Patriot Construction v. VK Electrical

Patriot Construction, LLC v. VK Electrical Services, LLC
No. 942, September Term, 2021
Filed March 2, 2023. Opinion by Friedman, J.
HEADNOTES:
LIMITATIONS OF ACTIONS > COMPUTATION OF LIMITATIONS PERIOD > ACCRUAL OF
RIGHT OF ACTION OR DEFENSE > CONTRACTS > CONSTRUCTION AND OPERATION >
CONDITIONS PRECEDENT TO PAYMENT
When a contract contains a pay-when-paid clause as a condition precedent to payment, a
breach of contract action for failure to pay does not accrue until the condition is met.
Circuit Court for Anne Arundel County
Case No. C-02-CV-20-001339
REPORTED
IN THE APPELLATE COURT
OF MARYLAND*
No. 942
September Term, 2021
______________________________________
PATRIOT CONSTRUCTION, LLC
v.
VK ELECTRICAL SERVICES, LLC
______________________________________
Wells, C.J.,
Friedman,
Eyler, James R.
(Senior Judge, Specially Assigned),
JJ.
______________________________________
Pursuant to the Maryland Uniform Electronic Legal Materials Opinion by Friedman, J.
Act (§§ 10-1601 et seq. of the State Government Article) this ______________________________________
document is authentic.
2023-03-02 10:17-05:00
Filed: March 2, 2023
Gregory Hilton, Clerk
* At the November 8, 2022 general election, the voters of Maryland ratified a constitutional
amendment changing the name of the Court of Special Appeals of Maryland to the
Appellate Court of Maryland. The name change took effect on December 14, 2022.
In June 2020, appellee VK Electrical Services, LLC (“VKES”) filed a breach of
contract action against Patriot Construction, LLC in the Circuit Court for Anne Arundel
County, alleging that Patriot had refused to pay VKES for completed subcontract work.
Patriot moved to dismiss the complaint for failure to state a claim upon which relief could
be granted. The trial court denied the motion to dismiss but for one count, and the matter
proceeded to a bench trial. VKES prevailed, and the trial court awarded it a judgment in
the amount of $64,575.09.
On appeal, Patriot asks us to consider whether the trial court erred in: (1) failing to
find that VKES did not satisfy a condition precedent contained in the subcontract;
(2) failing to find that VKES’s claims were barred by the statute of limitations;
(3) admitting parol evidence regarding pre-contract discussions; (4) failing to sufficiently
state on the record the reasons for its decisions on the contested issues; and (5) denying
Patriot’s motion to dismiss. For the reasons that follow, we affirm the trial court’s
judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In October 2015, Patriot was working under a contract with the Maryland
Procurement Office of the National Security Agency (“MPO”) to provide general
contractor services for an NSA project at Fort Meade. After its original electrical
subcontractor was unable to complete the work, Patriot entered into a subcontract with
VKES, in which VKES agreed to perform electrical work for the project for a sum of
$495,000.
The subcontract between Patriot and VKES explicitly provided that “[n]o alteration,
addition, omission or change shall be made in the Work or the method or manner of
performance of the Work except upon the written change order of PATRIOT
CONSTRUCTION.” In addition, an “Important Notice” was incorporated into the
subcontract. It detailed that performance of work prior to the full execution of a change
order would be done with “no expectation of monetary compensation from Patriot
Construction, LLC for that work.” (emphasis in original). The notice further provided
that in the event of “a rare emergency instance” that would require work prior to the full
execution of a change order, “permission to proceed shall only be granted by [John
Gilmore] or Matthew Timbario.” The contract between Patriot and VKES also included a
“pay-when-paid provision” which provided that Patriot’s receipt of payment from the MPO
was a condition precedent to Patriot’s payment obligations to its subcontractors. The
subcontract was signed by Craig Mills, Director of Operations, on behalf of Patriot and by
Vincent Krakat, President, on behalf of VKES.
As work on the project proceeded, Patriot requested that VKES perform fire alarm
and other work additional to the duties set forth in its subcontract. The additional work
increased VKES’s invoiced services by $366,428.09. Two of the additional invoices
submitted to Patriot were related to executed change orders, and the remainder were for
additional “ticket work” that had not been authorized in writing by Patriot.
