The opinion of the court was delivered by: John M. Facciola, United States Magistrate Judge
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND MEMORANDUM OPINION
This case arises out of a contract dispute between plaintiff Manganaro
Corporation ("Manganaro") and defendant HITT Contracting, Inc. ("HITT").
Manganaro, a Maryland corporation, sued HITT, a Virginia corporation, for
breach of contract arising out of a construction project for Lucent
Technologies ("Lucent"). The Lucent project, located at Metropolitan
Square, 1450 G Street in Washington, D.C., was to be performed on a
fast-track basis. HITT, Lucent's prime contractor, hired Manganaro to
perform the drywall and ceiling work on the 4th and 5th floors of
Metropolitan Square. Due to the state-of-the-art "brutalized"
architectural style, Manganaro was also contracted to install two
speciality ceilings: 1) a radians ceiling and 2) a decoustics ceiling.
On December 23, 1999, after completing all of its work except for the
installation of two ceilings and certain "punch list"*fn1 items,
Manganaro notified HITT that it would cease performance on the contract
until it was paid for the work previously performed. HITT denied that it
failed to make timely payments and claimed that Manganaro abandoned the
project. HITT, therefore, terminated Manganaro's subcontract and hired
another subcontractor to finish the work.
In this lawsuit, Manganaro seeks what it claims is due from HITT. HITT
seeks, as offsets or counterclaims, the costs incurred as a result of
hiring other subcontractors to complete Manganaro's work and to repair
alleged deficiencies in Manganaro's work.
The Contract and its Addenda
1. On July 22, 1999, a contract was entered into by Manganaro and HITT
in the base amount of $393,000.00. The original contract (prior to
the addition of the addenda) stated that the "Contractor's receipt of
payment by the owner shall be a condition precedent to the obligation
of Contractor to make any payment to the Subcontractor." Defs. Ex.
0005, ¶ 2A. Thomas Vagrin ("Vagrin"), President of Manganaro,
insisted, however, that the following be added to the contract:
"Notwithstanding the above, it is understood The Contractor has the
ultimate obligation to pay the Subcontractor within a reasonable time
regardless of payment status from the Owner." Defs. Ex. 0010, ¶
2A. HITT agreed to this modification of the original contract.
2. The addendum thus modified the original contract to require payment
by HITT to Manganaro within a reasonable time after Manganaro's
requisition for payment was received, eliminating any obligation of
Manganaro's to await HITT's payment by Lucent before Manganaro was
paid by HITT.
3. Vagrin testified that this addendum is typical of Manganaro contracts
and is intended to protect Manganaro, typically a subcontractor, from
Manganaro's not being paid within a reasonable time of the submission
of its invoices to the general contractor.
4. Vagrin further testified that the addendum does not make a
distinction between payments for "contract work" and payments for
"change order" work.*fn2
5. Yogen Patel ("Patel"), HITT's Vice President, conceded on direct
examination that it was his understanding that Manganaro was to be
paid in a timely fashion even if HITT had not yet received payment
The Dispute and the Termination
6. The work Manganaro invoiced consisted of two elements. The first, the
"contract work," was work Manganaro was compelled to perform by the
contract as written. Manganaro would bill for whatever percentage of
it was completed in that month. The second, the "change order" work,
was work that Manganaro had to do in excess of its contractual
obligation. See note 2. Manganaro was permitted to seek additional
compensation for the change order work.
7. At the midpoint of each month, it was Manganaro's practice to send
invoices seeking compensation for both work done and work Manganaro
projected would be completed by the end of that month. The
requisition specified: 1) the original contract sum, (2) the net
change due to "change orders," 3) the contract sum to date, 4) the
total dollar amount of work completed to date, 5) the total dollar
amount to date in earned retainage fees, 6) the total dollar amount
to date in payments to Manganaro, and 7) the total dollar amount to
date in outstanding payments currently due Manganaro. See e.g.,
Defs. Ex. 19028. Manganaro's monthly requisition also included
information detailing the percentages of work completed and remaining
to date and the dollar value of both percentageSee e.g., Defs. Ex.
