Barnard Const Co Inc v. City of Lubbock ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT July 19, 2006
_____________________
Charles R. Fulbruge III
No. 05-10582 Clerk
_____________________
BARNARD CONSTRUCTION CO.,
Plaintiff - Appellant,
v.
CITY OF LUBBOCK,
Defendant - Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
No. 5:03-CV-269
_________________________________________________________________
Before JONES, Chief Judge, WIENER, and PRADO, Circuit Judges.
PER CURIAM:*
I
Barnard Construction Co. (“Barnard”) sued the City of
Lubbock, Texas (“City”) for breach of contract in the Northern
District of Texas. The district court granted the City’s motion
for summary judgment, and Barnard appeals.
Barnard submitted the lowest bid for a pipeline construction
contract to the City. The City hired an independent engineering
company to act as “Engineer” for the project. The Engineer was
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
1
responsible for, inter alia, the bid form for the pipeline
construction project. The bid form included a line item for rock
excavation, but only for one of the fifteen pipelines (Line A1),
because the Engineer’s data suggested that rock excavation was
needed only in the one pipeline. Prior to the bidding process,
the City expressly stated that the Engineer’s data was for
informational purposes only, and that bidders had the opportunity
to drill their own test holes. The City also offered a question
and answer session prior to bidding and made changes to the
pipeline construction contract via addenda as a result of the
question and answer session. Barnard did not drill its own test
holes.
Barnard and the City entered into a written contract. The
City estimated that 410 cubic yards of rock would need excavating
from Line A1; but whatever quantity of rock was excavated from
Line A1, the City would pay Barnard at the unit price for which
they bid ($200). In performance of the contract, Barnard
discovered lines other than Line A1 required rock excavation as
well. Barnard excavated rock from several lines other than Line
A1. After Barnard billed the City for all rock excavated, the
City initially paid, but later offset payment for rock excavated
outside of Line A1. Barnard sued for breach of contract and on
appeal argues for reversal of summary judgment. First, Barnard
argues that the City’s decision to pay for all rock excavated is
a final, conclusive decision pursuant to the contract. In
2
response, the City maintains it had communicated to Barnard
before or at the time of payment that it might later offset
payment for rock excavated outside of Line A1.1 In addition,
Barnard argues that the contract is unambiguous in its terms
requiring payment of all rock excavated, or alternatively, that
it is ambiguous thereby warranting reversal of summary judgment.
II
We review an appeal from summary judgment de novo, applying
the same standard as the district court. Degan v. Ford Motor
Co., 869 F.2d 889, 892 (5th Cir. 1989). Summary judgment is
appropriate if there is “no genuine issue as to any material fact
and . . . the moving party is entitled to a judgment as a matter
of law.” FED. R. CIV. P. 56(c). Because this suit is based on
diversity jurisdiction, we apply Texas substantive law to
determine whether the City was entitled to summary judgment.
Fireman’s Fund Ins. Co. v. Murchison, 37 F.2d 204, 207 (5th Cir.
1991).
We review the interpretation of a contract, including the
question of whether the contract is ambiguous, de novo.
Constitution State Ins. Co. v. Iso-Tex Inc., 61 F.3d 405, 407
(5th Cir. 1995) (citation omitted).
III
1
Barnard contests the date this communication was made.
3
Barnard’s first argument, that the City’s decision to pay
for all rock excavated is a final, conclusive decision pursuant
to the contract, fails because the contract grants the City
authority to make a final determination regarding the amount and
quantity of work done by Barnard in excavating rock. Paragraph
47 of the General Conditions reads, in pertinent part:
Any decision by the Owner’s Representative, or deemed denial
by the Owner’s Representative, shall be final and conclusive
in the absence of fraud.
