Unified Contractor, Inc. v. Albuquerque Housing Auth.
34,826
| N.M. Ct. App. | Apr 24, 2017Background
- Unified Contractor (Unified) contracted with Albuquerque Housing Authority (AHA) to provide exterior stucco/painting work at multiple properties; the contract incorporated Form HUD-5370 and contained a disputed-billings clause and prompt-payment provisions.
- Dispute arose over the elastomeric coating used and whether Unified applied it per the manufacturer's specifications (AHA approved ParexUSA coating; Unified purchased 79 pails). AHA inspected and reported visible defects and suspected under-application.
- AHA withheld payments in part, audited Unified’s supplier invoices, then terminated the contract for material breach (use of non-approved materials and failure to follow manufacturer application). Unified sued for breach, unjust enrichment, and Prompt Payment Act violations; AHA counterclaimed for breach and damages to repair/complete work.
- At trial the court found both parties breached: AHA for imperfect compliance with disputed-billing notice provisions (but not liable for Prompt Payment Act interest due to a "major dispute"), and Unified for materially breaching by under-applying coating and misrepresenting performance. District court awarded Unified recovery for unpaid work and awarded AHA damages to repair; offset produced a net judgment for AHA.
- On appeal, this Court affirmed liability findings except it (1) rejected Unified’s notice-and-cure requirement claim, (2) allowed AHA to rely on under-application grounds at trial, (3) agreed that AHA gave sufficient notice to avoid Prompt Payment Act interest, but (4) reversed the damages calculation and remanded to apply the contract-price-limitation rule, reducing AHA’s recoverable damages.
Issues
| Issue | Plaintiff's Argument (Unified) | Defendant's Argument (AHA) | Held |
|---|---|---|---|
| Whether contract or HUD default clause required notice and opportunity to cure before termination | Contract required notice and an opportunity to cure as condition precedent to termination | Contract permissively allowed AHA to give notice but did not require it; HUD/Form default clause does not guarantee right to cure | Held: No mandatory cure right; Contract’s language is permissive ("may"), so AHA could terminate for material breach without providing cure notice |
| Whether AHA could rely at trial on termination grounds other than those stated in its pre-trial termination notice (i.e., under-application vs. number-of-coats) | Pre-trial notice limited AHA to stated grounds; raising different theory prejudiced Unified | Different articulation (under-application vs. two-coat violation) is substantively the same defect and caused no prejudice; later-proof of other grounds is allowed | Held: AHA may prove default on any ground supported by the facts at termination time; district court did not err in considering under-application theory |
| Sufficiency / method of proving damages and whether award was speculative | AHA’s damages evidence was speculative and legally insufficient | AHA produced expert inspection and repair estimates; evidence supports damages | Held: Damages supported by substantial evidence; however district court miscalculated net recoverable amount by permitting a double recovery and must apply the contract-price-limitation rule |
| Whether AHA’s mid-October correspondence triggered Prompt Payment Act interest liability | AHA failed to give timely disputed-billing notice; Unified is entitled to statutory interest | AHA’s mid-October communications put Unified on notice of a "major dispute," limiting statutory interest | Held: AHA’s correspondence sufficed to place Unified on notice of a material dispute; Prompt Payment Act interest not awarded to Unified |
Key Cases Cited
- Cockrell v. Cockrell, 117 N.M. 321, 871 P.2d 977 (N.M. 1994) (a request for findings is not the only way to preserve sufficiency-of-evidence claims on appeal)
- Public Serv. Co. of N.M. v. Diamond D Constr. Co., 131 N.M. 100, 33 P.3d 651 (N.M. Ct. App. 2001) (principles of contract interpretation: harmonize provisions and give meaning to all clauses)
- Paiz v. State Farm Fire & Cas. Co., 118 N.M. 203, 880 P.2d 300 (N.M. 1994) (contract remedies should not place injured party in a better position than full performance)
- Castricone v. Michaud, 583 N.E.2d 1184 (Ill. App. Ct. 1991) (applies contract-price-limitation rule: damages = cost to complete/repair minus unpaid contract balance)
- McDonnell Douglas Corp. v. United States, 35 Fed. Cl. 358 (Ct. Cl. 1996) (discussion on when government may justify termination for default on grounds different from those initially asserted)