8. Manganaro's change order work was subject to a separate and distinct
approval process from the contract work. Initially, Manganaro would
estimate in writing the cost of the modifications in terms of
material and labor and submit a work order, along with supporting
documentation, to HITT. If HITT approved the change order work, one
of its representatives would sign the work order, and then Manganaro
would proceed to do the work.
9. Next, HITT sent the change order work it had approved to the owner,
Lucent. Lucent's approval of the work order, after the work was
done, was crucial to Manganaro's getting paid. HITT's project
accountant, Kitty Siegfried, testified that she could not pay
Manganaro's change work orders until Lucent approved them. According
to defendants' witnesses, Lucent was habitually and notoriously late
in approving anything HITT submitted. Thus, HITT authorized Manganaro
to do change order work, Manganaro did the change order work, but
Manganaro did not get paid for it until Lucent authorized HITT to pay
11. Manganaro's first invoices, for July and August, 1999, were paid
without problem or exception and Manganaro's work was moving rapidly
towards its conclusion. In September, 1999, Manganaro billed HITT for
the change orders listed in Chart 1 in the Appendix with an invoice
that was submitted to Manganaro by a letter dated September 21, 1999
and that was due by October 21, 1999.
12. In October, 1999, HITT paid the two change orders which appear in
bold in the chart, but failed to pay for the remaining nine items.
This resulted in an outstanding balance of $18,574.18.
13. Even though these change work orders remained unpaid, HITT approved
subsequent change orders and Manganaro billed for these by an invoice
it submitted on October 14, 1999 and due by November 14, 1999. As of
the date of the requisition, Manganaro had completed 100% of the work
on the 4th floor and 86% of the work on the 5th floor for a combined
90% completion of the job. The new change work orders are set out in
Chart 2 in the Appendix and total $38,767.50 (total less retainage).
The October 14, 1999 bill sought payment for all outstanding change
work orders, i.e., the $18,574.18 carried over from September and the
new, October changes or $38,767.50, for a total of $57,341.68.
14. On November 12, 1999, Vincent asked for a meeting with HITT personnel
to review the status of numerous disputed change work orders that
HITT had still not paid. Present at the meeting were John Przybyla
("Przybyla"), HITT Project Manager, Jason Sherman ("Sherman"), HITT
Assistant Project Manager, Ken Whetzel ("Whetzel"), HITT Senior
On-Site Superintendent, and Kevin Corbin ("Corbin"), a HITT
representative. Agreement was reached as to numerous disputed tickets
and Vincent testified that he was satisfied that Manganaro's concerns
had been adequately addressed. He further testified that Przybyla
apologized for HITT's being so far behind in their payments to
Manganaro and that Przybyla promised to see what he could do to
15. Following the November meeting, Vincent sent a revised list of
outstanding orders to Przybyla. When payment on the outstanding
orders was not forthcoming, Vincent attempted to follow up with phone
calls to Przybyla. Vincent testified that Przybyla did not respond to
16. On November 19, 1999, Vincent submitted a requisition for the month
of November, 1999, indicating that $56,861 was due. Defs. Ex.
19059-60. In fact, this number was in error, and my independent
calculations show that a total of $112,628.68 was due.*fn3
17. On December 9, 1999, HITT sent Manganaro a check for $19,871.07. Defs
Ex 19063. Again, in keeping with its practice, HITT did not accompany
the check with an explanation of which change orders were being
paid. Fortunately, there is in evidence a worksheet prepared by
HITT's project accountant which indicates, by work order number, the
change orders paid by this check and an adding machine tape that
confirms this total. Defs. Ex 19066. As with so many of the documents
at issue in this matter, the calculation of this bill contained
several errors that I have attempted to correct.*fn4 Nevertheless,
it is clear that some of the paid change work orders were allocated
to the October and November invoices, thus reducing the total amounts
due on these change work orders. The balance on the October invoice
fell to $31,709.66, Chart 2, while the November outstanding change
work orders stood at $20,671.83. Chart 3. Thus, after Manganaro
received the December 9, 1999 check for $19,871.07, the total amount
due, including contract work and change order work, fell from
$112,628.68 to $92,757.61.