VKES completed its work on the project on or about July 20, 2016, and sought
payment. Due to the pay-when-paid provision, however, VKES had to wait for Patriot to
be paid by the MPO. Patriot received its full payment from the MPO in October 2019. In
2
April 2020, a representative from Patriot contacted VKES and informed it that Patriot did
not submit the additional ticket work to the MPO for approval or payment, and therefore
Patriot would not pay VKES for those invoices. Patriot ultimately paid VKES a total of
$796,853 but declined to pay the ticket work invoice in the amount of $64,577.15.
In June 2020, VKES filed suit against Patriot seeking damages in the amount of
$64,577.15. Its complaint contained counts of: (1) breach of contract; (2) quantum meruit;
(3) unjust enrichment; (4) violation of federal prompt payment statute; (5) violation of
Maryland prompt payment statute; and (6) violation of Maryland trust fund statute.
Patriot moved to dismiss the complaint with prejudice, asserting that VKES had
failed to meet the condition precedent in the subcontract to obtain written authorization for
the additional work before proceeding. Patriot further argued that the action was barred by
the statute of limitations because VKES had submitted the unpaid invoice to Patriot more
than three years prior to the filing of its complaint.
VKES responded to Patriot’s motion to dismiss, arguing that its claims should not
be dismissed because Patriot “ordered, acknowledged, accepted and benefited from the
electrical services VK[ES] performed at the project” and “acquiesced to and waived the
subcontract written modification requirement.” VKES further argued that, due to the
subcontract’s pay-when-paid provision, the statute of limitations did not begin to run until
October 2019, when Patriot was paid by the MPO and declined to pay VKES. VKES
referenced August 2017 email correspondence between it and Patriot, in which Patriot
assured VKES that the MPO had approved the invoice, that, while it was “not custom to
3
pay[ ] prior to receiving funds ... Patriot will honor all work completed on the project,” and
that the funds would be forthcoming in the upcoming weeks.
The trial court held a hearing on Patriot’s motion to dismiss on December 7, 2020.
At the hearing, Patriot argued that because there was no factual dispute that VKES did not
have written approval for the additional ticket work as required by the express terms of the
subcontract, VKES had not met the condition precedent to being paid for that work. Patriot
also asserted that it had not submitted the invoices for the unpaid $64,577.15 to the MPO
and thus Patriot had not been paid for the work, which, under the pay-when-paid provision,
would mean it had no duty to pay VKES for the outstanding invoices. In the alternative,
Patriot argued that because the ticket work was outside the original subcontract, the pay-
when-paid provisions of the subcontract should not apply to extend the statute of
limitations. Finally, Patriot argued that because VKES had failed to support its complaint
with affidavits relating to any facts outside the record, the court should not consider the
exhibits VKES had submitted in support of its claim that Patriot had approved and agreed
to pay for the extra work.
In response, VKES argued that the written authorization provision could be waived
when, as here, “the parties have a course of conduct throughout the ... project” that
evidenced a less formal authorization process. VKES further argued that the complaint
sufficiently pleaded facts showing that Patriot had directed VKES to perform additional
work outside the contract and noted that the motion to dismiss was the first time Patriot
had suggested that VKES had not fulfilled a contractual requirement. VKES argued that
the upcoming discovery would disclose “a boat load of emails” showing that the extra fire
4
alarm work was done at Patriot’s direction and that at no time did Patriot suggest a written
change order was required or that VKES would not be paid for the work. Finally, VKES
asserted that the statute of limitations did not begin to run until VKES was on notice that
Patriot would not pay according to the terms of the contract, or once Patriot was paid by
the owner.
During the hearing, the trial court noted that, because discovery could reveal a
pattern of conduct suggesting the written authorization requirement was waived, the
motion to dismiss was premature. The court also noted that determining the start date for
the statute of limitations would depend on findings to be made later by a judge or jury. At
the close of argument, the trial court denied Patriot’s motion to dismiss on all counts except
for the violation of federal prompt payment statute. VKES later dismissed without
prejudice the counts in its complaint alleging breach of Maryland prompt payment statute
and breach of Maryland trust fund statute.
The matter proceeded to a bench trial on the remaining counts. Vincent Krakat,
owner of VKES, testified that he became involved in the project partway through because
the first electrical subcontractor was unable to continue the work. Krakat testified that he
was contacted by Dwayne Spriggs, Patriot’s then-project manager, who asked VKES to
submit a bid. Krakat negotiated the price of the job with Spriggs and testified that Spriggs
was “the only person [he] talked to” regarding the project, and he believed Spriggs was
authorized to bind Patriot to construction decisions.
