Iannuccillo v. Material Sand & Stone Corp.
713 A.2d 1234, 1998 R.I. LEXIS 168, 1998 WL 285513 (1998)
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Rule of Law:
A party's performance under a construction contract may be excused under the doctrine of impracticability when an unforeseen supervening event, the nonoccurrence of which was a basic assumption of the contract, substantially frustrates the contract's principal purpose, particularly if the contract includes an express term limiting liability for such occurrences.
Facts:
- In 1985, Louis A. Iannuccillo entered into a written contract with Material Sand and Stone Corporation (Material), with C. Pezza & Son, Inc. (Pezza) actually performing, to excavate a 127,000-square-foot lot from a sloped state to a specific grade.
- The contract stipulated removal of an estimated fifty to sixty thousand cubic yards of gravel and “existing rock now exposed,” with Material processing and selling the excavated stone, and Pezza delivering ten thousand cubic yards to another Iannuccillo site. The agreement included a shared blasting cost of $5,000 each for “incidental” blasting.
- During spring 1986, residents bordering the property complained to North Providence town officials, who intervened, eventually shutting down the project on or about June 3, 1986, because Iannuccillo failed to provide required plans.
- While excavation was underway, approximately 10,000 cubic yards of newly discovered ledge were exposed. Iannuccillo instructed Pezza to work around it but failed to pay his half of the accrued blasting costs, later asserting Pezza was obligated to remove the ledge as part of their contract.
- Although the town allowed work to resume in August 1986 to “stabilize the bank,” Iannuccillo refused to renegotiate the contract terms with Pezza regarding the newly discovered ledge.
- Iannuccillo hired an engineering firm, R.F. Geisser & Assoc. Inc., in October 1986, which determined the eastern embankment was unstable and developed a plan for remedial work.
- In 1993, while the instant suit was pending, Iannuccillo hired R. DiCenzo Trucking (DiCenzo) to blast and excavate the ledge and complete site development, including resloping the eastern boundary according to the Geisser plan, for a total cost of $80,000, of which $32,000 went directly to a blasting contractor.
Procedural Posture:
- In January 1989, Louis A. Iannuccillo sued C. Pezza & Son, Inc., Material Sand and Stone Corporation, and Robert Pezza in Superior Court (trial court) for breach of contract and negligent performance of excavation work.
- Defendants C. Pezza & Son, Inc. and Material Sand and Stone Corporation filed a counterclaim against Iannuccillo, alleging breach of contract for failure to pay certain blasting expenses.
- The case was tried without a jury in Superior Court in May 1996.
- The Superior Court entered judgment as a matter of law in favor of defendant Robert Pezza individually, finding he was not personally liable on the contract.
- The Superior Court found that the ledge was not contemplated by the original contract, thus Iannuccillo was responsible for its removal cost.
- The Superior Court also found that Pezza had breached the contract by failing to tender substantial performance and awarded Iannuccillo $48,000 (plus interest) in damages, representing the cost incurred by DiCenzo to complete the job minus the cost of blasting the ledge.
- The Superior Court awarded Pezza $2,802 on its counterclaim for half of Pezza's actual blasting costs.
- Both Iannuccillo (plaintiff-appellant on certain issues) and the defendants (defendant-appellants on other issues) filed cross-appeals from this judgment to the Supreme Court of Rhode Island.
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Issue:
Does the discovery of a large, previously unexposed ledge during excavation, coupled with an express contract term limiting removal to “existing rock now exposed,” render further contractual performance impracticable, thereby excusing a contractor from completing the original scope of work related to the unforeseen condition and entitling the owner to damages only for the work originally contemplated and not affected by the unforeseen condition?
Opinions:
Majority - Weisberger, Chief Justice
Yes, the discovery of the large, previously unexposed ledge rendered further contractual performance impracticable, thereby excusing Pezza from completing the original scope of work related to the ledge and entitling Iannuccillo to damages only for the work originally contemplated and not affected by the unforeseen condition. The court first addressed the defendants' claim that performance was excused by impossibility due to the town's work stoppage, concluding that any frustration caused by the town's intervention was merely temporary, as the town permitted work to resume to stabilize the site, thus not warranting complete absolution. However, the court found merit in the defendants' argument for impracticability due to the discovery of the ledge. Applying the Downing v. Stiles test, the court concluded that: 1) the contract was executory; 2) the discovery of the ledge was a supervening event; 3) the nonexistence of the ledge was a basic assumption (evidenced by the low original blasting estimate and the “existing rock now exposed” clause); 4) the principal purpose of the contract (achieving an even grade by removing sand/gravel) was substantially frustrated; and 5) the frustration was substantial, adding approximately $60,800 in unexpected costs. While the existence of some ledge might be generally foreseeable in excavation, the express contractual term limiting Pezza's obligation to “existing rock now exposed” specifically protected against liability for newly discovered, unexposed ledge. Thus, Pezza was excused from performing the additional work related to the ledge. The court acknowledged that Iannuccillo's failure to pay his half of the blasting costs (for the newly discovered ledge) amounted to a material breach, which would generally excuse Pezza's further performance. However, because Pezza had already realized the full value of the contract (by processing and selling the extracted gravel), they could not claim damages under quantum meruit. The court held that Iannuccillo was entitled to recompense only for the portion of DiCenzo's work that Pezza was originally obligated to perform but failed to complete due to reasons other than the impracticable ledge removal (i.e., stabilizing and resloping the eastern boundary embankment). The trial court's damage award of $48,000 was vacated and remanded for recalculation, as it failed to sufficiently distinguish between costs related to ledge removal (for which Pezza was not responsible) and costs related to embankment stabilization (for which Pezza remained responsible). Finally, the court affirmed the trial justice's award of blasting costs to Pezza on its counterclaim, noting that Pezza had performed according to the contract until the ledge discovery and Iannuccillo's intransigence, and the “accessible rock now exposed” had been cleared. The court also denied Iannuccillo's unjust enrichment claim, finding that Iannuccillo had already significantly benefited from Pezza's labor by the removal of approximately 60,000 cubic yards of gravel.
Analysis:
This case significantly clarifies the application of the impracticability doctrine in construction contracts, particularly when unexpected subsurface conditions arise. It emphasizes that while some unforeseen difficulties are inherent, an express contractual term limiting the scope of work to “exposed” conditions can effectively shift the risk of hidden, materially different conditions back to the owner. The ruling underscores the importance of clear contract drafting and the necessity for parties to renegotiate terms when fundamental assumptions of the agreement are altered by supervening events, rather than allowing one party's intransigence to halt performance without consequence. Furthermore, it details how damages are calculated in such scenarios, limiting recovery to the portion of work that was not excused by impracticability, promoting fairness and preventing double recovery.