18. However, Vincent was not aware that some of the change work orders
had already been paid when he demanded full payment of all of them in
December, 1999. Indeed, Vincent only learned at trial that the
December 9, 1999 payment represented a payment of outstanding change
work orders. The significance of the December payment became apparent
only after a painstaking reconstruction of the documentary evidence
admitted at trial. The amount Manganaro was due for change order work
on December 23, 1999 is different from what Vincent believed was due
on that date. Nevertheless, while some of the change orders had been
paid, many more were outstanding on December 23, 1999, the date when
Vincent demanded payment of the outstanding ones and suspended work.
In response, HITT terminated Manganaro's contract.
19. Vincent further testified that the only remaining work at that time
was the installation of the two ceilings and any new punch list
items. Although Manganaro was prepared to install the decoustics
ceiling in the demonstration room on the 5th floor, Vincent testified
that Whetzel never gave Manganaro final approval to install the
ceiling. According to Vincent, Whetzel twice indicated that Manganaro
should install the ceiling and then told Manganaro to stop its work.
20. The radians ceiling, costing $17,927.00, was shipped by Ceilings Plus
to Manganaro on December 3, 1999. Defs. Ex. 2002. Although Manganaro
paid for the ceiling on December 30, 1999, the ceiling was received
around December 23, 1999.
21. On December 20, 1999, Przybyla sent Vincent a letter outlining the
remaining work to be done and the outstanding change orders. Defs.
Ex. 6001-02. In the letter, Przybyla stated:
Manganaro must complete the installation of the Radian
and Decoustic ceilings, as well as, all punch list
items. We understand that you have the ceiling
material at your Beltsville shop but are unwilling to
start the required work. This letter shall serve as
your formal notice of project delay. In the event that
work on all remaining items does not start tomorrow
HITT will begin to complete the work with our own
forces. All cost associated with this delay will be
the sole responsibility of Manganaro Corporation.
22. By fax dated December 23, 1999, Vincent responded to Przybyla's
December 20, 1999 letter. In the fax, Vincent outlined his
understanding of the amount of work that remained and the total
dollar amount of outstanding tickets. According to Vincent, of the
original contractual amount of $393,000, outstanding payments were
due in the amount of $135,462. More than half of that amount,
$81,239, was due for outstanding change order work dating back to
August, 1999. The only work remaining was the installation of the
metal ceiling and final punch list items that combined amounted to a
total labor cost of $14,903. In conclusion, Vincent stated: "As
discussed, we consider a large portion of the balance due past due
and request an agreed upon payment to be arranged prior to
commencing." Defs. Ex. 8001.
23. Later that same day, Przybyla faxed Vincent a formal termination
letter. Defs. Ex. 9003. In the letter Przybyla stated: "In accordance
with article 7A of our subcontract agreement, this letter shall serve
as your formal notice of termination. Since you are unwilling to
finish your contract work we are currently making arrangements to
complete all remaining items, including but not limited, to special
ceilings and punch list." Id.
24. To recap, the amount due as of December 23, 1999, stood at
$92,757.61. See ¶ 17. In addition, Manganaro had by that date
submitted its December invoice, which billed for another $3,412.80 of
change order work, of which only $552.20 had been paid. See Chart 4.
In addition, $14,902 in contract work was also due. Defs. Ex. 19071.
Thus, as of December 23, 1999, $92,757.61 was actually due and
another $17,762.60 had been billed and was due by January 14, 2000.
