RICHARD B. CAREY and CAREY'S HOME CONSTRUCTION, LLC Plaintiffs,
THE ESTATE OF DAVID L. MYERS and ARLENE J. MYERS Defendants.
Submitted: April 15, 2015.
Tasha M. Stevens, Esq., Fuqua, Yori and Willard, Attorney for Plaintiff.
Dean A. Campbell, Esq., Law Office of Dean A. Campbell, LLC, Attorney for Defendant.
DECISION AFTER TRIAL
M. JANE BRADY SUPERIOR COURT JUDGE
I. Introduction & Background
This is a contract dispute between a general contractor and his clients. Contractor Richard B. Carey ("Carey") is the owner and sole member of Carey's Home Construction, LLC ("Carey's Construction, " collectively, "Plaintiffs"). In 2008, Carey entered into a contract with David and Arlene Myers ("Mr. Myers" and "Mrs. Myers, " collectively, "Defendants") to serve as general contractor on their custom home project. Mr. Myers has since passed away. At some point during the building process, the relationship between the parties deteriorated; Defendants ceased to make payments; and Carey stopped work.
Carey filed the instant action on October 31, 2011, alleging breach of contract and unjust enrichment. Specifically, Carey alleges that Defendants breached the contract by failing to pay the seventh installment and by failing to pay for extras that Defendants allegedly requested and Carey allegedly completed. Carey further alleges unjust enrichment on the grounds that he performed extra work, that Defendants were aware of the extra work, and that Defendants knew they would be charged for the extra work.
After the Court denied their Motion to Dismiss, Defendants filed an Answer and Counterclaim on April 20, 2012. Defendants deny that Carey performed his obligations in accordance with the contract. Defendants deny that any "extra" work was performed and instead maintain that all of the work completed by Carey was work he was obligated to do under the original contract. Defendants allege affirmative defenses, including that Carey breached the contract first "through non-performance and abandonment" and "by failing to coordinate the job properly." Defendants further allege that Carey failed to disclose all of the subcontractors who performed work on the house and engaged in fraudulent billing for "extras" which were not authorized by signed change orders (when the contract stated that signed change orders were required).
Defendants counterclaimed against Carey for breach of contract and negligent supervision for allegedly failing to coordinate and supervise his subcontractors, causing damage to the property; and for ultimately abandoning the project rather than correcting the damage. Specifically, Defendants allege that Carey permitted the hardwood floor and custom built cabinets to be installed before the HVAC system was installed and operational, resulting in damage to these fixtures caused by humidity. Defendants allege breach of the implied warranty of good quality and workmanship on the same grounds. Defendants allege consumer fraud for Carey's alleged failure to provide the change orders in writing, as per the contract, before performing extra or different work. Finally, Defendants allege that Carey deceptively used the fictitious name "Carey's Custom Home Construction, " whereas the actual name of the business entity owned by Carey is "Carey's Home Construction, " in violation of 6 Del. C. §3101. During trial, Defendants suggested that Carey also acted in bad faith to conceal the fact that his business is an LLC rather than a sole proprietorship.
A three-day bench trial was held June 2-4, 2014. Plaintiffs and Defendants submitted post-trial closing statements on June 27, 2014 and July 21, 2014, respectively. The Court received a complete set of transcripts on April 15, 2015, and the Court took the matter under consideration. For the reasons detailed below, the Court finds that both parties breached the contract and owe damages to one-another. Offsetting the damages that Defendants owe to Plaintiff by the damages that Plaintiff owes to Defendants, the Court awards judgment to Plaintiff in the amount of $2, 490.80.
II. Testimony at Trial
A. Carey's Testimony for the Plaintiff
Plaintiffs only called one witness at trial, Richard Carey. Carey testified that he has been a contractor in Sussex County for the past 25 years. Carey testified that he has been in business for himself since 1997, originally as a sole proprietorship, which he later converted to an LLC for worker's compensation reasons. Carey testified that the trade name of his business is Carey's Custom Home Construction, but when his accountant submitted the paperwork to create the LLC, the accountant left out the word 'custom.' Hence, Carey testified, his LLC is named Carey's Home Construction, although Carey says that he was unaware that 'custom' had been omitted until he became involved in the present litigation.
