Untitled - Washington & Lee University School of Law Scholarly

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TABLE OF CONTENTS

Motion for Judgment filed June 25, 1975

Answer of Defendant Republic Insurance Company filed July 31, 1975 •••••••

3. Answer of Defendants Ecology One, Inc., Forrest w. Stout, Buford w. Duke, Jr.,

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Appendix Pages

A-2

A-4

R. Davis Winsett, Jr. and James J. Hricko filed October 3, 1975 • • • • • • • • • • • • • • • A-1

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s.

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a.

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Answer of Defendant Edward J. Gwathney filed October 3, 1975 •••••••••

Plaintiff•s Interrogatories to Ecology One, Inc., Forrest w. Stout, Buford w. Duke, Jr., R. Davis Winsett, Jr., James J. Hricko and Edward J. Gwathney filed April 23, 1975, and Defendants• Answers filed February 18, 1976 and February 25, 1976, Numbers 11, 13, 17, 19, 28, 46 and 47 •••• . . . . . . . . . . . . . . . . Testimony of Howard T. MacFall (Transcript, Volume 1, Pages 53-65) • • • • • • • • • • •

Testimony of Buford w. Duke, Jr. (Transcript, Volume 1, Pages 66-78) • • • • • •

Testimony of William H. Gouldthorpe, Jr. (Transcript, Volume 1, Pages 79-147) •••

Testimony of Lloyd B. Wilson (Transcript, Volume 1, Pages 169-230, and Volume 2, Pages 3-121). • • • • • • • • • • • • • •

Testimony of Howard T. MacFall (Tran~cript Volume 2, Pages 124-129) ••••••

Transcript, Volume 2, Pages 136-141 and Page 164. • • • • • • • • • • •

Transcript, Volume 2, Page 158 ••••

Agreement and Bond between Plaintiff and Defendants (Plaintiff•s Exhibits A and B)

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.A-15

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A-43

.A-112

A-293

A-300

A-307

.A-308

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Siltation Control Agreement (Plaintiff's Exhibit C) • • • • • • • • • • • • • • • •

Section 105.05 of the Virginia Department of Highways Road and Bridge Specifications (Plaintiff's Exhibit D) ••••••••••

Permit for Street Improvements (Plaintiff's Exhibit G) • • • • • • • • • • • • • • • • •

Progress Report dated April 10, 1975 {Plaintiff's Exhibit I). • • • ••••••••

18. Punch List dated April 24, 1975 {Plaintiff's Exhibit J) • • • • • • • • • • • • • • • • • •

19. Punch List dated October 7, 1975 (Plaintiff's

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Exhibit K) • • • • • • • • • • • • • • • •

Note for $175,500 and Deed of Trust dated March 1, 1974 {Plaintiff's Exhibit P) •••

Deed of Subdivision and Dedication (Plaintiff's Exhibit Q) •••••••••••••

22. Deed of Foreclosure {Plaintiff's Exhibit R) ••

23. Agreement between Plaintiff and H. L. Rust Company {Plaintiff's Exhibit V) ••••••

24. Letter from Public Utilities Branch dated June 16, 1975 (Defendants' Exhibit 1) •••

25. Letter from John F. Carman dated February 27, 1975 (Defendants• Exhibit 2) •••••••

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Letter from Lloyd B. Wilson dated February 26, 1975 (Defendants' Exhibit 3) •••••

Aetna Surety Report dated October 28, 1975 (Defendants' Exhibit 4) ••..••••••

Letter from James P. Downey dated April 6, 1976 (Defendants' Exhibit 5) •••••

Final Order issued October 29, 1976 by Judge Lewis D. Morris •••••••.••

Deposition of Henry R. Burt taken on November 10, 1976. • • • • • • •

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Appendix Pages

A-310

A-312

A-313

A-316

A-317

A-321

A-325

A-331

A-351

A-355

A-360

A-361

A-362

A-363

A-364

A-365

A-368

Appendix Pages

31. Assignments of Error • • • • • • • • • • • • • • A-393

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MOTION FOR JUDGMENT

COMES NOW the Plaintiff, by counsel, and moves this

honorable court for judgment jointly and severally against the

Defendants, in the total amount of One Hundred Seventy-two

Thousand Dollars ($172,000.00). For grounds of said Motion,

Plaintiff respectfully states to the Court as follows:

1. That Ecology One, Inc., Forrest w. Stout, Charles

w. Stout, Edward Gwathmey, Jr., Buford w. Duke, .Jr., R. Davis

Winsett, Jr., and James J. Hricko are the principal obligors,

and that Republic Insurance Company is surety on a bond executed

by them on May 9, 1973.

2. That the Board of County Supervisors of Fairfax

county, Virginia, is the obligee of said bond.

3. That said bond is in the sum of one Hundred

Seventy-Two Thousand Dollars ($172,000.00) and that a copy of

said bond is filed herewith as Exhibit A and made a part hereof

by reference.

4. That the condition of said bond was and is the

performance of all of the provisions of an agreement in regard

to a subdivision known as the Rainbow Subdivision, dated May 22,

1973, between Ecology One, Inc., and the Board of county Super

visors of Fairfax County, Virginia, a copy of which agreement

is attached hereto as Exhibit B and made a part hereof by

reference.

A-2

5. That the conditions of $aid bond have been

breached, that they are in default, and that the obligee

hereby seeks judgment for the sum of this bond.

WHEREFORE, Plaintiff moves that this honorable

Court enter judgment for the Plaintiff against the Defendants

jointly and severally in the amount of One Hundred Seventy-Two

Thousand Dollars ($172,000.00).

BOARD OF SUPERVISORS OF FAIRFAX COUNTY, VIRGINIA

By /s/ James P. Downey

A-3

ANSWER AND GROUNDS OF DEFENSE

COMES NOW the Defendant Republic Insurance Company

and for its answer and grounds of defense states as follows:

FIRST DEFENSE

That the motion for judgment fails to state a cause

of action against the Defendant Republic Insurance company

upon which relief may be granted herein.

SECOND DEFENSE

1.-4. The Defendant, Republic Insurance company,

admits that the Defendants Ecology One, Inc., Forrest w. Stout,

Charles w. Stout, Edward Gwathmey, Jr., Buford w. Duke, Jr.,

R. Davis Winsett, Jr., and James J. Hricko are principal obligors

as set forth in paragraph 1 of the Plaintiff's motion for judgment.

The Defendant, Republic Insurance Company, admits that the

Board of county Supervisors of Fairfax county, Virginia is the

obligee of said bond. A copy of said bond is attached to the

motion for judgment and speaks for itself. All allegations

contained in paragraphs 1, 2, 3, an4 4 of the motion for judgment

not hereby admitted are expressly denied.

5. Defendant Republic Insurance Company denies the

allegations contained in paragraph 5 of the motion for judgment,

and further states that the bond in question is not a forfeiture

bond, and that the most Plaintiff can recover, if anything, is

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the cost of completing work allegedly not performed.

THIRD DEFENSE

The Plaintiff's cause of action is barred by the sta

tute of limitations.

FOURTH DEFENSE

The Plaintiff's cause of action is barred by the

doctrine of laches.

FIFTH DEFENSE

The Plaintiff's cause of action is not within the

coverage of the Defendant Republic Insurance Company's bond.

SIXTH DEFENSE

That the Plaintiff herein, the Board of Supervisors

of Fairfax County, Virginia, have not, at any time since the

making of the aforesaid bond, been in any way damaged or damnified.

SEVENTH DEFENSE

That at the time of the making of the said agreement

between the said principal obligors and the Plaintiff, as referred

to in paragraph 4 of the said motion for judgment, the Defendant

Ecology One, Inc., owned the real property noted as the "Rain

bow Subdivision" in said agreement. That prior to the filing of

the motion for judgment, said property was foreclosed upon and

sold to the H.L. Rust Company, 1001 Fifteenth Street, Washington,

D.C. That as a result of said foreclosure and the purchase of

said property by the H.L. Rust Company, the Defendant Republic

A-5

Insurance Company was released from aforesaid bond.

EIGHTH DEFENSE

That the Defendant, Republic Insurance Company has

been discharged from any obligation of the said bond based on

the alteration and variation of the aforesaid agreement between

the said principal obligors and the Plaintiff.

REPUBLIC INSURANCE COMPANY

By Counsel, Donald s. Lilly, Esq.

A-6

ANSWER AND GROUNDS OF DEFENSE

COMES NOW Ecology One, Inc., Forrest W. Stout, Buford

w. Duke, Jr., R. Davis Winsett, Jr., and James J. Hricko, by

counsel, and file the following as their Answer and Grounds of

Defense to the Motion for Judgment filed herein by the Board of

Supervisors of Fairfax county, Virginia.

ANSWER

1. They admit that they executed a document entitled

"Bond" on or about May 9, 1973.

2. They admit the allegations of paragraph 2 and 3.

3. They expressly deny each and every allegation

contained in paragraphs 1, 2, 3, 4, and 5 which has not been

admitted herein and they demand strict p=oof of same.

GROUNDS OF DEFENSE

1. The Plaintiff has not been damaged.

2. The Defendants, Ecology One, Inc., Forrest w.

Stout, Buford w. Duke, Jr., R. Davis Winsett, Jr., and James J.

Hricko, have been released and discharged from any alleged

obligations to the Plaintiff.

3. The Plaintiff's Motion for Judgment is barred

by the statute of limitations.

4. The Plaintiff•s Motion for Judgment is barred by

the doctrine of laches.

A-7

WHEREFORE, the Defendants, Ecology one, Inc., Forrest

W. Stout, Buford w. Duke, Jr., R. Davis Winsett, Jr., and James

J. Hricko, request that the Motion for Judgment filed herein

by the Board of Supervisors of Fairfax County, Virginia, be

dismissed and that they be allowed to recover their costs expended

in this cause.

ECOLOGY ONE, INC. FORREST W. STOUT BUFORD w. DUKE I JR. R. DAVIS WINSETT, JR. JAMES J. HRICKO

By Counsel, Guy o. Farley, Jr.

A-8 . ..

ANSWER AND GROUIDS OF DEFENSE

COMES NOW Edward Gwathmey, Jr., by counsel, and files

the following as his Answer and Grounds of Defense to the Motion

for Judgment filed herein by the Board of Supervisors of Fairfax

county, Virginia:

ANSWER

1. He admits that he executed a document entitled

"Bond" on or about May 9, 1973.

2. He admits the allegations of paragraph 2 and 3.

3. He expressly denies each and every allegation

contained in paragraphs 1, 2, 3, 4, and 5 which has not been

admitted herein and he demands strict proof of same.

GROUNDS OF DEFENSE

l. The Plaintiff has not been damaged.

2. The Defendants, Ecology One, Inc., Forrest w. Stout,

Buford w. Duke, Jr., R. Davis Winsett, Jr., James J. Hricko, and

Edward Gwathmey, Jr., have been released and discharged from any

alleged obligations to the Plaintiff.

3. The Plaintiff's Motion for Judgment is barred by

the statute of limitations.

4. The Plaintiff's Motion for Judgment is barred by

the doctrine of laches.

A-9

WHEREFORE, the Defendant, Edward Gwathmey, Jr.,

requests that the Motion for Judgment filed herein by the Board

of Supervisors of Fairfax county, Virginia, be dismissed and

that he be allowed to recover his costs expended in this cause.

EDWARD GWATHMEY, JR.

By Counsel, Guy o. Farley, Jr •

.A-10

Q. 11. When did defendant stop installing the

public improvements at the subdivision?

A. 11. March 31, 1975.

Q. 13. State, as to the public improvements at the

subdivision, which have not been installed by defendant, and

with respect to each and every condition of the aforesaid Bond

and Agreement which has not been fulfilled:

a. The approximate date on which said

condition will be fulfilled

b. The approximate length of time within

which said condition could be fulfilled, and

(i) The facts or circumstances relied on

by defendant in determining said length of

time, or

(ii) The reasons for defendant's inability

to approximate a time within which said con

dition could be fulfilled

c. The facts or circumstances as to why it

has not been fulfilled or completed

d. The estimated cost of fulfilling and com

pleting said conditions, and the facts upon which

said estimate is based.

A. 13. Unknown; H. L. Rust Company is present owner.

A-ll

Q. 17. Did defendant make any attempt to alleviate

or overcome any of the facts which contributed to its inability

to install the improvements beyond the last date on which such

work actually was done?

A. 17. Yes.

Q. 19. If defendant did make any such attempt, for

each fact, state:

a. The remedial action taken

b. The inclusive dates of the action

c. The name and address of each person

having knowledge of defendant's action

d. The degree of success achieved

e. The reasons for any lack of success.

A. 19. Ecology One, Inc., through Buford w. Duke,

Jr., and R. Davis Winesett, Jr., attempted to secure additional

financing and conducted negotiations with H. L. Rust Company

through Mr. Wilson in 1974 and 1975.

Q. 28. State the extent, duration and precise nature

of any inability, excuse or discharge, whether financial or

otherwise, arising from said foreclosure, including but not

limited to:

a. The dollar amount of all mechanics• or

other liens filed prior or subsequent to said fore

closure.

b. The amount of any deficiency judgment

A-12

rendered against defendant in the foreclosure

c. The extent or limitation of any obliga

tions which defendant claims were created by said

deficiency judgment or mechanics' liens, if defen

dant claims that said obligations are less than the

actual amount of said judgment or liens

d. The extent to which defendant has at

tempted to perform its obligations under the agree

ment with plaintiff since the foreclosure, including:

(i) any subcontractors with wham defendant

has made proposals, or compromises, written

or oral, for the purpose of further perform

ing said obligations

(ii) the names, addresses and telephone

numbers of all such subcontractors

(iii) the names, addresses and telephone

numbers of any other persons having knowledge

of any other attempts on defendant's part to

further perform.

A. 28. See in part #24;

a. $30,700.00.

b. $233,343.03.

c. Question is not clear.

d. None; see in part #19.

Q. 46. Prior to the foreclosure by H. L. Rust Co.

did defendant have control over work to be performed in those

areas of the subdivision dedicated to public use?

A. 46. Ecology One, Inc. had control prior to

foreclosure.

Q. 47. Does defendant contend that the foreclosure

divested it of control over work to be performed in the areas

dedicated to public use?

A. 47. Ecology One, Inc. was divested of control.

A-14

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Company because of the fact that they loaned money, the

fact that they had to foreclose.

I know that ~.~~hen you have heard all of the

evidence that you will agree with our position that they

should be dismissed as third-party defendants in this

case, and that the act!on of the County against the

bonding company and against the principals should stand.

Thank you.

TEE COURT: Membersof the j~y, we are

going to take about a five or ten-~inute recess while

the bailirf rounds up some chairs here for the

parties, so if you would retire to the jury roo~ at

this time.

(Brief recess.)

THE COURT: Call your witness, Do~·mey.

~t-q. DOv!NEY: Nr. Ho;·rard T. r·!~Pall.

H~'lereupon,

HOt·!ARD T. r.rc FALL,

a witness, was called for examination by counsel for

the plaintiff, and, having been first duly sworn, was

examined and testified as follows:

A-15

DIRECT EXA:.-ii1·fA?ION

ANITA 8. GLOVER CERTIFI~O V!:RBAil~ REPORTER

10721 .JOYCE ORIVS

FAIRFAX, VIAGINI.olo 22030

273·40!16

PAGE

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1 BY ~·iR. DO~TNEY:

Would you state your name, please?

3 Howard T • r-'IcFall.

4 And Mr. McFall, are employed by Fairfax

5 County?

6 Yes, sir.

7 And what is your job title with Fairfax

s County?

9 A. I'm the Chief of the Bondi~g and Permit

10 Branch, Division of Design Raview.

11 And what are your responsibilitiss in that

12 position?

13 I maintain the records of the bond agreements

14 pernits, escrow

15 I~. FARLEY: I think they've indicated that

16 they can't hear.

17 THE COURT: I•!r. ?•!cPall, spaal-: right into the

18 mike. The acoustics are horrible in here.

19 BY fi!R. DO\·/NEY:

20 What are your responsibilities in that

21 position, Mr. McFall?

•)•) -- I maintai~ the records of subdivisio~s,

23 site pla~bond agreements, permits, escro~·r agreer.1ents.

A-16 ANITA B. GLOVER

CERTIFIEO Ve~B.oo\TlM RE~ORTCR

l0721 JOYCE O~t'J5

F.oo\IRJ:.oo\X, VtR'31NI"' 22030

273·4066

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~ And do you also serve on the Bonding

Co~~ittee or are you a staff member for the Bondi~g

Committee of Fairfax County?

~ I am not a staff member of the Bonding

Cowmittee, but I sit in on the Bond Committee Meetings.

~ And do you have any· direct responsibilities

that are related to the f~nction of that cow~~ittee?

~ Only to present them with the information

that is presented to us in some orderly fashion.

Q And what type of information -- could you

describe the functions of that coi~mittee, please?

~ My understanding of their function is to

approve for the Board of Supervisors ag~eenents with

the proper sureties to ensure the construction of

subdivision improvements.

Q And you referred to an escrow agree~ent

previously. Could you briefly state ~·;hat an escroN

agreement is in this context?

~ Well, there are several different types. You

have them for completion; you have them for siltation and

erosion control; you have them fo~ future construction.

· Q What is a siltation escrow agreement?

~rna t is its purpose?

.A-17 ANITA B. GLOVER

CERTIFieD 'I!'!RBA~IM R!!i='ORTaR

l 0721 JOYCE ORtVS: FAIRFAX. VIRGINIA 22030

27'3·406c5

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A A siltation ag~eement is provided by the

developer to guarantee to the County that if his

siltation control on the project fails,the County has

a means of financing a cleanup operation of its O\•rn \'tit:h

County forces.

~ I will show you Plaintiff's Exhibits A and

B, and I will ask you if you can identify them?

r-!r. I"J!cFall, I sho~·r you Plaintiff's Exhibits

A and B, and ask you if you can ident~fy those t~o

documents?

~ I will just reverse them. I don't see whe~e

they are marked A and B.

Q At the bottom of the p2ge.

~ The bond is A?

~ Yes.

A. A is a bond in the amount of $172,000 \'lhich

~·;as posted -- t.,e principals on which is Forrest Stout,

Charles Stout, Edward G~iath!r.ey, Bu.ford Duke, Davis

Winsett, and James Hrickc, and tha Republic Insurance

Company.

MR. FARLEY: If Your Honor please~ there are

going to be a myriad of documents introduced in this case,

an1 I don't see any need fer the ~itness to be reading

A-18 ANITA 8. GLOVER

CSRTIFIED VSRSATI'-1 RS~ORTeR

I 0721 JOYCe DRI'Il!

FAI~FAX. VIRGINIA 220.30

273-0:06'!;

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the documents. I don't think anybody has any objection

to either one of t~ose documents.

THE COURT: It would save a lot of time then

if you would just go ahead and stipulate or admit these

things into evidence without any objection.

There's no objection?

MR. FARLEY: No objection.

THE COURT: ~he ag~ee~ent speaks fo~ itself.

There is no point in having someone read it.

MR. DOWNEY: All right.

THE COURT: So if you have no objection,

counsel has no objection.

r·1R. DOWI.TEY: Your Ho~or, I have only on-e:

point I would like to make, that sore of these agreements

are rather technical, and there are certain portions of

them that I would like to highlight, not to interpret

in any way, but just to point out to the jury, rather

than have them get lost in a maze of fine print.

I am not asl<.:ing r:rr. r'!cFall or any of my

witnesses to read the agreements or any other dccuments,

but rather I will on occasion point to certain phrases

in tharn wh~ch are the pertinent ones, and ask them to

perhaps read one or two sente~ces.

A-19 ANITA 8. GLOV:R

CERTij::IEO VERBATIM RE'PO~TSR

1 ~721 JOYCE ORIVE

FAIF!~AX. 'IIRGINI" 22030

273·4CS6

Now that is all that

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I was going to do with this witness, and I think that the

jury would be aided in its deliberations by having that

done. And I would ask the Court's permission to do

that.

MR. FARLEY: Your Honor please, the only

trouble I have with that -- I understand what counsel

is saying, but if Mr. Downey has certain things that he

would like the witness to read, and Mr. Lilly has certain

things in the agreement he would like to read, Mr. Perry

and I, ~e,..;atld end up taking up a lot of time.

And these documents before the jury and

1 certainly in argument any point th~counsel wants the

I J

jjury to pay particula~ attention to can be shown to them,

and the agreements can be given to them, to the jury.

This is a long case, and I am of the opinion that if we

start reading documents, it is going -to take a ~·thole lot

longer because I would estimate probably 30 some

documents, at least.

THE COURT: tdell, '.'!e ~·rould be 't~asting an

awful lot of time, Mr. Downey. Anything that needs to

be called to their attention could be. If you have 30

sooe docue~ents,and he is going to read parts of it,

each co~nsel I am sure would have -- the pa~t that you


CERTIFIED VS:RBATI!\.4 RSPORT:!R

10721 JOYCS: ORIVS

FAIRFAX. VIRGINIA 220:30

273-.:056

PAGE

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1 want, ~aybe Mr. Farley doesn't want. Ee may have soce-

2 thi~g else he wants read. We would in essence -- I think

3 that the agree~ents speak for themselves. If there is

4 any question there, we can get together with counsel and

5 iron that out. But I would think that the agreements

6 speak for themselves.

7 So I understa~d then t~ere is no objection to

8 A and B, and ~·r~ \·Till adrni t them. A is the Bond, and ,,;hat

9 is B?

10 HR. DO~JNEY: The agreement .

11 THE COURT: Is that the agreenent?

12 THE WIT~ESS: That is the Standa=d County

13 Subdivision Agreereent.

14 THE COURT: Then let the bond be marked and

15 received as Plalntiffrs £x~ibit A and the agreement a3

16 Plaintiff's Exhibit B.

17 (The documents referred to above were marked Plaintiff's Exhibits

18 A and 2. fo~ identification and received into evidence.)

19 BY NR • DO~·!~IEY :

20 Now Mr. McFall, I also show you Plaintiff's

21 Exhibit marked for identification as C at the bottom of

22 the page.

23 A.

l\-21

t·!or:l,;~ '"0 11 ; d~'~"'~+- 4 fy t...,~ t- ·~ocu,..,,.o,..,t-" •: _.. .'-: . . J """' ... -~ .. v~ •• ,.,.,'-' "-iio ............ w.

This 13 a Standa~d County Siltation Agree~ent.

ANITA 8. GLOVER CERTIFIEO VeRBATIM RePORT~R

10721 JOYCS ORI'/5 FAII:t;:.\;(, VIRGIN!" 320:.10

27:3·40158

~ ... , 1•1r.

PAGE

60 l·!cFall, ~'-'ere any of these documents, and

11 1 the obligations and duties that they create, required as a

21 1 condition for tha recordation of the plat and approval

31 1 of the plans for this subdivision, Rainbo,·r Subdivision?

4 A. Yes, sir.

5 i·1R. DO~·!NEY: I have no other questions of

61 1 tb.is \·litness.

7 THE COURT: i--1~. P3.rley, C::'OSS ex~--nine.

8 ··TR ~ "RL:-v · vo y,.o""'or· ...... a o 1 y a··es- 4 on T L' ••• !!.M..:. ~ ........... ur r: .. ~ , "'n ... !'i.- _\4 ~....~.. _

91 1 have is Number C being offered i~to evidence?

10 ~-1R. DOHHEY: After the conclusion of t!1e

111 1 ere ss exai::ina tion.

12 r·iR. FARLEY: \~ell, I do ha":e an object!on, si~

131 1 I have no questions.

14 T~~E COURT: It i.s mar~~ed for identificat:!.on at

151 I this time. (~he cocument referred to

161 1 above :·:as marked Plaintiff' op

..... '-"' ·· c r 1~ ~.·r· ""' ' ) LX~~o~~ _or aen~1 1ca~1on.

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18 r:IR. DOH!·iEY: I'll mo·.fe it in to evidence at

191 1 this time as Plaintiff's Exhibit C.

20 r!R •. FARLEY: I do object to it because

211 1 I do not think that the siltation agreement is the subject

221 I of this suit.

:!3 THE COURT: Maybe we had better have counsel

co~e un to the bench.


CEATII=IEO VERBATI.'Ifl P.SCOR"!":R

I 0721 JOYCE ORIVS FAIRFAX, VIRGINIA 22030

273·4086

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BENCE CONFEF.Ei·!C E 61 HR. DOHriEY: Your Eonor, the reason that I

1 introduced the siltation ag~eer.tent iS this. The

2 a s sign w. e n t appoints Rus·t as the County's agent for

3 purposes of siltation and erosion control for work to be

4 done after the date of the assignment which was

5 September 30, '75. Now, these par"ties entered into this

6 siltation escrow agreement with the County at the outset

7 of their development,and it is our contention that the

8 funds expended by Rust to do siltation work after the

9 assignment are recoverable under the assignm~nt itself

ro from the proceeds of this law suit because the principals

11 a~a obligated to maintain siltation controls under the

12 plans, under the agreement.

13 And also, that funds were provided by thg

14 siltation escrow to take care of that. And the fact that

15 they defaulted on their obligations raises a question of

16 whether or not the successor, I mean this assignment

TI is entitled to the proceeds of their original escrow

18 payment to the bank. And it is certainly one for

19 judicial economy.

20 If nothing else, we could litigate that

21 question of whether or not the four or five thousand

22 dolla~s which Rust expended as the County siltation

23 agent is recoverable under this bond. And that is why


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we have to have the escro~ agreement.

And for the Court also, because the agraement

the assignment itself, appoints Rust as our agent and

there are numerous documents and letters between the ·

County, Ecology, Ecology's counsel, and the bank right

after that assignment appointing Rust as the County'c

agent under that siltation agreement.