Counterclaims and Offsets
25. Project progress meetings were held by HITT on a weekly basis. See
e.g., Defs. Ex. 10001. According to the minutes for the November 1,
1999 progress meeting, Manganaro's work at that point was limited to
patch and repair as well as the installation of two ceilings. Defs.
Ex. 10004. At no point in the progress meeting minutes does HITT
complain about the quality of Manganaro's work.
26. A second addendum to the contract between Manganaro and HITT
contained the following provisions: (1) the cost of overtime work
performed by Manganaro was to be covered by Manganaro only if
Manganaro was the cause of the delay, Defs. Ex. 0010, (2) Manganaro
was not responsible for repairing any damage to its work that is
caused by others, Defs. Ex. 0010, and (3) HITT had to notify
Manganaro 72 hours prior the issuance of backcharges to Manganaro for
additional work, Defs. Ex. 0011. The purpose of this last clause was
to allow Manganaro the opportunity to cure the defects that HITT
originally backcharged and now seeks to assert
as offsets and counterclaims in this lawsuit.
27. Whetzel described the quality of Manganaro's work as good and never
once complained about its quality while Manganaro was on-site and
28. John Hoffman, an employee of Stalker Brothers, the subcontractor that
installed the ceiling and did punch list work after HITT terminated
Manganaro, testified that he could not tell whether the repair work
listed on the punch list was the result of deficient work by
Manganaro in the first place or the result of damage done by others.
29. Cindy Athey, President of Precision Wall Tech, testified that the dry
wall work was not properly done but also testified on several
occasions during cross examination that she did not know who may have
caused the damage to the walls that had to be repaired before they
could be painted.
1. On December 23, 1999, Manganaro was justified in suspending
performance due to the non-payment of no less than $92,757.61 in
change order and contract work.
2. Since Manganaro was justified in suspending performance, HITT's
termination of the contract was unjustified and constituted a
material breach of the contract, excusing Manganaro from any
further performance. Manganaro therefore has no obligation to pay
for the completion of the work by others.
3. Manganaro was entitled to 72 hours notice prior to the issuance
of back charges by HITT to Manganaro for additional work. HITT
never provided Manganaro with that notice once it terminated the
contract on December 23, 1999.
Virginia law*fn5 acknowledges that a general contractor ("general")
may or may not condition payment by the general contract to the
subcontractor ("sub") upon payment to the general by the owner. If the
parties intend the sub to wait for the general to be paid before the sub
is paid, the contract is deemed to be a "pay when paid" contract. This
forces the sub to keep working despite not being paid until the owner has
paid the general. Galloway Corp. v. S.B. Ballard Const. Co., 464 S.E.2d 349
As Galloway indicates, whether the contract is a "pay when paid"
contract is a function of the parties' intentions. If the parties'
intention is ambiguously expressed, parol evidence may be admissible to
clarify their intention. Id.
There is neither patent or latent ambiguity in the addendum as it
relates to HITT's obligation to pay Manganaro. HITT specifically agreed
that it would pay Manganaro within a reasonable time whether or not HITT
had been paid by the owner. Indeed, even if parol evidence were to be
admitted, it is undisputed in this case that both parties to the contract
understood the significance of the language in the addendum. Both Vagrin
and Patel, signatories to the contract between Manganaro and HITT,
understood that HITT's payment of Manganaro's requisitions was not
conditioned on HITT's receipt of payment from Lucent. That HITT's
accounting department failed to pay Manganaro because Lucent had not
yet approved the work order that HITT itself had approved only shows that
HITT began breaching the contract with Manganaro's submission of the third
invoice in September.