Due to security issues, Krakat was unable to tour the site prior to submitting VKES’s
bid, so he based the bid on drawings and information from Patriot. Upon beginning the
5
actual project, however, VKES learned that additional work would be required because a
breaker that was supposed to have been installed already was not on site. As a result, two
change orders were executed, one in the amount of $102,000 and another in the amount of
$200,000. VKES negotiated the change orders with Spriggs and they were approved and
signed by Ron White, Patriot’s director of operations. The orders were then submitted to
the MPO on or about April 28, 2016.
Months into the project, it became apparent that no one was doing the necessary fire
alarm work. According to both Krakat and Spriggs, the fire alarm work was not included
in VKES’s original subcontract, but it was included in Patriot’s general contract with the
MPO. Spriggs asked VKES to do it and submit a ticket to bill Patriot. Spriggs also
requested other additional work, with assurances that VKES would be paid after Patriot
presented the invoices to the MPO. Krakat acknowledged that the tickets were not signed
by Patriot, but said that, typically, a general contractor does not sign the tickets, and if he
does, “it’s just an acknowledgment that you did the work.” Krakat testified that Spriggs
did not make any assertion that a lack of signature would impact VKES’s payment for the
work. The additional work was completed and invoiced in July 2016.
From 2016 through 2019, there were numerous email communications sent between
VKES and representatives of Patriot regarding payment for the completed work.
In February 2017, Krakat emailed Spriggs and White regarding payment for the
ticket work. There was nothing communicated in response to suggest that VKES would
not be paid. In August 2017, Spriggs assured VKES that although Patriot was not
accustomed to paying subcontractors prior to receiving funds, “Patriot will honor all work
6
completed on the project and is fully aware of the challenges of working with this particular
client.” Neither Ron White nor Matthew Timbario, who were parties to the email
communication, disputed that VKES would be paid or suggested that VKES had failed to
meet a contractual requirement. Krakat testified that he understood that VKES’s payment
would be due once Patriot received payment from the MPO. In June 2018, Spriggs emailed
Krakat, explaining that Patriot had to present the invoices to the MPO before payment but
that it couldn’t do so until another of its vendors finished some outstanding work. In July
2018, Krakat again emailed White and John Gilmore, a co-owner of Patriot. And in March
2019, Krakat yet again emailed White requesting payment. Krakat testified that at no point
was he informed that VKES would not be paid for the ticket work.
In November 2019, Krakat understood, through an email from White, that Patriot
was submitting all the change orders to the MPO for approval. Other email exchanges from
November 2019 established that Patriot had received payment from the MPO in October
but had not submitted VKES’s tickets for payment.
In April 2020, Paul Bradford, Patriot’s new project manager, contacted Krakat and
advised him for the first time that Patriot did not intend to pay the remaining amount of
approximately $65,000 due to VKES. Bradford stated in his email that Patriot believed
VKES had already been paid for the work under the $200,000 change order and that the
$200,000 charge was “not accurate” and “inflated,” based on VKES’s original quote.
Bradford did not mention anything about the work not being properly authorized.
Dwayne Spriggs, Patriot’s former project manager, testified on behalf of VKES that
VKES’s original base subcontract of $495,000 did not include fire alarm work, and that
7
the approximately $64,000 of ticket work performed by VKES, which included the fire
alarm work, was necessitated by an “emergency situation.” Specifically, Spriggs testified
that the MPO directed that the work had to be addressed immediately. Because VKES was
already on-site, Spriggs asked VKES to perform the work even though it was outside the
scope of their contract. VKES agreed, and Spriggs understood that they would “track it,
document it, and ... submit the paperwork to MPO, through Patriot, for a change order.”
According to Spriggs, Ron White reviewed all the pertinent information and was aware
that Spriggs had directed VKES to perform the additional work. Spriggs described that at
the time that VKES was being asked to complete the additional work, the project was under
scrutiny because they were behind schedule and management was involved in the meetings
and decision-making. Once the problem at the site was identified and the work completed
by VKES, Spriggs thought it was understood that “all of that would be charged back to the
client, via a change order from Patriot.” He described that the discussion regarding VKES
completing and being paid for the work was done onsite, with the MPO project manager
present.