Therefore,it is all !?.art of the same bundle

of operative facts. I think that it ought to be

litigated here. Otherwise, the County is going to be

in the position of demanding from the bank tha~ escr~~

r:toney payment to Rust, and we really have a!"l inte!"ple~der

situation here where the siltation escrow ought to go

back to the principals or ought to go to Rust.

And unless we litigate it here, it is going

to come up in a later case.

THE COURT: The only problem is I do not

remember reading anything about it in the pleadings.

I was going over the pleadings.

HR. DO\·INEY: It is still part of the motion

basically, Rust's actions and Rust's coercive acts

with the County have caused the foreclosure 1~ the fi~s~

p~ce, and the defensive discharge fro~ the ag~eement,

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I am sure it is founded on the fact that the Count.v hac

made this assignment and has not been damaged and

therefore should not be able to racover anything in the

discharge. And to say that the discharge should say

that that assignment constitutes discharge, I contend

that it doesn't, but under the assignment, the County

has appointed Rust to pe~for~ the siltation work as part

of the defense, really, whether they should be entitled

to what we say they are entitled to under the assign~ent.

THE COURT: Let me hear Mr. Farley.

r-!R. FARLEY: If it please the Court, Hr.

Downey keeps talking about an agreement, • .., "- I.... • a s~J.~..a~:Lo:t I

agreement with Rust. The agreement that he is endeavorin~

to introduce into evidence is the siltation agreement

between Ecology and the County which is not the subj~c~

of this suit, and it calls for a $5,000 escro~·; arnount

that is not included in the bond.

It is not included in the agreement, and it

is not the subject of the motion !'or judgment filed

the County, and it is no'iJhere nentioned.

And it is true that it is al~·:ays a good

idaa to try to.~itigate everything that ha3 to be

1\-25 ANITA B. GLOVER

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1 litigated at one time, but I submit to Your Honor that

2 we cannot litigate something that is outside of the

3 pleadings.

4 [tiR. DOWNEY: Your Honor, if I may be heard.

5 Mr. Farley has said it is outside of the

6 agreement, outside of the bond.

7 THE COURT: Outside the pleadings.

8 i"iR. DOHNEY: Outside the pleadings. Hell,

9 the pleadings reference the agreement; the agreement

10 references the plans; the plans reference the obligation

11 to perform siltation controls. You can not get a per~it

12 to work under these plans without I mean, you canno~

13 ~·1ork en a r.L,;oht-of-\-tay under County ordinances ~-tithout a

14 permit. You cannot ~et a permit without a bond,

15 including siltation escrow or other condition guaranteein[

16 performance of siltation contra~. Therefore, it is three

17 steps removed,and each thing relates to the other.

18 THE COURT: Then I am going to sustain his

19 objection. I will sustain his objection. I will just

20 leave it marked for identification at this time.

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OPEN COUR·I'

DOltiNEY: I have no further questions of

this witness, Your Honor.

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1 THE COURT: Cross examine, r-!r. Farley.

2 rm. FARLEY: No questions.

3 (;!R. SCH\o.!ARTZ: I just have one, Your Honor.

4 CROSS E~CL\NINATION

5 BY I'-1R. SCH\vARTZ:

6 Mr. McFall, you indicated that purchasers

7 or developers of various prope~ties in Fairfax County are

8 require~ to put up bonds for the development of any

9 polution?

10 A. Yes, sir.

11 rtiR. SCH\·fARTZ: Thanlc you.. I have no thins

12 further.

[·1R. PERRRY:

14 THE COURT: May he be excused at this ti~e?

15 r·'1R. DOHNEY: Yes, sir.

16 THE COURT: Mr. McFall, you may be excus~d.

17 You are free to leave at this time. Tha~k you very

18 much, Mr. McFall.

19 (Witness excused.)

20 THE COURT: Call your next witness.

21 MR. DOWNEY: The next witness is the

22 defendant, Buford W. Duke, Jr.

23


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2 RUFORD \'I. DUKE, JU~·IIOR,

3 a defendant, ;·ras called for examination by counsel for

4 the plaintiff, and, having been first duly sworn, was

5 examined and testified as follows:

6 DIRECT EXAMINATION

7 BY r•!R. DO 'VINEY :

8 Can you state your name please, sir?

9 Buford W. Duke, Junior.

10 And where do you reside, Mr. Duke?

11 A. 4458 Elan Court, Annandale, Virginia.

12 Mr. Duke, are you a stockholder in the

13 corporation, Ecology One, Inc.?

14 A. I am.

15 A~e you also an officer of that corporation?

16 I am.

li Did you have that inte~est, or, excuse me.

18 What is your interest in the co~poration?

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22 percent. 23 percent, I am sorry.

I am sorry?

I corrected that to 23 percent.

THE COURT: Ho-.•r much?

THE WITNESS: 23 percent.


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TEE COURT: Speak i~to the mike. The jurors

are having a problem; I an having a problem.

And I did not get the nu~ber there.

TEE \·fiTNESS: 23 percent.

BY NR. DO~·TNEY :

Q Mr. Duke, were you involved in the

development of the Rainbow Subdivision?

A. Yes.

4 In what manner were you involved in that

project?

~ I was the overall project manager.

Q And what were your responsibilities as

pro,j ect mana~er?

k Overseeing the total project.

~ Did you have responsibilities for the hiri~g

and firing of personnel

A. I did.

~ ~~ployed by the corporation?

~ (Nodding head.)

~ Did you have responsibility for hiring a

construction foreman and supervisors?

A. I did.

Q Would that have included the personnel who

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would be responsible for overseeing the road construction'

A. Yes.

Q Could you nane the individuals who were so

employed by you and by your company?

~ Clarence L. Mearson.

TEE COURT: Who?

THE WITNESS: Mearson. M-e-a-r-s-o-n.

Ken Cordle, for a very short tirne. And Ronald Stewart.

Junior's Excavating. D. I. Lyons Construction Compa~y.

Dexter H~bbard, civil engineer.

BY r-1R. DO'.•iNEY:

Q But was any one of those individuals

responsible for overseeing the coordination among the

persons who were doing the roadwork at any one time?

Let me rephrase that -- did you have one

person from time to time responsible for coordinating

among the various subcontractors the performance of the

road construction?

Q How frequently were you on the job site?

A It varied with the activity on the site~

but I would say an average of three to five d~ys a week.

~ And what investigation did you ~ake of the


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1 qualifications of Mr. Mearson prior to employing him as

2 your job supervisor?

3 We interviewed approxireately 25 applicants

4 and then we checked their references and their experience.

5 \·Jha t ~-ras rl!r. t·1earson' s experience in road

6 construction?

7 Previously he was the superintendent for

8 Fairlington Rehab work which involved only that portion

U of the road concerned with parking lots and so forth.

10 Did Mr. Mearson have a minimal experience

11 in road construction?

12 A. I would s~y so, but he·was not primarily

13 responsible for that as I pointed out earlier.

14 And Mr. Cordle, what background investigation

15 did you do of him?

16 I had worked with Mr. Cordle on a numbe~ of

17 jobs. He was forrne~ly superintendent for E. H. Glover

18 Construction Company.

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How long was he employed by you?

About six to eight weeks.

And f·1r. St e\·rart . HO\'l old \•iaS r·~r. Stewart?

Approximately 30.

And did Nr. Ste\-rart have any experience in

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road construction work?

~ Mr. Stewart was an architect and consequently

was familiar with that from a coordination standpoint

in the office.

Q Mr. Duke, do you recall what the applicable

standards of the Virginia Depa!"t~ent of High~.;ays l-rere

at the time that this project was under construction, as

far as road construction is concerned? What was the

title of the book containing the standards and

specifications for how the roads are to be constructed

in accordance with State requirements?

~ Hell, there are two books. One is the County

standards and one is the Virginia Department of High~·ray

standards.

Q I ~ill show you Plaintiff's Exhibit ~ark~d

for identification, letter D. Can you identify this book~

(The book referred to above was marked Plaintiff's Exhibit D for identification.)

IJ.1 ~IE \~fiTNESS: Virginia Department of High"';ays

Road and Bridge Specifications.

BY HR. DO~·T~JEY:

Q 1970?

A. 1970.


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1 " "='.: And would this be the book of standards that

2 was in effect at the time that your project got under

3 way?

4 I'm not sure that it was that edition.

5 Do you recall having this edition available

6 to you at the time that the project 't·ras under 'ttay?

7 It was in our office, but I did not rerer

8 to it because I hired, as I told you before, Dexte~

9 L. Hubbard, a registered civil engineer, to ~esign the

10 roads.

11 To design the roads?

12 Yes.

13 Was Mr. Hubbard there while the roads were

14 being ccnst~ucted?

15 Yes. H!s surveying cre\-r also laid out the

16 roads.

17 Mr. Hubbard was there daily while the roads

18 were being constructed?

19 At each point where there was a need for

20 Mr. Hubbard to be on the site with the County Inspector,

22 For t~e fi_rst _period of. time, to answer

23 your question, his surveying crew was on the job

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continuous for three to six months i~ the beginning of

the project.

Q Well, when you say ~hen the~e was a need fo~

him to be the~e, what do you mean bv that?

k When there was so~e questions. There are

always questions raised by the County Inspectors.

Q Did you rely on Mr. Hubbard to raise

questions with the subcontractors on his own initiative

regarding their performance?

A. Yes.

Q And would he hn.ve been on the job site on -a. daily basis to do that? - 7 (Y That 1-;ould have been myself or ~on

Ste't·rart.

Q Have you ever· read any of the provisions

of this book?

A. Sure.

~ Do you recall Section 105.05. G A. Not by numbers, I'm sorry.

Q Let me refresh your recollection. In the

contractor's absence, he shall have on the work at all

times as his agent, a competent superintendent capable of

reading and thoroughly understanding the plans and


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l specifications,and thoroughlv exoerienced in the type _ ""=""

2 of ,,..ror~: being performed, ~rho shall receive instructions

3 from the engineer or his authorizad representatives.

4 it. Yes, sir. We did that.

5 Q i~0\'1, Nas f-i!r. Hubbard your engineer?

6 A. Yes, sir.

7 ~ Who was there to receive instructions from

8 hir:!.?

9 A. Originally Mr. Mearson and the contractor,

10 Junior r s Excavatinz. I think this is a fairly CO!!'JnOn

11 c he clcs and balances procedure, sir.

12 But Mr. Mearson had no experience in road

13 construction; is that right?

14 A. Mr. Mearson, w~en he had a question, would

15 rely on Dexter Hubbard, who was the co~sultant,

16 professional consultant involved in answering such

17 questions. I think that you will find that this is

IS very ~uch co~~on practice among construction firms to

19 set up a hierachy of c he c ks and balances.

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21 A.

That would be your opinion; would it not?

No. T.._ -l.. is not my opinion, sir. I have

22 worked very closely with the developers over a number

23 of year~ and this is always the case.


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Q Where is Mr. Hubbard's office, Mr. Duke?

A In Fredericksburg, Vi~ginia.

1-!R. DOHHEY: I have no further questions.

THE COURT: Cross examine.

CROSS EXAMINATION

BY MR. FARLESY:

Q Mr. Duke, you are an architect?

A.. Yes.

Q How long have you been an architect?

~ Sixteen years.

~ And where is your office located?

& Falls Church, Virginia.

Q How long have you lived in the Northern

Virginia area?

A Twelve years.

~ Now, as an architect, would you just briefly

relate to the Court and the jury what your experience

prior to Rainbow Subdivision had bee~ in working with

road people and construction people?

~ I had obviously -- obviously the architect

is the overall coordinator of projects and consequently,

I wa3 involved in road an~ driveway, curb, gutter,

et cetera, coordination for eve~y p~oject that I did ~


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during that 16-year period.

Q Now, so far as Rainbow Subdivision is

concerned, do you knO'\'l any instance in \·rhich an engineer

was requested by the County that one was not furnished?

A. No.

Q Were there a number of occasions when the

County Inspector and Mr. Hubbard, your engineer, got

together?

A. Yes, sir.

Q And \•ras your engineer hired for this

purpose, to oversee the site?

ft.. Exactly.

Q Can you tell us a little bit about Mr.

Hubbard. What exactly is his occupation?

& He is a registered civil engineer in the

State of Virginia.

Q Do you know approxima~ely how long he has

been practicing civil engineering?

~ Approximately 10 to 12 yea~s.

Q And where has most of that been, if you

A. In the State of Virginia totally.

Q During this time that you were over the

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76 pro.j ect, \•!hen t:!". Hut> bard t·:ns there, or any of t!:e

other people th.a.t you nar:~ed, ~·Jere yo~ ever cited by the

County for any street or road violacions or a~ything

that Has ir.1properly done as far as the streets or the

roads were concerned?

~ To my knowledge, Mr. Farley, we were asked

to clean out so~e siltation ditches, and we did it

without really being written up.

~ As far as the road itself is concerned,

the streets, was there ever any citation from Fairfax

County or ~he Department of Eighways saying that this

is not being done properly?

A. No, sir.

MR. PARLEY: That is all.

I·1R • ? ERR Y : No o. u e s-: i ·:) n s •

THE CO~JRT: You !7lay step do\·,·n.

MR. FARLEY: Your Eono~ please, I think one

of the ju~ors has a question.

MS. STROUD: Did I not read in the book that

a juror has the right to question the witness?

THE COURT: Not to ask questions. In other

words, if at any time durinG the trial there is so~e ques ior

about your not either hearing the evidence or yo~ are

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not underotandinc the evidence

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77 o~ so~ething, we'll have

it reo.eated, bu~ the jure~-~ de not ~~~'e- r~ght ~o as 1• ..... ..., • ... ·--.., c:. - ., !.I l'~'

2 in other words, to interrogate the witnesses and so

3 forth under our system.

If you have a question or something, we would

5 be glad for you to write it down on a piece of paper.

6 The bailiff will submit it to ~e, and I will take it up

7 with counsel and see whether or not they -- we should

8 have it, but it is up to counsal to put on the case.

9 In other words, counsel represent the parties

10 They put on the case, and you ~ould be governed by

11 evidence that you hear, but not to ask questions. If

12 at any tine, if you don't hear the evidence, '·re' 11 mal:e

~ sure that you hear all of the evid~~ce. Or if there

14 is so~e evidence that you feel s~ould be repeated or

~ something, ~f it is necessary, then the Court would have

16 that evidence repeated, if it is necessclry in order for

17 you to arrive at a proper decision.

18 REDIRECT EXAfi1I!:ATIO?!

19 BY NR • DO\\fNEY :

20 Mr. Duke, was Ecology One issued a notice

21 of violation in writing from Fairfax County Public

22

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Utility Inspectio~s Division

February of 1975?


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1 A. I do not remember a date like that, sir.

2 Do you recall those two writings,

3 notices of violation?

4 fo ... Yes, I believe the context of that was

5 relevant to lots ~e had sold.

6 Q. That is another notice of violation, M~.

7 Duke. There 't"Tere two; weren't there?

8 p_ I did not receive the first one.

9 \·!asn 't there one that had to do with

10 allowing a home to be occupied without a residential

11 use permit, and another one dealing \·rith siltation

12 control?

13 p ... I do not remember the siltation control. ~--

14 THE COURT: Anything else?

15 r~IR. SCHltlAHTZ: Ko.

16 r-'!R • FARLEY : No •

17 NR. PERRY: No.

18 THE COURT: You may step down.


20 THE COURT: Ca.ll your next t·;itness.

21 ~'iR. DOHHEY: Call l\1r .. Hilliam Gould thorpe,

22 please.

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should consult with H. L. Rust on that. We agreed to

pursue the case if that was part of it, so before I

stipulate to it, I ~Tould like to see what they say. He

agree that the siltation escrow account can be released

and all of the damages will be sought from Republic's

bond. We 'tv ill stipulate the figure.

THE COURT: And what is that figure no'tv?

li!R. DOWNEY: $171,725.03 plus interest.

THE COURT: No'tv do you gentlemen 'tvant to

argue this other point here before we call the jury down?

~ffi. FARLEY: Your Honor, I think that so

much of that is going to come into the motion at the

end of the Coun·ty's case, that it is all intertwined as

far as the nature of the bond. Is that the point that

Your Honor is --

THE COURT: Ac·tually I understand that the

reason you wanted a ruling is number one, because if I ruled

that it were penal in nature, then it would not be necessary

to put this in, the 171. The bond would speak for itself,

$172,000. So, I mean, I think that I would have to rule

on that prior to that, and I just thought rather than

bringing _the jury down, and reading them five or six questior s ..

and answers, and sending them back upstairs, I think that

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SEC. 105.05

notify the Engineer. The Engineer will then make such corrections and interpretations as may be deemed necessary for fulfilling the intent of the plans and specifications.

Sec. 105.05 Cooper.~tioa by C011tractor-The Contractor will be supplied with a minimum of 2 sets of approved plans and contract assemblies. Two copies of the specifications and 2 copies of the Road Designs and Standards will be fumi1;bed on request without charge. The Contractor will keep one complete set of plans, standards, contract assemb1ies and specifications available on the work at all times. '

The Contractor shall give the work the constant attention necessary to facilitate the progress thereof aud shall cooperate with. the Engineer, his inspectors and other contractors in every way possible. Where any portion of a project is located within the limits of a municipality, military installation or other Federally owned property, the Contractor shall cooperate with the appropri· ate officials and agents in the prosecution of his work to the same extent as with the Department.

In the Contractor's absence he shall have on the work at all times as his agent a competent superintendent capable of reading and thoroughly understanding the plans and specifications and thoroughly experienced in the type of work being performed, who shall receive instructions from the Engineer or his authorized representatives. The superintendent shall have full authority to execute orders or directions of the Engineer without delay and to promptly supply such materials, equipment, tools, labor and incidentals as may be required. Such superintendence shall be furnished irrespective of the amount of work sublet..

Sec. 105.06 Cooperation with Utilities-The adjustment of utilities consists of the relocation, removal, replacement, rearrangement, reconstruction. improvement, disconnection, connection, shifting or altering of an existing utility facility in any manner.

Insofar as can be reasonably determined, all known existing utilities will be indicated by the Department on the plans. All existing private and public utilities which are to be adjusted shall be adjusted by the utility owner or his representative or by the Contractor as a contract item. The arrangements for adjusting existing utilities will be made by the Department prior to project construction; however, all utility facilities will not necessarily be adjusted in advance of project construction and will not a1ways be removed from the construction limits. When utility adjustments must be performed in conjunction with construction, the utility adjustment work will be shown on the plans and/ or covered by a special provision in the contract. In the event any existing

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1 \·!hereupon,

2 WILLIAM E. GOULDTEORPE, JUNIOR,

3 a witness, was called for examination by counsel ~or the

4 plaint iff, and, having been first duly sworn, v1as


6 DIRECT EXA.MINATIO:·J

7 BY MR. DOWNEY:

8 \Afill you state your name, please?

9 11. 'VJilliam H. Gouldthorpe, Junior.

10 G-o-u-1-d-t-h-o-r-p-e.

11 Where do you live, Mr. Gouldthorpe?

12 Warrenton, Virginia.

13 Ho\·: are you employed, r::r. Gould thorpe?

14 I am a senior engineer a~d inspector for

15 Public Utilities, Fairfax County, Virginia.

16 How long have you bee~ so enployed?

17 T',·.ro years.

18 Do you have previous experience in

19 inspections for road construction work?

20 Yes, I do.

21 And what was that experience?

22 i\. T "'as a o~o 4 ~~~ ;~~~oc~.~~ r~or •• - . . : - ·-· Y'l . - • ·--. "' •... • ._.J .... ~.'~-•... :- ' • ..., ,:.; ,..,.. ... \., "'='· ~ Yi~ginia

23 Department of Hirrhways and Transportation for six years in

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1 Fairfax Coun~y.

2 Did you have occasion to be involved in

3 inspections at the Rainbow Subdivision in Fairfax

4 County?

5 A. Yes, I did.

6 When did you first becone involved with

7 this project?

8 I first became involved in the project in

9 October of 1974.

10 Q. And in what capacity?

11 I was a public utility inspector on the job.

12 And at the t!ne that you first cane on t~e

13 job, what was the level of activity that you observed

14 there?

15 There was very little activity when ·r ca~e

16 on t!'le job.

17 \fnat activity, if an~r, was there? .

18 A. There \·ias some paved dit·~h being put in,

19 concrete ditch. And there was so~e crading going on on

20 a couple of the streets, and some clearing, and that

21 \·ras about the extent of the activity.

22

that time?

1!-44

Was there work goins on on the houses at

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A Yes, there was.

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-i Q Mr. Gouldthorpe, I ask you to step down to

the bulletin board here. I want to ask you some

questions about the plans.

f·ffi. DO\·INEY: Your Honor, could the plans

be marked as Plaintirf's Exhibit E?

plans?

THE COURT: This will be E.

(The plans referred to above were marked Plaintiff's Exhibit E for identification.)

BY !-JIR • DO\>lNEY :

~ Mr. Gouldthorpe, can you identify these

~ This is a copy of the approved plan for

Rainbow Subdivision, Section 1.

Q Now, if you will, can y~u id~ntify what is

contained in this particular section 2 t·Iha.t is this

sheet called?

~ This is a cover sheet.

Q This is a cover sheet. And is the cover

sheet a part of the plarG?

A Right. Down here it gives us general notes,

what permits must be obtained from the Highway Department,

and notes of where the County standards are to be

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used on the project. Over in this area you have all of

the different approvals that must be obtained from

Fairfax County.

Q Now, is this a set of app~oved plans, a copy .

of a set of approved plans?

~ Yes, it is.

~ And directing yo~attention to this plat

shown here, can you identify this, this document?

& That is a Report of Subdivision ?lat.

And can you leaf through these plans

instead of doing that -- have you, at rny request in ny

office, £O~e through these plans and looked them ove~

fairly thoroughly?

A. Yes, I have. i I

Could you tell us if there have been any I major revisions to these plans subsequen~ to the Or .; ,_l.. ":::\, I

-t., "'·--,

plans being submitted to the County?

Yes. There have bee~ deletions.

What have the provisions been?

~ The provisions are that some of the concrete

ditch had been eliminated, some of the concrete ditc~

had been added, the storm drainage structures had been

-changed from one design to another design. That was

A-46 ANITA B. GL.OVER

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generally abou~ the exte~t of it.

Do these notes on front here provide

for siltation erosion control?

~ Yes, they do.

Q In what manner do ~hey so provide?

A Well, if you look at 15, note 15l control

erosion siltation shall

THE COL~T: I can't he a~ you.

THE WITNESS: The notes on ~he front -- there

is an area the~e for land co~servation notes, and it says

that erosion and siltation controls will be placed

according to Fair~ax County and State standards.

MR. FARLEY: Your ~onor please, I a~ ~o~ng

to object to this cover being u~ed as part of plans.

Fairfax County ordinance provides for

siltation control. It provides for some of the othe~

things that have already been mentioned that a~e on the

cover, and I de not believe that the agreehlent staten

that language taken from the ordinar.~e, but I have not

been over all the plans, and I don't know whether it

conforms with the ordinance or notl or a part of the

plans by which the developer is supposed to construct

t!1e pro.j ect.


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8 L~ I realize that in all plans you have certain

111 explanations, b~,;.t ~..;hat i·1r. Do;o;ney is seel:inr; to do here i~

211 to introdu~e a cover with the plans that has a lot of

3 language about things that he is saying, the County is

4 saying, that the developer has to do, and I think that the

5 ordinance provides that. I don't kno\·T of any, and correct

6 me if I am wrong, I could be wrong, but I don't know of

7 anything in the agreement that says that a cover sheet

8 containing ordinance lang~age is part of the agreement.

9 THE COURT: Do you recall a.'1y such laneuage

10 in the agreement, Mr. Downey?

11 r:IR. DO~·Ir~EY: Your Honor, I ~ecall la.ngua~e in

12 ~he agreement which says that the public icprove~ents are

~ to be lnstalled in accordance with the approved plans.

14 THE COURT: And is this a part of the

15 approved plans?

16 MR. DOWNEY: Accordin~ to Mr. Gouldthorpe.

H And on the front here the approvals are shown right

18 on th~s front sheet.

19 :rffi. FARLEY: I don 1 t have any problem ";.J'i th

20 that, that the approvals are shown on the front. The

21 approvals have to be shown sonewhere, and that could

22 be done ~ven with a blank. But the problem that I have,

23 Your Honor, is taking language that may or may -- if it

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cowplies 100 p:rce~t ~·rith the ordinance, all I ar-:1

8,... ?

saying is that our clients a~e obligated tc do what the

Ordinance or the law says, but not to do something that

may not be contained in the County ordinance.

So now, at this point, I don't think that

anybody has said whether all of this language that is

on the cover of these plans is language from the

ordinance. If it is, then I don't have any objection.

THE COURT: I am going to overrule your

objection at this point, Mr. Farley.

BY f.'IR. DO\·lNEY:

~ Mr. Gouldthorpe, let ~e direct your attantio~

to this particular diagram shown here on the second page

of the plans. Can you explain what this eneineering

diagram is intended to represent and how it is used on

the project?

A. This dark line that is on here is a profile --

THE COURT: Can you all see over here? He

could bring it a little closer, if you like.

A JL~OR: It might help.

THE COURT: Why don't you bring this a

little closer and counsel~will j~st hav~-to ~~--

A-49

THE \·JITNESS: This darl-~ line here represents

ANITA B. GLOVER CERTIFieD VERBATIM REPORTER

10721 JOYCE DRIVE FAIRFAX. VIRGINIA 22030

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1 a profile of the roadway itself, the way that the road

2 would look after the asphalt was put on. There's

3 another line on here that represents the original

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ground, what the ground looked like before he started

any work in there, anything was graded, or any of the

trees or anything were removed.

The other lines on here represent a profile

of the elevation of the paved ditch where there was such

on the right and the left of the roadway.