This was certainly not a "pay when paid" contract, and therefore
payment was due when Manganaro billed HITT, irrespective of Lucent's
approving or not approving the work orders. The first question is
therefore when was payment due, since the contract did not specify a date
Vagrin testified that, in his opinion, it was reasonable for Manganaro
to expect payment from HITT within 30 days of the submission of the
invoice for the previous month's work. Vagrin's expectation of payment
within that period of time was certainly justifiable given the parties'
prior dealings, as illustrated in the following chart:
Date of Manganaro Date Requisition Paid Number of days between
Requisition Requisition and Payment
July 26, 1999 Sept. 9, 1999 45 days
Aug.18, 1999 Sept. 23, 1999 35 days
Sept.21, 1999 Oct. 21, 1999 30 days
Oct. 14, 1999 Nov. 18, 1999 34 days
HITT's failure to pay Manganaro's July 1999 requisition within 30 days
does not in this case affect the reasonableness of the 30-day window. On
an average, Manganaro was being paid within 36 days for its contract
work; the median was 34.5 days.
HITT seizes on this fact and asserts that the November 19, 1999,
requisition was not past due when Manganaro ceased performance on
December 23, 1999. That is, at best, half true. HITT paid for the
contract work in a reasonably timely manner. But, HITT never paid for the
change order work in a timely manner. By October 13, 1999, $18,574.18 was
overdue and by November 14, 1999, a total of $57,341.68 was overdue. By
December 23, 1999, the delay of at least 60 days in paying the September
change order invoices and of least 30 days in paying the October change
order invoices was unreasonable when one considers the practice of the
Perhaps more significant is the amount outstanding when viewed
absolutely or in relation to the total change order work billed. By
November 19, 1999, Manganaro had billed $104,301.28 in change order work
(less retainage) but had only been paid $14,614. (Note that payments
listed in Chart 1 were made in October.) By December 23, 1999, Manganaro
had billed $108,301.28 in change order work (less retainage) but had been
paid $34,485.07. See Charts 1, 2, 3 & 4. That is as unfair as it is
Since HITT's failure to pay the outstanding change order invoices by
December 23, 1999, was unreasonable, Manganaro was entitled to suspend
performance. While there is no Virginia case law on point, the authorities
uniformly state that a subcontractor who is unreasonably denied payment
as he progresses towards completion is justified in suspending
performance until he is paid. Restatement (Second) of Contracts §
251(1)(1981); 15 Richard A. Lord, Williston on Contracts § 43.18 at
12 (4th ed. 2000); 2 E. Allen Farnsworth, Farnsworth on Contracts, §
8:15 at 4 (1990).*fn7 Professor
Corbin, with his characteristic common-sense appreciation of the economic
There is a special factor to be considered in the case
of a building contract, or any other contract the
financing of which requires a progressive expenditure
in the course of performance. In these cases, one
reason for providing for installment payments as
construction proceeds is to supply the funds necessary
for the agreed performance; and failure to pay one or
more installments is more likely to cause
inconvenience and difficulty to the building
contractor. Therefore, a failure to make one of the
progress payments, even though the contract is not
divisible into pairs of separate equivalents and the
installment unpaid is only a small part of the whole
consideration, is more likely to justify suspension of
performance by the builder, or even total renunciation
of further duty.
3A Arthur L. Corbin, Corbin on Contracts § 692 at 269 (1960).
Echoing that thought, a district court, construing North Carolina law,
The Court has found that the defendants did fail to
keep the periodic payments up to date as called for in
the contract between Ling and Robinson and that it
failed to make payments for a large portion of the
extra work, change orders and speed-up. . . The Court
has therefore found that there was a substantial and
material breach, said breach going to the very essence
of the contract and justifying Robinson in refusing to
continue work on the project. The subcontractor cannot
and should not be expected to finance the project
until such time that the prime contractor or the
government decides to pay the amount due. If the
subcontractor is ordered to perform the work or even
required to do so, then the obligation in the absence
of an express contract provision falls upon the party
so ordering the work to be done to pay a reasonable
amount for that work within a reasonable time. To hold
otherwise would cast a burden upon the subcontractor
which in many cases would be impossible to carry as
the subcontractors are usually smaller in size than
the prime contractors.
United States for Use of F. E. Robinson Co., of N.C., Inc. v. Alpha
Continental, 273 F. Supp. 758, 775-76 (E.D.N.C. 1967)(emphasis added).