Carey testified that he was approached by Defendants sometime around 2007 about the possibility of Carey building a house for them. Eventually, Defendants settled on a home in the Bridlewood development. Carey testified that when he asked Defendants what kind of house they were interested in, they indicated that they liked a home that Carey had built for another client, Kenny Hughes. Carey said he told the defendants to contact the architect who designed Mr. Hughes' home, M.R. Designs. Carey testified that Defendants came back to him after contacting M.R. Designs and told him that they did not get the plans because they thought the price was too expensive. Carey said that he spoke with the architect and the architect agreed to provide an unmodified copy of the plans for Mr. Hughes' home at a lower price than it would have cost to draw up new plans or modify the Hughes plans. These were the plans that Carey went on to use for Defendants' home. Carey testified that he gave the plans to Defendants, and that Defendants took the plans home to review them and make changes. After Defendants had a chance to review the plans, the parties met to discuss the desired changes. The changes described by Carey include the house being "flip-flopped, " meaning that the positions of the kitchen and dining room were switched with the master bedroom and bath. Other changes included changing a screened-in porch into a closed-in room; dividing what was originally a sunroom into a closed-in room and a closet; and turning an office into a bedroom. Carey testified that before construction began he had additional discussions with Defendants regarding what they wanted in the house and that some of the content of these conversations was memorialized in Carey's notes.
Carey testified that he originally quoted Defendants $289, 000 for the house they wanted. Carey testified that Defendants told him that $289, 000 was too high and indicated that they needed to get down to a certain number, but did not indicate what this number was.Carey indicated several changes to which Defendants allegedly agreed for the purpose of lowering the price of the house, which Carey memorialized in his calculation notes. The changes identified by Carey include: changing from a three-car garage to a two-car garage, subtracting the money that Carey allegedly saved by reusing the blueprints from the other home, adjusting the price to reflect the cheaper concrete driveway that the Defendants wanted rather than the blacktop reflected in the original estimate, switching from a composite deck to treated wood, and reducing the allowances for countertops, cabinets, and flooring. Carey testified that the one thing that brought the price back up a bit was that Defendants requested a detached garage in addition to the attached garage. The number that ultimately resulted was $246, 000.
Carey testified that after negotiating the changes and getting to price to one that Defendants would accept, he presented Defendants with a contract, which they took home and looked over for a few days before signing. The contract included a "draw schedule" indicating the installments in which Defendants were to pay for the house. Once the framing was up, Carey had Defendants come down to Delaware from their current home in New Jersey to inspect the layout. Carey testified that he offered to make changes such as the locations of doorways at that point without extra charge since Defendants were supervising the project from a distance. Carey said that Defendants took advantage of his offer and indicated that they wanted a couple doorways changed, which he did without charge. Carey testified that Defendants subsequently indicated other changes that they wanted made but that Carey did not prepare "change orders" for these items even though the contract indicated that change orders would be made for changes. Carey suggested that he did this in good faith-that he told Mr. Myers, "Well, a lot of contractors will charge you $50.00 just to make that change order. I know what my contract says. If you want to make the change, we'll just do time and material." Carey said that he simply kept track of the changes himself rather than bothering with formal change orders. The Court finds that Carey's choice not to execute formal change orders, while perhaps imprudent, was reasonable given that Defendants were living in New Jersey during the construction and the parties were orchestrating most of the job at a distance. Carey testified that the changes requested by Defendants included adding "circle top" windows, extra concrete required for the driveway as a result of moving the house location, and adding windowed "sunburst" garage doors.Carey confirmed that his notes included a notation for $6, 499.14 for a composite deck because, according to Carey, "[Defendants] still wanted the composite decking on their back deck even though [the parties] already took it off to get the price down on their house."
Specifically regarding the deck, Carey confirmed that it was part of the contract between the parties, although not mentioned explicitly in the written contract, that the home should include a deck. Carey maintained that while Defendants originally wanted more expensive composite decking, the parties agreed to switch to treated lumber to get the price of the house down. According to Carey, this change saved Defendants almost $10, 000.Carey testified that Defendants subsequently reneged on the agreement and demanded the composite deck, and that this was the reason the deck was not complete as of the time Carey left the job.