At the close of VKES’s case-in-chief, Patriot moved for judgment, arguing
primarily that the statute of limitations had run. Patriot asserted that the cause of action
accrued when the services were rendered in 2016 and thus, VKES’s complaint, which was
filed in 2020, was after the applicable three-year statute of limitations had run. Patriot also
repeated its argument that, under the pay-when-paid clause of the subcontract, because
Patriot had never been paid for the disputed work it had no corresponding obligation to pay
VKES. Finally, Patriot repeated its argument that VKES failed to meet the contract
8
provision to obtain signed authorizations for the additional work. The trial court denied the
motion.
In Patriot’s case-in-chief, Patriot owner John Gilmore testified that the requirement
for written change orders is important because the government does not typically pay for
work it has not approved. Gilmore stated that regarding emergency situations, “everyone
in our company knows that you either have to call Matt [Timbario] or myself,” and he had
received no calls regarding emergencies on the project. In response to a question from the
court, Gilmore confirmed that Patriot had been “paid completely for this project,” including
the electrical work performed by VKES. He clarified that Patriot had not been paid
specifically for VKES’s approximately $65,000 ticket work because Patriot had not
submitted those invoices to the government for payment, even though the work was
completed and was part of the benefit received by the government in the completion of the
project.
At the close of all the evidence, Patriot renewed its motion for judgment,
incorporating its earlier arguments. The trial court again denied the motion. Following
closing arguments, the court ruled in VKES’s favor:
Spriggs was a senior project manager. That is why he was there. That
was his job, to deal with the sub-contractors. Mr. White had, and was aware
of just about everything that went on. These were direct agents of the
Defendant. And in the email exchanges between VKES and Spriggs, it was
really clear that there was apparent authority. Spriggs never said he needed
approval.
It just simply sounds like a failure of communication between Spriggs
and his superiors, and time was always an issue here. I heard about blackouts,
and power being down, and things had to be done in a timely fashion. So, I
9
can understand why some of that fell through the cracks, but the bottom line
is, this Plaintiff did the work. He did the work and earned the pay.
This is an easy call for the Court. [Patriot was] very anxious to get
paid. They submitted it to whoever was paying them without consideration
of who was going to pay the Plaintiff in this case. And they would never have
been paid if this electric work was not completed. It is simple. So, they were
very generous with his money and his work product. They didn’t hesitate,
because they wanted to get paid the same as he wants to get paid.
This is such an easy decision for me. I think that [Patriot is] not only
extremely unreasonable in not paying this contract, that if it had been argued,
and if I had authority to do it, I would have ordered counsel fees in this case.
* * *
So, this is an easy call. Judgment in favor of [VKES] for [$]64,575.09
with interest and costs. Thank you, all.
Written judgment was recorded on August 19, 2021. Patriot filed a timely notice of
appeal.
DISCUSSION
When a case has been tried without a jury, we “review the case on both the law and
the evidence.” MD. R. 8-131(c). We review questions of law without deference, but “give
due regard to the trial court’s role as fact-finder and will not set aside factual findings unless
they are clearly erroneous.” Clickner v. Magothy River Ass’n Inc., 424 Md. 253, 266
(2012). We consider the evidence presented at trial in the light most favorable to the
prevailing party. Id. If there is substantial evidence to support the trial court’s
determination, “it is not clearly erroneous and cannot be disturbed.” Id. (quoting Ryan v.
Thurston, 276 Md. 390, 392 (1975)).
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I. CONDITION PRECEDENT
We turn first to Patriot’s argument that VKES’s claims should have been barred
because VKES failed to meet a condition precedent to receiving payment. Patriot asserts
that because the subcontract contained at least three explicit clauses stating that there would
be no compensation for any work outside the contract in the absence of written
authorization—and VKES admitted that it did not receive written authorization to perform
the ticket work—Patriot should not be liable for payment for that work. At trial, VKES did
not dispute the subcontract’s language, but countered that the condition precedent was
waived by the parties’ actions. The trial court found that Patriot’s representative, Duane
Spriggs, had acted with apparent authority and waived the written authorization
requirement. We agree.
A condition precedent is “‘a fact, other than a mere lapse of time, which, unless
excused, must exist or occur before a duty of immediate performance of a promise
arises.’” Richard F. Kline, Inc. v. Shook Excavating & Hauling, Inc., 165 Md. App. 262,
273 (2005) (quoting Chirichella v. Erwin, 270 Md. 178, 182 (1973)). In other words,
“‘where a contractual duty is subject to a condition precedent, whether express or implied,
there is no duty of performance and there can be no breach by non-performance until
the condition precedent is either performed or excused.’” All State Home Mortg., Inc. v.
