Title: McGee Construction v. Neshobe Develop.

State: vermont

Issuer: Vermont Supreme Court

Document:

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 89-551


McGee Construction Company                   Supreme Court

                                             On Appeal from
     v.                                      Rutland Superior Court

Neshobe Development, Inc.                    February Term, 1991


Arthur J. O'Dea, J.

John J. Kennelly of Carroll, George & Pratt, Rutland, for plaintiff-
  cross-appellant

Timothy L. Taylor, William H. Meub and Katherine P. Mosenthal of Keyser,
  Crowley & Meub, P.C., Rutland, for defendant-appellant


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


     ALLEN, C.J.   This action arises out of a contract dispute between Hugh
McGee Construction Co. (McGee) and Neshobe Development, Inc. (Neshobe).
Neshobe appeals from a jury verdict finding it to be the breaching party and
awarding McGee damages in the amount of $20,000.  McGee cross-appeals from
the trial court's denial of its V.R.C.P. 65.1 motion for enforcement of a
separate judgment on stipulation against the security provided by Neshobe.
On Neshobe's appeal we affirm Neshobe's liability and reverse and remand on
damages.  On McGee's cross-appeal we reverse.
     In 1987, Neshobe undertook a condominium development project in
Brandon, Vermont.  The project was to proceed in three phases.  McGee was
hired to do the excavation, trenching, roadwork, and other sitework on Phase
I on a cost-plus basis.  The work on Phase I was completed in the summer of
1987.  A balance of $15,000 remained outstanding on the Phase I contract
after its completion.
     On August 30, 1988, McGee and Neshobe entered into a contract for Phase
II of the project, under which McGee was to do work similar to that
performed on Phase I.  Phase II was split into part 1 and part 2, each
consisting of six units.  The work on part 1 was to commence on September 1,
1988, and be substantially completed by October 1, 1988.  Work on part 2
would begin when sales of the units dictated, and be completed within four
weeks.  The Phase II contract between McGee and Neshobe was for a fixed sum
of $76,000, $38,000 being allocated to each part.
     McGee began its work on part 1, consisting of a duplex and a quad, on
or about September 1.  Soon thereafter it ran into unscheduled delays
occasioned by Birch Hill Construction Co. (Birch Hill), the contractor
responsible for the concrete work on Phase II.  Birch Hill delayed work
while waiting for the delivery of some additional concrete forms that it had
ordered.  There was also trouble with the setting of some footings, and one
of the walls set by Birch Hill had to be torn down because it was defective.
McGee was not able to backfill the duplex until October 3, and at that point
it had not yet been able to begin its work on the quad's walls because Birch
Hill was still working on the footings.  While it was a subject of dispute
at trial, McGee testified through its principal, Hugh McGee, that it had
been unable to do much of the roadwork, utility trenching, and other
sitework because of the disruption in its schedule caused by the concrete
delays.
     On or about October 7, Hugh McGee went to the office of Rick Kaminski,
President of Birch Hill and Vice President of Neshobe, to express his
concerns about the delay.  Kaminski told him that a meeting with the
principals of Neshobe would be scheduled for the 10th, and that if McGee had
requests, to make them specific.  The substance of the October 10 meeting is
captured in the minutes of the meeting prepared by Neshobe, which both
parties agree are accurate.

          At 7:25 am H. McGee enters the meeting and was asked by
          R. Kaminski to state his case and his reasons for
          calling the meeting in his own words.  He states, he had
          stated that he cannot operate under the existing
          contract and will no longer proceed under the terms and
          conditions of that contract.  R. Kaminski from Neshobe
          indicated that he is bound legally and morally by that
          contract and a new contract will not be allowed.
          Although, Change Orders will be allowed in reference to
          time extensions.  H. McGee insisted that he will not
          continue under the terms of that contract and R.
          Kaminski stated, if he will not honor the terms and
          conditions of the contract (suggested) that H. McGee
          remove his equipment from the site and (suggested) that
          perhaps we will be better off having another contractor
          finish the project.  H. McGee indicated that was
          acceptable to him and that would be exactly what he
          would do, remove his equipment from the site.

     Neshobe sent a letter to McGee later in the day, containing these
minutes and notifying McGee that if it was not on site on October 17, the
contract would be terminated.  A second letter to the same effect was sent
on the 12th.  McGee was not on site on October 17, and Neshobe hired a
replacement.  McGee received no payments under the Phase II contract.
     McGee subsequently brought suit, alleging breach of the Phase II
contract by delays attributable to Neshobe.  McGee also sought recovery of
the balance owed it on the Phase I contract.  Neshobe counterclaimed,
alleging that McGee's failure to be on site on October 17 and its failure to
abide by the contractual provisions for resolution of the dispute made McGee
the party in material breach of the contract.  During trial by jury, the
parties entered into a stipulation in favor of McGee on the Phase I
contract claim in the amount of $16,669.71.  At the close of trial the jury
found against Neshobe on its counterclaim, and returned a verdict in favor
of McGee in the amount of $20,000.  The court entered judgment on the jury
verdict and judgment on the stipulation separately.
     Following entry of judgment on the stipulation, McGee moved under
V.R.C.P. 65.1 to enforce that judgment against an irrevocable letter of
credit that Neshobe had used to provide security.  The court denied the
motion, holding that judgment on the stipulation had not yet become final
because of Neshobe's pending post-trial motions in opposition to the
judgment on the jury verdict.
     Neshobe has appealed from the judgment on the jury verdict, and McGee
has cross-appealed from the denial of its Rule 65.1 motion.  We will address
these appeals in turn.
                                    I.
     Neshobe contends that, by the terms of the contract, it was McGee's
cessation of work, not delays attributable to Neshobe, that materially
breached the contract.  Neshobe admits that it was responsible for many of
the delays which interfered with McGee's ability to  perform the contract
in a timely fashion.  Neshobe also concedes in its brief that "[h]ad the
contract not addressed delay, McGee could present a tenable argument that
the delays occasioned by Neshobe were a substantial breach of contract,
thereby justifying . . . a termination of the contract."  Neshobe points,
however, to provisions within the contract specifically addressing owner
delay and resolution of claims arising from such delay, and argues that
McGee's failure to comply with these provisions left McGee in material
breach of the contract.
     It is axiomatic that parties can define their contractual relationship
by the provisions employed in their contract.  Contracting parties can
define what will constitute a material breach of their contract.  See
Carter v. Sherburne Corp., 132 Vt. 88, 92,