And this area right in here represents one of J

the storm sewer structures. And it is used to help us getl

elevations and locations in the construction of the road.

BY r.TR. DO~-!HEY:

And the dark line represents whe~e the road

15 is supposed to be when it is finally constructed; is

16 that right?

17 Correct.

18 And during the progress of the work, can

19 you explain for the ladies and gentle~en of the jury

20 how it is deter~ined when you have a piece of raw ground

~ where you are i~ relationship to this final required

22 profile of the street? What procedures are ernployed to

23 determine whether cuttin~ needs to be done or filling

A-50 ANITA B. GLOVER CERTIFIED VERBATIM REPORTER

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needs to be done?

~ Okay. These lines right here, the da~k

line is usually designed in an engineers office after

he gets data fro~ the field from the surveyors. And

then as the project progresses,the surveyors will come

back out on the project and they will set what is called

grade stakes, so that the contractor can work from these

grade stakes. They will have n~~bers or them that

relate to this finished grade and there elevations.

They have cuts on then, which is earth to

be removed, or they have fills on them, which is

material to be added, to get to this point right here.

~ What is the sequence of -- what is the

sequence of the stages in bringing a road from its raw

state of raw land to a finished state of a finis~ed road?

Let me direct your attention to this diagram.

THE COURT: \·lhat page is that?

MR. DOWNEY: This is on page six of the

plans.

BY NR. DO\·INEY:

Q Tell the jury what this diagram represents

and \·;hat the stases are in brint;ing a ro:~d to that

status of completion?


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~his dia~ram is a typical section, and it

2 tells us how much sub-base ~aterial o~ stone will go

3 under the road, how much base material o~ more stone

4 is put on the road, how much asphalt is placed on the

5 road, the amount of fall from the center line of the

6 road for the asphalt, for the shoulder and for the

7 cuts and the fill areas.

8 And the way that we arrive at that is that

9 the first thing after the project has b~en staked out,

ro the right of way is marked from the stakes that the

11 engineers have set or the surveyors have set. The

12 right of way is cleared, rou~h grading is done, storre

13 seNers and part of the stor~ sewer structures are put

14 in, all under~round utilities that must go in are

15 placed, and then the grading begins from the stakes that

16 I said previously were placed in.

17 And the fills are built, or the cuts are

18 made, the amount of ston~ that is called for is put in,

19 and the last layer of stone is what we call fine graded.

20 In other words it is brought to as close a grade as

21 tolerance for it -- it is brought to as close a grad~

22 as is possible with the machines that are used.

23

A-52

And then t~e asphalt is placed. Anc the

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last thing that is done, the sh~ulders are built up

either with stone or with earth, and the~ the slopes

are graded to the proper fall.

Q And at what points along that sequence does

the County In3pector become involved in making the

required checks, or what checks are necessary followed

by your division in overseeing the construction of the

road from that first to last stage?

~ We start from the beginning when the right

of way is cleared, staked and cleared.

Q And what is your responsibility at that

point?

~ Well, the responsibility then is to make

sure that the land is cleared within the clearing limits

\":ithin the right of v1ay that is sho-:.·rn on the plans.

Q Then what is the next time when you become

directly responsible for making a check on some aspect of the work?

A. ':!hen the underground utilities or the

storm sewers are going in, when the pipe is being laid

for the storm sewers or any sanitary seKer that has to

be laid, we are responsible for the inspection of that.

And then all the ..,,ray through as the structures -- s term

and sanitary sewer structures are brought up, \·Te are

1\-53 ANITA B. GLOVER

CERTIFIEO VEP.9ATIM R!!PORTER

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273·4086

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on "'....,

1 respo~sible for that.

2 The cutting of the subg~ade or the fill~ng

3 and the placing of the stone and the asphalt, all the

4 way through to the shoulder construction, and the final

5 seeding and mulching of the slopes.

6 What responsibility do you have for seeing

7 to it that the road is on the proper line and on the

8 proper grade?

9 A. Well, we are to make sure that it is

10 constructed according to the typical section, a~d that

11 it is within the right of way and within the clearing i

121

131 limits.

Well, do you actually run the strinfline

14 between the center line of the road and the stake?

15 No. We don't run it ourselves, but we

~ check it with the contractor. We check the gra~es with

17 the contractor. The contractor's men, when they are

18 ready, will call us to check the subgrade or the base

19 stone before asphalt is placed.

20 And then, along with usually the co~tractor's

21 superintendent or foreman and a couple of his labor

22 • group, go out and physically check the grade.

23 Q. Now I refer to a stringlinin~ procedure; coula


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11 I you explain !·ihat I mean by that? Or, let me ast you it

21 I this \vay. Hhat is nea:1t by stringlining from the

31 I center line to the stake out?

:I "

~ The contractor will work off of stakes that

have been put in by the surveyors, stakes and a cut

6 sheet that the surveyors submit and the contractor gets

7 a copy of it.

8 On a road such as this,he will put w~at is

91 I called side stakes. It's a stake, it's about three

101 I feet tall, and he ~rill put them somelt;here at t~e

Ill I shoulder, at the edge of the shoulder. There is a

12 five-foot shoulder on this road, and he will put the~

131 I somewhere off the edge there so that he has room to

141 I get his grading equipment in here to do the roadway

151 I itself. He will put one on each side.

16 Then he will transfer this grade from the

171 I cut sheet onto this stake and then he \•rill ,iust pull

181 I a string across. Then he will take a ruler and measure

191 I do't-rn \tthatever he is supposed to have according to ho~·r

201 I he has transferred his grade.

21 Q

221 I of the line?

23 A.

.1\-55

And who does this measuring and runnin~

The contractor does it until he is ready

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:I for us to check it. As they are grading along he will

do it,and then we do the final check.

3 Q, Now let me ask you, what particular

41 I siltation control measures are indicated on these

51 I plans? And you may either point to specific pages or

61 I you may say generally and in whatever detail you think

71 I is appropriate, but what siltation control measures

81 1 ax:e necessary, indicated on these plans for this

91 i project'2

10 P ... Generally, we were requiring the developer

III I and contractor to place stra~·r bales in the ditch lines

12 to slow down the force of water and help some of the

131 I silt to filter out. \1e \-tere requiring him to pla~e a

141 I berm along in this area and stone filters at the end

151 I of these pipes and in the streams that ran through to

161 I control the silt, dott;nstream siltation.

li 0: ~nat about seeding and.rnulching the slopes?

18 A.. We had required him, we required everyone,

19J 1 to seed and mulch as soon as possible. And usually --

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the job is difficult, but it's usually not mo~e than abou

days ~t anything can be denuded without putting seed

-~~d mulch on it.

Q_,

A-56

And you refer to a silt basin -- or did you

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1 refer to a silt basin?

2 A. No.

3 0: ~I ere silt basins required on the proti ect?

4 A. Yes, they \-:ere. .

5 Q, Approximately where \•lere they? You may

6 refer to the plat or to the page on the plans~ "'hichever

7 is easier for you.

8 We were requiring a silt basin, which is a

9 large dugout area that allows the water to stand a

10 little while and silt to filter out. This a~ea right

11 in here, Beach-Plum Drive, there was a pipe that wenc

12 across the road here down on Silverleaf. We were

a . requiring a silt basin at this large pipe here. We w~~e

14 requiri.w~g it dot·:nstream a little ;·:a~/S because this hc.d a

15 stream that \·Tent through the pipe and went do"t-rn throur;h

16 another piece of property and off. So we were requiring

17 a basin in this area.

18 Thank you, Mr. Gouldthorpe, I don't

19 think you will need to refer to these again, so you may

20 return to the witness stand.

21

22

Mr. Gouldthorpe, what was the name of

the job supervisor for Ecology O~e_who was on the

site at the time that you first ca~e on the property?

~-57 ANITA 8. GLOVER

CERTIFIED VERBATIM REPORTER

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273·4066

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1 A.

2 And did yo~ observe Mr. Stewart giving any

3 direc~ions to people on the right of way who we~e doing

4 work there?

5 Eo, I did not.

6 And did you have occasion to discuss with

7 Mr. Stewart the need for that, or whether he was doing

8 that, or why he wasn't doing that?

9 Yes, I did.

10 And what was the substance of your

11 conversation?

12 MR. FARLEY: Your Eonor please, I a~ GOi~;

13 to object to t~is as hearsay, to:=:at Hr. Ste~·:art saiC:. I

14 don't thi!"lk that t!'1is testimony should be allo\'.red, r .. nd

15 that he should be here to testify.

16 THE COURT: \·Jell, was he an employee thouG:"l

17 of Ecology One, because I t!"linl-~ r·ir. Buford test if led he

18 wasn't one of the employees

19 MR. FARLEY: But I would submit, and perhaps

20 I arn wrong~ that every single employee of Ecology's

21 testimony would not be an exception to the hearsay

22 rule.

23

,1:\-58

TFE COURT: I will allow him to

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1 question.

2 TEE WITNESS: We talked about how the job

3 was progressing,and we talked about the need to get

~ the job seeded and mulched before, at that time,

5 October 15th. And he indicated to me at that time

6 that he was more of an architect than he was a road

7 superintendent.

8 BY f-1R. DOt.-JNEY:

9 And how ~uch activity or declining level of

10 activit~ did you observe during your involvement with

11 this project? I am referring to the ccnst~uction

12 activity itself.

13 A. From the tice I took it ove~ it wis gct~ing

14 close to the winter month~ and the activity kind o~

15 went down weekly.

16 And, Mr. Gouldthorpe, did you keep a diary

17 of what you did or what you observed on th~s project?

18 Yes, I did.

19 And did you have occasion to enter into

20 your diary occasions when you would speak to the Ecology

21 One people about maintaining siltation controls and

22 erosion controls?

23 A.

.A-59

Yes, I did.

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1 Well, do you recall how frequently you

2 had occasion to do that?

3 \·ihen \ole \vere trying to get the job seeded

4 and mulched for winter, I spoke to I•!r. Stewart every

5 day just about that I was there. And then after that~

6 after he had left, I spoke to Mr. Larkin on a nu~ber of

7 occasions about getting the silt controls squared away

8 and what seeding and mulching remained to be cone, done.

9 Q, Mr. Gouldthorpe, I will show you Plaintiff's

10 Exhibit marked for identification, F. Can you state

11 what that document is? I

12 ~ This is an amendment to the Fairfax Coun:yl I

13 Subdivision Control Ordinance for erosion and sediment!

14 control.

15 And was that amendment effective at the

16 time that you were on this project?

17 A. Yes, sir.

18 And does it require by law certain erosion

19 and siltation control measures to be taken?

20 A. Yes, sir. It does.

21 I move the introductio~ of plans and the

22 amendment, November 1972 amendment to the Subdivision

23 Ordinance.


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1 TEE COURT: Any objection?

2 MR. FARELY: No objection to the Ordinance,

3 Your Honor. I do object to the language of the cover

4 sheet of the plans, but no objection to the plans

5 themselves.

6 THE COURT: Then I \·Till overrule your

obj action, and note an exception for you on the co·1er sheei .

MR. SCHWARTZ: No objection, Your Honor.

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(The plans previously rea~ked Plaintiff's Exhibit E for identification were received into evidence. The Ordinance referred to above was rna~ked Plaintiff's Exhibit F for identification and received into eYidence.)

BY f•lR. DOltlNEY:

Mr. Gouldthorpe, did you have occasion to

16 speak to either Mr. Stewart or any other employee of

17 Ecology One about seeing an approved set of plans?

18 Yes, I did.

19 And did you ask to see an approved set of

20 plans?

21 fl .. Yes, I did. I asked Mr. Stewart shortly

22 after I took the job.

23

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Now, \'Tare you able to see a

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1 set?

2 A. ?·!o, I \·ras not.

3 What reason was given to you?

4 There was no reason given. ~here jus~ was

5 not a set of approved plans that were available for me

6 to lock at.

7 He told you that there was no set of

8 approved plans there?

9 I don't kno~v if he used that e}:ac t language,

ro but there was not any set to show me. I asked for the

11 approved plans, plus the road and bridge specifications,

12 and County Construction Standard Book.

13 They couldn't show you any of those

14 do~uments?

15 P .. No, sir. -

16 Well, did you have occasion to notify them

17 of any particular County requirenents about having t~em

18 there?

19 A. I told them at that time that th~y were

20 required, the approved plans \·rere required to be on

21 the job.

22 Q. r·1r. Gou~dthorpe, _): shO'tT you Plaintiff's

23 Exhibit number G. Can you identify that document?


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~ That is a copy of the pernit to install

the street improvements for Rainbow.

~ And are there certain conditions attached

to being allowed to work in the right cf wey pursuant

to that permit?

~ Yes. The second sheet is the special

provisions.

r:IR. DOl:lNEY: I move the introduction of

Plaintiff's Exhibit G.

THE COURT: Any objection?

l•'lR. FARLEY: 1·!0 objection.

rlin. SCHHAR1'.rZ : t:o object ion.

THE COURT: Other counsel spea!\: up if you have

any objection, other\arise I -;1ill assume that i>~!r. Per:-y

along with tha others have no objections.

THE COURT: Let rr:.e mark this received as

Plaintiff's Exhibit G.

(The document referred to above was marked Plaintiff's Exhibit G for identification and received into evidence.)

BY HR. DO\·INEY:

Q Now· Mr. Gouldthorpe, did there come a time

\'lhen l\'lr. Ste\'lart \"ras no longer there at the job site

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1 subsequent to your becoming involved on the project?

2 A. Yes, there did.

3 Was he replaced by someone else?

ll. Yes, he t'las.

5 And who was he replaced by?

6 A. r-1r. John Larkin.

7 \·fno \'las r.ir. Larkin? In \·rhat capacity -r,;e_s

8 he there on behalf of Ecology One?

9 At one time he was a carpente~ and I thlnk

10 when Mr. Stewart left,he was there. He was the man that

11 \'re went to for anything that needed to be done. So I ~o:t ·

12 think that I could call him a superinte~dent. He acted

13 more like a foreman.

14 He was their job foreman?

15 I would say yes.

16 Was there anyone else there from Ecology

17 One who you dealt with as their representative?

18 A. Not at that time.

19 And did you observe any change in the level

20 of activity between October and say the latter ~onths

21 of 1974, and the early months of '75?

22 A. Yes, I did. It eventually came to a

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1 What do you mean by a standstill?

2 A There was nothing being done.

3 Q Was there any decline in the level of

4 public utilities being provided to the project i-cself?

5 A.' There was no work being done on the roadway

6 itself after sometime in January of '75.

7 Was there electricity being furnished to

8 the houses?

9 P .. Up until some time in the wi~ter of '75,

10 there ta;as, a"'ld then it is my underst~"'lding from Nr. Larkin

11 that the electricity was cut off.

12 And were there telepones continuing in

13 operation at the hou3e where the job was being run f~o~?

14 That was eventually cut off, also, at the

~ house that they were using for the office.

16 Now, did you have occasion to continue, or

17 did you have occasion at all, to point out to i·!r. Larkin

18 certain siltation p~oblem~ that you observed on the site?

19 !' .. Yes, I did.

20 And what were those problems?

21 The two biggest problems were the seeding

22 that was supposed to have baen done in the fall of '74,

23 and the erosion control that was at the end of the

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1 do~ble 30-inch pipe on Silverleaf Drive. That was the

2 eroslon control where the stream ran to downstream

3 properties.

4 Did you observe silt infiltrating that

5 stream?

6 fl .. Yes, sir. I did.

7 And how many times would you say that you

8 had to remind Nr. Larkin or so~eone from Ecology One

9 about taking preventative measures about this?

10 P. .. At least t·;eekly.

11 And did there come a tirne w~en you ~elt it

12 necessary to issue a notice of violation to the

13 corporation?

14 A. Yes, I did.

15 I show you Plaintiff's Exhibit marked H.

16 Can you identify this document?

17 Yes. That is the Netic~ of Violation that

18 I wrote to Ecology One for failu~e to install and

19 maintain adequate silt controls.

20

21

22

23

MR. DOWNEY: Your Honor, I co~e the

introduction of Exhibit H into evidence.

THE COURT: We will let Exhibit H be

admitted the~, if there is no objection.


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(The docume~t referred to above ~1as mar~:ed Plaintiff's E):hibit r: for identification and received into evidence.)

BY r·:IR. DOH?·TEY:

Mr. Gouldthorpe, did there come a time when

6 you became at~are of the foreclosure by H. L. Rust Conpan:

7 on this p~oject?

8 Yes; I did.

9 Q. How did you become aware of that?

10 A. I was told down at Davis store, which is

11 about a quarter-mile off the project, that the~e was

I2 going to be a sale of the project on the Courthouse

~3 steps. And then I asked Mr. Larkin after that. I went

14 out to the job in the morning about it. And he said

15 that there was going to be a sale of foreclosure.

16 Approximately when was that; do you recall?

17 Sometime in March of '75.

18 Do you ~~no"'t Nhen tha foreclosure took pla~e?

19 A. No, I don't no, I really don't.

20 Q, Would you have been responsible for running

21 that do~m and finding out?

22 P ..

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A-67

No.

Did you prepare a·written mernorandurn to your

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status

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once you had learned of the sale

of the project in April of '75?

There ~1as a p~~ch list ~ade.

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describing

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v ... es. ~·le made ·I a punch list of deficiencies on the job sometime in that f

5 time period. And my supervisor was notified by me that

6 the job was going to be sold.

7 Did you prepare a progress report?

8 Yes, sir. I did.

9 I show you Plaintiff's Exhibit marked I.

10 Can you identify that document?

11 Yes. That is the progress report that I

12 made the lOth of April '75.

13 And what do you indicat~ on that progress

14 report as the status of the job in April of '75,

15 April lOth?

16 A. That 60 percent of the job remained to be

li completed, and I have a co~~ent that Ecology One, the

18 original developer, has been for~closed upon.

19 Q.

20 to complete?

21 A.

22

A.

.1-\-68

Did you make any cost estimates of the cost

No, I did not make any cost estimate.

So is· this a rough estimate by you?

It is a rough estimate. Yes.

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i.'iR. DOHNEY: I move t h:-! introduction of

2 Exhibit I into evidence.

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TF~ COURT: Any objection~

r:!?. • FARLEY : No •

THE COURT: Let Exhibit I be admitted.

(The document referred to above was marked Plaintiff's Exhibit I for identification and received into evidence.)

Mr. Gouldthorpe, in the month or April 1975, d

11 you have any conve~sation with Mr. Winsett of Ecology

12 One on the job site?

13 A. Yes, I did.

14 Do you see Mr. Winsett sitting in the

15 courtroom here today?

16 A. Yes, I do.

17 Is this him here on the end?

18 A. Yes~ Yes, that is Mr. Winsett.

19 Q, And what was the substance of that

20 conversation? Do you recall?

21

22

23

A. Generally, I asked him what was going to

happen w~th the job and wh~n they were planning, or

·anybody was planning on finishing it, going back to work


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1 on the ,job. And that was about the substance of

2 And he said th~t he just really didn't k~ow what was

3 going to happen.

4 Did he say anything about ob~aining

5 additional funds somehow having a bearing on that?

6 He did not indicate that to ~e. No.

7 Q. He did not. Did he at any time ask yo~

8 what was going to be expected of his co~pany or what

9 he could expect to happen next, or what the County was

10 BOing to require him to do at that point?

11 No. Not to my kno\1-rledge, he didn't.

12 Did you represent anything ~o him about

~ what the require~ents would be for soffieone in the

14 position of his company at that point after the

15 foreclosure?

16 A. No. I dldn't.

17 You said nothing to hi~ about whether the

~ original road completion bond should be looked towards

19 by the County, or anything like that?

20

21

22

23

No. I didn't say anything like that.

I show you Plaintiff's Exhibit J, marked

for identification. _Can you ident~fy that document?

A.

:A-70

This is a punch list that I ~ade April 24,

ANITA B. GLOVER CERTIFIEO VERBATIM RSPORTER

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1 1975 of the i~ems remaining to be comple~ed at Rainbow.

2 ~iliat do you indicate on as the

3 general deficiencies on all streets?

4 The base stone had to be graded to the

5 proper typical section; the asphait surface had to be

6 placed; the slopes had to be graded, and seeded, and

7 mulched. The paved ditch had to be finished; the debris

8 from the right of "w-.ray removed, and the storm se't-rer and

9 the entrance pipes had to be cleaned.

10 i1IR. DO\·JNEY: Your Honor, I rr~ove the

11 introduction of Exhibit J at this tine.

12 TPE COURT: Any objection.

13 MR. FARLEY: No objection.

14 TEE COCRT: ~he punch list will be narked

15 and received as Plaintiff's Exhibit J.

16 (The punch list referred to above was marked Plaintiff's

11 Exhibit J for identificat~on and received into evide~ce.)

18

19

20 So that the jury will u~de~stand this, is

21 it true that the punch list is a detailed description

22 of what you see as the precise things that have to be

23 done througho;.;.t the project? t

I. ! ~

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A-71

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1 True. That is true.

2 Is that a fair statement?

3 Yes.

4 Subsequent to your issuing that notice of

5 violation for failure to claan up the silt traps,

6 et cetera, did you observe anyone from Ecology Ona, or

7 with whom you had previously dealt from that company,

8 take any action to alleviate those problems?

9 Mr. Larkin ona day tried to place soce

10 large stones in the stream to -- he was trying to place

11 them by hand to alleviate the silt, but that was all.

12 vi ell, did you on the basis of anything

13 that Mr. Larkin or anyone from Ecology One did, I 14 you release them from that violation? I

Not on the basis of anything that Mr. Larkin ~~ 15

16

17

18

19

20

21

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2!3

A.

or Ecology One did, no.

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It's past lunch time. I i

MR. DOWNEY: I have just a few more questio~s~

THE COURT: All right.

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of a punch l:s:~RO::me:n:h::kt:::taw:_need a definition I

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THE COUR1.': \~auld you define a punch list?

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1 THE WITNESS: It is a list that we ~ake at

2 periodic intervals of work to be done that is re~ai~i~g

3 on the project.

4 A JunOR: Ho~·r periodic?

5 THE WITNESS: Usually the people in bonds

6 ~ . ":"4- d ' and permits call !or these to oe done. ~w epends on

7 the progress of the job. Six nonths to a year.

8 is usually -- when we send in this progress report and

9 according to how much work is be!~g do~e, acco~di~~ t~

ro the progress report, then they will ask for a punc~

11 list. And then they are made at other times.

12 Just before ~e are ready fer the st~eets

H to be accepted by the Virginia Department of Highways,

14 we give a detailed punch list. And that's all it is,

15 is just \·rork remaining to be done.

16

17

IS

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20

21

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23

THE COURT: Let me see counsel at the bench

for just one mo~ent.

{Discussion off the record.)

THE COURT: Ladies and gentle~en of t~e ju~y.

I noticed one of the ladies who just asked questions, an~

Sn. e t-ras ""akin("!' not c s o.,.. __ dJ... na.,... __ -t lY ~·'C- do not aJ.. .. , o· .. ; the •• W ._ O ._. _ <V •- -

j.urors to take notes unless counsel has no objection

"A-73

I just checked with counsel. They-have no

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1 objection. If you feel like you rnust take notes or

2 something like that, they have no objection to your

3 taking notes, but we do not per~it jurors to take

4 notes during the process of the trial. But they have

5 no objections, so if they have no objection, I have

6 no objection. So if you feel like you need to take

7 a note --

8 BY NR. DOHHEY:

9 Mr. Gouldthorpe, did you observe Mr. ~honas

10 Larkin on the p~oject sometime in the spring of 1975?

11 A. Yes, sir. I did.

12 Did you beco~e awa~e so~eti~e around that

13 tine or sometim9 thereafter, of E. L. Rust Co~pany

14 having some type of interest in the project?

15 P .. Yes, I did.

16 And did you also become aware, or did you

17 become aware in September or October of 1975, of an

18 agreeme~t with H. L. Rust Company and the County to

19 complete this job?

20 Yes, I did.

21 And were you called upon to make a punch

22 list showing the status of conpletion of the job in

23

. A-74

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Octobe!' of 197).

~ Yes, I was.

3 Q I show you the punch list dated October 7,

4 1975. Can you identify that?

5 Yes. That is the punch list I made

6 October 7, 1975.

7 And t•Tas there any big difference bet"t·ie:en

8 the status of the job back in April and what it was in

9 October?

10 A. No. No large difference. No.

11 MR. DOHHEY: I move the introduction of

12 this punch list.

13 r·1R. FARLEY: No objection.

14 TEE COURT: Let the punch list of Octobe~

15 be admitted as K.

16 (The p~~ch list referred to above was marked Plaintiff 1 s

17 Exhibit K for identification and received into evidence.)

18

19 BY ri!R • DO \·!NEY :

20 One final exhibit, Mr. Oouldthorpe. Can

21 you identify this book?

22 fl.

A-75

Yes.

A~d it is marked Exhibit D for the Plaintiff.

ANITA B. GLOVER CERTIC:ISO VSRBATIM REPORTER

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1 TEE COURT: D~'

2 MR. DOWNEY: Exhibit D. It has already

3 been marked.

4

5 t:!ould this ha. ve been the Virginia Department

6 of Highway specifications applicable to this project

7 on the date that the plans were approved?

8 A. Yes, it is.

9 r"1R. DO'tt!HEY: Your Honor, I move thc .. t

10 Exhibit into evidence at this time.

11 MR. FARLEY: I have no objection.

12 THE COURT: Let it ree marked and received

13 then as Plaintiff's Exhibit No. D.

14 (The book previously ~arked Plaintiff's Exhicit D for

15 identification was received into evidence.)

16

17 MR. DOWNEY: I believe .that's all the

18 questions I have of this witness.