Daniel, 187 Md. App. 166, 182 (2009) (quoting Pradhan v. Maisel, 26 Md. App. 671, 677
(1975)).
Nonetheless, “[p]arties to a contract may waive the requirements of the contract by
subsequent oral agreement or conduct, notwithstanding any provision in the contract that
11
modifications must be in writing.” Kline, 165 Md. App. at 277. In considering whether
waiver or modification of a contract has occurred, courts “look to the totality of a party’s
actions.” Hovnanian Land Inv. Grp., LLC v. Annapolis Towne Ctr. at Parole, LLC, 421
Md. 94, 122 (2011). See also Taylor v. Univ. Nat’l Bank, 263 Md. 59, 63 (1971) (“the
conduct of parties to a contract may be evidence of a subsequent modification of their
contract”). Waiver or modification of an agreement may be established by a preponderance
of the evidence, and “‘[w]hether or not the subsequent conduct of the parties amounts to a
waiver is a question of fact to be decided by the trier of fact.’” Kline, 165 Md. App. at 278
(quoting Hoffman v. Glock, 20 Md. App. 284, 289 (1974)).
The evidence presented at trial showed that Spriggs, Patriot’s project manager,
approached VKES about putting in a bid for the electrical work on the project after the first
subcontractor was unable to complete the job. Spriggs then negotiated the terms of the
subcontract with VKES, and then and thereafter, Spriggs was the only person with whom
VKES had any direct contact regarding the day-to-day work on-site. VKES performed the
fire alarm and other ticket work at Spriggs’s specific direction on an emergency basis after
the MPO declared the work had to be completed immediately.
Even if Spriggs did not have actual authority to bind Patriot in relation to its
subcontractor’s work, the modification of a contract by an agent who lacks actual authority
may nonetheless be enforceable against the principal if the agent acts with apparent
authority. See Dickerson v. Longoria, 414 Md. 419, 442 (2010) (“In the absence of actual
authority, a principal can be bound by the acts of a purported agent when that person has
apparent authority to act on behalf of the principal. Apparent authority results from certain
12
acts or manifestations by the alleged principal to a third party leading the third party to
believe that an agent had authority to act.”); Penowa Coal Sales Co. v. Gibbs & Co., 199
Md. 114, 119 (1952) (“[A]s between the principal and third persons, the mutual rights and
liabilities are governed by the scope of the agent’s apparent authority, which is that
authority which the principal has held the agent out as possessing or which he has permitted
the agent to represent that he possesses and which the principal is estopped to deny.”).
Whether Spriggs was Patriot’s agent for purposes of waiving terms of the subcontract “is
a factual determination that we review using the clearly erroneous standard.” Dickerson,
414 Md. at 433.
Patriot claims that there was no waiver of the condition precedent because Spriggs
did not have the authority to waive or modify the contract’s provisions. The trial court
disagreed, however, and was persuaded that there were sufficient facts to find that Spriggs
acted with apparent authority. Moreover, the trial court was persuaded that Patriot and
VKES waived the written authorization requirement by their actions:
Spriggs was a senior project manager. That is why he was there. That was
his job, to deal with the subcontractors ... And in the email exchanges
between VKES and Spriggs, it was really clear that there was apparent
authority. Spriggs never said he needed approval.
The trial court also pointed out that “you had White and Spriggs there for a reason, right?
Why else would they have been there? To deal with issues like this. They were agents of
Patriot.” As to Spriggs’s apparent authority to authorize VKES’s work, the trial court noted
that the ticket work was not a one-time situation. Instead, “[t]his was ongoing, and
everyone knew this work was being done, and condoned it,” especially as “things
13
developed spontaneously, time was of the essence” in completing the additional work.
Moreover, in addition to the ticket work, Spriggs also directed VKES to perform the
additional work that was subject to the change orders that were executed by Patriot and
accepted by the MPO, evidencing his authority to act on behalf of Patriot.
Then, after the ticket work was completed, Patriot assured VKES on several
occasions that it was going to submit the ticket work invoice to the MPO and that VKES
would be paid for the work. At no time did anyone from Patriot mention that written
authorization was lacking. Even when Bradford, who took over project management for
Patriot in 2020, notified VKES it would not be paid, the reason given was not that the work
had not been authorized properly but that Patriot believed VKES had inflated the price and
thus had already been compensated sufficiently for its work.