Accord: Stewart v. C & C Excavating & Const. Co., 877 F.2d 711, 713 (8th
Cir. 1989); (Miller Act case; acknowledging that failure to make progress
payment may justify sub in suspending performance); Blake Const. Co.,
Inc. v. C.J. Coakley Co., Inc. 431 A.2d 569, 576 (D.C. 1981). See also
Rodgers Co., Inc. v. Aztec Const. Co., No. 155591, 1997 WL 1070464 (Va.
Cir. Ct. 1997) (Virginia trial court concluding that failure to make
payments under contract that authorized sub to suspend performance until
payment was made on all outstanding invoices justified sub suspending
performance; failure to pay was material breach).
HITT nevertheless argues that it was merely slow in paying Manganaro
and that the delay was not a material breach of its contractual
obligations to Manganaro. HITT further argues that its delay did not
justify Manganaro's cessation of its performance and therefore Manganaro
was the breaching party.
Since at least 1895, Virginia has accepted the principle that not every
breach of a contract justifies the other party's refusal to perform.
Instead, a party who has substantially performed his obligation may
insist upon performance by the other party provided the party demanding
performance has merely breached his contractual obligations in a trivial
manner that can be remedied by awarding damages for his non-material
breach to her opponent. Buena Vista Co. v. McCandlish, 23 S.E. 781, 783
(Va. 1895). Accord: Neely v. White, 177 Va. 358, 14 S.E.2d 337, 365 (Va.
1941); Kirk Reid Co. v. Fine, 205 Va. 778, 139 S.E.2d 829, 835-836 (VA.
965); Wallinger v. Kelly, 117 S.E. 850, 855-856 (Va. 1923); Smith v.
Packard, 27 S.E. 586, 588 (Va. 1897); Toepfer Const. Co. Inc. v. Abramson
Family Partnership, No. 156055, 1998 WL 972149 (Circuit Ct, Fairfax
County 1998); Old Line Const. Corp. v. Tribby, 1990 WL 751065 (Circuit
Ct., Loudoun County 1990). The corollary is that if a party has
materially breached the contract in a manner that goes to the very root
of the contract, he cannot then terminate his performance and demand that
the other party perform.
HITT attempts to invoke this principle by equating itself to parties*fn8
victimized by another party's abandoning performance based on a breach
ultimately deemed to be immaterial. HITT analogizes this case to a
situation in which the parties are engaged in a legitimate dispute as to
the amount due, the quality of work performed, or another equally
legitimate reason for delaying payments. Courts may conclude that the
good faith and justifiable delay required more patience than the
abandoning party showed. In those situations, however, the party
victimized by the abandonment had substantially performed its
obligations. This substantial performance makes the abandonment
unreasonable, because the abandoning party would have been compensated in
damages for the understandable delay it encountered. Thus, after one
applies the principles of "substantial performance" to this case, it is
clear that HITT's reliance on these principles and the cases articulating
it makes little sense.
First, Manganaro never abandoned its duty to complete its contractual
obligations. It merely suspended performance and demanded payment of what
was due. It was HITT that fired and terminated Manganaro. Since it did, I
do not understand how HITT could claim that it substantially performed
its obligation to Manganaro by firing Manganaro when it demanded payment
as a condition precedent to proceeding with the remaining work.
Second, as HITT ignores, the contract specified that "time was of the
essence," a phrase that means what it says, i.e., that the parties are
agreeing that the time within which a party performs its obligation to
the other is a material part of their agreement. See United States ex rel
Virginia Beach Mechanical Services, Inc. v. Samco Const. Co.,
39 F. Supp.2d 661, 672 (E.D. Va. 1999) (failure to make timely payment
may be material breach of construction contract if parties agree that
time is of the essence). As Williston points out, the generosity of
permitting a breaching party to recover despite his insubstantial breach
will never be permitted to modify the contract the parties in fact
created by their mutual assent. Williston, supra, § 44.53 at 224.
