new contract take the place of an existing obligation. The intention of the parties to effectuate a novation must be clear and definite, for novation is never to be presumed." Kirby Building Systems v. McNiel, 327 N.C. 234, 243 (1990). The same concept of law applies in Virginia where a "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." Honeywell v. Elliott, 213 Va. 86, 89 (1972). It is also the law in Virginia that the intent for a novation must be clear, definite and shared by all involved parties, because a novation is never presumed. Id. In both jurisdictions, the party claiming that a novation occurred bears the burden of proof.
PROOF OF DAMAGES
Neither party disputes the basic law dealing with the proof of damages where a subcontractor is prevented from completing the work contained in the contract by the general contractor. In Virginia that law is controlled by the case of Central Lunatic Asylum v. Flanagan, 80 Va. 110,116, (1885), and in North Carolina it is controlled by the case of Industrial Textile Piping, Inc. v. Industrial Rigging Services, Inc., 69 N.C. App. 511, 515 (1984). Both of these cases say the same thing. The measure of damages is the cost of materials furnished, money expended and work completed at the time the subcontractor is prevented from finishing the contract, plus the profits he would have earned if he had actually been able to finish his work. Profits are measured by deducting the cost of labor and materials to complete the contract from the contract price for that portion of the job.
Plaintiff feels that damages can be more precisely computed by applying the provision of the contract that says if the Defendant compresses the amount of time to complete the work, so that more is required in a lesser time, then that is a change in the scope of the work. Such a change would have called for additional compensation, which Plaintiff points out it requested with its change order to hire Newcomb Electric. Plaintiff believes that had that been allowed, Defendant general contractor would have had to pay Plaintiff its full contract price plus the extra cost for Newcomb Electric's work in assisting Plaintiff to complete the changed scope of the contract. Following that logic, Plaintiff argues that it should receive the unpaid balance of the full contract price as damages. In the alternative, Plaintiff's second argument is that they calculated the man-hours worked by Newcomb Electric as though they were Plaintiff's own, and assigned
Plaintiff's average hourly rate to it. That figure was then deducted from the contract price to arrive at Plaintiff's lost profits, which it claims as damages.
Plaintiff's initial argument that the compression and speeding up of the work schedule amounted to a change in the scope of the contract and entitled the Plaintiff to additional compensation is not helpful, because the additional compensation was not determined. That portion of the contract simply said that if the scope of the contract was changed the Plaintiff could receive more compensation. The amount of compensation was not discussed. It was a matter of negotiation and no negotiation or meeting of the minds occurred. Plaintiff's argument that whatever was paid to the extra subcontractor to complete the job is what they would have agreed upon, is speculative at best.
The problem with Plaintiff's second argument is that Defendant general contractor did not hire Newcomb Electric alone to finish Plaintiff's work. They also hired two other subcontractors to complete the shop contracts. Proof was not presented as to their hours. There is no evidence as to the cost of the additional materials that were used by any of the added contractors to complete the work, or whether those materials were supplied by Plaintiff and used by the other subcontractors, or whether the other subcontractors supplied their own materials. The labor costs estimated by Plaintiff from the hours Newcomb's employees worked, failed to include the "burden" on that labor cost. "Burden" is defined by the parties as the extra hidden expenses attributed to employees, such as the cost of FICA, state and local unemployment taxes, health insurance, liability insurance and worker's compensation insurance, just to name a few. Those costs are necessary elements in determining lost profits and were not proven by Plaintiff.
THEFT OF BUILDING MATERIALS
One of the claims made by Plaintiff subcontractor against Defendant general contractor involves the purchase and delivery by Plaintiff of light fixtures that were to be installed in the shops, but which were stolen from the building site prior to installation. Plaintiff's position is that Defendant should be responsible for replacing those fixtures at no cost to Plaintiff, because Plaintiff complied with its end of the contract by purchasing and delivering the materials. However, the contract entered into by the parties refers to the work as a "turn-key electrical package," making this a turn-key job, which is a term of art used in the construction industry. As defined by Robbins v. C.W. Myers Trading Post, Inc., 253 N.C. 474, 478 (1960), a turn-key job is "[a]ny job or contract in which the contractor agrees to complete the work to a certain specified point, and to assume all risk." Here, the risk of loss assumed by Plaintiff subcontractor was that materials and fixtures might be stolen from the job site. The same result is reached in Virginia, but the law from numerous Virginia cases as well as the definition from the dictionary have to be processed and extrapolated in order to arrive at the same, simple explanation of a turn-key job, as used in the North Carolina case. See Kern v. Freed Co., 224 Va. 678 (1983), Southgate v. Sanford Brooks Co., 147 Va. 554 (1927) and Webster's, New International Dictionary, 2nd Edition.