For all these reasons, we cannot say that the trial court clearly erred in determining
that Spriggs had at least apparent authority to direct VKES to perform work outside the
subcontract in the absence of written authorization. There was also significant evidence
presented for the trial court to conclude, by a preponderance of the evidence, that Spriggs,
with at least apparent authority, waived the condition precedent that work outside the
subcontract was required to be approved in writing. We, therefore, conclude that the trial
court did not err in finding that the condition precedent in the subcontract was not a bar to
VKES’s recovery of damages.
II. STATUTE OF LIMITATIONS
Patriot next contends that the trial court erred in concluding that VKES’s lawsuit
was not barred by the three-year statute of limitations. Patriot claims that the statute of
14
limitations began to run when VKES completed its work in July 2016, and thus, the
complaint filed in June 2020 was too late. VKES disagrees, asserting that in light of the
pay-when-paid clause in the subcontract, the statute of limitations did not begin to run until
sometime in late 2019 when the MPO paid Patriot, but Patriot refused to pay VKES.1
Under Maryland law, “[a] civil action shall be filed within three years from the date
it accrues unless another provision of the Code provides” otherwise. MD. CODE, COURTS
& JUDICIAL PROCEEDINGS (“CJ”) § 5-101. Contract actions are generally governed by
Maryland’s three-year statute of limitations. Kumar v. Dhanda, 198 Md. App. 337, 342-43
(2011). “As a general rule, the party raising a statute of limitations defense has the burden
of proving that the cause of action accrued prior to the statutory time limit for filing the
suit.” Newell v. Richards, 323 Md. 717, 725 (1991). Ordinarily, “‘the question of accrual
in [CJ] § 5-101 is left to judicial determination,’ unless the determination rests on the
resolution of disputed facts regarding discovery of the wrong.” Poole v. Coakley &
Williams Const., Inc., 423 Md. 91, 131 (2011) (quoting Frederick Rd. Ltd. P’ship v. Brown
& Sturm, 360 Md. 76, 95 (2000)).
1
The trial court rejected Patriot’s argument that the pay-when-paid clause did not
apply because Patriot never submitted VKES’s outstanding invoices to the MPO and was
thus never paid for them. We similarly reject this argument on appeal. When a party to a
contract contributes to the non-occurrence of the condition precedent, a trial court may
apply the “prevention doctrine” to waive the condition precedent. The prevention doctrine
is a generally recognized principle of contract law that states if one party to a contract
“hinders, prevents or makes impossible performance by the other party, the latter’s failure
to perform will be excused.” WSC/2005 LLC v. Trio Ventures Assocs., 460 Md. 244, 267
(2018) (quoting 13 Richard A. Lord, Williston on Contracts § 39:3, at 569 (4th ed. 2013)).
There was sufficient evidence presented to support the implicit finding that, under the
prevention doctrine, Patriot was liable to VKES for payment notwithstanding the alleged
failure to fulfill the “pay-when-paid” clause in the subcontract.
15
The test to be utilized in fixing the accrual date of a cause of action “is to ascertain
the time when [the complaining party] could have first maintained [its] action to a
successful result.” Kumar v. Dhanda, 426 Md. 185, 194 (2012) (quoting James v.
Weisheit, 279 Md. 41, 44 (1977)); accord Henry’s Drive-In, Inc. v. Pappas, 264 Md. 422,
428 (1972) (“[L]imitations will run from the time the plaintiff could have acted.”). “In
Maryland, a cause of action for breach of contract accrues when the contract is breached,
and when ‘the breach was or should have been discovered.’” Boyd v. Bowen, 145 Md. App.
635, 669 (2002) (quoting Jones v. Hyatt Ins. Agency, Inc., 356 Md. 639, 648 (1999)).
Here, the question is whether the three-year statute of limitations began to run when
VKES completed its work on the project and invoiced Patriot in July 2016, or whether, due
to the condition precedent of the pay-when-paid provision in the subcontract, the statute of
limitations began to run when Patriot was paid by the MPO for the general contract but
refused to pay VKES, sometime in late 2019. Resolution of this question depends on the
interpretation of the pay-when-paid clause in the subcontract, which provides:
PAY-WHEN PAID PROVISION: PATRIOT
CONSTRUCTION receipt of payment from OWNER is a
CONDITION PRECEDENT to PATRIOT Construction’s
payment obligation hereunder and the source of such payment.
