Fidelity & Deposit Co. v. Olney Associates, Inc.

JAMES S. GETTY, Judge. William L. Griffith and Company, Inc., (Griffith) and Fidelity Deposit Company of Maryland (Fidelity) have appealed from a judgment entered in favor of Olney Associates, Inc., (Olney) following a jury trial in the Circuit Court for Montgomery County. Olney has filed a cross-appeal alleging that the trial judge (Beard, J., presiding) erred in granting partial summary judgment to the appellants thereby restricting the damages claimed by Olney. The case was a contract action arising from a one count declaration filed on July 28, 1984, by Olney against Fidelity and Griffith. ³⁷⁰ Facts On September 1, 1982, Olney entered into a written contract with Griffith for construction of 34 office units in Montgomery County, Maryland.

Fidelity furnished a performance bond and a labor and material payment bond. The contract dated September 1,1982, contained a provision for damages for delay in performance of $400 per day commencing on April 1, 1983. A dispute arose between Olney and Griffith when Olney refused to pay Griffith any further money until the job was completed. On November 16, 1983, Griffith filed an action to enforce a mechanic’s lien claim and a separate action to enjoin occupancy; on June 28,1984, Olney sued Griffith and Fidelity on a breach of contract theory.

In February of 1984, Olney and Griffith entered into a subsequent agreement to settle the litigation. Although Fidelity was not a party thereto, the agreement nonetheless provided that it was not the intent of the parties to release Fidelity from its liability. Pursuant to the terms of the February agreement, Olney agreed to pay Griffith upon execution of the agreement the sum of $108,375.00 and Griffith agreed to complete the items remaining on a punch list. 1 The sum of $10,000.00 of the total amount due Griffith was placed in escrow by agreement of the parties to be released upon certification by an engineering firm selected by the parties that the work had been completed. The record indicates that after receiving the $98,375.00 Griffith did not complete the work or request a final inspection to obtain release of the $10,000.00 held in escrow.

At the conclusion of the trial, the jury returned a verdict in favor of Olney against both Griffith & Fidelity in the sum ³⁷¹ of $71,850.33, representing the cost of completing the project. Not submitted to the jury was whether Olney was entitled to damages for delay pursuant to the terms of the original contract dated September 1, 1982, which involved an additional claim for $55,600.00, and whether Olney was entitled to an additional $49,192.08 for units it was unable to sell because of construction problems, mainly water damage. Prior to trial, Griffith and Fidelity filed a motion for partial summary judgment seeking to limit Olney’s claim to the cost of completion of the project in accordance with the terms of the substituted agreement. The trial court (Messite, J.) granted the motion as to Griffith, but denied it as to Fidelity.

Thus, the case proceeded to trial on Olney’s claim against Griffith for failure to complete construction and against Fidelity for both failure to complete the project and for damages for delay under the original contract. 2 Prior to submission of the case to the jury, Fidelity’s motion for partial summary judgment was renewed and granted by the trial court. Olney, therefore, was precluded from seeking delay damages provided for in ³⁷² the original contract. Recovery was limited to the cost of completion of construction, i.e., the punch list attached to the substituted contract. The jury determined these costs to be $71,850.33 and judgment was entered for that amount.

Appellants’ motion for new trial and remittitur was denied. On appeal, appellants allege that the following evidence should not have been admitted: 1. Evidence regarding the original contract dated September, 1982; 2. Evidence that the contractor had not paid its subcontractors; 3.

Evidence of work for which subcontractors were paid by a company other than appellant’s; 4. Two self serving letters written by agents of Olney; and 5. Testimony of a witness not identified prior to trial. On cross-appeal Olney asks us to consider whether it was entitled to damages for delay pursuant to the terms of the the original contract, dated September 1, 1982, amounting to $104,792.08.

I. Evidentiary Issues We shall combine the evidentiary issues presented by appellants. These contentions will be considered in light of the well settled principle that the admission or exclusion of evidence is a function of the trial court which, on appeal, is traditionally viewed with great latitude. Fleming v. Prince George’s County, 277 Md. 655 , 358 A.2d 892 (1976). Moreover, [f]or an item of evidence to be admissible, it must be both relevant and material.

Evidence is material if it tends to establish a proposition that has legal significance to the litigation. Evidence is relevant if it is sufficiently probative of a proposition that, if established, would have legal significance to the litigation, (citation omitted). ³⁷³ Paige v. Manuzak, 57 Md.App. 621, 632 , 471 A.2d 758 (1984). See also Schear v. Motel Management Corp., 61 Md.App. 670 , 487 A.2d 1240 (1985). In the case sub judice, the trial judge did not grant appellants’ Motion for Judgment as to Fidelity until the close of all the evidence.

Therefore, the issue of whether Olney was entitled to damages for delay from Fidelity pursuant to the September 1, 1982, contract remained before the jury until the granting of that motion. Because the September 1, 1982, contract was before the jury until the granting of appellants’ motion for partial summary judgment at the close of the trial, it is elementary that the initial contract and matters relating to it were relevant and material until appellants’ motion was granted at the close of all the evidence. We hold that the trial judge did not abuse his discretion in permitting testimony relating to either the September 1, 1982, contract or regarding the fact that money Griffith owed its subcontractors pursuant to this contract had been paid by a company other than Griffith. In so holding we observe that any prejudice claimed by appellants was mitigated by the trial judge’s curative instruction on this matter: The agreement that you are to consider in this case is what has been referred to throughout this entire trial as the settlement agreement.