Carey testified that during the "courting period" between him and Defendants, he remained very interested in getting the job. Carey testified that in order to win Defendants over, he gave them several accommodations free of charge, including adding an "octagon bump, " an area shaped like half an octagon with windows, to the house, which Carey estimated as worth over $8, 000; putting 50 sheets of plywood in the attic to be used as flooring; and doing the concrete driveway himself and charging Defendants only for materials. Carey testified that he absorbed $13, 815.72 in order to get the job.
Carey testified that at some point he told Defendants that they needed to address all the "extras" that they were requesting for the house. Carey said that when Defendants acted like they did not know what "extras" he was talking about, he typed up a list and presented it to Defendants. The total cost that Carey quoted for these extras was $8, 440.90. Carey said that he presented the list to Mr. Myers around March 2009, and Mr. Myers told Carey that he could not afford it. In April, Carey received a letter from Defendants, stating that they did not intend to pay for any of the extras. Carey testified that after subsequent conversations with Defendants, they eventually agreed to pay roughly half of Carey's requested amount ($4, 522).
Regarding payments, Carey testified that Defendants paid the first, second, third, fourth, and fifth draws without incident. After Carey presented Defendants with the list of extras, Defendants also paid him the sixth draw, which was, per the contract, triggered by the completion of the exterior of the house. Regarding whether the exterior was in fact complete at the time Defendants paid the sixth draw, Carey conceded that certain items were incomplete, but he explained that he thought most of these incompletenesses were justified. First, Carey testified that the porch brickwork was incomplete but maintained that this was "extra" work, rather than work agreed upon under the original contract. Second, Carey testified that the deck was unfinished but maintained that this was because Defendants stopped him from putting on the treated lumber boards. Third, Carey testified that the decorative shutters were not installed, but he explained that he usually puts them on at the end because they are "not a big-ticket item." Finally, Carey conceded that the gutters were not installed, but he did not explain why.
Carey testified that the seventh draw was to be triggered by the completion of the interior trim. Carey said that at the time the sixth draw was paid, the interior trim was already complete. Carey testified that he requested the seventh draw and the $4, 522 for the extras from Defendants, but that they told him that the exterior of the house was not complete and they could not give him any more money until it was finished. Carey testified that he told Defendants in response that they had already received extras that they did not pay for and that he could not continue the work until he was paid.
Carey testified that the relationship between him and Defendants changed after he presented them with the bill for the extras. Carey said that up until that point, Defendants seemed satisfied with the job he was doing, but after they received the bill, Defendants became critical of his workmanship. Carey said that he tried talking to Defendants, but they cited several things that they wanted him to do before they gave him any more money, including finishing the brick façade and installing composite decking on the deck. Carey testified that he finally told Defendants that he would not be doing any more work until the seventh draw was tendered. Carey testified that he did not receive payment, and he left the job. Carey made a list of the items left incomplete at the time he left the job, including larger items such as the driveway, shutters, and water heater; and fixtures such as toilet seats, lights, and door knobs. Carey said that he priced out the remaining work, and that the outside work remaining amounted to $8, 175, and the inside work remaining amounted to $7, 161.97. Carey also took pictures of the state of the house when he left.
Regarding the installation of the custom kitchen cabinets, Carey testified that his only involvement was to be there to meet the cabinetmaker and to open the house up for him.Carey testified that the installation of the cabinets was not a part of the contract and he had no obligation to supervise the cabinetmaker.
B. Mrs. Myers' Testimony
Defendants presented five witnesses, including Carey. Defendants' first witness was Mrs. Myers. Mrs. Myers confirmed that Defendants met with Carey because they liked a house that Carey had built. Mrs. Myers confirmed that Carey got the blueprints for the previous house from M.R. Designs to use for Defendants' home. Mrs. Myers testified that some changes were made to customize the plans for Defendants and confirmed that Carey had described the changes fairly accurately. When asked how these changes would affect the price, Mrs. Myers testified that Carey said that "it wouldn't be an issue" to move walls and doors while the framework was up.
Mrs. Myers testified that the original proposal that Defendants received from Carey was $280, 000, but that they asked Carey to try to bring the number down. Mrs. Myers testified that Defendants did not want to go above their $250, 000 budget. Mrs. Myers said that Defendants had taken out a $250, 000 home equity loan to cover the construction of their new home, but that they did have funds to go above that amount if necessary. Mrs. Myers testified that she had no notice that Carey was operating as an LLC at the time the contract was made.