19

20

21

23

THE COURT: It is about ten ninutes after

one. He are ten r.1inutes in:to o'.lr lunch period. Ladies

and gentlemen, normally we try to take a lunch break

. bet;·ieen o_ne and t~'~q, ~~~- sor:1~. effo!'t is al\·rays !i:ade

to try to get through a witness' testimony without

A-76 ANITA B. GLOVER CERTIFJ!:O VERBATIM ~ePOR'iER

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1 breaking in the middle of it~ so this is the reason

2 at this time. So we will recess at this ti~e until

3 2:15.

4 During the course o! the recess, do not

5 discuss the cas~and do not allow anyone to discuss it

6 in your presence. And retu~n to the jury room about

7 ten minutes after two.

8 THE COURT: Will you bring the witnesses in?

9 MR. FARLEY: Your Honor, one of my clients,

10 r-1r. G\'lathrney, more or less an e~ergency situation, has

11 to leave this afternoon, but ~1hen the case is reconvened

12 he will be back. Could he be excused? I don't think

13 anybody here intends to call him.

14 THE COURT: Does counsel have any objection

15 to his being excused?

16 !~R. DOvJNEY: No.

17 THE COURT: Nr. Gt·rathmey, you may be excused

18 this afternoon. I might say this, that the case

19 apparently will go over, and if it goes over, it will

20 go over until Tuesday morning. And I am hoping that

21 this will not interfer with the jurors, but if it is not

22 concluded this afternoon, and this is something we do no~

23 know, there are certain stages in the trial, there are


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1 certain rules the Court makes and so forth, so if we

2 do go ove~ it will go over to Tuesday morning.

3 THE COURT: Are all of the vritnesses in?

4 Cou~t w!ll recess at this ti~e until 2:15

5 for the lunch recess. During the course of the recess,

6 please do not discuss your testi~ony with anyone, and do

7 not permit anyone to discuss your testimony with you,

8 other than counsel in the case. Everyo~e is excusec

9 until 2:15.

10 (\·/hereupon at 1:10 o'clock p.m., t.r..e hearing

11 in this matter was recessed for lu~ch.)

12

13

14

15

16

17

18

19

20

21

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A-78 ANITA B. GLOVeR

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AFr!'ERHOON SESS!Oa 115 (Whereupon at 2:15 o'clock p.n., the hearing

in this matter was reconvened.)

THE COURT: Mr. Downey, were you through

\•ri th direct"?

NR. DQi,·!NEY: Yes, Your Honor, I was.

TEE COURT: Mr. Farley.

\·Jhereupon,

WILLIAM H. GOULDTEOR?E, JUNIOR,

resumed the t·litness stand, and ~'las examined and testified

further as follows:

CROSS EXAMINATION

BY HR. FARLEY:

0 . , r~tr-. Gouldthorpe, T ~.~~'• - \.. .. ...., ... .., recall, I d·:)rl 't

think before we broke for lunch, did you indicate hew

long you had worked for the Highway Department befor~

you worked for the County?

A. Yes, sir, I did.

~ I've got a bad memory. Woulj you tell me aga]n?

A. Six years.

Q And then how lo~g for the County after that?

A. T;.;o.

Q And were you doing street i~spection work for

1

. the H~~h:·1ay ~epart~ent? I .• res, s~r. I


CeRTII=IC:O V:tABATlM ?.EPORTER

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116 I i!"lsp~ction 'itorJ·: i c:. yot-4 al3o have do!1e street

for the Coun~y?

Yes, sir.

Q, Now would you explain to the Court your

O\·rn \vords t•Ihat the term, as-built, t1eans?

~ It is a plan that is submitted after the

job has been completed to shbw exactly how it wa3 built,

exactl~r '.·That is on the ground, and l-rhat is underground.

Q Now, am I correct when I say that even though

the plans that are approved ~hen a permit is gra~~:d

to the subdivider call for one grade, that there are

occasions when the County will approve something as-

built even though it does not comply with that grade

as shown on the plans?

A. Yes, sir.

Q And this frequently happens; doesn't it?

~ Well, I don't know exactly what you mean by

frequently. It does happen, yes.

n Well, frequently would mean very often.

~ It does. Yes.

Q Now do you recall whether there were, prior

to March of '75, whether there was an as-built situation

there at Rainbow?

A.

A-80

There were not any as-built situations.

ANITA B. GLOVER CE?.T!FieO VE~BATI~ P.EPOo:tT!:R

10721 JOYCe DRIVE FAIRFAX.. VIRGINIA 22030

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1 There were so~e revisions.

2

3 I\ ~.

That were contrary to the plans?

Not contrary to those plans right there.

117

4 Those plans reflect the last revisions that were made.

5 But, I mean, they were contrary to the

6 plans that ~rere originally adopted? In other t·;ords, the

7 plans 't·Tere amended?

8 A. Yes.

9 I C)! No".·r do you recall after Rust foreclosed a~d

10 took over the p!"oj ect, do you recall t·Thether or not

11 there were any as-built situations then, when the ~oad

12 was approved or at any time as you went along?

13 There were no revisions made to those

14 plans through design review. No.

15 Well, has the road been checked and found

16 to comply exactly t·rith those plans?

1i A. I do not understand exactly. Has it been

18 checked as far as line and grade .is concerned, yes.

19 In what ways does it differ?

20 The only revision that we nade in the field

21 \-;as on, I think it is the far, the east end of Silverleaf I 22 Drive.

A-81

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1 A. We did not ~ut as much a subgrade as was

2 necessa~y. ~uch of the original ground there.

3 Then how did that become approved?

4 It was approved in the field.

5 Is that what you would call an as-built

6 situation?

7 A. No.

8 An as-built situation is after it is

9 completed and you have improved it~

10 That is juct a field revision. It was

11 something that we're allowed to do. Ve have some leeway

12 in what we can do in the field, and ~hat ca~e under our

13 guidelines.

14 Q Now is it not true that in a lot of

15 instances the developer or t~e cont~actor will request

16 that you all approve an as-built situation in order not

17 to have to redo the thing?

18 A. Yes, sir.

19 And that this does often happen as long as

20 it is withln your general standing?

21

22

23

ft .. Yes, sir.

_Q, Your-other choice would be to make them

redo what had already been done; is that correct?

A-82

ANITA B. GLOVER CERTIFIED VE~BATIM REPORTER

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1 A. '.rhat is correct.

2 Ho'.-r directing your attention to ~ainbcw

3 Subdivision after this foreclosure on work that was

4 already done so far as grade and line is concerned, did

5 Rust or anybody on its behalf, ever ask you to approve

6 an as-built situation there?

7 ~ Just the area that I was talking about

8 \•there \'re did not cut the sub grade and there \·ras some

9 misalignment on Beach-Plu..,-: Drive do'.m to~'lards its

IO intersection with Silverleaf.

II Other than those two things, there were no

12 as-builts requested that you recall?

I3 A. No. Not that I can recall.

14 Well, was there quite a bit of redoing of

I5 the streets? In other words, was there quite a bit of

16 gravel, because it 1·:as belot,v grade~ tal{en up after Rust

I7 got in there?

18 A. Not so nuch taken up as rno~e added.

19 Is it not true that you had some areas

20 where you might have ~s much as 30 inches, or two feet

21 to 30 inches of gravel, and because it was below grade,

22

23

you came in and.put more gravel on top of that?

A. 'l'ha t

A-83

; -_.;:, true.

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1 ~ ~ow in those situations did they ever,

2i I instead of putting more g:::-avel on top o!' that, e·1er

31 I request that you treat it as an as-built, or take a

41 I look at it at that grade and see if it could be

51 I acceptable at that grade?

61 ~ As I recall Mr. Swetnam asked me about that

7 at one time. I don't recall exactly whsn it was, and

81 I i~ \'las more in passing, and I told him at that time that

91 I he would have to -- well, I could check ~ith rey super-

101 I visor and that we would probably have to have a revision

Ill I to the plans, and it was never pursued any furt!a-:r.

12 I do not ~ave that latit~de in the field to make that

131 I decision.

14 Q Unless he formally requested you take it

151 I to your supervisor, you cannot do it; can you?

16 A. Yes.

17 Q,~ And that was the only time that you ever

181 I heard anything about an as-built fror.: them; is that

191 I correct'?

20 ~ As far as the grading is co~ce~ned. It came

211 I up one more time, but it \';asn 't ~·ri th the ~rading.

22

23

~ Well~ isn't it true that so far as money is

concerned, that if you have an as-built situation that


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1 can be app~oved, that there is a consider~ble savings

2 to the developer if that can be done? In other words,

3 the cost of getting the plans changed by an enginee~ is

4 ninute compared to the cost of going on and brin~ing it

5 up to grada?

6 A. I-!ot l<no\·:ing ho~·T much the engineers are going

7 to charge to do all of that and the number of plans that

8 have to be submitted to design review, I would probably

9 say that you are correct.

10 Ho~·T I don't kno~·r whether I heard you in-

11 correctly or maybe it was just a mistake, but when you

12 testified on direct examination how much -- on your

13 April cut shee~ how much of the road did you say, what

14 percentage did you say,needed to be built and what

15 percentage was already done?

16 The cut sheet? A.

17 0: Yes. Or maybe I'm calling it t~e wrong

18 thing.

19 A. Punch list?

20 Q, The punch list.

21 A. The pro~~ess report. 60 percent had been

22 done.

23 " ~ !

I 60 percent had been done. And 40 percent

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1 remained. I understood you to say Eo pe~ce~t remained.

2 If you did say that, that is incorrect?

3 P .. I would have to look at that progress report

4 again and make sure.

5 THE COURT: Take a look at it.

6 THE WITNESS: The percent remaining is

7 60 percent.

8 BY MR. FARLEY:

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Is \'I hat?

60 percent remaining.

Look at Question No. 6. It says what I

12 percentage of wbrk remains to be completed. What does I

13 that say?

14 A.. 40.

15 Is it 40 percent that remains to be co~pleted

16 or 60 percent?

17 A. Hell, according to that it is 40.

18 You are not saying that this is incor~ect;

19 are you?

20 What I did, it is 40 here, I kind of just

21 took a general average of what we had here. We had 40

22 percent remaining on the storm drainage, 60 on u~derGrounc

23 utilities, 20 o~ concrete, 60 on over lot grading, and


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1 erosion and siltation was 20.

2 Those are the i terns brol-:en do't·in, I unde:'S tanc!

3 that. But the question says -- No. 6 say~ what percentag~

4 of work remains to be completed, and what is the answer

5 to that question?

6 ~ 40 percent.

7 ~ Then that means that 60 p~rcant is done;

8 is that correct?

9 ~ Correct.

10 ~ Now genera·lly speaking, \'.Jhen these punch

11 lists are filled out, is the top part already done when

12 you get it?

13 A. Yes, sir. That part right t~ere along the

14 top . Yes , sir .

15 The top about one-rifth is already done?

16 Yes, sir .

. 17 And then you fill in the rest?

IS A. Yes, sir.

19 Nol-'r Comment No. 12 says, Ecology One, t!!e

20 original developer, has been foreclosed upon. The new

21 owners are planning to finish the project as soon as

22 possible. These are their plans at this ti~~-

23 Now who were you referrin~ to when you said


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the new owners when you wrote this on April the 16th,

1975? You were referring to Rust and Co~pany; weren't

you?

A. Yes, sir.

~ Have you had experience both as a Highway

Inspector and as a County Inspector with Mr. Don Lyons,

the road contractor?

~ Yes, sir. I have.

Q How would you characterize the quality of

his \'tork?

~ The times that I have inspected his wor~ he

has always done acceptable wo~k.

Q And would it be fair to say that he,as a

road contractor in NorthemVirginia, that he enjoys a

good reputation?

~ Yes, sir. He does.

~ When you started inspectir.g out there, was

Mr. Lyons the road contra~tor, the street contractor?

A. Yes, sir.

Q Now you made reference to a siltation

violation which I believe was Exhibit H. Am I correct

in saying that it is really not for a two-year project,

it is not at all unus~al to have a siltation violation;


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1 is it?

2 No, sir.

3 And this silation violation was cor~ected

4 by one of Mr. Lyon~ men or Mr. Lyon~ employees; isn't

5 that correct?

6 No, sir.

7 It ,.;as not?

8 No, sir.

9 Has it corrected?

10 A. Yes, It \'ras.

11 Q, Who corrected it according to your

12 understanding?

13 A. It was corrected by people w~o were ~orking

14: '·ti th Nr. St.-Ietnarn.

15 Well, I will show you a letter here or

16 June the 16th addressed to Ecology, and it says, this

17 letter will serve as a release from the violation dated

18 February 19, 1975 for failure to install and maintain

19 adequate silation controls. If this office can be of

20 any further service, please advise. Public Utilities

21 Branch, Division of Inspection Service.

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23 A.

Did you ever see that letter?

Yes, sir. I did.

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Q So you do know that the violation was

co~r-acted?

P.. Y e 3 , sir .

Q And this lette~ is addressed to Ecology;

is that correct?

~ That is correct.

HR. FARLEY: I would to offer this.

A~e we numbering ours?

TEE COURT: Yes.

J:l~'q. FARLEY: No. 1. I would like to offer

that into evidence, Your Honor.

THE COURT: We will treat this as Defendantsr

In other it!Ords, \·;e \-.rill name Republic a~ a. separa. te pa::-ty

So this will be Defendants' Exhibit No. 1.

Is there any objection, Mr. Downey?

MR. DOWNEY: No objection.

TPE COURT: Admit the letter dat~d June 16

add~essed to Ecology fron the Public Utilities Branch.

~-90

(The letter referred to above was marked Defendants' Exhibit No. 1 for identification and received into evidence.)

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BY ;·,1R. FARLEY:

Q Are you saying that Mr. Lyons or his

personnel or Ecology personnel did nothing themselves

to correct this violation?

ft.. Yes, sir.

Q And as I understand it, you had most o~

your conversations about the violation with whom?

~ Before the violation was written, with

Nr. Larkin.

Q Mr. Larkin?

~ That is correct.

Q What is his first name?

A. John.

Q Now is he the one who corrected the

violation?

A. · No.

~ \"e 11, is i 't not true that after Rus-e and

Company took over the project~ that Mr. Larkin became

their employee?

A. Yes, sir.

Q And that he stayed out there until he

finished with the streets?

A. Yes, sir •


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1 And is this ~he sane Mr. Larkin that you were

2 intimating yo~ had talked to about the problem with the

3 erosion control.

4 Yes, sir'.

5 In other words, that same Mr. Larkin is the

6 one that Rust and Company kept on as their employee; is

7 that corre~t?

8 Yes, sir.

9 Did you have any proble~s with him while

10 he was under their employment?

11 A. Problems like how?

12 Anything in your capacity as an inspector?

13 Only the silt controls and the seeding that

14 we had asked be done, that's all.

15 Q. Did you issue Rust and Co~pany a violation?

16 A. No, because the violation had been written

17 on the job t~ Ecology One.

18 No, I mean after he bec~une Rust and C-::>;npany' s

19 employee, did you have any proble~s with hin?

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After he became their employee?

Yes.

No, sir.

He was all right from then on so far as any

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1 violations are concerned?

2 Yes, sir.

3 Now, when you talked to Dave about the

4 foreclosure, do you recall approx1~ately when that was?

5 Dave Winsett?

6 Some time in April, the middle of Ap~il.

7 Did he tell you then, or didn't he tell you

8 the~ that the street work is what did them in?

9 Yes. He did, as well as I can remember.

10 And as soon as you heard about the foreclosur~

11 which by the way,was a few days before the foreclosure;

12 l-·la s n ' t it"!

13 A. Yes, sir.

14 Q. In other words~ I think you heard about it

15 on like a weekend or just before a weekend, and it was

16 the following week?

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Yes, sir.

You reported that to_you~ supe~visor?

That is correct.

\•lho ':!aS rllr. Clarence Carroll?

Yes, sir.

And what is his title with Fairfax County?

Area

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Engineering Supervisor.

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Q Do you know what he did with that report

that you gave him?

/'-.. No' r don't knO\•i -- I knO~I/' Nha t he t·:as

supposed to do with it. Now, whether he did it or not,

I don It knol-t' because \•le don r t get involved in that

aspect of it really. It would go to his supervisor.

Q What is your understanding of what he is

supposed to do with it?

& It goes to his supervisor, it goes through

the chain of corr~and.

Q Hho is his supervisor?

~ It would be to Mr. Reggie Gilbert and to

M~. c.· A. Lanham.

~ And then after the forec~osure, some ti~a

in either April, May or the first part of Ju~e, you

began to see new faces out there; is th~t correct?

A. Yes, sir.

J\. Yes, sir.

Q And other people working for Rust and

Company?

A. Yes; sir.

Q Now, when you wen~ out there and saw


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Tyler s~etna~ and other pecple working for Rust and

Company, did they have their plans on the job, do you

recall?

~ Yes, they did. Yes, they did.

~ And I believe that this is required of the

subdivider, inn't it, to have your plans on the j~b?

k Yes, sir. That is a requirement.

Q And they were complying with that

requirement?

A. Yes, sir.

Q And did they also have ~he permits and some

of the other documents that formerly had been in the

possession of Ecology; do you recall?

~ A~ far as I can remember, they had the

permi~ that was entered into evide~ce here, for

installing the streets, but it ,.;as still in Ecology

One's name as far as I can remenber. The ether permits,

building, mecha~ical, I don r t ha '?'e anything to do ~itt h.

Q But so far as the stree~ plans and the street

permit, in either April or May when you saw.the Rust

people out there, they had those in their possession?

f. .. -. 1-:s, sir.

Q Now did you treat them from then on when you

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first saw thee out there with those plans, did you treat

them any different from any other su~divider in your

relationship with them as an inspector?

A. No, sir.

Q They \·rere treated the same as. any other

subdivider; is that co~rect?

~ That is correct.

Q. In all respects?

A. !n all respects, as far as I'~ conce~ned.

Q Did you ever, after you saw Rust and Co~pany

out there, did you ever see any of the Ecology people

working with them, or doing anything out there after

Rust took over?

P.. lJo, sir.

~ Do you recall seeing, after Rust took over,

seeing no tresspassing signs up out there?

~ Yes. I believe I did see no trespassing

signs put up on one lot out t~ere.

Q No~ the contractor that continued on with

the road work was Mr. William Hazel ; is that correct?

ft.. Yes, sir.

:_ · Q) -- - - -And. he- ,.,orked from \·ihat you could. obse~v:e - -

unde~ the supervision of R~st and Company's supervisor,

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1 I·!r. Tyler S\·Jetnam? In other ~·:ords, Tyler S~\letnam \•;as,

2 '.·;hut 1·rould you call him, the superintendent of the job

3 for Rust and Company?

4 For Rust and Company, yes.

5 And then Hazel worked for them; is that

G correct? I ~ean as a contractor, not as an employee.

7 & Yes, sir.

8 And Hazel had their own superintendent,

9 Mr. Aylor; is that correct?

10 Yes, sir.

11 Q, Now, so far as you are concerned, from that

12 point on \·ihen Rust and Company took over, \·Tas anythinR

13 done by yo~ or from your observation, anybody else with

14 the County,to try to cut costs out there, to try to save

15 money?

16 Not to my knO\iledge, no.

17 And do you recall a gentlemen by the nane

18 of Biggers comine to you on the job and indicating that

19 he would like to see somebody about doing the paved

20 c!itches?

21 Yes, sir.

22 .. NR. DOH!I~Y: You~ HonC?=', I am going to

23 object at this line of questioning. It goes outside of


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the scope of anything I asked Mr. Gouldthorpe on direct.

We are goin6 to call Nr. Swetnam to the stand later in

the case to talk about what happened once the job was

.completed and what he did to co~plete it. Mr.

Gouldthorpe~ I don't think, can talk about anything

beyond foreclosure o~ about a month after that when he

talked to ffl.r. \~!insett. I think that this is not only

outside of the scope of direct, but it is also taking

up the Court's time to bring out facts which could just

as well be brought out later on the County's case.

THE COURT: 1.-Jhat is the relevancy, r.rr.

Farley?

MR. FARLEY: If Your Honor please, the

County has already introduced two progress reports, or

\'ihatever you -- I don·' t recall -:he tech!'lical na!!le, I

think that's right, that go all the way up into -- I

think there were two that go all the way up into 1976.

And this all has to do l·rith ~·:hat \·:as done. And one of

the allegations in this case by the County is that

Rust and Company was their agent to get the roads done.

And one of the contentions in the case, one of the

Company superseded Ecology or was a successor in interest.

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1 And the purpose of this testimony is to show

2 that after the foreclosure that they took over the job,

3 assumed responsibility for it, and went on with the job.

4 And I do not think that it exceeds the direct examination~

5 because the documentary evidence from this witness went

6 into --all the way up to the e~d of the project in '75

7 and '76.

8 MR. DOWNEY: Your Honor, the only the

9 latest progress repo~t is dated October '75.

10 THE COURT: This is the list you are tall:ine;

11 about?

12 MR. DOWNEY: The lates~ progress report ~as

13 October of '75. The latest punch list -- April of '75,

14 the latest progress report. The latest punch list was

15 October of '75, just afte~ Hazel -- no just before Hazel

16 began to bring his equipment onto the job, is when

17 ?~Ir. Gouldthorpe nade his punch list, but that has nothing

18 to do with what happened after that, how they went ahead

19 and did the work, or anything; just what the status of

20 the job was on that day.

21

22 that· •. ·

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THE COURT: Let me just hear ~r. Perry on

NR. PERRY: Your Honor, r.!Y o:J5ection goes

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1 to the po~tion of Mr. Farley's state~ent that concerns

2 o~ references the Rust Ccm~a~y as the successor in

3 interest. I think that the Court has already ruled that

4 the third-party plaintiff, Republic Insurance Company,

5 cannot follow that particular line, and I think that

6 subject to the Court's reversing itself as it stated

7 earlier in the proceedings, that that aspect of the case

8 should not be referred to, because you already ruled that

9 they are not to pursue that.

10 THE COURT: r~Ir. Sch\·;art z.

11 HR. SCrH·!ARTZ: You~ Honor, I may, "'ras

12 my understandinG that one of the defenses raised by

13 Republic was that there was no breach of the fern of the

14 bond, because Rust was the successor in interest, and did

15 take over the work, do the work to completion on schedule

16 and therefore I believe this certainly is relevant to

17 that, and that is the claim brought by the County.

18 THE COURT: I am going to overrule the

19 objection, and will note your exception, Mr. Downey.

20 BY NR. FARLEY:

21 You do recall Mr. Bigge~s corning to you and

22 asking who he should s~e about ~oing the- naved ditch

23 work?


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1 Yes, sir.

2 And this the same Mr. Bigger3 that had

3 been doing the paved ditch work for Ecology; is that

4 correct?

5 Yes, sir.

6 Q. And who did you refer him to?

7 A. Nr. Swetnam.

8 Were you present when he talked to Mr.

9 Swetnam about doing it?

10 A. No, I wasn't. I wasn't present when he

11 talked to r.1r. Si.ietnam about doing the ditch.

12 Did Mr. Swetnam eve~ talk to you about

H permitting Mr. Biggers to do the paved ditch work?

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~ do it?

A.

No. ~ot about permitting, no.

Well, did he talk about not permitting him to

He did not talk about not permitting either.

He did not talk about it at all.

He never got to do t~e work did he;

19 i'-1r. Bi~~ers didn't?

20 A. No, sir. He did not.

21 No~during this time that Ecology was working

22 on the project before the foreclosure~ am I correct that

23 they were able to obtain occupancy permits for four


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1 houses?

2 A. That is correct.

3 ~ Now, if the road progress is not going as

4 it should, is it cus~o~ary for the County to issue an

5 occupa~cy permit for those people to move into houses,

6 if the contractor is not progressin~ with the roads?

7 If it meets the requirements of the

8 residential use permit.

9 So far as the progress of the road is

10 concerned, ~'lhat is that requirer:ent, or t·rhat are those

ll requirements?

12 A. They must have all of their over lot gradin~

13 done, \'lhich is the grading around the house site itself,

14 so that no pending water will be presen~. Thera ffiUSt

15 be an impervious lead in walk, and the yard must be

16 seeded and mulched, except for an exception in the

1i \·tintertime 'lrhen it only has to be mulched.

18 And there nust be all the sidewalks,

19 curb, and gutter leading to the structure itself, have

20 to be i~ and there must be a dust-free surface.

21 Now, all of those things must be done by

the developer in order to issue those residentual

23 occupancy permits; is that co~rect?

A-102

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1 i\. There are a few other things, but not with

2 this project.

3 And the reason for that is that if the

4 road work is not progressing properly, you do no~ wane

5 people moving in their houses and not beine able to get

6 back and forth to those houses; is that basically true?

7 P .. That is correct.

8 Q, :NoTtT ho1-r \·rould you describe, from October of

9 '73, that winter, and January and February 6r '74, how

ro would you describe that winter so far as rain is

11 concerned?

12 A. I was not on the job then.

13 Well, were you in the area?

14 No, sir. I dldn 't come to \·icrk tL"'ltil

15 Sep~ember of 1 74.

16 You weren't in the Northern Virginia area?

17 A. I was in the Northern Virginia area, yes.

18 You nay or may not, do you remember it being

19 a particularly rainy winter and sprin~?

20 A. I honestly could not say. I do not remenber.

21 Do you remember anybody who was inspecting

22 out_ there, li!ce M!". Sines, telli!'lg_ ~!'ou that th_ere had

23 been bad weather that winter and spring?

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?·ro, sir.

I-!Ovi t!'lis r·.~r. Lark:!.n ',•!hO became Rust t s

3 employee, I think you indicated that while he was working

4 for Ecology, that you talked to hin weekly about the

5 siltation violations, once a week?

6 A. Yes, sir.

7 For what, like three or four weeks; for

9 Let's see. I talked to him before the

10 violation \·ias issued to give him so many days to correct

11 the violation and put him on notice that a violation

12 would be issued.