MECHANIC'S LIEN QUESTIONS
Defendant contends that New Plan Excel Realty Trust, Inc., the owner of the real estate upon which the grocery store and shops were constructed, is no longer a necessary party to this litigation and should have been released when the mechanic's lien was replaced with a bond. In fact, both § 43-70 and § 43-71, Code of Virginia (1950), as amended, state that when the statutory bond is posted, the property affected by the mechanic's lien shall stand released from the lien. Once the lien on the owner's property was released by the posting of the bond, the owner's property interest could not be defeated or diminished by the underlying litigation, and the owner became an unnecessary party. George W. Kane, Inc. v. NuScope, Inc., 243 Va. 503, 509-510 (1992). In effect, this "bonding off" process simply substitutes the bond for the real estate. Under these circumstances, it makes no difference whether the property owner remains a nominal party or is released from the lawsuit. Id. 510.
Plaintiff's claim that the owner of the real estate should continue to be a party to the litigation because it owes damages to Plaintiff under the theory of unjust enrichment or quantum meruit, is untenable. As argued by Defendant, although Virginia law governs the statutory mechanic's lien issues, by agreement of the parties, North Carolina law governs the parties' contract. North Carolina law does not permit a cause of action for unjust enrichment or quantum meruit when the evidence before the Court clearly indicates the existence of a written agreement, as it does in this case. Catoe v. Helms Construction Concrete Co., 91 N.C. App. 492, 497 (1988).
Defendant also challenged the efficacy of the mechanic's lien, claiming Plaintiff had erroneously filed it against the wrong real estate. That position was not born out by the evidence. Defendant failed to carry its burden of proof.
INTEREST
Both parties have asked for pre-judgment and post-judgment interest on any judgment granted to them. Pre-judgment interest is discretionary with the trier of fact in Virginia, and post-judgment interest is mandatory, and is set by statute. "Prejudgment interest is normally designed to make the plaintiff whole and is part of the actual damages sought to be recovered. In contrast, postjudgment interest is not an element of damages, but is a statutory award for delay in the payment of money actually due." § 8.01-382, Code of Virginia (1950), as amended, and Upper Occoquan Sewage Authority v. Blake Construction Co., Inc., 2008 Va. LEXIS 17, 33 (January 11, 2008), quoting from Dairyland Ins. Co. v. Douthat, 248 Va. 627, 631 (1994).
In North Carolina the law is different. In an action for breach of contract, the amount awarded on the contract bears mandatory interest from the date of the breach and continues until the judgment is satisfied. N.C. Gen. Stat. § 24-5 (2007). Interest is required to be fixed at the rate set in the contract, and if no such rate is set, then at the
legal rate. The legal rate of interest in North Carolina is eight percent (8%) per annum. N.C. Gen. Stat. § 24.1 (2007). There, the trier of fact determines the date of the breach of contract, which is also the commencement date of the interest. General Metals, Inc. v. Truitt Mfg. Co., 259 N.C. 709 (1963).
The questions of whether mandatory prejudgment interest applies, and at what rate, are conflict of laws questions. The parties' contract calls for it to be governed by the laws of North Carolina, but their case is being tried in Virginia. Under these circumstances the substantive law of North Carolina applies to all substantive issues and the procedural law of Virginia applies to all procedural questions. Willard v. The Aetna Casualty and Surety Company, 213 Va. 481, 483 (1973). Because prejudgment interest is designed to make the prevailing party whole and is part of his actual damages, it will be treated substantively under the law of North Carolina. Accordingly, there being no contract rate agreed upon by the parties, any judgment rendered will carry interest from the date of the breach of contract, at the North Carolina legal rate of eight percent (8%) per annum, until the judgment is satisfied.
