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11/30/77 John H. Safer, Et Al. v. Frank M. Perper

November 30, 1977

JOHN H. SAFER, ET AL

v.

FRANK M. PERPER, ET AL. DONOHOE CONSTRUCTION COMPANY, INC.,

ET AL., THIRD-PARTY DEFENDANTS; JOHN H. SAFER, ET AL., APPELLANTS

v.

FRANK M. PERPER, ET AL.

v.

DWOSKIN, INC., ET AL., THIRD-PARTY DEFENDANTS 1977.CDC.264



UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

a Maryland Corporation, APPELLANT v. DWOSKIN, INC.,

Appeals from the United States District Court for the District of Columbia (D.C. Civil 2377-72).

APPELLATE PANEL:

Danaher, Senior Circuit Judge, McGowan and Tamm, Circuit Judges. Opinion for the court filed by Circuit Judge Tamm.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE TAMM

We are called upon to review various rulings of the United States District Court for the District of Columbia in a case concerning the alleged breach of a construction contract for a Holiday Inn motel located in Chevy Chase, Maryland. We are presented with issues concerning the capacity of various entities to recover on the construction contract, the liability of the contractor, and the measure and certainty of damages. Because the capacity issues center upon a byzantine series of transactions, it is necessary to set out the relevant facts in a fairly detailed manner. I. THE FACTUAL BACKGROUND

In October 1968, the property upon which the motel is located belonged to Somerset Properties Joint Venture (Joint Venture), whose principals were John H. Safer and Stephen A. Winkelman. On October 10, 1968, Joint Venture entered into a lease agreement with Chevy Chase Motel Associates (Chevy Chase), under which Joint Venture agreed to construct and lease a motel and related facilities *fn1 to Chevy Chase for twenty-one years with two consecutive renewal options of twenty-one years each.

By contract dated February 11, 1969, Winkelman and Safer *fn2 agreed to sell the property to the Winthrop Lawrence Corporation (Winthrop) and Lammot DuPont Copeland, Jr. By deed dated April 11, 1969, Winkelman and Safer granted the property to Winthrop. Winthrop gave back a deed of trust and a note *fn3 guaranteed by Copeland. Winthrop granted the property to Copeland by deed dated the same day. *fn4

In April 1969, Donohoe Construction Co., Inc. (Donohoe) began construction of the motel. *fn5 On May 6, 1969, before any of the deeds of April 11, 1969, had been recorded, Winthrop signed a standard form, stipulated sum AIA construction contract for the motel complex with Donohoe. Once again, Copeland acted as Winthrop's guarantor. The contract price was $3.4 million.

On May 7, 1969, the deed from Winkelman and Safer to Winthrop was recorded. On June 30, 1969, the deed from Winthrop to Copeland was recorded. On August 26, 1970, Copeland filed a declaration of trust indicating that the property was being held fifty percent for himself and fifty percent for Thomas Shaheen.

Copeland filed for a Chapter 11 bankruptcy arrangement on October 20, 1970, in the United States District Court for the District of Delaware. Winthrop filed similarly on November 10, 1970, in the United States District Court for the District of Maryland.

Chevy Chase received occupancy of part of the motel in January 1971, and of the remainder no later than May 1971. On May 5, 1971, Donohoe filed a mechanic's lien against the property, the principal of which was $184,419.46. *fn6 On the same day, pursuant to a private power of sale in the trust deed given to Winkelman and Safer dated April 11, 1969, the property was sold at foreclosure to Financial Underwriters, Ltd. (Financial). *fn7 The sale was ratified by the Circuit Court for Montgomery County, Maryland, on June 18, 1971.

On July 19, 1971, Financial assigned all of its right, title, and interest in the property to the Somerset Properties Limited Partnership (Limited Partnership). *fn8 Five days later, on July 24, 1971, Limited Partnership, the trustees, and Financial deeded fee simple title to the Peoples Life Insurance Company (Peoples). Peoples leased the land back to the Limited Partnership for fifty years on August 16, 1971, and gave the Limited Partnership a quitclaim deed to the improvements. Two days later, Limited Partnership paid the lien of Donohoe in the total amount of $205,079.58. *fn9

Certain damage claims developed in connection with the construction of the motel, most notably with respect to the wall coverings in the halls and rooms, the riser pipes, and water spots on various ceilings. Winkelman and Safer, on behalf of Joint Venture and Limited Partnership, brought suit *fn10 against Chevy Chase and Donohoe on November 30, 1972, seeking injunctive and declaratory relief with regard to a demand for arbitration by Chevy Chase against Joint Venture under an arbitration clause in the lease of October 10, 1968. In the alternative, the complaint asked that Donohoe be brought into the arbitration proceedings.

The complaint was amended to seek damages from Donohoe for breach of the construction contract of May 6, 1969. Chevy Chase cross-claimed against Donohoe for breach of the construction contract, predicating its claim on a third-party beneficiary theory. Chevy Chase, Joint Venture, and Limited Partnership were aligned to oppose Donohoe. It was in this posture that the case proceeded.

Donohoe moved for summary judgment, and, in the alternative, for judgment on the pleadings against both plaintiffs and against cross-claimant Chevy Chase. The trial judge granted Donohoe's motion for summary judgment against Chevy Chase and Joint Venture. Memorandum and Order of Sept. 13, 1973, Joint Appendix at 85-89; Memorandum and Order of Oct. 30, 1973, J.A. at 90-95. Both Chevy Chase and Joint Venture appeal, each urging that it was a third-party beneficiary capable of maintaining suit on the construction contract. The trial judge denied Donohoe's motion with respect to Limited Partnership, ruling that Limited Partnership was the "successor-in-interest" of Winthrop. Memorandum and Order of Sept. 13, 1973, J.A. at 85-89; Memorandum and Order of Oct. 30, 1973, J.A. at 90-95. On appeal, Donohoe argues that Limited Partnership has no such status.

On the eve of trial, Donohoe renewed its motion for summary judgment against Limited Partnership based upon "newly discovered" facts. *fn11 The trial judge denied Donohoe's renewed summary judgment motion. Memorandum and Order of Nov. 19, 1974, J.A. at 99-103. Donohoe appeals.

The case was tried without a jury. The district court awarded Limited Partnership a total of $68,000: $47,500 in connection with the vinyl wall coverings, $17,000 in connection with the water leak damage, and $3,500 in connection with a missing electrical thermostat and chiller interlock. Memorandum Opinion and Order of Nov. 27, 1974, J.A. at 104-14. Donohoe appeals these damage awards.

Limited Partnership was denied an award based on the substitution of stainless steel for copper pipes in the risers, and it appeals. II. JOINT VENTURE AND CHEVY ...


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