13 And then, of course, after it was issued, he

14 had so rnany days to get it squared away or further action

~ would be taken by the County, and, of course, I talked

16 to him then also.

17 And so far as the streets a~e concerned, that

~ is the only violation that you know or While Ecology

19 had the p~oject; is that correct?

20 A. As far as I know of, yes, sir.

21 Q, So far as you know, when this alleged

22 violation took pla~e, the County made ~o att~mpt to go_

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1 A. ~o, they did not.

2 That is a p~ocedure that is followed, isn't

3 it, when the violation is serious?

4 A. ~hat is a last resort when they usually

5 can't get nothing -- t·rhen they cannot gat any

6 satisfaction fro~ the contracto~.

7 But if they get satisfaction, they don't go

8 to that last resort; do they?

9 ft .. That is correct.

10 l·IR. FARLEY: Th~.t 's all I have.

11 THE COURT: r·~r. Sch\<~art z.

12 HR. SCfH,JARTZ: Just a fe~·r brier"' ones, Your

13 Honor.

14 BY NR. SCH~,·.JARTZ:

15 Hhen you ;·:en~ on the job at Ecology, D. I.

H Lyons was doing the road work; is that correct?


18 And the t·rork that they did ~:as acceptable

19 by County standards; is that correct?

20 What work they were doing, yes.

21 And it is t~ue, is it not, that there were

22 some streets accepted by the VDE, Vi~ginia Department of

23 Hight·;ays?


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A. v!hen?

Q As of April 19, I believe, 75?

k No, sir. There were no streets accepted by

the Virginia Department of Highways in April of 1975.

MR. SCHWARTZ: Court's indulgence for just

a moment, please.

BY MR. SC H\·lARTZ :

Q At the ti~e of you~ status report of

April 16th, '75, you indicated that there were streets

in this develop~ent to be accepted by VDH; is that

correct?

~ That is correct.

!viR. SCHHARTZ: Than!-: you. !':othing further.

T~IE COURT: Nr. Perry.

I·iR. PE!tRY: I have no questions.

THE COURT: Redirect?

NR. DOWNEY: Yes, Your Honor.

REDIRECT EXAMINATION

BY NR • DO \·!rrEY :

Q Mr. Gouldthorpe, in answer to one of Mr.

Farley's questions, I understood you to say that as far

as not precisely following_p~~ns is ccncerne~o~e

of that was that there was not as much --

~-106 ANITA B. GLOVER

CERTIF=ISD VeRBATIM REPORTeR

I 0721 JOYC!! DRIVE FAIRFAX. VIRGINIA 22030

273·4066

example

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1 :-'iR. FARLEY: Yot~r Honor, I am going to

2 object to leadinr: the witness. He is just telling him

3 exactly what tc say, and I guess he is asking for a yes

4 o~ no answe~.

5 THE COURT: I \·Till have to sustain the

6 objection to that, Mr. Downey. I think that you can

7 rephrase the question.

8 r.tR. DOHNEY: I will rephrase the question.

9 BY NR. DO\~!NEY:

10 Mr. Gouldthorpe, did you make some reference

11 to subgrade at the end of Silverleaf Drive in one of

12 your ans\·rers?

13 • fl.. Yes, I did •

14: \·!hat t·1as your ans"t'ler on that question?

15 That we did not cut the subgrade as deep as

16 the grades called for.

17 Hhat does that mean?

18 P .. Well, it generally -~ it just means th~t we

19 changed the grade in an area probably 100 feet long by

20 a couple of inches or so. That is all it really means.

21 Well, as the result of that change \&rell,

22 what effect did that change have on the amount of gravel

~ that had to go in at that particular spot on Silverleaf


CERTIFIED VERa~TIM REPORTER 10721 JOYCE ORIVE

FAIRFAX. VIRGINIA 22030 273-40156

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1,, h ~:..,.

1 Drive'?

2 Oh, there was a lesser arnou~t.

3 Lesser gravel. And what effect would that

4 have had on the costs to finish that road?

5 A. It would be less cost.

6 Now did you also rnake soce reference to the

7 align~ent 't·:ith Peach-Plum Drive in one of your answers?

8 f. .. Yes, I did.

9 ~ t·:ha-t problem \~i th the alignment \·Tere you

10 referring to there?

11 The roadway was on a curve, and according to

12 the center line stakes that were put in by the surveyors,

13 the center line of the roadway was not where it was

1~ supposed to be. The roadway itself had been shifted

15 somewhat,

16 Who would have caused that to have happened?

17 A. The people that did the gradin~.

18 G. Now, in one of your progress reports, there i~

19 some reference to your notation of finishing the jo~ as

20 soon as possible. The owners were ~oing to finish the

21 job as soon as possible. Once William A. Hazel, by

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RPS~, """•'··O':I~d 4-""':=:dr e·..,u"'p~ont: u-""'+-o t-i1a1- .;ob ..... - • • - " ... -- - • ~ - ••• .._ 4 'oJ • 4 .., ... .. ~ .J '

finish it as soon as possible?


CERTIFIED VERBATIM REPOJ:tTER 1 0721 JOYCE DRIVE


did they

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k I would say so. Yes.

Q And you made some reference to how unusual

or not unusual it is to have a siltation violation, one

siltation violation issued on a project. Is it unusual

to have to repeatedly warn the contractor weekly about

these violations prior to issuing one?

& Yes, it is.

~ That is unusual. And as far as the let~er

from I·Ir. Lanham is concerned releasing Ecology On a frv:n

that violation, does that indicate that Ecology made the

necessary cor~ections?

f... l:o, it does :not. I

C Does that mean that no violation ever

OCCU:'red?

~ N~ it does not.

Q And there was some discussion about Mr. Larkin

having ~'lor ked for both Ecology One and II. L. Rust. Hhen

Mr. Larkin was working for H. L. Rust,was he also working

under someone rather than being the person solely

responsible thare?

~ That is correct.

C Who was ~e working for?

~ Mr. Swetnam.



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273-4056

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1 And was Mr. Swetnam responsible for the job

2 at that point?

3 A. Yes, sir.

4 And you made some reference to Biggers never

5 getting to do the work. Why did Biggers never get to do

6 the \•tork for S\'letn~~?

7 HR. SCh'1•lARTZ: Objection. He testified that

8 he was not there l·:hen !~r. Biggers \•rent to S11etna.rn.

9 TEE COURT: I sa.y ho~: t'lould he kn0\'1?

10 I\1R. DOT;JNEY: I' rn asl~ing if he kno~'ls. If

11 he doesn't know he can say so.

12 THE WITNESS: I really could not say for

13 sure.

14: HR. DOHNEY: That is all I have.

15 THE COURT: Any further cross exa~ination?

16 MP.. FARLEY: Just one question.

17 RECROSS EXAMINATION

18 BY r.;R. FARLEY:

19 You indicated that Mr. Hazel the Rust

20 contractor,really finished it up fast. Well, the time

21 that he worked was how long altogether~ In other words,

22 \ttasn 't it fnshed up back in about r:!ay, April or f .. lay'?

23 . .. .. ..

We had the final VDE inspection, I think it

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ANITA 8. GLOVER CERTIFISO VERS.:.TIM RS;IORTER

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273·4066

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1 was the 9th of June of this year.

2 9th of June.

3 A~d he had done all of the physical

4 improvements abcutthe end of i·;Iay of this year.

5 ford your progress report of April 28

6 indicated at that time he only had 5 percent left to

7 do; is that right? On April the 28th of this year,he

s only had 5 percent left to do?

9 A. I believe that is correct. Yes, sir.

10 So if it is true that Ecology had until

11 May of this year to complete the streets, as of May of

12 this year they were almost completed; weren't they?

13 P .. Yes, sir.

14 fv1R. FARLEY: Okay. That's all' I have.

15 MR. SCHWARTZ: Nothing further.

16 MR. DOWNEY: Nothing.

17 r-Ut. PERRY: Nothing.

18 THE COURT: You may step do\·rn. Thank you.

19 r!Iay he be excused?

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~1R. DO\'lNEY: Yes, he may.

f-·iB. SCH~IARTZ: Yes, he may.

THE COURT: You may be excused. ··-. '"':"'

E-111

(Witness excused.)

ANlTA B. GLOVER CERTir:'IEO VERBATIM R!:POATER

10721 .JOYCE DRIVE

FAIRFAX. VIRGINIA 22030 273..S066

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1 ruling was on it.

2 NR. DOv!;·rEY : _ think ~hat would be acceptable

3 as far as !'m conce~ned.

4 THE COURT: I thin!-= it makes sense.

5 He may be excused at this time, then.


7 THE COURT: Let's bring the jury back down.

8 (The jury returned to the hearing room.)

9 THE COURT: Hembers of the jury, that

10 ~-ritness has· been excused.

11 Will you call your next witness, Mr. Downey.

12 r ... 1R. DO\vNEY: r~lr. Lloyd '-·iil son

13 Whereupon,

14 LLOYD B. WILSON, JUNIOR,

15 a witness, was called for exa~ination by counsel for

16 the plaintiff, and, having been first duly sworn, was


19 BY HR. DOHN~Y:

20 vlill you state your name, please?

21 Hy first name is Lloyd, spelled \·;i th t";;o

22 l's, ciddle initial B, as in boy, last name is Wilson.

23 I a~ a Junior.

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10721 JOYC~ DRIVE FAIR,::Ax. VIRGINIA 22030

273·4066

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1 Mr. Wilson, where do you reside?

2 3537 Hamlet Place, Chevy Chase, Maryland.

3 ~hat is your occupation, Mr. Wilson?

4 A. I am Chairman of the Board of H. L. Rust a~d

5 Company, \·rhich is a general real estate company;

6 mortgage banking, insurance, real estate management, and

7 sales.

8 Mr. Wilson, do you have any professional

9 designations of any kind?

10 I am a member of The Society of Residential

11 Appraisers, and I have the designation of SRA, \'lhich

12 stands for S~nior Reside~tial Appraiser.

13 Could you explain to the Court and the

14 ju~y what a mortgage banker is; what he does?

15 A mor-tgage banker·, through its o1·:n resources,

16 through its credi~and through its arfiliations with

17 investment sources, brin~s borrowe~s, investors, real

18 estate buyers together with the sources of funds which

19 they need to build, create housing~ create real p~operty,

20 buy itself:~ acquire.

21 Mr. Wilson, would you describe to the

22 Court and_ to the __ jury your first. ~eeting .·~·:ith the

23 Ecology One people, as they have been refer~ed to in

ANITA B. GLOVER CERTIFIEO VER9A.TIM RSPORTER

10721 JOYCE O~IVE

FAIRFAIC. VIAGII'IIIA 22030

::O~"..snRA

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1 this case?

1 ... , (-

2 1\ ~ .. Would you repeat that, Mr. Downey? I didn't

3 hear the beginning of it.

4 I am sorry. Could you describe your first

5 meeting with the Ecology One people, as they have been

6 ~eferred to in this case? vilien did you first meet

7 Mr. Duke, Nr. Winsett, and the others in Ecology One?

8 I first met Mr. Stout, Mr. Duke and Mr.

9 Winsett, with other of their associates who are not

10 present, about Ja~uary 24th, 1974) in their office in

11 Springfield, Virginia.

12 And what was discussed in that meeting?

13 ~ They had applied to us, to my compa~y, for

14 mortgage financing on a community identified previot.:.sly

15 as Rainbow. And they came to rne, or to my company,

16 through one of our loan officers, and l. t·.:ent do~·rn there l

17 among many other things that I did,to ascertain whether

18 we should proceed with their loan application.

19 Do you want more than that?

20 Hhatever else you think is pertinent, sir.

21 Well, we discussed the application. I had

22 previou3ly reviewed the ~lans and specifications. I

23 discussed details of the financing with the three


CERTIFIED VERSATtM REPORTeR

10721 JOYCE DRIVE FAIRFAX. VIRGINI-a. 22030

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1 ~entlenen who I mentioned who are here.

2 I cautioned the~, I explain~d cur position

3 of advancing funds, part of which were ours a~d part

4 of which were based on our credit. I cautioned them

5 as to the circumstances at the time, which were

6 somewhat perilous, and I told them t~at they were

7 putting their names and their 'Hives na.mes and the

8 corporate r.ame on the line and risking their financial anc

9 professional status.

10 Shall I go on f~om there?

11 Well, Mr. Wilson, did you make any inquiries

12 about their financial condition prio~ to ma~:ing any

13 loan commitments to them?

14 Yes. I personally -- I should say that

15 our organization ordered credit reports, which I saw

16 and revie\·red and they were clea~. \·!e obtained fror::

17 them financial statements, which w~re furnished.

18 I did not personally, but we, in

19 our organization, checked with a bank reference, the

20 No~thern Virginia Bank. I personally interviewed and

21 communicated with the President of the mortgage company

22 ~·:hich held the mor:-t;gag~~ on the Rai~bot·r com~unit~l 't·Then

23 we took it over.

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CERTIFIED VERBA.TIM REPORTeR

10721 JOYCE CRIVE FAIHFAX. VIRGINIA 22030

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1 Actually, I initiated one contact with

2 the President of the company, a ~r. Clark, and a

. 3 1·1:-. Nonroe, anothar officer of that compa~y. The

4 Common\iealth r·1ortgage Company communicated \·Ti th me.

5 Their reports to me were favorable.

G And did you then enter into a business

7 relationship with Ecology One?

8 P .. Only after further investigation on my

9 part.

10 What was that investigation?

11 He vrent from the G\·;athmey, Du~:e or the

12 Winsett, Duke office 1n Springfield with a Mr. Rutte~,

U who I believe was the Assistant Secretary and Treasurer

14 of the Ecolozy company. Ee drove us to the community.

15 I, along with another loan officer, inspected

1G the houses that were under construction, examined the

17 lots, the subdivision. From there we went to the

18 r·~asaey Building, all of you kno;,, it, I r:uess, as the

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County Building.

What did you do at the Massey Building?

I:Iy first stop \~·as \·rith i~r. James \•Jhi te,

\·Iho \·tas, as far as. I t.·:as c~~cerned, a man "tvho assembled

and retained the bond agree~ents, because I was

,A-116 ANITA B. GL.OVER

CERTIFIED VERBATIM ASPORTeR

10721 JOYC; ORIV5 FAIR;:AX. VIRGINIA 22030

273·~066

PAGE

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1 concerned abo~t the bo~d, and con~er~ed about

2 subdivision situations, and the public utilities, and

3 so forth.

4 So in order to assure myself before ny

5 co!'!'lpany should proceed, I t.Yent to see i'·1r. vlhite and

6 he showed me a copy of the bond of $172,000 issued

7 by the Republic Insurance Company, and also advised

8 me of a siltation contr61 cash bond of $5,000, which

9 was on deposit, I believe, with the Northern Virginia

10 Bank.

11 I also went on from there and talked to

12 a r-Ir. -- I believe I talked to t·.;o or th::-ee people in

13 this office, but Mr. Bentoni, who was 1~ charge of the

14 building permit section, as I unde:'stood. it, f·Ir. Dentoni

15 assured me that the permits held by Ecology were in

16 good shape on twelve houses which were then under

17 construction.

18 And there were twelve lots, later reduced

19 to nine. By twelve lots, I mean with no houses on

20 them, I call the!!! unimproved. There t·rere t-:.·rel 1re lots,

21 later reduced to nine, which also had building permits

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issued by the C_o~~~Y •..

He also corn:i'tunica ted

A-117 ANITA B. GLOVSR CERTIFIED VERBATIM RSPO~TER


273·4066

shall I continue?

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1\. ~·:e also co::1municated '.·:i th the heal t!~

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authorities, and verified the fact that the percolation

tests -- and those are tests which made by County

authorities to assure that the soil is of the p~oper

type density and depth to allow for the proper drilling

of wells and in3tallation of septic tanks -- I verified

in fact, or reverified in fact, that those percolation

tests had been made and were in existence.

We went from there -- at that particular

time, oneof the reasons for my precautions was t~ct

I

i~ the press and in thS radio and the television were

the acts or discussion~ taking place within the 3oard

of Superviso!'s so far as expansion in the d\vellinr-;s

called urban sprawl, so far as the advisability of

allowing continued urban and residential growth in the

County.

I was still concerned, and we went to

another floor in the ~assey Building, and that day I

met but did not have much discussion with a Mr. Chilton

and a nr. Pa:ru'"':le 11.

And_I_~a~_ad~ised that those _two men_had .-



10721 JOYCE ORIVS FAIRFAX. VIRGINIA 22030

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1 been designat~d by~ I assume, the Board o~ Supervisors,

2 to resolve come of the questions that we~e coming up

3 among or from builders so far as further progress

4 of construction.

5 I did not intentionally 'lrant to get the

6 principals of Ecology, and certainly did not \·rant to

7 get H. L. Rust Compan~ into a position of fiscal

8 problems.

9 Did you then decide to lend money to

10 Ecology One?

11 ft .. Yes. After further communication, not by

12 me, but with men in my organization who did contact

13 Mr. Chilton, Mr4 Pammell, we went one step further.

14 Mr. Rutter communicated with a Mr. Jones

15 to atteEpt to resolve a ouestion of a further resubdivisi~ n

16 of the existing subdivision .. We I will just say that

17 the response that we got were all tavorable.

18 And so far as the response from Mr. Jones 1

19 it was favorable from the Ecology standpoint, but was

• ... '>0 lf such that I could not take it into consideration myse ,

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and after consulting my associates I have authority

to make decisions, but· in t~is case I consulted Cl ·-

asso~iates of whom there were at least four --

A-119 ANITA 9. GLOVER CERTIFI!!O VeRB~TI:'.'I RE?ORTER

10721 JOYCE ORrv:


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and we did decide to proceed with the financi~r subject

to ~he cor.ditions of the application.

~ And what terms of financing did you arrive

at, f•lr. 1tlilson?

A. \·Ie made t~·1o first deeds of trust, one

covering twelve houses under const~uctio~, totaling

$656,000 or thereabouts, terms nine months fro~ the

date of the note, interest rate p~ime plus t;.ro or three.

vie made a second, but I don't mean a second

trust. ' . ..Je made another deed of trust, f:irst deed of

trust upon ,.;hat turned out to be nine unimproved lots,

lots having no dwellin~s either undar construction or

corn.i·nenced upon.

That deed of trust was $175,500. And

incidentally, that was for twelve months. And likewise,

it was for the prirne rate plus t~ree or four, : have

forgotten that.

It was the market situation at that time.

Q In any event, the total amount that you

co~-::.itted \'las ho\v much at that tir::e?

A. · Close to, ivir. Do~·!ney, 831 or tl'ro or three

thousa:1d d?.llars; .that is T:fithir. a thousc..nd or t\·to of beir g

correct.


CERTIFIEO VERBATIM RE,:tORTER

1 0721 .JOYCE DRIVE


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178 ~ Did you say the.. t sone of' that ~·:as bac!:eC. up

1 by your company's credit?

2 -, .es, ~il"' ..., --- . A mortgage canKer, at least of

3 the tyoe that we represent, has capital of its o~n,

4 and our nor~al practice would be to the extent that

5 it was to our advantage, and to the borrower's

6 advantage, \·!e \·iould advance our ot•Tn funds.

7 After those fu~ds have been exhausted or

8 mve been obligated, vre would bo:=tro1.; the money i'ro~

9 banlts on predeter~!ned lines of credit, predetermined

10 by us and predeter~ined by the banks.

11 Q, I show you Plaintiff's Exhibits 0, which

12 is this group of documents. And also Exhibits P and Q,

13 a total of three groups of documents. Can you identify

14 these l-. vn!'ee sets of documents, please?

15 Well, the first set that Mr. Downey has

H handed to me, without counting the~ I'm sure that there

17 are twelve notes dated March l, 1974.

18 THE COURT: ''-!hat v;as the date?

19 TEE \·liT~·TESS: Harch 1, 197 4. In the S-J-nount

20 of $54,700 due nine months from March 1, 1974. Those

~ twelve notes were secured by one blanket deed of trust,

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23 conztrtlction.

,A-121

against·:the tv:al·;e housas under.

ANITA B. Gl-OV:R CERTif:IS:O VERSA.TIM REPORTER

10721 JOYCE ORIVfi


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1 The second set of papers is one note dat~d

21 I I··Tarch 1, 197lJ, in the amount of $175,500 datad i·!arch 1,

31 I 197 4, I'm sorry to repeat myself', due in one year. To

41 I each one of those packag~s there is attached a deed of

51 I trust which is the recorded instrument identifying the

61 I note and conve~ting the properties to a trustee for

71 I the benefit of the mortgagee, and I guess also the

81 I mortgagor so long as they meet the terms of the deed

91 I of trust.

10 Those papers by the ..,,.;ay are signed by

111 I Ecology One Incorporated, and the notes -- I believe

121 I I only have the reverse of a typical note of the

131 I first t~·sel ve. ':'hey a:r·e also signed by r-Tr. Stout,

14:1 I Mr. Dul\:e, !~r. \·Jin3ett, \·Thorn! intervie-r,red at the tiMe

151 I that tve agreed to mal-::e the loan, and also by Nr.

161 i G'.'lathmey, and f.1r. Hricko, l·Jhom I did not intervie;·;

171 I at the time that they made the loans and l'!horr. I don't

181 l recall meeting, and also by their wives.

191 I And I am sure that the second note on the

201 I land vias liket-!ise so endorsed, although I do not have

211 1 that here.

-~2 The third ex!-li·bit 't·:hich··r1Ir. ·Dot:rney h9.nded

23 ~e is a~ exhibit which I an not as familiar with as I

A-122 ANITA B. GLOVER CERTI~IED Vc~BATIM REPORTER

10"121 JOYCE DRIVE FAIRFAX. VIRGIMA 22030

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1 am the other papers.

2

3 What does it say ac~oss the top?

4 /1 n. It says that it is a deed of subdivision and

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dedication. And this had to do -- it is dated in Ma~ 197: ,

a~d I a~sume created the subdivision and the dedication I of the streets to the municipality and t·:as negotiated

prior to the time that ~"ie came into the picture.

Now, do you· say that -- dedicating the

streets to the municipality, what does that mean and

11 how does that affect your decision -- how does that

12 relate to the loan transactions ~hich you entered into

13 with this cor~oration?

14 A. Well, part of our consideration for going

~ ahead with this project was the fact that streets had

16 been dedicated and the subdivision had been put on

17 record, engineered and put on ~ecord.

18 Had we not had a dedicated street and

19 subdivision plat, we would not have gone ahead, because

20 at that time, unless I am mistaken, I am sure that

21 there are others here and perhaps outside who h-noTt: more

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23 subdivisions and ne,., dedications.


CERTIFIED VER9ATIM REPOR1:R

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FAIRFO:.X, VI"GINIA 22030

273·4086

a moratorium on new

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1 So this did create a subdivision and did

2 dedicate the streets to the nu~icipal~ty. The streets

3 were not cove~ed by our deed of trust or by our loan.

4 So had this not existed, there 't·tould ha·1e been nothing

5 for us to go ahead on.

6 ~!r. \·lilson, Nha t procedure ',·;as used for

7 Ecology to take dot·rn and to draw on those loans? vlhat

8 procedure did you set up with them?

9 It is a rather cw~be~so~e procedure, but

ro I believe that Mr. Duke made the request. But in any

11 case, it came from Ecology and its ere~;. l'ie worked out

12 a procedure whereby these twelve houses were treated

13 as one entity or as one group of hor:tes.

l.J: And ~·1e advanced our money in ins~allnents

15 as requisitioned by the bo~rowers and their a~chitects.

16 These requisitions are a numbered form prepared by

17 rrhe---·American !n3titute of Architects, and a contractor,

18 the borrower, Ecology Incorporated, Ecology One,

19 Incorporated,in this case, requisitions the anount of

20 money to which it believes it is entitled.

21 Attached to the requisitions, each.

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. requisitio:r,;- a.re bills t:;'hich they ~e.:rtify, and

architect certifies, with a Notary Public acknowle~rnent,

J\-124 ANITA B. GLOVER

CERTIFIED VSRBATIM R5PORTER

I 072 I JOYCE ORI\Ie FAIRFAX. VIRGINIA 22030

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certifies will be paid.

And after the requisition, the

requisitions are accompanied by receipted bills to

show that the previous requisition and disburse~ent

had been properly applied.

These requisitio~s were submitted to the

District Realty and Title Compa~y by the Ecology One

Incorporated or by one of its officers. And District

Realty and Title Company examined the requisitions,

in theory v~rify the bills tha~ were presented for

payment, and after the original ~equisition verified

the receipted bills which were attached to show :hat

prior ~oney requisitioned had been used or appl!ed

promptly.

After the title ccmp~~Y ascertained that,

they issued to us, the Rust Compa~y, a title bir.der

this is rather complicatad, I a~ sorry -- a title

blnder, whi~h in turn certified to us that title was

good according to record, as it had been when they issued

the original title certificate, anc certified to us

that there had been no nechanic's liens filed by any

contrac~ors_or GUbcontractorz .

The title company, when it notified us that

A- 125

ANITA B. GL..OVER CERTIFIED VERSATIM R!iPORTSR

10721 JOYCE ORIVe FAIRFAX. VIRGINIA 22030

273-4()66

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this had been acco~plished, we then in ou~ office drew

a checl·: cove:-in;.: th: !"equisition pa:,rable to District

Realty Title Company. Gene~ally a representative of

Ecology One Incorporated, but not necessa~ily, picked

it up and took it to the title company.

To the extent of my 01-m examination of

our canceled checks, the ti~le company then endorsed

that check or those checks over to Ecology One

Incorporated.

Q Mr. Wilson, could you describe the set

of events from the first tine that you began to

perceive that Ecology One was in so~e kind of financial

difficulty up to the time that you decided to foreclose

0!1 the project?