Paragraph 14 of the “General Conditions of the Agreement,”
clearly states, in pertinent part:
Unless otherwise specified, it is mutually agreed between
the parties to this Agreement that the Owner’s
Representative has the authority to review all work included
herein. The Owner’s Representative has the authority to
stop the work whenever such stoppage may be necessary to
ensure the proper execution of the contract. The Owner’s
Representative shall, in all cases, determine the amounts
and quantities of the several kinds of work which are to be
paid under the contract documents, and shall determine all
questions in relation to said work and the construction
thereof, and shall, in all cases, decide every question
which may arise relative to the execution of this contract
on the part of said Contractor.
The record is clear that the City, via the Owner’s
Representative, told Barnard that it was only considering
Barnard’s request to pay for rock outside of Line A1.2 Barnard
2
While Barnard disputes the date on which the City informed
Barnard that it would only consider the payment, the date is not
dispositive; nor is the fact that the communication was made.
The fact that Barnard was initially paid for the rock excavated
outside of Line A1 is also irrelevant. The contract places
authority over final decisions on the Owner’s Representative.
After reviewing the City’s obligations under the contract, the
City and the Owner’s Representative correctly determined that it
4
does not allege the City has committed fraud in making this
decision. The Owner’s Representative made a final decision as to
the amount and quantity of excavated rock for which Barnard was
to be paid when it determined under the contract that it need not
pay for rock excavated outside of Line A1.
IV
Barnard’s second argument also fails. First, it argues that
the contract is unambiguous thereby requiring payment for rock
excavated outside of Line A1. Alternatively, Barnard argues the
contract is ambiguous and therefore creates a genuine issue of
material fact, requiring reversal and remand. Whether a contract
is ambiguous is a question of law for the court to decide. Coker
v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). If the written
contract is worded such that it can be given a certain or
definite legal meaning or interpretation, then it is not
ambiguous and the court will construe the contract as a matter of
law. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.
2003); Coker, 650 S.W.2d at 393. The court must give meaning to
each of its provisions, in light of the circumstances surrounding
the contract’s execution, excluding statements of the parties as
to what they intended. Davidson, 128 S.W.3d at 229; see also
Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157
(Tex. 1951).
need not pay for rock excavated outside of Line A1.
5
First, Barnard argues that the following circumstances,
which they contend were not taken into account by the district
court, existing at the time of execution, support its
interpretation that the contract is unambiguous: (1) the City
provided all the forms for the bidding process and did not allow
any alteration of the form or negotiation of the terms; (2) no
bidder could bid on a unit price for rock anticipated to be
encountered except on the blank provided for rock excavation on
Line A1; and (3) no bidder could increase an amount for work
performed on one line in order to “pad” or “cover” unpaid work
performed on another line. As the argument goes, because Barnard
could not bid on rock outside of Line A1, it was irrelevant
whether it took the opportunity to investigate the sub-surface
conditions outside of Line A1. However, Barnard neglects to
consider that the City did allow for an opportunity for the
bidders to ask questions, a process through which the contract
could be changed and through which addenda were added to the
contract.
In the General Conditions section of the contract, under
Paragraph 17, “Contractor’s Understanding,” it states:
It is understood and agreed that the Contract has, by
careful examination, satisfied itself as to the nature and
location of the work, the confirmation of the ground, the
character, quality and quantity of materials to be
encountered, the character of equipment and facilities
needed preliminary to and during the prosecution of the
work, and the general and local conditions, and all other
matters which in any way affect the work under the contract
documents.
6
. . .
Unless otherwise specified herein, all loss, expense, or
damage to Contractor arising out of the nature of the work
to be done, or from the action of the elements, or from any
unforeseen circumstance and the prosecution of the work,
shall be sustained and borne by the Contractor at its own
cost and expense.
Paragraph 17 of the General Conditions clearly places the risk of
unforeseen circumstances on Barnard. See I.O.I. Sys., Inc. v.
City of Cleveland, 615 S.W.2d 786, 789 (Tex. App. 1980). Barnard
bore the risk in undertaking the project under the terms of the
contract.