That is the contract that this case is about. There was substantial amount of reference to prior contracts, that I allowed that, because I felt that it was essential that you keep a historical prospective about the case. But please keep in mind that the contract we are talking about in this case is the settlement contract or this settlement agreement. That is the contract that is being sued upon.

Regarding appellants’ contention that Olney’s exhibit # 53, a letter written by an agent of Olney, should not have been admitted because it was self-serving, we note that although counsel objected at the bench that he believed this exhibit to be “self-serving,” no such objection was made when this document was submitted as evidence. In fact, ³⁷⁴ the objection to Olney’s exhibit # 58 seemingly was limited to the fact that the proper foundation needed to introduce a business record into evidence was lacking. Olney introduced exhibit # 53 at trial as a business record. The letter, dated May 24, 1984, was written by W.D. Rivenbark, President of Olney, to Wm.

L. Griffith, for the purpose of complaining “that you have not corrected the water problem in our lower level units as of yet.” Even if we were to agree with appellants that the lower court erred in admitting this letter because it was self-serving, we observe that any prejudice appellants suffered from the introduction of this letter has become harmless. This is because a letter dated June 15, 1984, written by Wm. L. Griffith to W.D. Rivenbark, and which thoroughly discussed the remaining water leakage problem, was also admitted into evidence as Griffith’s exhibit # 10. Takoma Park Bank v. Abbott, 179 Md. 249 , 19 A.2d 169 (1941), cert. denied, 314 U.S. 672 , 62 S.Ct. 134 , 86 L.Ed. 538 (1942).

Appellants further aver that the lower court abused its discretion in permitting Olney’s expert witness, who was not identified in pre-trial discovery, to testify regarding his estimate to replace certain of appellee’s damaged and missing shrubbery. In response to Fidelity’s discovery request, Olney did not disclose the expert’s name it intended to rely on, nor did Fidelity utilize Maryland Rule 2-432(b) to compel complete discovery. Olney did disclose prior to trial that it expected to rely on an estimate from Ashton Nurseries, Inc., for the replacement value of its damaged and missing shrubbery. At trial, however, Olney called Mr. Kinghom as its expert and stated in explanation of why it was not calling the representative from Ashton Nurseries that: When we try to serve the guy [from Ashton Nurseries] with a subpoena, we discovered that he is no longer there and we couldn’t find him anywhere.

The Court then asked appellee when Mr. Kinghorn’s estimate was prepared and appellee replied: ³⁷⁵ We brought this man in to try to cover one area, the only one that he [appellant] had not received a copy of, but he did receive a copy of the higher estimate from Ashton Nursery. (Emphasis added). Although Griffith moved tó strike Mr. Kinghorn’s testimony on the basis that “his report wasn’t prepared until this week-end ... [he had] never been given notice of it,” Griffith does not contest that Mr. Kinghorn’s estimate was, in fact, lower than the one prepared by Ashton Nurseries and previously supplied to Griffith by Olney. Moreover, Griffith does not dispute that Mr. Kinghorn’s estimate was a “fair and reasonable” one.

Since the decision to impose sanctions sua sponte, within the framework of the discovery rules, for apparently inadequate answers to interrogatories is “within the sound discretion of the trial judge,” we hold on these facts that the lower court did not abuse its discretion in permitting the testimony of Mr. Kinghom. Broadwater v. Arch, 267 Md. 329, 366 , 297 A.2d 671 (1972). See also Evans v. Howard, 256 Md. 155 , 259 A.2d 528 (1969). Finding no error by the trial judge on the evidentiary issues we affirm the $71,850.33 judgment entered in favor of Olney, representing the costs of completion of the contract.

II

Cross Appeal The single issue presented by the cross appeal is whether the settlement agreement executed by the parties should be construed to be a substitute contract or an executory accord. Griffith argues that the new agreement was designed to be a substitute for the original cause of action. Olney claims it intended to surrender its prior rights and liabilities only upon full performance of the new agreement. In short, Olney contends it intended to create an executory accord.

An executory bilateral contract of accord has been defined as: [a]n agreement embodying a promise express or implied to accept at some future time a stipulated performance in satisfaction or discharge in whole or in part of any ³⁷⁶ present claim, cause of action, contract, obligation, and promise express or implied to render such performance in satisfaction or in discharge of such claim, cause of action, contract, obligation ... J. Calamari and J. Perillo, The Law of Contracts § 21-4 (2d ed. 1977) (emphasis added). See also Clark v. Elza, 286 Md. 208, 214 , 406 A.2d 922 (1979); Restatement of Contracts § 417 (1932). In cases involving an executory accord the parties ordinarily intend that the duties created by the previous transaction shall be suspended during the period fixed for performance of the accord.

A. Corbin, Corbin on Contracts § 1274 (1962). “If the debtor breaks such a contract, the creditor has alternative rights. He can enforce either the original duty or the subsequent contract.” 3 Restatement of Contracts § 147(c) (1932). As the Court noted in Clark v. Elza,