~ As previous testimony has indicated, work

had slowed at least on the dwellings almost to a halt

when I first inspected the property. The work on the

stree~was continuing at a slow pace.

A~d I received a statement from Mr. Rutter

as +-:o ~·Then t~e '··~or'1 .. · on ~""' 10 pr,...; e~.:.. "·roula~ ...,csume "" w'W 4~- I ~·-'- ;..1~ ._ \., ~ .0. '- I • The

Nork did not resume on the target date.

However,_ ~e closed the loans in March qf

1 74, March 1, 1974, and made the first advance on

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the proper requisition under the procedure which I

have describad. I do~' t kno~·r exa.c tly at 11rha t point,

3 but after Earch 1st, perhaps a fe\·t ~teeks after, I

4 became concerned about the progress of the work. There

5 were not enough men on the job. Work was not progressing

6 efficiently.

7 We were in touch with mostly Mr. Duke.

8 We were in touch from time to tiree with him, urging

9 hin to speed progress of the work.

10 That condition continued, and by the ~ay,

11 I made frequent inspections and we had representations

12 from them as to how progress would move alo~g. Pro~ress

13 did not move along as expeditiously as I had hoped

14 would or I think that they hoped it would.

15 In July, at their request, we had a meeti~g,

H and they told me at that time that there was not enough

n money left in the loans ~- the first portions of the

18 loan, there was not enough money left, enough money

19 to complete the project.

20 And did it become necessary for you to

21 advance any further proceeds to them than you had

22 originally comn!tted?

23 A.

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in July, perhaps as late as July 30th.

M2. FARLEY: Your Eonor, just so we will

get the years right. Are we talking about '74?

THE COURT: Are you talking about '74?

THE vl!THESS : '74, yes. 1974. I think

everything, all of my comments, have been addressed to

the first half, the ea~ly part of 1974.

At the time that this communication was

made face to face in good faith that the~e was

inadequate money left to complete the job, I asked

fo~ estimates, which were given to me verbally, of

what it would take to complete the job.

And in my diaries and in ~Y reco~ds,

the estimate given to me was $200,000, of which there

was only $100 left in the two loans which I have

identified as exhibits.

Shall I go on?

BY T·iR. DOl·!NFY:

Q (Nodding head.)

~ We proceeded, and on August 9th, a~ain after

considerable consideration I'm sure on my part and pre-

approval and at their request, and ~aybe I omitted this,



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but they felt that they needed $100,000 mo~e to

complete this project.

So on August 9th, I submi~ted a letter

which all of the principals approved, agreei~g to

make them a loan of $100,000 in addition to the

loans that we had already made.

Q Why did you think that that additional

advance was warranted in light of the fact that it

was difficult to move the project forward?

~ There were a number of reasons, some o~

which are based on business judgment. These twelve

homes were partially completed and were progressing,

even though slowly.

At various times, the builders had as

many as six and I think eight of these t\<telve houses

sold, purchase contracts with deposits fran ho~e

buyers.

I did not participate in those contracts.

I assume that they had reliable buyers, but I played

no part in that.

Our objective, our focus, was to get the

project completed. By completing these twelve homes

to permit and by our part in completin~ the~, by

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1 financing the completion of these twelve homes, we

2 put Ecology On~ Incorporate~ in a position to perform

3 under these contracts of sale to home buyers.

4 Had we been able, had our efforts been

5 successful, in theory the project would have been

6 completed and the properties would have been sold,

7 and the proceeds of the sal~would have been applied

8 to the completion of the various portions of the

9 project; they t·rould have paid us off, and t·Te \•:auld

10 have been scot-free.

11 In my proposal, they offered certain I

12 l. additions to the col~ateral land already offered. i

13 ~ I • There were I have rorgo~ten how many conditions to

14 that propvsal, but 14 or 15, which sounds excessive,

15 but which was not.

16 And as in evidence, !~1r. Do\·Tney, of the

17 sincerety of all of our purposes, we did partially

18 accomplish, after they approved and after we closed this

19 new $100,000 loan, four houses were completed, per~its

20 were received, home buye~s moved in, and four out of

21 our twelve notes, which I have identified here, were

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paid off.

However, $100,000 additional ultimately

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also turned out to be inadequate.

One of the requirements which I requested

was a further estimate given to me in the latter part

of August 1974, which again summarized the amount

necessary to complete the projec~. And unfortunately,

I soon realized that there was still to be a short fall

in funds available so that all twelve houses could not

be completed.

One of my conditions was rurther contribution

on their part of funds, and they certified to me that

they did contribute additional funds in June or July

of 1974.

Q Did Ecology One furnish you w~th any

additional and subsequent estimates of the cost of

finishing this project?

A. Yes. After I received these estimates dated

in August of 1974, late in August, it appeared to me

there was still a short fall. I so notified Mr. Duke,

I believe, in writing.

And out of the $100,000, the additional,

the final $100,000 note and deed of trust, we made two

advances. The last advance we made was on November_l~t~,

1574, th~ last being the second of two.

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At about that time, further fi~ures were

given to ne showing -- and I will have to not be too

concise and definite about the date, but it was in

November, further figures \·rere given to me sho,·rinf;

that about $200,000 was still necessary to complete

the project, some of which was still in reserve in

the various loans which we had closed to them.

After the final advance of November 12,

Mr. well, the p~incipals, costly Mr. Duke, raised

with me the need for a further advance, which to my

knowledge never reached the requisition stage. We

wera exerting every effort and receiving statements

f~om them that these houses would reach a certain

stage of completion, the state of co~pletio~ being, ready

to be delivered to home buyers. Completion, in other

l'lords.

The houses were not meeting those deadlines,

which they themselves set.

I finally did agree, under certain

circumstances, to advance a final, or another additional,.

I should, not a final, an additional sum of money to

the builders, ~colo~y One, Incorporated, ?Ubsequent to

their fu~nishing the no~nal requisition a~d the bills

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1 and the receipted bills

At about this time, around Thanksgivin~

3 time, by that time -- shall I continue?

4 Yes,. sir.

5 At about Thanksgiving time, I received

6 a telephone call from a Mr. McPherson, who was, at

7 least then, an associate of Mr. Farley. This

S telephone call surprised me, and unsolicited by me,

9 asking that a meeting be soheduled for December 10,

10 1974.

11 I told him that I would agree to a

H meeting, provided that he told me what the meetinc

13 was going to cover. He did not tell me.

14 I attempted to reach t•1r. Dul{e and r~·:r.

15 Hinsett. I \'las unable to reach them. r~Iy O\-Tn attorney,

16 a man named James B. Cla~k, who was our house counsel

17 at that time, I could not locate him either.

18 I finally called Mr. McPherson back, and

19 said that I could not reach my counsel; I could not

20 reach Mr. Duke nor Mr. Winsett, and therefore, I did

21 not wish to hold a meeting.· Besides that, I thought

22 that December lOth was putting ~t off too long .. . .

23 I did not wish to hold a meetiP~ without some knowled~e I

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11 1 of' ~·;hat .,ias supposed to come up.

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2 His answer to me was that Ecology One

31 I Inc.::>rporated, \·.ras in trouble or having prob lees, and

41 I I use those tl·ro ~-.rords, because it \-:as one or the

51 I other. I believe that the 't'iord ''-'as problems.

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6 I agreed to hold the rr.eeting. I told them

71 I that I t-rould not \'lait until Decer.:ber lOth, that it

81 I had to be held sooner. And I belie-..re ~hat meeting

91 I 1:ra.s held on Decewber 5.

10 By the wa~', at tha.t time they tentatively--

Ill I or discussed further advance from the $100,000 proceeds

121 I of the final $100,000 loan.

131 I I told Fir. f:1c?herson that ha'f.ting no

141 I kno"::ledge of ~'ihat 1t1as tal~ing place, and having been

151 I told only that problems had arise~ or" "t-:ere about to

161 I happen, that I C:.id not feel bo~nd on any further

171 I advance

IS MR. FARLF.Y: Excuse me, Your Honor. Is

191 I 'the tvitness talking about at the neet:!.ng or in the

201 I telephone conversation?

21 TF.E \·fiTNESS: Hha t t·:as your quest ion,

221 I Mr. Farley?

23 THE CO~RT: Were you speaking of -- at the

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time you told hin, was th!s at the meeting or was it

a phone conversation?

THE \{ITNESS: It ~as in response to his

phone conversation. You knov; more about tha-: than I

do because you were representing -- as a reatter or fa~t

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r~R. FARLEY: I wasn't listening in on the

other line.

TFE 1:JITNESS: I did not kno'"; that you

\·:e~e representing, f'.'!r. Farley, at that tine. And I

told Mr. McPherson, where do you carne into the picture.

And subsequently they furnished me a letter identifyi~s

you and a~thorizing you to negotiate \·ri th me. And if

you will recall, we scheduled a meeting, I believe,

on December 6, and neither you nor Mr. McPherson

appeared.

~ Mr. Wilson, had you had any discussions

with Ecology One and its principals regardi~g the road

completion bond durinc this period, 1974, the suillmer

and fall, winter?

~io. I don't believe we eve~ discussed it. . .

I just -- when I realized that t~e bond existed, they


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told me it existed, I confirmed their state~ent~ a~d

I 1-:ne~·; it existed and I assumed that the bonding

company \vould perform.

Q Did you have any -- a~ong the conditions

for your advancing the $100,000, did you have any

reference to any guarantee by them about the road

bond?

~ Yes. One of the conditions, which ~ay have

been a superfluous condition, was that evidence be

furnished me that the Republic perfo~mance bond was

still in existence. f....nd the bond, I believe, ;·ras

executed in May of 1973.

The ntreet permit, in connection with

which the bond was issued, did not expire until

May of 1976. I assumed that the two, pe~mit and the

bond, were concurrent. So my request, my condition

that evidence be given me that the bond existed and was

in effect, may have been superfluous, but they, at

that time, did furnish me with an additional copy

of the bond.

They also did furnish me with a receipted

~~ll-show1ng tpat t~eir insuranc~ c9verage on_t~e_

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Q Mr. Wilson, does your company write

surety bonds o~ does it have some capacity in that

business o~ has it in the p~st?

~ Yes. We have in the past written su~ety

bonds. We are a fairly sizable insurance. Generally

we are not a carrier. We are a ge~eral agent.

Q And were the estimates which Ecology One

gave you o! their cost to finish this project, did

they turn out to be accurate or inaccurate?

~ Well, I think obviously they turned out

to be inaccurate, because I am sure that we, and I am

sure that they, would not have entered into the

co~struction loan posture that ~e entered into in

Mar6h of 1974 had they not belie7ed that thei~

estimates would successfully conclude the project.

I am sure that they would have not ecce

to me in July of 1974 representing that a certain

amount of money was necessary to cc~plete the project

if their estimates had been ac~urate.

And their subsequent estinates which !

received in August 1974, I don't believe now that these

were accu~ate, and

not accu~ate, because there was still by their own


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state~ent inadequate funds to complete the project.

Q Did you learn of any previous -- did you

learn of any financial obligations of Ecology One

which you had not previously been made aware of?

A Well, you are leading into another subject.

Yes, you are leading into the consideration

for the foreclosure.

~ Well, then let me just ask you that.

A. Sir?

Q Why did you decide to foreclose?

~ It was a long drawn-out decision. It was

not arrived at hastily.

We finally had meetings in early Decenber.

I believe the first one was the 12th of December.

And I believe you came to that rneeting, ~r. Farley.

And I felt we had gone about as far as

we could go .. They had submitted in these statements

t·rhich I stated that I received in IIovember, they had

shown an accounts -- a list of accounts payable.

In the first meeting that we had, a question

came up as to what we would do to carry the project

along. __ I believe.that my.rea~tion at the time -was.·

that we had done about as much as we could do and that

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1 we would maintain our posture of reso~~!n~ to the

2 te~ms of the deed of trust.

3 did take into consideration

4 a list or acco~nts receivable. This list started out

5 at about $73,000. Hhen I say receivable, I ~'lish to

6 correct myself. That was accounts payable.

7 Subsequently, that list increased.

8 Subsequently, I found that the list was not 100 percent

9 cowplete. I think that it ~·ras primaril:; complete,

w but there were na~es omitted.

11 Subsequently, I found from telephone calls

12 r~_am ... su~con~racto~- ~~~t maybe ~~e Ia• ~~u~~s on ~h~- 1·~~ - • ..., £ \I • .. >::> ' \I L ~- !I. • \I;.~ :; ~...., ... ~ v • "' ••• ..:» ... J. .., "

13 of accounts payable -r,;ere not correc-cl. Eo\ve·..rer, that

1~ could have been from the omission of additional bills

~ which were not available at the time that the list

16 was prepared.

17 Also I found that F.cology One Incorporated

18 had what was identified to me as a deed of trust

19 debt to a local bank in the amount of $30,000. ~

20 didn't believe that this was accurate because I would

21 have seen it in the title search.

22 Subsequently, .this turned out to be a debt

23 of $17,000, which as of the time that I verified it,

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".·!as about 1:0 be due, or ~.-i3.S tten, or shortly pa~t-

due.

I also found that there·~as a debt ~o a

corporation in Oklaho::1a City of :·:hich ~he G\"Tathr.:ey,

Duke or the Duke, Winsett enterprises had become a

part, which was rather sizable, 60 or 70 or 80 thousa.nd

dollars. I have a record of it; I don't have it in

my head.

7hese con3ideratio~s concerned me.

Also during this period, so~e. of the bills

which were submitted, were these requisitions, in a

few cases, were not being paid, or if they were

being paid, they were only bein~ partially paid.

This concerned ~e because of the possibility

of liens being filed.

On one occasion, only o~e to ~y knowledge,

~ was confronted by a subcontractor who accused me,

or accused our company, of not advancing funds at the

proper time to cover his bill.

On the job at that tiffie was a man who you

have heard identified as Stewart, and I confronted

Stewart with this statement. It was a three-way vi$it,

an<.i Ste-v;:.rt stated that he had been told that the ft!nds

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had ~at been paid. 198

1 If Your Ho~o~ please, I ~·Ionder

2 the could identify the subcon~ractor that he

3 is quoting?

4 TEE COURT: ~·!hich subcontractor are you

5 speaking of?

6 THE WIT~ESS: The subcontractor's name, I

7 think he has been identified as Biggers. He was a

8 concrete man. I think that it was Jim Biggers.

9 At the time I did not con~radict Mr. Stewart.

10 I was not posit~ve that I was correct. I did return

11 to my office, and I found the Mr. Biggers' bill had been

12 part of the requisition.

13 I also found that our check had been

14 advanced. I found that it had reached the Ecology

15 principals. Obviously Mr. Stewart on the job was not

16 aware of what had taken place.

17 Subsequently, through my efforts, I did

~ arrange through Mr. Duke, through o~~er funds that

19 became available to Mr. Duke and his associates, to have

20 Biggers paid.

21 BY r.-tR. DO\·JNEY:

Then what was the total indebtedness of

~ Ecolo~y One· to E. L. Rust at th~ ti~e of foreclosure?

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199 ~ What was the indebtedness?

Yes.

2 On the one trust, which! identified as

3 having twelve notes, as a result of the advance of

4 the $100,000 in extra funds, four of those notes have

5 been paid off. So at the time of the foreclosure, the

6 amount of the indebtedness on that particular trust

7 of the eight notes still existing, surviving) was

8 approximately $433,000.

9 The a~o~~t due on the second, or the

10 additional first trust on the ground on the nine lots,

11 t-: as $1 7 5 , 5 o o •

12 So the total due on the two trusts that

13 ~e f~reclosed upon was about $613,000. I would reduce

14 that by a small amount, which at that point had not

~ been advanced. And that was about $4,400, which we

16 still have in our possession.

17 That's the amount of the t\·ro trusts, i:lhich

18 ~ere foreclosed on in ~arch 31, 1975.

19 There was an additional trust, which we

20 dld not foreclose on, upon t·:hich t·re had had funds.

21 7he amount I gave you did not include the amount of

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The other obligation was the extra

2 $100,000 junior lien or junior trust, which we had

3 agreed to ma~:e. And at that til:'~e ~·!e had advanced

4 approximately $44,000, slightly over $!~4, 000, so

5 we had roughly $55,000 left in our possession in

6 that trust, which had not been requisitioned in the

7 usual procedure.

8 So according to these figures, the total

9 amount of funds that you had advanced, but for which

10 you had not received reimbursener.t fro~ Ecology One,

11 was $653,000?

12 1\. Yes, sir. About $653,000 $658,000, I

13 believe now. That's correct.

14 I show you Plaintiff's Exhibit marked R,

~ and ask you to identify the documents co~tained there~~?

16 \·Jell, this is a deed from. the Cornmon\·realth

17 Abstra~t Corporation, which was t~e corporate trustee

18 under all three deeds of trust~ deeding the eight

19 houses on eight lots, plus nine lots which were

20 unimproved., tc;> the H. L. Rust Company after the

21 foreclosure.

22. . ~.: Subsecp..te!'t~- t_o the foreclosure, r:1r. \·:ilson; ·-· -· -

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did you e~gage the services of Mr. Tyler Swetnam to

ac1; on your behalf on the site?

~ Yes. After quite a bit of research and

consideration, we actually engaged him in two capacities.

The first capacity was as a consultant on a fee basis.

And we asked him to make a survey of the houses so

far as the nature of the construction, t·thether there

were any code violations, the quality of the work that

had been done, the condition of the work, and what

would be necessary when we started to work, what

\-rould be necessary to complete the houses, and Hhat

the approximate cost would be. That was the first

association that we had.

His report was dated May 1, 1975.

Subsequent to that, I think, the latter part of Nay,

\tie decided to -- on a contract basis, ~·ie had an

agreement with him, he is a private contractor, to

htre him as superintendent of the job to get it

completed.

Q Have you made any further inquiries in

the County of Fairfax regarding this road completion

bond and what you could ~xpect f~orn it or what

happe~ed concerning that bond about the time of the


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202 I 1 foreclosure or the~eabouts?

2 A. On January, I believe it was the 23rd, his

3 reply vras dated Ja:1uary 27th, I er.ployed ~1hat I presumed

4 to be, and still presume to be, because I am still

5 employing him, a consultant to assist me -- and this, I

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guess was in January prior to the

confirm the various things that I

foreclosure -- to go anc

had found out personallj

8 in the Massey Building the prior January.

9 This man's name \·ras Hr. Russell Pelot,

10 P-e-1-o-t. P as in Peter, e-1-o-t.

11 THE COURT: How do you spell it, sir?

HITNESS: P as in Peter, e-1-o-t, Your

Honor.

14 Mr. Pelot, on January 27th, visited Mr. White

15 Mr. White again confirmed that the bond still existed.

16 i\1R. FARLEY: Your Eonor, the ~·ri tness is

17 obviously testifying what he claims Mr. Pelot told him

18 that Hr. \·ihi te told him.

19 THE COU~T: I sustain the objection. Don't

20 testify to what scneone told you.

21

•)•) --23

THE HIT!·!ESS: It is in the \•tritten

mel'!lora..,."l<itll!!, so. it. is not verbal, I·1r .. Farley •...

A-145

MR. FARLEY: I would ask that the Co~rt

ANITA B. GLOVER CERTIFIED VERBATIM REi>OR~ER

10721 JOYCE OI=IIVE FAIRI="AX. VIRGINIA 220.30

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1 c:'EE COU2'1': V::.s 7 s·· ... -:::~->n "-ho obj~,..-ion ·~)....., ~.-.=:Jl,._...,~. ... •..~ ... ..,. ._..w·.~- .;..

2 Don'~ te3tify to anything Mr. Pelot may have told you tha~

3 somebody else told hio.

4 TEE WITNESS: All ri~ht.

5 THE COURT: Or anything that Mr. Pelot

6 told you. You cannot testify to anythine that someone

7 else may have said to you othe~ than the parties.

8 Th""E \·!ITNESS: \·/ell, the in formation

9 furni~hed me -- is· that fair?

10 THE COURT: sir.

11 THE WITNESS: Well, the information which I

12 received --

13 THE COURT: What did you do as a result of

14 that. I~ other words, what did you do as a resul~ of

1- the information? :.>

16 THE vJITHESS: That \•ras one of the things

17 that influenced me to proceed with the foreclosure,

18 because I found t~at the bond still existed. I found

19 that the permits were still in good shape. I found

20 .that the percolation tests were still existing and

21 current, and I got the density and the location of the

: -22"

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A--146 ANITA B. GLOVER

CERTIFIED VERBATIM R!:PORiEA

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The permits on the nine lots h~d expi~ed.

Th~y had no~ been renewed. The~e were other -- ther~

was other information furnished me which persuaded rne

to proceed with the foreclosure, which ultimately took

place on March 31.

After the foreclosure, I again returned

to the County Building personally. That was on April

the 9th. I again interviewed Mr. White. He told me

that he would call upon the bonding company. He told

that in a few days he would let rne know what the

bonding company's reaction was.

He told me that the County had certain

yardsticks so far as the approximate completion of the

streets cost, and he said he would convey that to me.

About four o~ five days later, I comrr.unicated

with him, and he said so far as he ~~ew, the bonding

company l•!as still being ccl'i!.municated t·;ith, and that

he would ~ive them another call.

Either on the personal visit or on the

telephone call which I made to him, he did tell me

that he was goi~g to consult his supervisor, who is

.a .f~!r ... Perre.tt ~-. __ anfi that he. ~·;ou~q- consuJ.t .fv1r ..... ~e~re.tt ~-· :·

and he might consult the County Attorney.


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1 On May 1st, I a~ain called him, reminded

2 him that he had not communicated t,-rith me as he said

3 that he would. And he stated that the claim, or

4 process, or requisition, or whatever the word was,

5 for the performance by the bonding company had been

6 referred to the County Attorney.

7 During these visits, either by my consultant

S c.r by myself, I had asked f:lr. Hhite if a mortgagee

9 appearing in the picture would have any affect on

ro the bond. And to the best of my recollection --

11 MR. FARLEY: If Your Honor please, I don't

12 lmow whether the witness is distinguishing between

13 what he is sayinG, his consultant ~old him, and I

W have absolutely no objection to what he is going to

15 quote r•Ir. \·lhi te as saying but if he is ouoting "ttha t

16 his consultant told him, I think the consultant ought

17 to be here, just like everybody else is to say what

18 he has to say.

19 THE COURT: I don't thin!-: there is any

20 question about that, but I was under the impression

21 that he \•ras talking about t·rhat 1'-'Ir. \~Thite had told him.

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f·laybe I'm wrong._

MR. FARLEY: He added his consultant. I


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FAIRFAX. VIRGINIA 220:JO 273-4(16'3

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1 didn't think he was differentiating which was which.

2 7EE C0URT: The in~orr.:atio~ that ~,rou .just go.: .... ·~ ,

3 was that what Mr. White told you ~ith respect to the fact

4 that the bond -- the question on the claim on the bond

5 had been turned over to the County Attorney? r:lr. it.'hite

6 told you that or the consultant?

7 THE WITNESS: April 9th, Mr. White told me

8 that personally, face to face.

9 THE COURT: The statement was between you

ro and Mr. White. He has no objection to your testifying

11 to what Hr. \'Thite told you.

12 THE WITNESS: On April l4~h, Mr. White a~ain

~ confirmed and a~ain said he would call me. He did not.

14 I called hie on May 1st, and at that ti~e he said,

15 no question about the bond existing. He said that the

16 bondins company had been called upo~ and been cor.~unicatec

17 with, and that the procedure was to turn it over to

18 the County Atttorney for performance or for execution

19 of the claim.

20 Does that fit in with your guidelines?

21 MR. FARLEY: Your Honor, I got up to May the

22 lfit. The part I was talking about was after M~y the 1st,

23 when he talks about going back and seeing Mr. White,


CERTIFIED VERBATIM RSPORTER

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he and his consul~ant, and that wa3 my concern, his

~estifyine to wh~t the consultant said.

T~E WITNESS: The only reason I brought that

in \·:as, because prior to r·1r. Do~·:ney' s question, I also

covered some of the considerations

?HE COUF.T: All right. Subse~uent to May

the lst --

THE WITNSSS: -- of the foreclosure. In

January, I did make a verification. Excuse me, sir.

TEE COURT: Sub sequent to i•!ay the 1st, t·;hat

did you do? Subsequent to ~ay ~he 1st.

THE WITNESS: Well, on May lst, I think in

ans":rer to Hr. Do~·rney' s questions, I said that \·:e ha1 a

report from Hr. S\-tetnan. Subsequent to 1':-~a~,. lst, late

in May, we retained him as a contract employee to

supervise the coffipletion of ~he houses.

BY rJIR. DO~·!NEY:

~ Nr. ~ilson, did there cone a time in the

County A"'Ctorney 's office -- you met \•ri th the County, in

the County Attorney's office, and you became aware of

additional guarantees that the County wanted to require

of you?

A.

A-150

Yes.


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What position did the County take once this

default had been forwarded from~~. ~hite's office to

the County Atto~ney's office?

rtiR. FARLEY: Your Eor.or, please. First,

could we ascertain when this was? Ee said, did there

co~e a time, and he said yes.

THE COURT: Please clariry the time fra~e.

BY f·1R. DOHNEY:

Q In April or May of 1975, did there come a

time around that time period when you became aware of

additional guarantees that the County was requiring ' I

before allo~ing this project to nrbceed? - '

~ Yes. And I would like to go back to the

personal visit that I. made to the County Buildin~ on

April 9th. At that time, as. I believe I said, I found

that the perillits were still existing a~d in good shape.

A Mr. Geo~ge Gourick, ~ho was in the

Euildins Inspection Depa~tment, very acco~modatingly

showed me the stage of the inspections that had been

made. Five out of the eight houses that we had

foreclosed on were in a certain stage of inspection,

which was favorable

three t-1ere not.