While the incantation of the phrase "time is of the essence" should not
lead to a result the parties did not fairly contemplate, Manganaro
specifically demanded and received the assurance in this instance that
Lucent's delays in paying HITT would not be a basis for HITT's delays in
paying Manganaro. To permit HITT to escape from paying Manganaro in a
timely manner because of Lucent's failure to approve and pay the change
work orders in a timely manner is to deny Manganaro the very contractual
benefit HITT gave it and to permit HITT to do exactly what it contracted
not to do.
Third, any breach excused because of a party's substantial performance
of his other obligations must pertain to an obligation that does not
truly deny the other party the benefit of its bargain. See Corbin,
supra, §§ 703-706 at 317-326; Williston, supra, § 44-52 at 220
("The doctrine of substantial performance is intended to protect the
right to compensation of those who have performed in all material and
substantive particulars, so that their right to compensation may not be
forfeited by reason of mere technical, inadvertent or unimportant
omissions or defects."); Restatement, supra, § 237 (referring to
"uncured material failure" to render performance) & § 241 (listing
significant factors in determining materiality of performance not
rendered). I can only hope that HITT is not arguing that Manganaro's not
being paid for the work it performed was an immaterial part of their
contractual relationship. It was, of course, the very heart and soul of
I am not ignoring in this context Patel's testimony that in December
HITT offered to pay Manganaro $56,000 when Manganaro indicated that it
might suspend performance. Patel testified that he offered to pay $56,000
which was not yet due. He must have been referring to a November 19, 1999
invoice submitted by Manganaro charging $56,861 as "payment due for
current work." Vincent insisted that Patel never offered any money.
Assuming, in any event, that I were to credit Patel's testimony and HITT
had tendered the $56,861 the November invoice sought, by my
calculations, a sizeable amount would still have been due.
An immense amount of confusion has been created in this case because
the November 19, 1999 invoice submitted by Manganaro is mistaken and
understates what was in fact due. The problem occurs because the section
of the invoice that appears at Defs. Ex. 19059 contains an arithmetical
error in the entry on the Application and Certificate for Payment that
totals payments received and is entitled "Less Certificates for Payment."
The entry is $389,776 which is wrong. The total amount paid by HITT to
that point was $341,654 (the sum of 329,740 from Chart 5 plus 11,914 from
Defs. Ex. 19033). When the correct amount is deducted from the entry
entitled "Total Earned Less Retainage," the entry entitled "Current
Payment Due" should be $112,628.68.*fn9
On December 9, 1999, or shortly thereafter, Manganaro received the
check for $19,871.07. When deducted from the $112,628.68 that was in fact
due, a balance of $92,757.61 was due when Patel supposedly made his offer
of $56,000, which had to occur sometime between December 9, 1999 and
December 20, 1999. Thus, HITT's purported offer, which left a large
amount outstanding, was certainly not "substantial performance" of its
obligation to pay for change work orders it approved and directed
Manganaro to execute.
It is no answer to say that HITT's subjective understanding of what was
due renders its performance "substantial." To assess the substantiality
of HITT's performance I have to use the objective criterion of what it in
fact offered against what in fact was due. The principle of "substantial
performance" cannot be contorted to visit solely upon Manganaro the
consequences of what might have been, at worst, a temporary*fn10 mutual
mistake of fact in the November invoice.
More importantly, in the letter HITT wrote to Manganaro on December
20, 1999, HITT conceded that what it called "the total contract amount
w[ith] approved and pending changes" was $501,603. Defs. Ex. 6002. HITT
also concedes that as of December 23, 1999, it had paid Manganaro a total
of $361,524, which is true.*fn11 Joint Pre-Trial Statement, Defendant's
Chart, final page. Thus, HITT's own version of the billing history,
correct or incorrect, established that it was $140,079 in arrears when it
insisted on Manganaro's performance and then terminated Manganaro for
suspending performance and demanding payment. I do not understand how a
party like ...