Concerning the specifics of the project, Mrs. Myers disputed that the third garage bay was taken out of the plans to save money; Mrs. Myers maintained that it was always supposed to be a two-car attached garage along with a two-car detached garage. Mrs. Myers testified that her husband was going to trade Carey a car for the detached garage but this plan was never put in writing. Mrs. Myers confirmed that the driveway was to be made out of concrete. She said that she had no knowledge of the driveway being moved 24 feet, but conceded that this was probably something arranged for by her husband. Mrs. Myers testified that the cabinets and bathroom vanities were not included in the contract and that Defendants planned to take care of these themselves; but otherwise the home was supposed to be "turnkey." Mrs. Myers testified that the finished home was to include, among other things, a heating unit and central air conditioning unit. Concerning the front porch, Mrs. Myers testified that it was to be "all brick, " meaning that the brick veneer would extend "[a]ll the way around the two windows" and onto the two side walls. Mrs. Myers testified that even though these areas were siding in the original plans, the brick porch was a change that was added in the contract.
Concerning the payment draws, Mrs. Myers testified that Defendants never received written invoices. Mrs. Myers testified that since Defendants were far away from the site, they often took Carey's word that the work was done. Mrs. Myers testified that at some point after they had already paid the fourth draw, Defendants became aware that not everything they thought was done was in fact complete. However, it was unclear from Mrs. Myers' testimony whether she believed that these items were required to be done for the fourth draw. Mrs. Myers testified that at the time Defendants paid the fifth draw, which was for drywall, in March 2009, the drywall was not completed to Defendants' satisfaction because "[t]here were a lot of seams where you could see openings." Mrs. Myers testified that the seams were eventually fixed.
Mrs. Myers was asked whether Carey authorized Defendants to have the cabinets installed in April 2009. Mrs. Myers responded, "I guess he did, because we told him that Sam, [from] Hilltop Furniture was coming down, and that he needed to have the appliances there so that they would put the appliances in [because there were cabinets specially made for the appliances]." Mrs. Myers testified that Carey did not make the appliances available as Defendants requested. Mrs. Myers testified that prior to the issue concerning the appliances in April 2009, the only dispute between Defendants and Carey had been related to the deck- when Defendants told Carey to stop construction on the deck because he was prepared to install treated lumber decking instead of the composite that Defendants wanted.
Mrs. Myers testified that Defendants received the bill for the "extras" sometime in April or May 2009. Concerning the list of items on the second page, Mrs. Myers testified that Defendants disputed several of them. First, Mrs. Myers testified that they disputed items 1-6 because these items all concerned the framing, and it was Defendants' understanding that changes to the framing would be done free of charge. Concerning item 7, framing the medicine cabinet, Mrs. Myers testified that Defendants thought this was also included.Concerning item 11, the circle top windows, Mrs. Myers testified that Defendants thought these were included because they were in the original plans for the house and are in Mr. Hughes' home on which Defendants' home was modeled. Concerning items 12 and 14, the brickwork, Mrs. Myers said that Defendants disputed it because they did not know that the brick was oversized brick, which would be more expensive, and because they thought that the bricking the entire porch was included in the original contract price. Concerning item 13, extra recessed lights, Mrs. Myers testified that Defendants disputed this charge because Carey had never specified the number of recessed lights to be included to begin with. Despite these disagreements, Mrs. Myers confirmed that the parties eventually came to an agreement whereby Defendants would pay half of the amount that Carey had requested for the extras ($4, 522). However, Mrs. Myers said that her understanding was that this amount was not due to be paid until after the house was finished. However, Mrs. Myers later testified that it was her impression that if the full $8, 440 was not paid for the extras, work would cease.It is unclear whether Mrs. Myers intended to indicate that her understanding changed at some point.
Mrs. Myers testified that Carey requested the sixth draw around the same time as he requested payment for the extras. Draw 6 was for the completion of the exterior. Mrs. Myers testified that Defendants drove down over the weekend to inspect the house and found that certain exterior items were not completed, including the brickwork, deck, decorative shutters, gutters, and driveway. Mrs. Myers said that Carey reassured Defendants that he would get these items done within two weeks and so Defendants sent him the money for the sixth draw.