Arguing that the City’s interpretation is unreasonable
because it confers a windfall, Barnard maintains that Paragraph
1.6 of Section 01020 of the contract unambiguously mandates
payment for rock excavation, including “all of the extra cost of
equipment and labor associated with the excavation of rock over
and above the excavation of nonrock materials in a tunnel or
trench.” Section 01020 is titled, “Measurement and Payment.”
Paragraph 1.6 appears in Part 1, titled, “General.” The contract
has both specific provisions, such as providing a line item for
rock excavation only for Line A1, as well as general provisions,
for example in Section 01020 in Paragraph 1.6 labeled “Rock
Excavation,” in which it states, “[p]ayment will be made at the
unit price bid for Rock Excavation.” Where a contract “appears
on the surface to be ambiguous . . . the apparent ambiguity may
be resolved by the application of a well-settled rule of
7
construction, to wit: that if general terms appear in a contract,
they will be overcome and controlled by specific language dealing
with the same subject.” City of San Antonio v. Heath & Stich,
Inc., 567 S.W.2d 56, 60 (Tex. App. 1978). The fact that the only
place where a line item appears for rock excavation is for Line
A1, a specific provision, suggests that the agreement between the
parties was to pay for rock excavation only on Line A1. This
interpretation of the contract is further supported by the
provision in Section 01020 entitled “Scope,” in which it states:
The unit price bid on each item stated in the Bid Form shall
include furnishing all labor, superintendence, machinery,
materials, equipment and incidentals necessary to complete
the various items of work in accordance with the plans and
specification. Cost of work or materials shown on the plans
and called for in the specifications for which no separate
payment is made shall be included in the bid price on the
various pay items.
(emphasis added). The contract clearly evinces a unit price for
rock excavation only for the item Line A1.
As an alternative argument, Barnard argues that the contract
is ambiguous. First, Barnard disagrees that the phrase “on each
item stated in the Bid Form” in the “Scope” of Section 01020 is
unambiguous. It points to the fact that this is a unit price
contract because the City had to make estimations for each line
item, including an approximate amount of rock to be excavated.
Barnard maintains that the phrase “on the project” at the end of
Paragraph 38, “Quantities and Measurements,” found in the General
8
Conditions,3 refers to the project as a whole, not to rock
excavation on Line A1. As the argument goes, the City is
therefore required to pay Barnard for all rock excavated on the
whole project. Barnard states, “[t]he term ‘project’ is not
defined by the contract, but ‘Project Number’ is identified
throughout the contract as ‘Project Number 293-6903 . . . .”
Barnard’s invocation of Paragraph 38 is unavailing for the same
reason its attempt to use Paragraph 1.6 of Section 01020 is. The
unit price bid blank found in Line A1 plainly evidences that the
City expected drilling only on Line A1 and requested bids on rock
excavation on that one line.4 Barnard ignores the fact that the
City’s estimate of 410 cubic yards of rock was only for Line A1,
and not for all of the lines in total. We find that the contract
between Barnard and the City is not ambiguous in its terms that
3
Paragraph 38 reads:
Where the estimated quantities are shown, and only when same
are expressly stated to be estimates, for the various
classes of work to be done and material to be furnished
under this contract, they are approximate and are to be used
only as a basis for estimating the probable cost of the work
and for comparing their bids offered for the work. In the
event the amount of work to be done and materials to be
furnished are expressly stated to be estimated, and only
when same are expressly stated to be estimated, it is
understood and agreed that the actual amount of work to be
done and the materials to be furnished under this contract
is the unit price method, payment shall be for the actual
amount of work done and materials furnished on the project.
4
It bears repeating that Barnard had the opportunity to
drill its own test holes prior to bidding. Instead, Barnard
relied on the Engineer’s data.
9
rock excavation would be paid only for that performed on Line A1.