The interpretation of a contract is a legal question that we review without deference to the
decision of the trial court. Credible Behavioral Health, Inc. v. Johnson, 466 Md. 380, 392
(2019).
Normally, “unless the contract provides otherwise, a cause of action for extra labor
and services accrues when the work is done or services provided.” Mayor & Council of
16
Federalsburg v. Allied Contractors, Inc., 275 Md. 151, 157 (1975). Patriot argues that,
under this principle, the statute of limitations began as soon as VKES completed the ticket
work. But, “it is also true that when the contract requires some action, such as an
accounting, a billing or a hearing, by one or both of the parties before the obligation for
payment fully blossoms, then the performance of that activity is ‘a condition precedent to
recovery of such payments, absent bad faith or collusion.’” Id. (quoting Laurel Race
Course v. Regal Constr., 274 Md. 142, 150 (1975)). VKES argues that under this principle,
the statute of limitations did not begin until the contract’s condition precedent—the pay-
when-paid clause—was satisfied.
Running the three-year statute of limitations from the date VKES’s work was
complete, as Patriot urges, is inconsistent with the pay-when-paid clause of the contract.
Due to the pay-when-paid clause, VKES could not maintain its action against Patriot until
the MPO paid Patriot for the work on the project, but Patriot refused to pay VKES. Had
VKES ignored the pay-when-paid provision and brought this action within three years of
its completion of the work, Patriot could have—and likely would have—moved to dismiss
by virtue of the non-occurrence of the subcontract’s condition precedent that it had not yet
been paid by the MPO. Regardless of how much time had passed since the completion of
the work, the breach of contract did not occur until Patriot was paid by the MPO. We hold,
therefore, that the pay-when-paid provision of the contract was a condition precedent to
VKES’s ability to seek payment and thus the statute of limitations did not begin to run until
17
that condition was satisfied.2 As a result, the trial court properly found that the statute of
limitations did not bar VKES’s lawsuit.
III. PAROL EVIDENCE REGARDING SCOPE OF SUBCONTRACT
Patriot next asserts that, because the contract language was unambiguous, the trial
court erred in admitting prejudicial parol evidence regarding the terms of the contract.
Under the objective theory of contract interpretation utilized by Maryland courts, if the
language of a contract is unambiguous, the intent of the parties is “based on what a
reasonable person in the position of the parties would have understood the language to
mean and not the subjective intent of the parties at the time of formation.” Credible Behav.
Health, 466 Md. at 393 (cleaned up). It is only when a contract’s language is determined
to be ambiguous that a “court is entitled to consider extrinsic or parol evidence to ascertain
the parties’ intentions.” Id. Patriot argues that, because the trial court made no findings that
the language of the subcontract was ambiguous, it should not have considered the
testimony of Krakat and Spriggs regarding their subjective understanding of whether the
fire alarm work was or was not within the scope of VKES’s subcontract. Patriot alleges
that the terms of the subcontract unambiguously included the fire alarm work. VKES
2
Other jurisdictions have held similarly. See, e.g., Shelter Mut. Ins. Co. v. Nash,
184 S.W.3d 425, 428 (Ark. 2004) (“In ordinary contract actions, the statute of limitations
begins to run upon the occurrence of the last element essential to the cause of action” and
“if the right of action depends upon some contingency or a condition precedent, the cause
of action accrues and the statute of limitations begins to run when the contingency occurs
or the condition precedent is complied with.”); JC Ryan EBCO/H&G, LLC v. Lipsky
Enters., Inc., 78 A.D.3d 788, 789-90, (N.Y.S. 2010) (the limitations clause in the
subcontract conflicts with the pay-when-paid clause because the subcontractor’s right to
bring an action against the contractor might not ripen until after the expiration of the
limitations period).
18
counters, first, that the testimony was not parol evidence because it was not offered to
explain, vary, or contradict the language of the subcontract, only to state that the fire alarm
work did not fall within the terms of the subcontract. Second, VKES asserts that Patriot did
not preserve the issue because it did not object each time it was addressed at trial and itself
elicited testimony from the witnesses about whether the ticket work was outside the scope
of the subcontract. We agree with VKES that the issue was not preserved, thus we need
not reach the correct scope of the parol evidence rule.