Mrs. Myers testified that Carey appeared to stop working on the house around May 15, 2009. According to Mrs. Myers, on July 3, Defendants went down to inspect the house. Mrs. Myers said that they found the brickwork incomplete on the outside of the home and also that the inside of the home was very humid as if it had been closed up and left unattended for a very long time. Mrs. Myers testified that the cabinets and hardwood floor had warped due to the humidity. Mrs. Myers said that Carey came one time and sanded down the floors, but this did not fix the problem and resulted in sand getting stuck to the walls and ruining the paint finish. Mrs. Myers testified that at this point Defendants became concerned that Carey was using their money on someone else's house and that very little work was done on their house over the summer. Some brickwork was done over the summer, and the well was installed. However, Mrs. Myers testified that the Carey installed the wrong well pump. Mrs. Myers testified that they spoke with Carey the week of August 17, 2009, and he asked them for the seventh draw check, which was for the interior work. Mrs. Myers said that they refused because they did not consider the interior complete; in fact, in Mrs. Myers' opinion, "[Carey] didn't even finish the work for Draw 6 for the outside of the house and [Defendants] paid him for that." Mrs. Myers said that Defendants went to the house on September 4, 2009 and at that point found all of Carey's equipment removed, which they interpreted to mean that he had abandoned the job. Mrs. Myers said that Defendants obtained legal counsel and demanded that Carey provide "adequate assurance" that the job would be finished, but Carey demanded more money in order to finish the job.Specifically, Carey requested the $30, 000 seventh draw and that the final $16, 000 draw be put into escrow.
Mrs. Myers testified that Defendants subsequently hired various subcontractors to finish outstanding projects including plumbing work,  gutters and downspouts,  composite decking installation,  removing and reinstalling the brick veneering,  laying gravel in the driveway, repainting the rooms,  refinishing the hardwood flooring,  installing carpets, and installing insulation in the floor. Mrs. Myers testified that Defendants also personally bought miscellaneous items (e.g., doorknobs and register covers) to finish the home from home improvement stores such as Home Depot and Lowes. Mrs. Myers testified that during this time, Defendants uncovered other damages and deficiencies in the workmanship performed and overseen by Carey, including chips in the tub finish and faucets installed incorrectly.
On cross-examination, Plaintiff's counsel questioned Mrs. Myers about her understanding of how Carey was able to get the cost of the house down from the initial bid of $289, 000 to the contact price of $246, 000. Mrs. Myers testified she "didn't know" how the money was trimmed off. Counsel asked Mrs. Myers, "You believed that you were going to get everything you wanted for the 289, 000 for the price of 246, 000?", and Mrs. Myers answered, "Yes." Concerning the issue of the name of Carey's business and whether it was an LLC, Mrs. Myers testified that she wrote checks to Plaintiff in various names because she was unsure of the actual name of the company. Mrs. Myers testified that she never asked whether Plaintiff was an LLC but that "it would have mattered" to her and her husband whether Plaintiff was a sole proprietor or an LLC. However, Mrs. Myers was unable to articulate precisely why the difference would be important.
Mrs. Myers testified that Defendants requested some framing changes at the time of the first walk-though, and that Carey assured Defendants that these changes "wouldn't be a problem." Changes included changing the doorway to the master bath from a regular doorway to an arched doorway and putting in fewer recessed lights in the kitchen than originally planned. Plaintiff's counsel asked Mrs. Myers about the April 3, 2009 letter that Defendants wrote to Carey, in which Defendants went through and responded to all of the items which Carey designated "extras" in the bill that he sent. Mrs. Myers testified that she wrote "nickel-and-dime" next to several items, indicating that Defendants thought that these were trivial expenses for which Carey should not ask them to pay.
Relevant to the issue of whether Defendants knew Plaintiff was an LLC, Mrs. Myers confirmed that at the bottom of the bill that Carey sent for the "extras" there is a sentence: "Balance due on extra to Carey's Custom Home Construction, LLC, " but said that she did not notice this at the time she originally received the bill. Mrs. Myers also confirmed that "Carey's Home ...