ATTORNEYS' FEES
In Virginia, the "prevailing party generally cannot recover attorneys' fees from the losing party." Ulloa v. QSP, Inc., 271 Va. 72, 81 (2006). However, such a general rule "does not prevent parties to a contract from adopting provisions that shift the responsibility of attorneys' fees to the losing party in disputes involving the contract." West Square, L.L.C. v. Communication Technologies, Inc., 274 Va. 425, 433 (2007). Under such a contract, the prevailing party bears the burden to present a prima facia case that the requested fees are reasonable and necessary. Chawla v. Burger Busters, Inc., 255 Va. 616, 623 (1998).
In North Carolina, the law regarding attorneys' fees is vastly different than the law in Virginia, and entirely controlled by statute. The North Carolina courts have held that "even in the face of a carefully drafted contractual provision indemnifying a party for such attorneys' fees as may be necessitated by a successful action on the contract itself, our courts have consistently refused to sustain such an award absent statutory authority therefore." Stillwell Enterprises, Inc., v. Interstate Equipment Co., 300 N.C. 286, 289 (1980). That state's courts have also held that in North Carolina "there is no express statutory authority permitting the award of attorney's fees in breach of contract cases." Lee Cycle Center, Inc., v. Wilson Cycle Center, Inc., 143 N.C. App. 1, 19 (2001). It is clear from a reading of these cases and the code sections that discuss attorney fees, that North Carolina law forbids the recovery of attorney fees in a contracts case, even in situations where the parties have expressly agreed that they would be recoverable.
CONCLUSIONS OF MIXED FACT AND LAW
1. When Defendant general contractor hired Newcomb Electric to assist Plaintiff electrical subcontractor in the completion of the electrical work, they did not do so because Plaintiff had breached the contract by not working fast enough. They did so because the scope of the contract had changed and the electrical work had to be completed in less time and on a rushed schedule. Their agreement called for the parties to negotiate for additional compensation to be paid to Plaintiff for any change in the scope of the contract. Neither party did that. Instead, they each made demands on the other based on the misunderstandings each of them had concerning the terms of their contract. The cost of hiring Newcomb Electric to assist in the completion of the work on the grocery store will be born by Defendant general contractor, and not by Plaintiff subcontractor.
2. Plaintiff's claim that Defendant breached the contract by going beyond 26 weeks, fails. The adjusted schedule only constituted a change in the scope of the contract, a possibility that had been contemplated by the parties, as evidenced by their written contract. Their agreement called for them to negotiate for Plaintiff's additional compensation, and neither side did so. They just made non-negotiable demands of each other. If the failure to negotiate is a breach of the contract, then it is a breach by both parties, and each party's breach negates the other's breach.
3. Defendant failed to present sufficient proof that a novation occurred as a result of the January 19, 2005 meeting.
4. The claim by Plaintiff subcontractor that they are entitled to the full contract price as damages because they were prevented from completing the contract by the actions of Defendant contractor also fails. Under the facts of this case, the proof of these damages requires evidence of lost profits. Sufficient proof of lost profits was not forthcoming. Plaintiff's arguments require the Court to inappropriately engage in speculation to determine the claimed damages.
5. The Sammy Phillips Electric bill for the shops was not sufficiently detailed so that the Court could determine if the work claimed fell within the scope of the original contract or not. Plaintiff testified that they did all of the work on the shops except for the installation of the stolen lights. They also claimed to have done the work on at least one change order. Plaintiff further testified that Defendant asked for additional work to be done on the shops, but when Plaintiff refused to do it without a change order, Sammy Phillips Electric was hired to do it. Defendant failed to bear their burden of proof on this issue, and so that claim by Defendant is denied.
6. Defendant's claims for additional job supervision and management costs are not part of the contract. They are also not actual out of pocket expenditures for this job. Rather, they are a compellation of numbers made by an accountant for the manpower cost overrun to Defendant because the job ran longer than they had originally anticipated. That claim is denied. Likewise, the claim for the bond premiums to bond off the liens is not a compensable claim under the facts of this case.
7. Plaintiff subcontractor did not submit the final lien waivers and warranty documentation when the work was finished because they were prevented from completing the contract. That may be the reason that Defendant chose to have a portion of the warranty repair work done by someone other than Plaintiff. Plaintiff testified that they responded to all the warranty calls given to them, and that they would have made the other warranty repairs had they been so requested. Under these circumstances, Defendant cannot be reimbursed for the warranty repair costs for which they did not call Plaintiff.
