The opinion of the court was delivered by: SIRICA
This dispute arises out of the construction of the Tyler House, an apartment building in the Mt. Airy area of Washington, D.C., for low and moderate income families, that was built under a federal loan guarantee program. The plaintiff is Majestic Builders Corporation ("Majestic"), the general contractor for the project. The defendant is Mt. Airy Baptist Church Housing Corporation ("Mt. Airy"), the owner of the building.
The plaintiff bases its suit on breach of the construction contract and unjust enrichment. It claims it is entitled to at least an additional $271,542 under the construction contract as modified. For the reasons which follow, the Court finds that the plaintiff is entitled to that amount.
It subsequently became apparent, however, that in order to obtain a 100 percent mortgage guarantee from the government, the project would have to be taken over from the start by a non-profit sponsor. For this reason, and also to minimize the group's own cash investment in the project, Mt. Airy Associates was replaced by the present defendant non-profit corporation.
The officers and directors of the sponsor corporation were all residents of the Mt. Airy area. Although none was associated with Mt. Airy Associates, the three partners were actively involved in setting up the organization and continued to be actively involved with the project:
(1) Majestic Builders, of which Milton Polinger was president and Howard Polinger an officer, was designated construction contractor for the project;
(2) the Polinger Company, of which Milton Polinger was also president, was designated the project's management agent; and
(3) Judge Lawson was designated attorney for Mt. Airy; she subsequently became attorney for Majestic in this matter as well.
On March 13, 1969, after approval from the Federal Housing Administration ("FHA"), Majestic and Mt. Airy entered into a standard Federal Housing Administration "cost plus" contract for the construction of the Tyler House. Under the contract, the plaintiff was to be paid a total of not more than $4,163,749 for completing the project. A construction mortgage covering this amount was obtained by Mt. Airy from Thomas J. Fisher and Company, Inc.; that mortgage was in turn guaranteed by the Federal Housing Administration.
Paragraph IE of the construction contract provided in part as follows:
Changes in the Drawings and Specifications or any terms of the Contract Documents, or orders for extra work, or changes by altering or adding to the work which will result in any net construction cost increase, or will change the design concept . . . may be effected only with the prior written approval of the Lender [Thomas J. Fisher and Company, Inc.] . . . and the [Federal Housing] Commissioner and under such conditions as either the Lender or the Commissioner may establish.
Majestic began work shortly after the contract was signed, but immediately ran into difficulties with laying the foundation. It soon became apparent that the foundation called for in the contract -- one consisting of half "spread footings" and half "caissons" -- would be inadequate; a foundation consisting completely of caissons was needed. Majestic and Mt. Airy agreed that the change should be made. But since this change in plans and the resultant delay would increase the total cost of the project considerably, the two, in accordance with paragraph IE of the original contract, submitted on a standard FHA form a contract modification ("Change Order #1"). Assuming that the change order would be approved, Majestic went ahead with construction of the project as modified. However, the FHA never did approve this change order.
As time went on, the owner and the contractor agreed that other changes had become necessary and therefore submitted additional change orders to the FHA. Some of these were accepted and the contract price eventually rose to $4,176,629. Finally, on March 1, 1971, as work drew toward completion, the two signed a final contract modification form, by which they agreed that the contract price would be increased to $4,700,129. This modification was designated "Change Order #11."
Although the $4.7 million figure did not represent the full cost of the project, with profit, to Majestic, it did represent an amount which the FHA had ...