Subcontractor suit was permitted against a project owner as well as an officer of the project owner in his individual capacity for negligent misrepresentation on the basis that the project owner had represented the General Contractor to be acting on behalf of the Owner as an agent with authority to issue change orders. It is unusual for a subcontractor to have an action directly against the owner instead of having to sue the general contractor that employed it. But this was a unique situation. The allegations were that the corporate officer entered into a contract with the GC to obtain a reduced price for construction of his personal home in exchange for the GC inflating his compensation under a separate contract for an auto park that the corporate officer was having built for his corporation. Coppola Construction v. Hoffman Enterprises, 721 A.3d 480 (Ct. 2013).
It was alleged that the officer entered into a scheme to obtain lower bid estimates in an attempt to have the bank fund the auto park initially and then to provide change orders after the fact to force the bank into further financing. The subcontractor averred that it was not aware of the scheme and was promised by the officer that he would pay for all change orders and extras that were ordered. Later, however, the officer alleged that the GC was not his agent for purposes of the construction of the auto park and did not have authority to act on his behalf.
The court held that the subcontractor complaint was sufficiently pleaded to allow it to go forward on a claim of negligent misrepresentation against the corporation. And the claim could also go forward against the corporate officer as an individual because the allegations were sufficient that his actions were taken “in an independent capacity or ultra vires… in a personal capacity to assist him in completion of his residence…., and that he “would pay for change orders and extras with respect to the construction of the auto park, and that the GC was his agent for purposes of the construction project.”
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 15, No. 10 (Oct 2013).
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