8. The claim by Defendant for back charges from the grocery store for repair and supplementation is nothing more than a line item charge on a balance sheet. More detailed evidence was required to show that the work and materials supplied by Plaintiff were defective, and that they had to be replaced, repaired or supplemented. Such proof was not forthcoming. Defendant's claim for back charges will be denied.
9. Defendant general contractor also made a claim against Plaintiff for the cost of a security system that was not installed. The testimony of Plaintiff was that a more complicated one was supplied by the grocery store owner. Plaintiff installed the more complicated security system. The labor costs and additional equipment supplied by Plaintiff to make it work was an even trade-off of the Plaintiff's original estimated cost to install the original security system. Since Defendant got a security system satisfactory to the grocery store owner for the same cost as they would have paid for the original system, no off-set will be made for the cost of the original security system.
10. The Court finds that the change orders in the form submitted, and in accordance with the parties' modified agreement as discussed earlier, they being Plaintiff's Exhibit Numbers 3, 8, 9, and 10, are legitimate expenses for the grocery store contract, and Plaintiff's Exhibit Number 11 is a legitimate expense for the shops contract. They should be paid by Defendant to Plaintiff. The change orders for the grocery store that are unpaid total $4,696.60. The one change order for the shops contract that is also unpaid totals $562.50. The two change orders set out in Plaintiff's Exhibits # 6 and 7 have already been paid and no controversy exists as to them. The fact that some of the change orders arrived after the date agreed upon in the contract between the grocery store owner and Defendant has no effect on the Plaintiff subcontractor. Plaintiff was not a party to that contract. When Plaintiff subcontractor and Defendant general contractor modified their agreement through their actions, they failed to agree upon a specific time frame for presentation of the change order payment requests. Accordingly, the Court finds that they intended a reasonable time. All of the change order requests from Plaintiff were submitted within a reasonable time.
11. Plaintiff's Exhibit Number 4 contains General Contractor's Progress Affidavit #8 covering the period of time through February 28, 2005. In that document, Defendant declares that Plaintiff subcontractor has completed $253,315.00 worth of the work on the grocery store. Plaintiff testified that he had also completed all of the work on the $15,000.00 shops contract. Defendant's Summary of Claims against subcontractor, which is Defendant's Exhibit P, indicates that through December 23, 2004, Defendant paid $232,834.50 to Plaintiff subcontractor, which includes all of the payments for both the grocery store contract and the shops contract. The balance due to Plaintiff subcontractor on the grocery store contract was therefore $20,480.50, plus the claims for the change orders. The balance due on the shops contract was $15,000.00, plus the claim for the change order, less the $1,848.00 cost of Varney, Inc. to provide the labor and materials for the exterior canopy lights for the shops. Those lights were originally supplied by Plaintiff and then stolen. As explained above, the risk of loss of the lighting fixtures and their cost of installation is to be born by Plaintiff subcontractor. Therefore, the principle amount owed by Defendant to Plaintiff for the grocery store contract is $20,480.00, plus $4,696.60 for the change orders. The principle amount owed by Defendant to Plaintiff for the shops contract is $13,152.00, plus $562.50 for one change order. Judgment will be entered against Defendant and in favor of Plaintiff for that total, which is $38, 891.60.
12. The Court finds that the only breach of contract occurred when the Defendant general contractor failed to pay the balance due on the contract to the Plaintiff subcontractor. The last claim for payment made by Plaintiff was with its change order contained in Plaintiff's Exhibit Number 10, and dated March 18, 2005. Defendant customarily made payments approximately thirty days after receipt of the payment requests. The money was therefore due and payable on April 18, 2005, which is the date Defendant general contractor breached the contract by not paying what it owed to Plaintiff subcontractor. Simple interest, at the North Carolina legal rate of eight percent (8%) per annum, begins on April 18, 2005, and continues until the debt is paid in full.
13. The question of attorney fees is a substantive provision of the contract, and not procedural. It is therefore governed by the North Carolina law that forbids the recovery of attorney fees in contract cases, despite the agreement of the parties. Accordingly, the request for an award of attorney fees is denied.
14. The request of New Plan Excel Realty Trust, Inc. to be dropped from the litigation is moot. The lien on their real estate was released when the statutory "bonding off" process was completed. Thereafter, New Plan Excel Realty Trust, Inc. was nothing more than a nominal party.
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.
Very truly yours,
Robert P. Doherty, Jr.