## Facts

- Louise Caroline Nursing Home, Inc. contracted with Dix Construction Corp. to build a nursing home.
- Reliance Insurance Company issued a performance bond guaranteeing Dix’s performance.
- Dix failed, without justification, to complete the project within the agreed time and did not participate in the litigation (defaulted).
- The Nursing Home completed the project through another builder.
- The parties stipulated that an auditor would decide the case and that the auditor’s findings of fact would be final.
- The auditor found: (i) the Nursing Home performed its contractual obligations; (ii) Dix breached by failing to complete on time; (iii) Reliance breached by taking no action after Dix’s default; but (iv) the Nursing Home suffered no compensable damages because the reasonable cost to complete was within the original contract price minus amounts already paid to Dix.
- The Nursing Home objected to the report and moved to recommit; Reliance moved for judgment on the report. The trial court denied recommittal and entered judgment for Reliance.

## Issues

1. What is the proper measure of damages when a contractor fails to complete a construction contract and the owner completes the work through another contractor?
2. Whether an owner suffers compensable contract damages when the reasonable cost to complete is less than the unpaid balance of the original contract price.
3. Whether the auditor properly excluded the owner’s expert opinion testimony regarding the value of the partially completed structure and the projected value upon completion.
4. Whether the auditor’s failure to make requested findings, and the trial judge’s refusal to recommit the report, was reversible error.
5. Whether the owner could recover delay damages absent specific proof of loss attributable to delay.

## Decision

- The Supreme Judicial Court overruled the Nursing Home’s exceptions and left judgment for Reliance standing.
- The court held the correct damages measure for failure to complete is the reasonable cost to complete (and repair defective work, if any) minus the unpaid portion of the contract price, not diminution in value.
- On the auditor’s binding findings, the Nursing Home had no compensable damages because completion cost was less than the unpaid contract balance.
- The auditor acted within discretion in striking the expert’s opinion testimony for lack of an adequate factual basis and doubts about qualifications.
- Objections premised on failure to make requested findings did not independently warrant relief; denial of recommittal was not error.
- Delay damages were unavailable because the Nursing Home failed to present specific evidence of additional losses caused by delay.

## Legal Principles

- For a contractor’s unjustified failure to complete a construction contract, expectation damages are measured by the reasonable cost to complete the work (and correct defects) minus the unpaid portion of the contract price.
- Diminution-in-value is not the default measure when the owner completes the project after abandonment and seeks completion costs rather than compensation for permanent defects.
- If the reasonable cost to complete is within the unpaid contract balance, the owner has no net completion-cost damages absent proof of additional consequential losses.
- When parties stipulate that an auditor’s findings of fact are final, those findings bind the court absent an error of law.
- A fact-finder may exclude expert opinion testimony that lacks a stated factual foundation or where the witness’s qualifications are not established.
- Delay damages require proof of actual loss attributable to the delay; mere lateness without quantified harm does not support recovery.

## Conclusion

The court affirmed judgment for the surety because the auditor’s final findings established that, although the contractor and surety breached, the owner completed the project for less than the unpaid contract balance and proved no other loss; therefore, under the cost-to-complete-minus-unpaid-price measure, no compensable damages were shown.


Louise Caroline Nursing Home, Inc. v. Dix Constr. Corp., 362 Mass. 306 (1972)