A-151

our stanrlpoint,. and the oth~r

ANITA B. GL.OVER CERTIFIED V~RBATIM REPORTER

'0721 .JOYCE ORIVE FAIRFAX. VIRGINIA 22030

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1 I was told that all that I had to do to

2 continue the permit status, which I found, was to sign

3 a form, which he showed me how to sign, ~ave me the forms

4 and pay renewal fees or extension fees of ten dollars

5 each on each house. We did that.

6 Subsequent to that, and now co~es more of

7 the answer to Nr. Dot·rney ':s question, t·;e found -chat the

8 Co~nty did not expect to issue the permits, even though

9 I had been assured that they would.

10 So at that time -- I would say that that was

11 p~obably in June -- the County Attor-ney communicated

12 with either me or our attorney. I believe they

13 con".municated. t·:ith our attorney, i·'Ir. john Aylor, i,•;horr. t·re

14 had retained rig~t after the foreclosure, and ente~ed

15 the picture.

16 Hhe.t position \·:as the County taking ;•rith

17 respect to ~enewal of those building per~its and allowing

18 those houses that were under construction to be occupied,

19 given the current situation of those roads?

20 Well, the County's position was to protect

21 the Coun~y interest, the community interest, the public

22 interest . On _one o c cas i_ on , £t!r • R U?_k v:!' o t e a 1 e t t e r ---

23 stating that that was paramount.

A-152



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P.AGE

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The County's position was also intereste~

or directed a~nst pro· ... ·iditlr; the ~ost expeditious and

economical means from the bonding company's standpoint,

and from the borrower's standpoint, the original

borrowers, and fro~ the Rust Co~pany's standpoint, to

get this project completed and get the streets completed.·

The County ~ealized, I believe, its

obligation to actually five people who were living l~ •

this community. Four of those hornes we had !inanced

and Ecology Co~pany ani its associates had completed the~

and these people were living there without completion of

the other houses and without completion of the streets.

There was one additional houze, home,

occupied, which Ecolo~y, I don't believe, built. The~:

sold the lot. We had nothing to do with it.

But the County contir.ued, and the Cour.:.ty :~

by that I a~ talking about the County Attorney and

the County employees, assu~ed soMe obligation to

the five people who had moved in and occupied their

homes and received occupancy permits, what I call

occupancy permits. They call them residential use

p?.rmits.

Q'! ·i·Jo\·i ?·'!.!< ~·!ilson, after this f.oreclosure, -did


CERTIFIEO VERBATIM REPORTER

10721 JOYCE O~IVE FAIRFA~. VIRGINIA 22030

273-4088

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1 you then own a:l of the lots in the subdivision?

2 A. no, sir.

2.,., J.-1.

3 Eow rna~y did you not own, and do you recall

4 where they were located on the plat?

5 A. Yes, I do.

6 Let me brine the plat over to you and I

7 will ask you to point out w~ere the lots were ~hat you

8 did not own -- and just so that the jury can see it.

9 A. Well, hopefully, not to co~fuse, the~e are

10 24 subdivided lots on this plat. We wound up, after

11 the foreclosure, owning 17. Four were sold to home-

12 ow~~rs and occupied by the owners, in homes built by

13 Ecoloby and sold by Scology.

14: One was occupied by a family who, so far

15 as I know had their own horne built on a lot which they

16 had bought from Ecology. ~hen there were two ad~itional

17 lots, that's four and one is five, t~ere \·;ere t~·:v

18 additional lots which we did not own, because they had

19 bee:;. sold to an individual o~·rner or O\'lners, I do not

20 know, by Ecology, prior to the time that ever entered

21 the picture back in January of 197~.

22 S.o .~here ~·:e!'~ __ seven lots sold. off, anG. vre

23 acquired 17, making a total of 24.


CERTIFIE~ VEP.BAT!M REPORTER 10721 JOYCE ORIVe

FAIR!=AX. VIRGINIA 22030

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Q Now, where were the lots located that you

did not own? Do you remember that?

A. Yes.

~ Hould you point them out ger!erally on the

plat?

~ Yes, sir. This lot here at the very entrance

was sold with a house on it by the Ecology to a man

named Worth, W-o-r-t-h.

Q That is Lot 3?

~ That is Lot 3. Lot 11 was snl~ to a ho~e

buyer and occupied, and I believe by.Ecology, I believe

occupied by a man named Arn. Lot 12 was sold with a

hom~ on it by Ecology, and i~ was occupied cy a man

named Shore.

Lot 20, down here, the first lot was here,

the next two were here. Lot 20 was likewise sold by

Ecology to a home buyer '·rho occupied it, and his n8.J.'"':!e

or their nace, was Marks. Lot 31 or 33, I believe 33,

was sold to a Colonel Walsh. It was sold by Ecology,

but the house was built by someone else. And it was

O\'Jner-occ upied.

· · · ·· ·----·-_-::Wets·-- that .lot. :..\·ras down here -on::--a-~ c:ul-.::~:-:· . . - .. ·-

de-sac. Lots 14 and 15 were sold to individual owners.

A-155 ANITA B. Gl-OVER


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I do not know who. I have never had any contact with

thern. But they !'iere sold by the Ecolo.r,y company before

we ever got into the picture. Th~etwo lots are right

here.

Q. Do you kno~·l the date· that this la'.·r suit

''"as filed?

A The law suit was filed, I was advised,

June 26th was it, Mr. Downey?

Q 25th.

Ttffi COURT: 25th.

THE \A!ITNESS: I'm sorry.

BY i·ffi. D0\'!!-!3Y:

Q Subsequent to the filing of this law suit,

did there come a time when the County Attorney and your

counsel entered into an understanding agreenent signed

by them both regarding what the County would do as far

as these permits were concerned, and whether you would

be allowed to proceed with the project?

A Well, yes. I believe that the first

negotiations, if that is w~at you want to call it,

1.-.ras directed to a Hr. Brault by the County Attorney's

office. I a~ not su~e who signed the letterJ and I . . .. -· - --- ..

believe that that was in July.


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And I believe that sug~estion was that

Republic I believe that Mr. Brault represented

I Republic at that time -- anc I believe that the suggestiorh

was that Republic advance the money thro~gh the Rust

Company and that Republic have a voice in the contractor

and the costs, and thus expeditiously complete the

streets, and hopefully econom~cally complete t~em for

all concerned.

MR. FARLEY: Your Honor please, the wit~es~

is testifying about what a letter says; that is

available. I think we've all agreed it can go into

e•.tidence.

Th""E \·fiTNESS: Subs equant to that

BY V!R. DO\-Ii·JEY:

Q Let n~e aslr you to identify Plaintiff'' s

Exhibit S.

~ This is the letter I aw referrir.g to --

11HE COURT: ~·ihat is the date on the letter.

TF.E \-liTNESS: to Mr. Brault, and the

date is July 14, 1975 addressed to Mr. Brault and signed

BY.HR. DOH!'-IEY: . ..

Q And does this letter invite a representative

A- 157 ANITA B. GL.OVER

CERTIFIEO VSRBATI~ REPORTER

10721 JOYCS ORIVS FAIRFAX. VIRGINIA 22030

273-4066

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1 of Republic ::.o n~e~ at a r:1utu:!lly con•.rer:ient ti~e and

2 discuss this problem in the nanner that you have

3 outlined?

4 The letter states that the Board of

5 Supervisors has directed that legal action be taken.

6 Skipping over and out 6r context, you state:

7 I a~ takin~ this opportunity to suggest a solution to

8 the problems which have given rise to this law suit.

9 You state that you have been contacted by Mr. John Aylor,

ro which confirms ~Y recollection, who represents E. L. Rust

11 and Comp:J.ny.

12 IilR. SCI-H·IARTZ: Your Honor, ~-:e have bean

13 through this before. The letter speaks for itself.

14 I believe that the question that he is about to azk

15 can be answered yes or no.

16 MR. DOWNEY: Your Honor, I think it is

li important to point out that thiz surety was cor.tacted

IS at this point.

19 TEE COURT: I will overrule the objection.

20 We could read the whole lett~~, but counsel knows

n whether or not that this is the meaning of the letter,

letter "shoul~.

23 be read, and if so, I'll let you do it on cross examinaticn.



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?EE HI::rT.!ESS: Yea as1:ed. a question about

whether the letter suggested that a meeting be held.

The answer is yes.

~ Is there any reference in that letter to

preserving the legal position of this surety as it then

stood? Any legal claims it ni~~t continue to have

against Ecology One?

~ After your first subparagraph on page 2, why

you suggest that Republic agree to reimburse ~ust for its

expenses. Then you suggest th~t the above steps be taken

without any prejudice whatso9ver to Republic's action or

against the principals to the f~ll extent of this loss,

arising from the principals default on the bond, thereby

insuring Republic's interest.

Does that answer your question?

Q Yes, sir. Ho·.-.r, pre·..riously you !'!lade

refere~ce to -- previously I asked you a question about

a written agreement between your cou~sel and the

County Attorney on your respective positions as to

building permits, residential use permits, and

completion of the roads. .

Now, I ask you to identify Plaintiff's


CERTIFIED VERBATIM R5POR~!!R

I 070! I JOYCE ORIV5 FAIRFAX. VIRGINIA 22030

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Exhibit T, and state whather or not that is the

agreerr.ent reached, the siGned a~reene~t between the

t~·:o?

2 ... ~ .l.t

~ This letter is dated July 29th, and it is

addressed to John E. Aylor, \•rho represented the Rust

Company, signed c~,. Frederick Lee Ruck. And I ttlill be

glad to read as much or as little as is within the

guidelines.

The County agrees -- as I mentioned to you,

much to my surprise and contrary to what had been ~old

to me personally, I found that we did not have building

permits. I am not talking about street pernits; I am

talkinG about building permits to complete the houses

that we had involuntarily accuired.

So, this letter agrees to give us the

building permits. It further conditions the g~anting

of the buildin~ permits and I had better read this,

although I think that I remember so~e of it.

The County shall not be obli5ated and

expressly intends to withhold issu~nce of the residential

use permits until such time as the public improvements as

sho~·;n O!]. tP-e .. Plan3 ·:fo~.:-_~ainbow· ~ubdi vision_,- Section One,

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insofar a:3 the sane benefits the ei5ht houses o"\med by Ru~ t



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P.AGE

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Co~pa~y, are completed.

Attached to this letter, Mr. Downey, and

it does not sea~ to be attached, was a plat of the

subdivision, a duplicate perhaps on a smaller scale

from the one that Mr. Do~~ney held up. And at that

time, the provision was that we would be asked to completE

the st~eets only in front of the lots that we had

acquired. And that plat identified that area o~ thos~

street areas.

It is this letter which again co~firms my

statement that Mr. Ruck stated that the public interest

is paramount. Does that answer your --

Q I will show you a copy of that plat as soon

as it is marl·:ed.

~ I don't need to see it. I reme~ber i~.

And I did not, by the way, approve this letter. ~Y

name is not on it. Ho\~ever, I did authorize r~lr. Aylo:-

to approve

Q I show you ?laintiff's Exhibit G and ask

you simply to identify it as the plat referenced in

that letter?

~ Yes, sir. This is the plat. And this . . .. . -ident·ifies the

A- 161

lots that -are , ~

so~a..


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the lots that we acquired with an R, and by del!neation

identifies the area or the street which th~ County

Attorney's office felt should be completed before

residential use permits were given to us so that we

could transfer our eight houses, which we acqui~ed

from Ecology, to purchasers when and as they were

sold.

Q Well, did there come a time -- did you

on September 30th, 1975 finally reach an agree~ent

by t··:hich -- did your con!pany and the CotL."'lty enter

into an agreement dated September 30, 1975?

~ Did. we enter into an agree~ent with t~a

County on Septereb~r 30, 1975?

~ Yes, sir.

~ Yes, sir. We did,

NR. DOv!i!EY: Let r.1e get this marked.

Q I show you this exhibit marked Plaintiff's

Exhibit V and ask you to identify that document?

~ This appears to be and is an agreement

between the Board of Supervisors of Fairfax County

and H. L._I~~st Companj~, c;_a_t~d Sept.ember 30th,. 19_75,

signed by the Chairman of the Board of Supe~visors,


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Jean R. Packa~d, and signed by me.

C! Undar -:hat ar.;:-e-anent, did you a~ree to·

complete the ~oads in that subdivision, Mr. Wilson?

Did H. L. Rust, rather, agree to do that?

~ Yes, sir. Through a negotiation which we

had undertaken or entered into ~·iith \~!illiam A. Hazel,

his name is recited in the agreement, and we had

already undertaken certain measures at the instigation

of the County to prevent siltation and erosion, and

we agreed to co~plete the p~blic improvements as

sho\![n on the plat in accordance ~,:ith the plans and

State specifications, some of which you have had

sho~n, displayed to you today.

Q t~hat did the County agree to do in return,

simply stated·?

~ The Board of Supervisors agreed to assign

to the Rust Company all rights to any a~ount of money

which may be received by the Board including interest.

I could read sene ~o~e. The Board and

Rust agree that the foresaid assigncent shall be

li~ited to the actual ~~aunt of expenses incurred

by Rust in the performing of the obliGations hereunder.

A-163

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10721 JOYCe ORIVc FAI;U:AX. VIRGINI.a. 22030

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I thlnk that sum~arizes what it says.

; -_.:. th~ i~portant part as f~r

3 as I am concern:d.

4 MR. FARLEY: We do not necessarily agree.

5 THE WITNESS: By the way, one of the things

6 the Board agreed to do t~at would be of interest to

7 you, f':Ir, Fa.:-ley, because there has been a question

8 raised by the deposition

9 THE COURT: You just answer questions,

10 r-Jlr. Hilson.

11 THE \-JITNESS: It is in this agreerren~ --

12 THE COURT: All right. 1 think he said

13 that pretty well sums it up, I believe.

14 A JUROR: Your Honor, I Kould like to get

~ some clarification. Are we talking about Rainbow

16 Subdivision, Section 1, only, where you have 17 lots

17 to be completed? Is that what we are talkins about,

IS just subdivision, Sectio~ 1, which is the~e on the

19 blackboard? Is that the only part that we are talkin~

20 about?

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A-164

THE COURT: Are there 17 lets in Section 1?

7EE \{IT~·:ES.S; _ !·la~1 I ans1·rer that, sir?.

THE CQUR'J:: I ~·!ill allot·! you.

ANITA B. GLOVER CERTIFIED III!RBATIM REPORTER

10721 .JOYCE DRIVE FAIRFAX. IIIRGINIA 22030

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1 THE WITNESS: If anyone else would like to~

2 We're talking about 17 lots which we

3 acquired from Section 1 of Rainbow Subdivision.

4 However, the conversation or the testimony has also

5 covered 7 lots which we did not acquire.

6 A JUROR: Right. They were sold off,

7 but what you arc concerned with --

s THE COURT: He is only interested in 17

9 lots. ·

10 A JUROR: That is right. Under Section 1

11 of Rainbo~., Subdivision. Olcay.

12 THE WITNESS: However, this agreement

13 covered completing the streets in front of 24 lots.

14 TP'..E COURT: The agreement \'fill spea!( for

15 itself. I presume it is going to be introduced into

16 evidence and so the jury will have a chance to look at the

17 agreement, and so forth.

18 f·ffi. DO~·lNEY: I have no further questions.

19 I would move the introduction of Exhibits L through V

20 at this time, Your Honor.

21

•')•) . _ ... ..,

THE COURT: I do not have a list of them.

23 understood you to say 0, Exhibit 0, P, Q, and then



10721 JOYCE DRIVE FAI~FAX. VIRGINIA 22030

273·4065

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1 I don't know what happened to L, M, N, unless you have

2 withdrawn

3 MR. FARLEY: You~ Eo~or, I have L here,

4 which was taken up during the last -- when we were

5 talking about the other gentleman's testimony. And

6 I don't think

7 THE COURT: Well, let me just see. My

8 records indicate that C was the only one that

9 still remains marked for identation, that w-ras the

10 siltation agreenent, dow~ to o.

11 Then from 0 through V, but L, M, and ~

12 I've never heard. I haven't heard anything abou~

13 L., H , and N •

14: f.'IR • FARLEY : I don't think L has really

15 been offe~ed.

16 r·1R. DOt-·!NEY: Those are the three v;hich

17 Mr. Burt was going to refer to, but which were

18 ~-.:ithdra~'ln.

19 TEE COURT: I see. ~.

~lne. So, in other

20 words, it would be 0 through V. In other words, you

21 are moving for admission a throue;h V.

22

23 am sorry.

A-166

DOt;JHEY:

ANITA 9. GLOVER CERTIFIEO VERBATIM REPORTER

10721 .JOYCE ORtVE FAIRF~X. VIRGINIA 2..!030

·myself.

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TEE COURT: That's all I v:an-ced in

oth:r t;lords, ycu. ~e speal·:inr; o:f' 0 through V. Any

objectio~s to the admission o~

1JI~. SCR\·lARTZ: I believe there was no U.

Ti1E COURT: Yes, there \'Tas a U. It was

a plat. U was the plat that was supposedly attached

to the letter. And then V was the agree~ent between

H. L. Rust Co~pany and the County.

NR. FARLEY: Has one of those the fo!"eclosure

deed?

THE COURT: Yes. In other words, the deed

of -- R is the deed froi:l the Col:'!;no:n·real th Abstract to --

the foreclosure deed, if I'm not mistaken. That's ~hat I understood ~t to be.

MR. FARLEY: I would ask that along t•ri th

that, the order of this Court which approved the final

accounting and the foreclosure be admitted with it,

U-1.

THE COURT:

THE COUR'l': t·!ake that U-1 then.

(The o~der referred to above was marked Plaintiff's Exhibit U-1 for identification and recei~ed into evidence.)

In order to clarify the record then, you

have indicated p~eviously all of the Exhibits-A ~hrough

K are in evidence, except C. Is thnt correct? And

A-167

ANITA B. GLOVER CERTIFIED VER9ATIM RSraORTE:R

10721 JOYCE ORtVE FAIRFAX. VIRGIN!~ 22030

273·4066

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1 then, 0 is the twelve notes wit~ the daed of trust

2 attached.

3 (The docurr.ents referred to above were marked Plaintiff's :xhicit 0

4 for ider.~ification a~d received into evidence.)

5

6 THE COURT: P would be the one note with the

7 dead of trust attached. That's for $165,000.

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9

10

11 THE COUR'!':

(The doc~rr.ents referred to above were marked Plaintiff's Exhibit P for iden~ification and received into evidence.)

Q \"·!OUld the deed of subdivision

12 and dedication.

13 (The doc~ment referred to above was marted Plaintiff's Exh!bi~ Q

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15

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for identification and received into evidence.)

THE COU~T: R would be the deed of Commonwealtl

17 Abstract. Core:r.on\·;ealth Abstract, is that the na:7!e of the

18 company?

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::n

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A-168

':'EE \·JITrJESS: Yes.

( mh · .&.. .co d ~ e aocunen~ re~erre to above was ma~ked Plaintiff's Exhibit R. for identification and received into evidence.)

~EE COURT: Arid S wo~ld be the letter,

ANITA B. GLOVER CF.R T IFI ED VERBA TlM REPORTER

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C.ated --

I:I~. FARLF.Y: Excuse me, Your Hon·:>r. On

that R, that order really sh~uld be considered --

THE COURT: The R. R-1 would be attached,

and it would be closer, more closely related. We'll

make it R-1 then. Make that R-1 -- would be the

order approving the trustee's account.

(The document referred to above was marked Plaintiff's Exhibit R-1 for identification and received into evidence.)

THE COURT: Then the S would he the letter

dated July the 14th to Mr. Brault.

(The document referred to above was marked Plaintiff's Exhibit S for identif~cat~on and ~eceived into evidence.)

TEE COURT: T \'lould be t~1e letter dar;ed

7/29/74 free the County. I ass~rne that was fro~

Nr. Aylor to the Rust Company.

\:fiTNESS: John Aylor ~·Ias our counsel.

f·1R. SCHl·!ARTZ: July 2 9, '7 5.

COURT: '75, I'm so::::-ry. Yes.

1·~R. FJl.RLEY: Your Eonor, the witness testified

that there ~as an attachment to that.


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THE COURT: Well, that was the plat that

came in as U, as I understood it. Was that the same

3 plat that you were speakin~ of?

4 The plat that was introduced as U was

5 supposed to have been a plat that he said was attached

6 MR. FARLEY: Maybe I misunderstood, but

7 I al3o thought that he said that there was so~e~hing

8 from the County indicating t~at they would have to

9 complete the streets only in f~ont of the h~uses that

10 were occupied. Ee testified

11 TEE COURT: ~·!as he reading from an

12 agreement at that time?

13 THE HIT!·TESS: It 's on that plat.

14 NR. DOHNEY: This istreletter.

15 MR. FARLEY: Is it in the body of the

16 letter itself?

17 THE COURT: T~at is what I unde~stood he

18 said when he was testifyin~ at the ~irne that it was

19 in the letter.

20 So the letter of 7/29/75 to Aylor is

21 T, a14d U tvould be the plat that he said \··:as attached

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to i~ and V would

Con:pany.

A-170 ANITA B. GLOVER CERTIFIED VERBA.T:M REPORTER

107:!1 JOYCE DRIVE

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1 And if there is no o~jectior., th~n all of

2 those will be ad~itted into evid~nce. I understand

3 there is no objection.

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(The documer.ts referred to a~ove were marked Plaintiff's Exhibits T, U, and V for identification and received into evidence.)

f·1R. FARLEY: Your Honor, I don't see it in

s the letter. Where is it?

9 THE CCURT: It 1 s in the letter.

10 MR. FARLEY: Hell) it refers to eight houses

ll and apparently the plat shows the eight houses that they

12 are talking about.

13 THE C0U~T: I understood he was referrin7- to

14 the letter when he was testifyin~.

15 This concludes your direct examination?

16 MR. DOWNEY: Of Mr. Wilson, yes, sir.

17 THE COURT: i\1r. Do~·rney, \4Te 've gone about 15

18 minutes over the limit. I said we'd try to break about 5.

19 I've got an engagement this afternoo~, so rather than

20 getting into cross examination at t~is ti~e, Court is

21 going to adjour~ at this ti~e until 10 o'clock on Tuesday

22 norning.

23

A- 171

DurinE the time between now and Tuesday

ANITA B. GLOVER CERTIFIED VF.RBATIM REPORTER

10721 JOYCE DRI'.'E

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1 ~orning, do not discuss the case with anyone. That

2 neans your spouse or a~yone, in other w~rds, because

3 they haven't been here; they haven't heard all the

4 facts, and so forth, so please ·do not discuss it with

5 your husband or your wives or anything like that,

6 and try to eet any opinions or anything.

7 Don't discuss the case with a~yone; don't

S attempt to arrive at any conclusions; don't discuss

9 the case in the presence of anyone around the Courthouse,

10 or permit anyone to discuss it around your presance.

11 And you are to ~eturP. bacl{ at 10 o'clock.

12 Are there some witnesses out the~a yet?

13 Is M~. Swetnam out there?

14 r.:J.R. DOHNEY: There ~·;ou ld be t~·ro more.

15 THE COURT: Let us bring the two witnesses

16 in.

17 I might say, before you gentlemen leave,

18 nake sure that the clerk gets all of the F.xhibits.

19 THE COURT: Just come i~side the courtroom,

20 please. You can just stand ri~ht there, Mr. Swetnam.

21 Are those all of the witnesses out there?

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TEE COURT_: Nr. Gould+!:o~...e, you are free

to leave at any time.


CERTIJ:IS:O VER9ATIM RePORTER

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1 r:IR. GOuL~T~ORPE: I'~ t·rai tinp: fo!" him.

2 THE COURT: Court is going to adjourn at

3 this time until 10 o'clock Tuesday morning. So, I

4 will recognize each of you to return back here

5 Tuesday morning at 10 o'clock.

6 During the recess period, please do not

7 discuss the case with a~yone other than your counsel

s who are involved. And don't discuss the case with

9 anyone who has already testified or with respect to

10 any testimony that has been given in the courtroom

n today, whether it be with counsel or not.

12 With respect to the question of any

13 testimony that may have been given, if they will discuss

14 that with you there would be no point of having you

15 excluded, if they went back and told you

16 exactly what somebody had said. So do~·~ discuss

17 the testimony, but you certainly can d!scuss the case

18 vli th counsel, but n-:> one else.

19 Court will adjourn at this time until

20 10 o'clock on Tuesday morning.

21 (Whereupon, at 5:20 o'clock p.m., the

22 hearinc in this matter was adjourned to reconven~ at

23 1 "' 0 ' 1 1 ~ • - .. • 7 ~ o- (:. ' u: 0 o c oc:: a.n. on ·J.ues::.ay, ~ep~.~~nce~ , .l~f...;.,


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3 PROCEEDINGS

THE COURT: Board of Supervisors of Fairfax

County versus Ecology One, Inc., At Law No. 34324.

Counsel ready?

MR. DOWNEY: Ready for the plaintiff.

MR. PERRY: Ready.

MR. SCHWARTZ: Ready, Your Honor.

MR. FARLEY: Ready, Your Honor.

THE COURT: Before we commence, Miss Stroud,

some concern has been brought to my attention by counsel

about your taking n~tes in this matter, and so I am going

to have to ask you to ·discontinue taking notes.

I As I told you, it is a policy of the Court

and under our rules not to permit jurors to take notes

in a case. However, at the time I took the matter up

with counsel, they said that they had no objection, but

this morning some concern was raised about your taking

of notes in the case, and so they have requested that I

ask you to discontinue taking notes.

Also I believe one of them noticed that --

thought that possibly that you may have brought a law

book of some sort with you, or some book concerning the

law involved in this case.

