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RHA Construction, Inc. v. Scott Engineering, Inc.

Superior Court of Delaware, New Castle

July 24, 2013

RHA CONSTRUCTION, INC., a Delaware Corporation, and BEECHWOOD RETREAT, LLC, a Delaware Limited Liability Company Plaintiffs,
v.
SCOTT ENGINEERING, INC., a Delaware Corporation and GREGORY R. SCOTT, P.E., a resident of the State of Delaware, Defendants.

Submitted: May 24, 2013

Richard H. Cross, Jr., Esquire, Tara M. DiRocco, Esquire, Cross & Simon, LLP, Attorneys for Plaintiffs.

Patrick M. McGrory, Esquire, Tighe & Cottrell, P.A., Attorney for Defendants.

OPINION

Jan R. Jurden, Judge

I. INTRODUCTION

Defendants Scott Engineering, Inc. ("SEI") and Gregory R. Scott ("Scott") move this Court for summary judgment as to all claims and counterclaims. For the reasons state below, Defendants' motion for summary judgment is GRANTED in part and DENIED in part.

II. BACKGROUND

On June 20, 2011, RHA Construction Inc. ("RHA") and Beechwood Retreat, LLC ("Beechwood") (together, the "Plaintiffs") filed an amended complaint (the "Amended Complaint") in the Superior Court of the State of Delaware against SEI and Scott (together, "the Defendants").[1] The Amended Complaint stated three causes of action: (I) Breach of Contract, [2] (II) Breach of Implied Covenant of Good Faith and Fair Dealing, [3] and (III) Consumer Fraud (Negligent Misrepresentation).[4]

Each of the Plaintiffs' three claims arises from two contracts entered into by RHA and Scott in May 2007 and August 2008 respectively. RHA, a construction manager jointly owned by Randall H. Amos ("Mr. Amos") and his wife, Tammy Amos ("Mrs. Amos") was engaged by TASH Corporation ("TASH"), a corporation jointly owned by Mrs. Amos and Signe Murray ("Mrs. Murray"), to manage the acquisition, planning, and development of two adjoining parcels of land in Kent County.[5] One parcel was owned by the Yoder family ("Yoder") and the other was owned by the Parag family ("Parag"). On behalf of TASH, RHA hired SEI to conduct, among other tasks, a feasibility study to determine whether the Yoder and Parag properties were suitable for Mr. and Mrs. Amos and Mrs. Murray's intended purpose: to build a comprehensive "green" community, consisting of one major and two minor subdivisions.[6]

In April 2007, the TASH Corporation entered into agreements to purchase the Yoder and Parag parcels.[7] While the approximately 34-acre Parag property abutted a major road, the approximately 105-acre Yoder property was accessible only by a 30-foot wide strip of land known as "Percheron Road."

Shortly following the contract for sale, RHA hired SEI for engineering services related to the planned development of the two properties. The May 11, 2007 agreement between RHA and SEI consisted of a ten-page document and a one-page addendum entitled "Terms and Conditions of Agreement for Professional Services" ("Terms and Conditions").[8] Mr. Amos disputes that the Terms and Conditions page was attached to this contract between the parties.[9]

The May 2007 contract describes the work to be completed by SEI as "services [SEI] understand are necessary to provide [RHA] with a complete set of approved Construction Drawings and a recorded Record Plan."[10] The various services are divided into twelve separate "Tasks, "[11] which SEI estimated would cost RHA $287, 500.[12] The May 2007 agreement also includes a clear reference to the Terms and Conditions addendum: "The attached Terms and Conditions of Agreement for Professional Services shall be considered an integral part of this proposal/agreement."[13] Within the Terms and Conditions page, is a clause entitled "Risk Allocation" which specifically limits SEI's liability on the contract to the total fees paid.[14] Whereas the ten-page "proposal/agreement" primarily addresses the RHA's goals for the properties and the nature of the work to be completed by SEI, it is the Terms and Conditions page that addresses the legal and financial implications of the agreement.[15]

Following RHA and SEI's contract in May 2007, Mr. Amos put SEI's surveying work on hold while the financing for the project was finalized.[16] Soil tests were also placed on hold while RHA and TASH secured financing for the project.[17] As a result, the Yoder property became subject to an agricultural lease through November 2008.[18] As part of the financing agreement, the financing company required Mr. and Mrs. Amos and Ms. Murray to create a new holding company so that separate entities would own and develop the land, respectively.[19]That new holding company created to secure financing was Beechwood Retreat, LLC ("Beechwood").[20] Beechwood closed on the two properties in July 2008.[21]

After Beechwood closed on the two properties, RHA entered into a second agreement with SEI in August 2008. The August 2008 agreement covered services described by SEI as "necessary to provide [RHA] with a complete set of approved Construction Drawings and recorded Minor Subdivision Plans for each parcel."[22]That agreement was eight pages long and included a Terms and Conditions addendum identical to the one SEI claims was attached to the May 2007 agreement.[23] The body of the proposal/agreement also contained the same direct reference to the Terms and Conditions page, which state that the attached Terms and Conditions, "shall be considered an integral part of this proposal/agreement."[24]Again, the contract described each element of SEI's expected work as a "Task" and estimated the total cost of the seven separate Tasks as $165, 000.[25]

Following the acquisition of the two properties, and after entering into the second agreement with SEI, Mr. Amos was told that the subdivision plans would not be approved by Kent County (the "County") because the 30-foot strip of land known as "Percheron Road" was not actually a road, but an easement over property owned in fee simple by abutting land owners.[26] The County would not allow Beechwood to use the 30-foot easement as a main access point because County regulations require any access point to be at least 50-feet wide.[27] In addition, the County would not permit Beechwood to lay ground lines for necessary utilities because Beechwood did not own the strip of land in fee simple. Attempts to negotiate a purchase of Percheron Road were unsuccessful.[28]

III. STANDARD OF REVIEW

Summary judgment is appropriate only if, after reviewing the record in the light most favorable to the non-moving party, the court finds there are no remaining issues of material fact related to a claim.[29] In determining whether a material issue of fact exists, the court should consider all pleadings, depositions, answers to interrogatories, admissions, and affidavits.[30] "Even where there are disputed facts, summary judgment is warranted if the undisputed facts and the non-movant's version of the disputed facts entitle the moving party to judgment as a matter of law."[31]

IV. DISCUSSION

A. Introduction

Defendants move for summary judgment on several grounds. First, Defendants argue that no errors or omissions by SEI caused Plaintiffs to suffer any damages.[32] Second, Defendants assert Plaintiffs have not suffered any damages, or in the alternative, that any damages claimed by Plaintiffs are speculative.[33] Third, Defendants seek summary judgment on the consumer fraud claim, arguing Plaintiffs have no evidence to support a claim under the Delaware Consumer Fraud Act ("DCFA"). Finally Defendants seek summary judgment limiting liability, if any, to an amount equal to fees paid.[34] For the reasons stated below, summary judgment is GRANTED with respect to Plaintiff Beechwood ...


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