Opinion ID: 396525
Heading Depth: 1
Heading Rank: 6

Heading: heyl v. rich

Text: 72 As previously noted, Rich had a two-prong theory to its litigation strategy. The first, which we have just discussed, was that the Virgin Islands Government breached its contract and therefore Rich was entitled to compensatory damages. Its alternative theory was its defense in the case of Heyl v. Rich, wherein Heyl sought damages from Rich. As to the latter, Rich in substance argues that as per its contract with Heyl and standard contract doctrine, Heyl must bear whatever losses it suffered as a result of the debacle on Estate Nazareth. The trial judge rejected Rich's contentions.
73 The trial court concluded that the underlying risk of economic loss for the failure of Rich's contract with the Government fell on Rich and that Heyl had a compensable reliance interest which was not waived by the parties' agreement. 74 Appellant argues, however, that two aspects of its contract with Heyl specifically indicate that Heyl bore the risk of failure of Rich's agreement with the Government: (1) Heyl's duty under Paragraph 1a.46.1 of the Project Specifications to obtain a building permit for the proposed project, and (2) the waiver provision of Article 8 of the Heyl-Rich Agreement. 75 Neither Heyl nor Rich challenges the trial court's determination that Paragraph 1a.46.1 of the Specifications 14 assigned Heyl the duty to obtain a building permit. Rich would have us infer from this, however, that both parties intended for progress payments to be contingent upon Heyl obtaining a building permit. We are unable to discern in either the language of Paragraph 1a.46.1 or Article 6, 15 or the subsequent behavior of the parties the intent which appellant would have us find. We find the trial court's finding on this issue was not clearly erroneous. 76 A more difficult issue is appellant's assertion that Article 8 of its contract with Heyl constitutes a waiver of Heyl's right to sue Rich for breach of contract. Article 8 reads in part: 77 The Contractor is aware that the work of this contract is being done pursuant to an agreement between the Owner and Government of the Virgin Islands and that the Contractor has read said contract and understands the provisions contained therein. In the event either the Owner or the Government of the Virgin Islands shall fail to comply with one or more provisions of said agreement between them, Contractor agrees it shall make no claim against the Contractor (sic) for damages or extra payment allegedly arising from said failure to comply; unless such action directly affects the dwelling unit costs. 78 (emphasis added). Rich argues that the second Contractor in the last sentence was meant to read Owner, while Heyl contends that the intended words were Government of the Virgin Islands. We believe the trial court was correct in concluding that the disputed word was intended to read the Government of the Virgin Islands, as asserted by Heyl, and that Heyl had not waived its right to sue Rich for breach of contract. 79 Finally, relying upon Restatement (Second) of Contracts §§ 294 and 296 (Tent. Draft No. 10, 1975) 16 the trial court determined that Heyl had a compensable reliance interest because Rich bore the risk of the parties' mutual mistake insofar as the legality of Rich's agreement with the Government. Rich objects to the reasonableness of the trial court's allocation of the risk of mistake as provided for under § 296(c), but under the circumstances of this case, it clearly was not erroneous for the court to so allocate the risk of mistake as it did and subsequently conclude that Heyl had a compensable reliance interest under Restatement (Second) of Contracts § 300, Comment b (Tent. Draft No. 14, 1979), which provides that a party may also have a claim that goes beyond mere restitution and includes elements of reliance by the claimant.
80 The question of damages was extensively considered by the trial court, which determined that Heyl's reliance interest entitled Heyl to damages of $262,398.01 plus costs of $2,668.25, attorney's fees of $21,000.00 and prejudgment interest of $841.50. Rich takes issue with the trial court's findings only as to the award of damages for steel which did not conform to contract specifications. Although the contract called for grade 50 steel, Heyl substituted grade 40. On the basis of testimony offered by witnesses for Heyl the trial court concluded that the lower grade steel could and would have been partially utilized on the project. Accordingly Heyl was reimbursed for 50% of the cost of the steel or $33,828.53. Although witnesses for Rich testified that grade 40 steel was not an interchangeable substitute for grade 50 and that substitution would not only be difficult, but also involve extensive design revisions, we cannot conclude from the evidence of record that the district court's finding was clearly erroneous. Consequently we will let stand the $33,828.53 damage award for the steel.IV. A PYRRHIC VICTORY 81 As we stated in the beginning of this opinion, one has to have some disquietude with the results of this decision. There is nothing which this court can do to reassemble the housing project that, like Humpty Dumpty, has been irretrievably shattered, and we are left with choosing among several undesirable alternatives. Families of low and moderate income still don't have housing at Estate Nazareth. The Government has spent substantial sums on this now decimated project; Rich claims that it spent more than a half million dollars on the Nazareth project in reliance on the Government's own (earlier) recommendation of the townhouse concept. (Appellant's brief at 24). Rich has been subjected to an additional loss by a very substantial judgment below for a project that was aborted in its infancy because of changes in governmental administration. Although the Government has prevailed on appeal because of a plethora of valid technical objections, it seems that the primary reason why the project floundered was not the failures to comply fully with the statutory mandates, but probably because a succeeding governor was not committed to implementing the detailed plan of his predecessor. With the Government's repudiation of its predecessor's work, those who are poor and of moderate income did not get even one of the three hundred houses planned. Much of the Government's money was spent, and a private developer has sustained an extraordinary loss. Using blunt language the appellant asserts that: 82 The district court's opinion, if left undisturbed, will undermine the confidence of all those who contemplate entering into solemn contractual obligations with the Government of the Virgin Islands. Moreover, those who have contracts with the Government are now left in grave doubt as to the enforceability of their agreements. 17 Appellant's brief at 25. 83 Though on this record the Government has prevailed, in the long run, if future developments are to be built, this case may be merely a pyrrhic victory for the Government because the winning of this law suit is not the equivalent of meeting the desparate housing needs of the families of poor and moderate income in the Virgin Islands.