V
For the aforementioned reasons, we AFFIRM the district
court’s grant of the City’s summary judgment motion.
ENDRECORD
10
WIENER, Circuit Judge, dissenting:
I respectfully dissent from the panel majority’s affirmance of
the summary judgment for the City. I do so because I am convinced
that summary judgment was granted despite the existence of a
genuine issue of material fact which cannot be resolved under the
summary judgment record that was before the district court and is
now before us.1
None disputes that (1) a decision was made by the City on May
22 to pay Barnard for all rock excavation, whether inside or
outside Line A1 —— and indeed, the City did pay for it —— but (2)
on June 17, the City reversed that decision and deducted from the
next periodic payment the portion of the prior payment attributable
to excavation outside Line A1. The parties do vigorously contest,
however, the correct way to classify the legal nature of the City’s
May 22 decision and payment. Barnard insists that under the terms
of the construction contract, the May 22 decision was “final and
conclusive,” making it binding on the City and not subject to
subsequent unilateral reversal or change by the City. In contrast,
the City pays little heed to this issue; and the panel majority
opinion demonstrates an unwillingness even to recognize the
possibility that whether a particular decision by the City is
“final and conclusive” is not simply whatever the City unilaterally
1
Summary judgment may be granted, of course, only if “there
is no genuine issue as to any material fact ....” FED. R. CIV. P.
56(c).
11
may say.2
The contract states that “[a]ny decision by the [City’s]
Representative ... shall be final and conclusive in the absence of
fraud.”3 Although neither a definition nor an explanation of
“final and conclusive” appears in the contract, the phrase is used
in it. For example, the contract gives the City’s representative
authority to resolve “all questions of dispute or adjustment [that
are timely] presented by the Contractor” to the City’s
representative. Elsewhere in the contract, the City’s
representative is given the authority and duty to, “in all cases,
decide every question which may arise relative to the execution of
this contract.” Further, the contract deems each such decision to
be “conclusive in the absence of written objection to same
delivered to Owner’s Representative within fifteen (15) calendar
days of any decision or direction by [City’s] Representative.”
Here, there were (1) an initial decision by the City on May 15
to deny Barnard’s request to be paid for all rock excavation; (2)
a timely objection by Barnard to that decision; (3) a decision
favorable to Barnard made by the City on May 22, reversing its May
15 decision and agreeing to pay Barnard for all excavation; and,
finally (4) a third decision by the City, this one on June 17,
purporting to reverse its own May 22 change of position from its
2
See footnote 2 in panel majority opinion, supra.
3
Emphasis added.
12
initial decision of May 15 —— a double flip-flop.
I do not question that the City, acting through its designated
representative, had the right vel non to make the May 22 decision;
but given that decision, I do question how the City could then, on
June 17, make a contrary decision on the same discrete issue. I
have found no principled way to interpret final and conclusive ——
at least not without making this construction agreement a contract
of adhesion —— to mean anything other than that an officially made,
unqualified and unconditional decision by the City on any given
issue, at any stage of the construction, is not merely final and
conclusive, but is also just as unilaterally irreversible by, and
binding on, the City as it is on Barnard. As the contract is the
law between the parties, contractual interpretation must provide
the answer to the key question, “which of the City’s diametrically
opposed, sequential decisions regarding rock excavation was the
final and conclusive one, and was therefore irrevocably and
irreversibly binding on both parties?”
The summary judgment record makes clear, and none disputes,
the relevant sequence of events.
• On May 15, the City made a “decision” to deny Barnard’s
request to be paid for all rock excavation, not just that in
Line A1.
• Barnard timely objected to that denial.
• On May 22, the City made a “decision” to reverse its May 15
decision and to pay for all rock excavation (which it did).
