Unified Contractor, Inc. v. Albuquerque Housing Auth.
2017 NMCA 60
| N.M. Ct. App. | 2017Background
- Unified Contractor won a bid from Albuquerque Housing Authority (AHA) to perform exterior stucco/painting work using an approved elastomeric coating (ParexUSA); the Contract incorporated Form HUD-5370 and included prompt-payment and disputed-billing provisions.
- Unified purchased 79 pails of ParexUSA; AHA inspected and suspected under-application and other performance defects at two large properties (716 Morris NE and 903 Nakomis NE).
- AHA withheld payment on some invoices, audited Unified’s purchase invoices, and ultimately terminated the Contract for material breach (use of non-approved material and failure to follow manufacturer application requirements). Unified sued for breach, unjust enrichment, and Prompt Payment Act violations; AHA counterclaimed for breach and damages to complete/repair work.
- The district court found both parties breached the Contract: awarded Unified $92,318.63 for unpaid work and awarded AHA $125,600 to repair/complete work, offsetting to a net judgment of $33,281.37 against Unified; the court declined to award Prompt Payment Act interest to Unified.
- On appeal, the Court of Appeals affirmed most rulings but reversed the damage calculation, applying the contract-price limitation rule to reduce AHA’s recoverable damages and remanded for entry of a revised judgment for AHA of $22,257.34.
Issues
| Issue | Plaintiff's Argument (Unified) | Defendant's Argument (AHA) | Held |
|---|---|---|---|
| Whether AHA had to give notice and opportunity to cure before terminating | Contract and common law require notice/cure as condition precedent | Contract (and HUD Form) permit immediate termination for material breach; notice is permissive and not required where breach is vital or cure futile | Held: Contract does not require notice/cure as a condition; AHA could terminate for material breach without giving cure opportunity |
| Whether Unified materially breached and whether evidence supported termination grounds raised at trial | Denied under-application and argued trial should be limited to termination grounds in AHA’s notice | AHA argued under-application (not just "two-coat" theory) supported material breach; alternative grounds discovered/supportable at trial | Held: Substantial evidence supports material breach (under-application); district court may consider the under-application theory at trial—no prejudice shown |
| Proper measure of AHA’s damages and whether district court’s award produced double recovery | District court erred by not offsetting or applying contract-price limitation; double recovery resulted | Argued awarded repair cost was proper based on estimate to correct defects | Held: Applied contract-price limitation rule (market cost to complete/repair minus unpaid contract balance). Reduced AHA’s damages to $22,257.34 and remanded for final judgment |
| Whether AHA’s communications satisfied "undisputed"/Prompt Payment Act notice so as to avoid statutory interest | AHA failed to give timely disputed-billing notice and Prompt Payment Act interest should apply | Mid-October correspondence put Unified on notice of a major dispute; statutory interest therefore limited | Held: AHA’s mid-October communications constituted sufficient dispute notice to limit Prompt Payment Act interest liability |
Key Cases Cited
- Public Service Co. of N.M. v. Diamond D Constr. Co., 33 P.3d 651 (N.M. Ct. App.) (rules for harmonized contract interpretation)
- Collado v. City of Albuquerque, 45 P.3d 73 (N.M. Ct. App.) (materiality of breach and substantial-evidence standard)
- Paiz v. State Farm Fire & Cas. Co., 880 P.2d 300 (N.M. 1994) (contract remedies principle: injured party should not be better off than full performance)
- Castricone v. Michaud, 583 N.E.2d 1184 (Ill. App. Ct.) (adopting contract-price limitation rule for defective/unfinished construction)
- McDonnell Douglas Corp. v. United States, 35 Fed. Cl. 358 (Fed. Cl.) (limitations on justifying termination at trial on different grounds when prejudice from lack of cure-notice exists)
- Coll. Point Boat Corp. v. United States, 267 U.S. 12 (U.S. 1925) (party may justify termination by proving adequate cause existed at time of termination)