A- 174

Of course, this particular case, the Court

ANITA B. GLOVER CERTIFIED VERBATIM REPORTE~


273-4066

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1 will instruct you as to the law that will be applicable

2 to the facts of this case, and so the only law that you

3 would use, or any principal of law that you would use,

4 would be those which come from the Court in the form

5 of instructions.

6 I will instruct you as to the law that is to

7 be applied to the facts that you hear from the witnesses

S on the witness stand. So you won't be able to do any

9 interpretation of your own law with respect that it will

10 be in accordance with the instructions that the Court

11 gives you.

12 That is the law that would be applied, because

13 under our system, as I say, number one, the note taking

14 incident -- counsel, as long as they have no objection,

15 I have no objection, but they have expressed some concern

16 this morning about taking notes, and I would have to ask

17 you to discontinue taking notes.

18 We are now ready to go. Have Mr. Wilson

19 resume the stands. .r.1r. tvilson.

20 MR. FARLEY: Your Honor, maybe at a recess,

21 could we have a couple, maybe one other chair later on?

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A-175

THE COURT: Yes indeed, surely.

MR. FARLEY: I tried to find one aro~id here,

ANITA B. GI..OVER C:ERTIFIEO VERBATIM REPORTER

10721 JOYCE ORIVE FAIRFAX. VIRGINIA 22030

273-4006

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l but it seems like all of them are occupied.

2 THE COURT: I believe we are ready for cross

3 examination by Mr. Farley. Have a seat, Mr. Wilson.

4 Whereupon,

5 LLOYD B. WILSON, JR.

6 a witness, resumed the stand and was examined further and

7 testified as follows:

8 CROSS EXAMINATION

9 BY MR. FARLEY:

10 Q. Mr. Wilson, I believe you indicated that H. L.

11 Rust and Company is a real estate company, mortgage

12 company, and that they also do write bonds; is that

13 correct?

14 A. We have written bonds, yes, sir.

15 Subdivision bonds?

16 A. Yes.

17 Q. How long has that Company been engaged in

18 the real estate business?

19 A. Well, the Company was founded in 1889. To

20 my personal knowledge, it has been engaged for 41 years.

21 Q. And how long has it been in the mortgage

~ banking business?

23 A. Well, again, to my personal knowledge, prior

ANITA B. GL.OVER CERTIFIED VERBATIM REPORTER

10721 JOYCE DRIVE FAIRP.AX, VIRGINIA 22030

273-40645

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1 to the time that I went there 41 years ago.

2 Q. And how long has it been writing subdivision

3 bonds?

4 A. Well, I cannot speak beyond 1935, but since .

5 1935 we have represented carriers which wrote subdivision

6 bonds.

7 Q. Now, last, I guess it was Thursday when we

8 quit, last Thursday you indicated to the Court and the

9 jury the amounts of money which your Company lent --

10 loaned to Ecology and to the individuals. Those loans

11 generally carried a prime rate plus four percent; didn't

12 they, prime at that time plus four percent?

13 A. Are you talking about the loans that we made?

14 Q. Yes, sir.

15 A. I think in one case that it was prime plus

16 three, and in another case it was prime plus four. I

17 would have to verify that.

18 Q. And prime at that time was what, up around

19 ten, more than that; do you recall?

20 A. I would have to look back.

21 Q. Approximately what do you recall it to be·

22 in '73 and '74?

23 A.

A-177

Well, it went ~p very rapidly. I think that

ANITA B. GLOVER CERTIFIED VERBATIM REPORTSR

10721 JOYCE ORIVE FAIRFAX. VIRGINIA 22030

273·4068

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1 it was in the nines or the tens.

2 Q. At any rate, regardless of what it is, the

3 rate of interest that they would be paying on the money

4 was four percent above the prime rate?

5 A. I think that in one case it was three percent,

6 and in one case it was four percent. That was the practice

7 at that time.to protect lenders on fixed yields from

8 fluctuations in market rates.

9 Q. Now, as former President of the Company, and

10 as Chairman of the Board, did you as one of your responsi-

11 bilities try to keep acquainted and up to date on the

12 various types of. business that the H. L. Rust and Company

13 was engaged in?

14 A. Yes. Through departmental heads in charge

15 of the various segments of our business.

16 Q. In other words, the different departmental

1i heads then would report to you, and your communication

18 with.those departments was basically through the heads

19 of the departments?

20 Yes. That is right. My control was mostly

21 fiscal. The details of each department were handled by

22 the department heads.

23 Q.

A- 178

Now, one of the things that you singled out

ANITA B. GLOVER CERTif:IEO VERBATIM RePORTeR

I 0721 JOYCE ORIVE FAIRFAX. VIRGINIA 22030

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1 that you did before this loan 'tvas made was to make sure

2 that there was a street bond; is that correct?

3 A. Before I made the loans?

4 Q. Yes, sir.

5 A. Yes, sir. I did that.

6 Q. And your reason for that 'tvas that you wanted

7 to make sure that there was a bond that would enable them

8 to continue to work; is that basically correct?

9 A. Well, I verified these statements that were

10 made to me by the principals of the Corporation, Ecology

11 One, Inc.

12 Q. And did you or somebody with Rust and Company

13 actually see the bond?

14 A. I s.aw it, or it \'las displayed to me. I saw

15 't'lha t was purported to be the bond by Mr. White.

16 The bond was nothing new to yo~was it? I

17 mean since your Company writes bonds itself, it was not

18 exactly a foreign document; was it?

19 A. Well, as I said to you, I am not in charge or

20 familiar with the intimate details of running an insurance

21 department. However, it was a bond, on a form which I

22 assumed was the proper form, it having been accepted by

23 the County.

A-- 179


I 072 I JOYCE DRIVe FAIRFAX. VIRGINIA 22030

273-405&

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1 Q. Did you notice in the bond that it said that

2 it applied to Ecology, to the individual principals, to

3 their heirs,assigns, and successors in interest?

4 A •. I do not recall that.

5 Q. Have you seen a bond in your experience as

6 President and Chairman of the Board of the Company that

7 does not have that language, that it applies to the

8 successors in interest?

9 A. No. I have not. · We have not written one of

10 these bonds for some years.

11 Q. But you have not seen one that did not include

~ that language; have you?

13 A. I have not seen one that I knew did not use

14 that language, nor have I seen one that did not include

15 Q. And as a mortgage banker, a realtor, and

16 President of a real estate company, what is your under-

17· standing of what successor in interest means?

18 MR. DOWNEY: Your Honor, I object to that

19 question.

20 MR. PERRY: I object on the grounds he has

21 already stated that he does have a lack of familiarity

22 that that particular clause in the bond exists, nor does

23 he indicate any expertise to be able to express an

A- 180

ANITA 8. GLOVER CERTIFIED VERBAT-IM· REPORTER

I 0721 JOYCE ORIVe FAIRFIAX. VIRGINIA 22030

273-4085

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1 opinion as to what that

2 MR. FARLEY: Your Honor, the only thing he

3 could say is that he does not understand.

4 THE COURT: I think he could. I will overrule

5 your objection. I think he can testify to whether he

6 could or could not.

7 BY ~lR. FARLEY:

8 Q. What does successor in interest mean to you?

. 9 A • Well, this bond was not between the Rust

10 Company, but between Republic Insurance Company and the

11 County.

12 Q. Hr. Wilson, my question is, what does

13 successor in interest mean to you?

14 A. Well, I am going to come to it. I am leading

15 up to that.

16 Q. I will try to be more patient.

17 A. Well, I am trying to answer a question which

18 is a little difficult for me to answer. I am not an

19 attorney either. This bond was between Republic and the

20 County with the County as obligee, with Ecology and its

21 principals as co-guarantors or warrantors. So I would

22 assume that its successors and assigns would be an

23 assigned assignee of the qounty, or an assignee of the



10721 ~OYCE CAlVE FAIRI=AX. VIRGINIA 22030

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1 Republic, or an assignee of the principals. Does that

2 answer your question?

3 Q. Well, you indicated what assignee means. Now, -

4 my question is,what does successor in interest mean to you?

5 A. Well, I would l~~p the two together as

6 successorsin interest if Republic had a successor, or the

7 County had a successor, which is not likely, or Ecology,

8 or its principals had successors.

9 Q. Now, I believe I indicated to you when I

10 asked the question that the term.successor in interest

11 applied to Ecol.ogy, as I said, Ecology, the individuals,

12 or assigns,or successors in interest. Now, what is your

13 understanding of how Ecology would have a successor in

14 interest? What is the \-ray that Ecology would have a

15 successor in interest?

16 A. Well, successor in interest would be if

17· Ecology voluntarily entered into some negotiation with

18 other principals or another corporatio~ like they sold

19 several homes to successors in interest,homeowners,

20 homebuyers, four to be exact, and they sold three lots.

21 I would classify them as voluntary successors

22 in interest.

23 Q.

A-182

· So yo~-~bul~-6lassify a purchaser as one ty~e

ANITA B. GLOVER CERTIFI5D VERBATIM REPORT5R

t0721 JOYCE DRIVE FAIRFAX, VIRGINIA 22030

273-4088

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1 of successor in interest; is that correct?

2 A. I "'vould think so 1 and that 1 of course, would

3 depend upon the phraseology in the deed that they trans-

4 ferred the title.

5 ~ Now, you used the word, if they voluntarily

6 sold. Did you see anywhere in that bond any language

7 that said that this only applies to the involuntary, or

8 this only applies to voluntary successors in interest

.9 and not involuntary?

10 A. I do not believe that I did, Mr. Farley. I

11 do not remember seeing that.

12 Q. Are you saying that the H. L. Rust Company

13 was an involuntary purchaser at the foreclosure?

14 A. We became an involuntary purchaser through the

15 default of the Ecology people. They defaulted to us.

16 Would you tell the Court and the jury how

17 you purchased the property?

18 A. It is rather a long1drawn out --

19 Q. No, just what you did at the foreclosure sale

20 in order to purchase it.

21 A. I requested when the default took place, which

22 actua~ly was December 1, I believe, 1974, I requested

23 the Trustee under the Deed of Trust-- the Deed of Trust


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conveys the property to the Trustee, under certain

terms and circumstances, and the Trustee is to perform

for the benefit of the noteholder, in this case the Rust

Company, in the event of a default.

The default took place. I requested the

Trustee, the Commonwealth Abstract Compan~ to take action

under the terms of the Deed of Trust. Under prescribed

laws or regulations, codes, there is certain advertising

to be done.

Those advertisements were placed, to the best

of my knowledge, properly. The auction was scheduled

l-larch 31, 1975. I am probably going into too much detail.

Q. Well, you have not even gotten to the question.

My question is, how did you buy it?

k I appeared at the sale March 31, 1975,

representing our Company as noteholder, and on a predeter-

mined formula I made bids on the various properties on

behalf of the noteholder.

~ Now~ are you trying to tell this jury that

you were forced to make those bids, that it was not

voluntary on your part?

A. Well, to p~t it differently, it was involun-

tarily to the extent that had no default taken place, I

A-184 ANITA B. Gl-OVER

CeRTIFIED VERBATIM REPORTER

10721 JOYCe ORIVE FAIRFAX, VIRGINIA 22030

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would have had no right to have been there.

~ Now, you have been to foreclosure sales before;

haven't you?

~ Strange to say, that is the first one that

I recall attending.

~ You.are aware that it was right in the

advertisement of the sale, and you yourself knew that if

it was not an advantageous ·time to sell that the sale

did not have to go forth at that time; didn't you? You

understood that; didn't you?

A. If it vTas not advantageous?

~ You could tell the Trustee to dalay the sale

to another time?

~ I did not know that it was not an advantageous

time.

~ I mean advantageous as far as the price of

the property is concerned, not for H. L. Rust. I did

not mean that. Did you know that it was not an advanta-

geous time for the sale of the property so far as the

price that it would bring?

~ I did not know that.

~ l~ell, how many other people were there bidding

on the project?


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A. There were a number of other people there.

2 Q. .t-1y question is, how many people were there

3 bidding on the project?

4 A. So far as I know, there was only one other

5 bidder.

6 Q. And he bid on two houses; is that correct?


8 Q. So you were the only one there bidding on the

9 whole proje~t; is that correct?


11 Q. And you were authorized, am I correct, to bid

12 as much as the 1total amount up to the amount of the i I

13 deficiency of the total amount that \vas owed H. L. Rust

14 and Company?

15 A. Well, I was authorized, I introduced low bids,

16 hoping that other bidders would appear. I have checked

17· my records since a deposition which I gave when you were

18 the attorney for, I guess, Ecology, and I did not intend

19 to go to the full amount of the amount of principal,

20 interes~ expenses, foreclosure costs, which I could have

21 gone to.

22 Q.

23 correct?

A-186

But you were authorized to do that; is that


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A That is correct.

~ As a matter of fact, you bid 230 some thousand

dollars less than 't·lhat was actually owed on the project;

isn't that correct?

A. At the time, I think that the figure was a

little less than that, but it was $218,000 or $219,000.

~ Less than what was actually owed then on the

project?

A You have those papers .

~ Now, none of these gentlemen, or none of these

people from Ecology,was there trying to bid the project

up; were they?

~ Well, they were there.

~ None of them bid; did they, Mr. Wilson?

A. Not so far as I know.

~ Now, what is your understanding of what would

have happened at that sale had you not bid at all, had

you -- weren't you knowledgeable enough to know that you

could have asked the Trustees to set the sale on another

day?

A. Well, I think that I had legal counsel at ·the

sale, and my legal counsel advised me to pr~ce~d~

~ Now, I show you here a letter from the Trustee,

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1 Mr. Carman in Arlington, and the Trustee sale ad, and

2 ask you if you will identify this as to whether or not

3 this is the Trustee sale as advertised in, I believe, it

4 is the McLean Herald?

5 A. This is the ad that was prepared by the

6 Trustee or Trustees insofar as I recall.

7 Q. Would you read just the very last paragraph

8 of the last sentence of that to the jury?

9 A. The right to postpone or set over the date

10 of sale is expressly reserved. Any such postponement,

11 or setting over will be announced on the originally

12 scheduled date of sale.

13 MR. FARLEY: I would like to offer this into

14 evidence.

15 THE COURT: What is the date on that letter?

16 MR. FARLEY: The letter is February 27, 1975.

17 THE COURT: And is the ad attached to it?

18 ~m. FARLEY:. The ad is attached to it.

19 THE· COURT: Do you all have any objection to

20 it?

21 MR. DOWNEY: No objection.

22 z.1R .. PERRY: No objection .

23 THE COURT: Then let it be admitted as

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1 Defendant Ecology One's Exhibit Number 2.

2 (The document referred to above was marked Defendant Ecology

3 One's Exhibit No. 2. for identification and received into

4 evidence.)

5 BY MR. FARLEY:

6 Q. Just referring to one other clause in the

7 advertisement, this same ad says that the property shall

8 be sold in as is condition without any warranties as to

9 the improvements; is that correct?.

10 A. That is correct, but that refers to the

11 improvements, and to the lots which we foreclosed on.

12 Q. Would you indicate where it says that that

13 refers to the lots?

14 A. Well, it says that the property shall be

15 sold as is, and, excuse me, you are wobbling it around.

16 Q. I am sorry.

17 A. Let me hold it. The property shall be sold

18 in as is condition without any warranties as to the

19 improvements. The property, as far as I am concerned,

20 was the property which was collateral for our notes and

21 Deed of Trust, namely the houses and the lots, and the

22 ~nimproved lots.

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I had no lien on anything else.

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1 Q. Nr. tvilson, when you -- prior to the fore-

2 closure, when you 'tven t to see .Hr. White , who is in charge

3 of bonding for the County, is it true that Mr. White told

4 you that if you or anybody else purchased that property,

5 that that purchaser would have to put up his own street

6 bond?

7 A. No. It is not true. I did not see Mr. White

8 from January 1974 until the foreclosure. I did send a

9 representative.

10 Do you recall Mr. White in your presence

11 stating that you saw him in December of '74?

12 A. Yes. I recall that.

13 Q. Was that incorrect?

14 A. That is incorrect.

15 Q. Are you saying that it was never brought to

16 your attention through Mr. White that you or any person

17 · purchasing that subdivision would have to put up a new

18 street bond?

19 HR; DOWNEY: Objection, Your Honor. As a

20 matter of law, it is irrelevant whether or not a new

21 street bond would have been required because the law is

22 cl.~.ar that a .subse~uent surety -- rather a co-surety or

23 a sub-surety on existing bonds does not release the

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1 original bond anyway.

2 So I do not see the relevance of whether or

3 not they would have been required to put up a new bond.

4 MR. FARLEY: If it please the Court, I think

5 it goes to the question of whether or not they are a

6 successor in interest within the meaning of the existing

7 bond, and if they are, they either had to adopt the

8 provisions of that bond, or to put up a new bond.

9 And it also goes to the applicability by the

10 County in this particular instance of the ordinance to

11 these purchasers.

12 THE COURT: I will sustain his objection,

13 Mr. Farley. I believe I will sustain the objection.

14 BY MR. FARLEY:

15 Q. Now, how many times did a representative of

16 H. L. Rust, either yourself or anyone else, go to meet

17 with somebody from the County regarding the bond prior

18 to, before the foreclosure?

19 A. To the best of my recollection, I personally

20 went with another officer of our Company in January of

21 1974. I personally sent a representative, or a man

22 representing us or me, in January 1975; that is before the

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1 foreclosure?

2 Q. Yes, sir. Before the foreclosure.

3 A. That was before the foreclosure.

4 Q. There were a number of meetings after the

5 foreclosure; is~'t that correct?

6 A. I do not want to say the number. I went

7 personally after the foreclosure. I want to make that

8 clear. I did go again, but I did not go when Mr. White

9 said I did.

10 Q. Now, going back to the time. when Ecology

11 still had the project, I understood you to say that the

12 last commitment was for $100,000, all of \vhich was. not

13 drawn out; is that correct?


15 Q. How much of that $100,000 \vas not drawn down?

16 A. Between $55 and $56,000.

17. Q. Now, at that time, after that commitment \Y'as

18 made, how many times did you talk either by phone or

19 personally with-either Mr. Lyons or Mr.. Biggers, or both,

2o Mr. Lyons being the street contractor, and Mr. B~ggers

~ being the paved ditch contractor? ~1

22 A. You base the effective date after this $100,00C

23 was approved and signed for, and the note was signed?


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1 Q. No, not after the note was signed, after it

2 \vas approved by H. L. Rust.

3 I only recall, and I cannot pinpoint the date--

4 I only recall tal~ing to l1r. Lyons once at any time.

5 Would you tell the jury what you told him

6 when you talked to him?

7 A. Mr. Lyons was quite disappointed that he did

8 not receive some money that was due him. I had no

9 knowledge or no way of proving whether was due him

10 or not~ It was listed on the accounts payable list

11 furnished to me by Ecology.

12 Mr. Lyons threatened to file a lien, which

13 was perfectly within his rights. I had no way of preventin~

14 it, or proving it. There is some question as to whether

15 he had any rights, but that was not for me to determine.

16 He ultimately, when I stated that I was unable

17 to directly deal with him, threatened to damage the

18 streets. I had no way of preventing that. The streets

19 belonged to the County, not to me, or not to my Company.

20 Does that answer your question?

21 Q. No. I asked you what you said to him.

22 A. I told him that if he wante~ to damage the

23 streets, that was up to him, but that they belonged to


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1 the County, and he had better consult an ~ttorney.

2 Q. Are you saying that you did not tell him that

3 he -- that out of this $100,000 that had been approved

4 that he -- did you tell him that he would be paid for

5 his work on the streets?

6 A. That is where my memory as to when I talked

7 to him comes in. I do not recall tvhether it \v-as after the

8 foreclosure or before. If he asked me whether there were

9 funds still available, I would have answered him truth-

10 fully that under certain circumstances, under procedures

11 which other funds had been advanced, there tvere funds

12 available providing those procedures could be maintained

13 by the borrower.

14 Q. Now, were those funds made available to Mr.

15 Lyons who was the street contractor at that time?

16 A. I had no way of making them available, but

17 there \alas never a requisition for those funds by the

18 borrowers.

19 Q. when Mr. Lyons talked to you, when he asked

20 you for his money for the work that he had done on the

21 streets?

22 A. I had I suppose conservatively, oh, eight, ..

23 or ten, or twelve.requests for funds.


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1 Q. Is that what he was doing?

2 A. Yes. I granted none of them. I could not.

3 Q. You as a realtor, how would you describe the

4 real estate market in March of '75?

5 A. In March of 1 75?

6 Q. Yes, sir, in the preceding months.

7 MR. DOWNEY: Objection, Your Honor, relevancy.

8 MR. FARLEY: Your Honor, I think one of the

9 questions in this case is whether or not Rust and Company

10 is the successor in interest, and if it is, does ·the

11 County's suit act as an unjust enric~~ent to H. L. Rust

12 and Company.

13 I think that the change in the market from

14 when the foreclosure took place and what it is now would

15 show that it does in fact act as an unjust enrichment.

16 THE COURT: I will sustain your objection.

17 Mr. Farley, objection sustained.

18 BY MR. FARLEY:

19 Q. Now, in November of 1974, did Mr. Duke

20 specifically ask you for these additional funds that had

21 been committed at -- the balance of this $100,000 that

22 had been committed?

23 A.

A-195

-· In November of. 1974, perhaps before that, ~lr.

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Duke and I did discuss ways and means for advancin~ these

funds.

~ And did he request that these funds be advanced -

so that they could be used to pay the· street contractor

so that the streets could be completed?

A. He requested that the funds be advanced. I

do not recall that he limited the advance to the streets.

I do not think that he did.

~ Are you saying that he did not, or that you

do not recall?

A. I have answered this question before, and I

will answer it the same way as I did before, and that is

~ Well, you do not have to. All I am asking

you is what actually happened.

~ To the best of my recollection, Mr. Duke

asked that the funds be advanced for the completion of

the project.

~ Was this again discussed at the December the.

6th meeting, 1974, by representatives of Ecology asking

that the funds be paid toward the street improvements?

A. The discussion on December 6th was not in

connection with the advance of these funds. It was a

discussion, as you know, to determine how we couldextricate

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everyone from the predicament that we \vere in.

~ You are saying that no request was made at

that time for these funds that had not been advanced,

but had been committed?

k That may have come up in the discussion,

but I think -- well, maybe you were not there. The

discussion, I believe, originated -- I will take that

back because you were not there. Very little was

accomplished at that December 6th meeting because except

for Mr. Rutter, \'lho, I believe, a·i: the time was an officer

of the Ecology Company, very little was accomplished

because the Ecology principals did not show up and their

counsel did not show up.

~ Was there a request at that time to you for

the moneys to complete the streets?

~ A request was made prior to that meeting, yes.

Not necessarily to complete the streets, however. I

keep emphasizing that.

~ Now, do I understand that ~tr. Sweetnam was

originally hired by H. L. Rust and company as a consultant?

~ That is correct.

~ Now, ~asthat before or after the foreclosure?

A. After the fore.closure.

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1 Q. Do you recall when he was first hired as

2 a consultant?

3 A. It would have been late in April. I have a

4 report from him dated May 1.

5 Q. t·1ho hired him?

6 A. Our Company hired him. He was introduced to

7 us by a Hr. Harnett, originally to r.u-. Green, subsequently

8 to me, and Mr. Green and I hired him.

9 Q. Was he hired just for general work or for

10 this particular project?

11 A. He was hired strictly for this project.

12 Q. i And when did you first talk to him?

13 A. !Probably the later half of April 1975.

14 Q. About a month after the foreclosure, or a

15 little less than a month?

16 A. Less than a month.

17 Q. Now, were you aware at that time that he was

18 also an official with the County of Fairfax serving on

19 the Board of Zoning Appeals?

20 A. No, sir.

21 MR. DOWNEY: Objection, Your Honor, on two

22 grounds; relevancy, and secondly, I see no purpose to

23 . . .

that question other than to· attempt to prejudice the

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County 1 s case. It would be unto"tvard if IY!r. St-1eetnam 1 s

willingness to become involved in civic affairs could

somehow be used in this Courtroom to prejudice the County's

case. I do not see any other purpose for that to be

asked here. It is totally irrelevant to begin with.

MR. FARLEY: If it please the Court, I do

not think it is irrelevant. I do not think that serving

on the Board of Zoning Appeals is exactly being involved

in civic affairs. I think that the evidence will show

that at the time that Rust and Company hired Mr. Sweetnam

as a consultant, then later put him on contract, that he

was also an employee of the County, that this was the

same time that H. L. Rust and Company entered into this

contract with the County, and I think the evidence goes

to the control that the County exercised over this project

to the detriment of the defendants, the fact that one of

their own officials was acting as a foreman for H. L. Rust

and Company, and erfectively prevented, and this is an

anticipatory breach suit, not a final breach--they had

over a year to complete the project--effectively prevented

the defendants from performing under their contract.

MR. DOWNEY: Your Honor, clearly as a matter - - .

of law, an individual member of the Board of Zoning

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Appeals first of all is not a County employee. He is

appointed by the Circuit Court. It is my understanding

that he is a quasi judicial state official functioning

at the County level. Furthermore, the Board of Zoning

Appeals had absolutely no power whatsoever over any

aspect of this project that we are talking about.

The fact that this overall parcel of land

might have been zoned .at one time in a category which

would have allowed for a subdivision development is the

only interest or involvement that the Board of Zoning

Appeals could have ever had over this project.

THE COURT: I sustain the objection, Mr.

Farl~y.

MR. FARLEY: Your Honor, for the record

could I also state that I think that his ~erving in that

capacity would also go to the showing of bad faith by the

County in entering into this private agreement with the·

mortgage company.

THE.COURT: Well, I will sustain his objection.

Note an exception, please.

BY MR. FARLEY:

~ Then after Mr. Sweetnam was employed as a

consultant, did there come a time that he was put on a

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