Thus, when we interpret the contract as a whole, with all relevant
13
provisions considered in pari materiae, this second “decision” by
the City, the one on May 22 to reverse its May 15 decision and pay
Barnard for all rock excavation, had to be “final and conclusive”
—— unless, that is, the May 22 decision was expressly made subject
to the putative condition subsequent, reserving to the City the
power to reconsider and again reverse itself. Unlike the May 15
decision which was timely contested by Barnard pursuant to the
contract, the May 22 decision was not contested or appealed by
either party. Rather, the City just changed its mind weeks later.
Crucially, then, for the May 22 decision not to be final and
conclusive, and thus remain reversible by the City, this condition
subsequent would have to have been made by the City and
communicated to Barnard (1) in the May 22 decision, (2) before that
decision was made, or (3) contemporaneously with that decision.
Conversely, any subsequent attempt by the City to make its May 22
commitment reversible would have been too late and thus ineffectual
to render the May 22 decision anything other than final and
conclusive.
It follows that if, on the one hand, the question when that
condition subsequent was made and communicated to Barnard is
ultimately found to have been in the May 22 decision, or on or
before May 22, then that decision would not have been “final and
conclusive,” and the City would be entitled to change its mind, as
it purported to do on June 17. But if, on the other hand, the fact
ultimately found is that communication of the reserved right to
14
change its mind was not made by the City in, before, or
contemporaneously with its May 22 decision, but only thereafter,
the May 22 decision would be a “final and conclusive” decision on
that one point, viz., to pay Barnard for all rock excavation. This
is why the answer to the question whether the May 22nd decision was
final and conclusive and therefore not subject to a unilateral,
post-hoc change of position by the City (as the City purported to
do on June 17), is the crucial “genuine issue of material fact” on
which this contract dispute turns.
The panel majority appears to accept as a given the City’s
representation to this court that “it had communicated to Barnard
before or at the time of payment that it might later offset payment
for rock excavated outside of Line A1.” Yet the majority opinion
also concedes that “Barnard contests the date this communication
was made.”4 In the face of these irreconcilably opposed factual
contentions of the parties, I cannot conclude, as did the district
court and the panel majority, at least implicitly, that no genuine
issue of material fact exists regarding the timing or sequence of
the City’s reservation of that condition subsequent. Instead, I
remain convinced that this material fact question cannot be
resolved on the basis of the summary judgment record, either by the
district court or by this court on de novo review. Here’s why.
In granting summary judgment, the district court stated as a
4
See footnote 1 in panel majority opinion, supra.
15
given that Barnard was “forewarned”5 —— shorthand for Barnard was
informed of the condition subsequent by the City, before, in, or
contemporaneously with its May 22 decision to pay Barnard for all
rock excavation. If that turns out to be how it happened, I would
agree that the May 22 decision was conditional, preventing it from
being deemed final and conclusive, and thus making it subject to
reconsideration and change by the City. I repeat for emphasis,
however, that the district court’s conclusional statement that
Barnard was “forewarned” simply is not supported by the summary
judgment record, without which support that material fact issue
remains genuinely contested and unresolved.
By the district court’s own declaration, its determination
that Barnard was “forewarned” by the City is based solely on one
individual’s affidavit. The problem is that the affidavit nowhere
states, mentions, adverts to, or implies either (1) the precise
calendar date of the City’s making and communicating the condition
subsequent, or (2) the relative timing of that communication vis-à-
vis the notification to Barnard of the City’s May 22 decision to
pay for all rock excavation (itself a turn around from its May 15
decision not to pay). Whether Barnard was or was not “forewarned”
remains an open genuinely contested issue of material fact.
If this panel had reversed and remanded, the City as movant
might well have been able to supply evidence of such date or timing
5
Emphasis mine.
16
to show that Barnard was indeed “forewarned”; and it might well be
that Barnard would not have been able to controvert it. But,
without a summary judgment record sufficient to support the absence
of a genuine issue of material fact, we should not affirm the
summary judgment here being appealed. This is why, with genuine
respect for my colleagues of the panel majority and for the
district court, I am compelled to dissent.
17