Patriot points to several instances in which it objected to the trial court’s admission
of what it claimed was parol evidence about whether fire alarm work was included in
VKES’s subcontract. As VKES points out, however, there were also several instances in
which such testimony was admitted without objection by Patriot. And indeed, Patriot’s
own attorney questioned the witnesses about whether the fire alarm work was part of the
original subcontract. Patriot asked Krakat whether it was his position that “you didn’t have
to do any fir[e] alarm work ... in the contract” and that he “didn’t agree to do any of that,”
to which Krakat responded, “No.” Patriot also showed Spriggs VKES’s invoice for the fire
alarm work and asked, “[T]he work that VKES performed, was this outside of its base
contract work, sir?” Spriggs responded, “Yeah, this was outside of the base contract.”
A claim of error in the admission of evidence is “waived if, at another point during
the trial, evidence on the same point is admitted without objection.” DeLeon v. State, 407
Md. 16, 31 (2008). See also Yates v. State, 429 Md. 112, 120 (2012) (“Where competent
evidence of a matter is received, no prejudice is sustained where other objected to evidence
of the same matter is also received.”) (cleaned up); Berry v. State, 155 Md. App. 144, 172
19
(2004) (“The failure to object as soon as the ... evidence was admitted, and on each and
every occasion at which the evidence was elicited, constitutes a waiver of the grounds for
objection.”). Because the alleged parol evidence about which Patriot complains was
received without objection on several occasions, and elicited by Patriot itself on more than
one occasion, Patriot has waived the issue.
IV. MARYLAND RULE 2-522(A)
Patriot next asserts that the trial court’s ruling in favor of VKES was “nearly devoid
of any factual or legal findings concerning the issues raised by the parties” in violation of
Rule 2-522(a), and thus the case should be remanded for a new trial. We disagree.
Maryland Rule 2-522(a) requires that “[i]n a contested court trial, the judge, before
or at the time judgment is entered, shall prepare and file or dictate into the record a brief
statement of the reasons for the decision and the basis of determining any damages.” MD.
R. 2-522(a); see also PAUL V. NIEMEYER & LINDA M. RICHARDS, MARYLAND RULES
COMMENTARY 573 (5th ed. 2014) (“In a case tried to the court without a jury, the court
must make a decision and give its reasons for the decision ... and the basis for determining
the damages, if any. A failure to comply with this requirement may result in a remand.”).
There is no violation of the rule where the court clearly articulated the rationale behind its
decision. See Viamonte v. Viamonte, 131 Md. App. 151, 162 (2000) (“[Rule 2-522(a)]
simply requires the [court] to explain, at or before the time judgment is entered, her reasons
for making her decision.”).
The present case included a hearing on Patriot’s motion to dismiss and a two-day
trial on the merits. During both, Patriot raised essentially the same defenses and the trial
20
court sufficiently articulated the rationale for its decisions. Throughout the motions hearing
and the trial (which included a ruling on Patriot’s motion for judgment), the court
thoroughly detailed the background information, which provided the factual predicate for
its decisions that: (1) Spriggs, as senior project manager, operated as an authorized agent
of Patriot when he directed VKES, with White’s knowledge, to complete the disputed ticket
work on an emergency basis; (2) the continuing course of conduct between VKES and
Spriggs, the only Patriot agent with whom VKES interacted during the pendency of the
project, served as a waiver of the condition precedent that authorization for all additional
work be in writing; (3) VKES had satisfactorily completed the work for which it invoiced
Patriot; and (4) after performing the work in a timely fashion, VKES was entitled to
payment for that work under the terms of the subcontract, especially as Patriot had been
paid by the MPO for the entire general contract. Ultimately, the court determined that “the
bottom line is, this Plaintiff did the work. He did the work and earned the pay” and that
Patriot was “extremely unreasonable in not paying this contract.”
The court’s factual findings and legal conclusions at the end of the trial, while spare,
were not so summarily articulated as to prevent us from adequately assessing the cogency
of its conclusion or the reasonableness of its remedy. See Prahinski v. Prahinski, 75 Md.
App. 113, 136 n.6 (1988) (holding that “a trial court is not required to articulate each step
21
in its thought process”). We conclude, therefore, that the trial court sufficiently complied
with Rule 2-522(a).3
V. MOTION TO DISMISS
Finally, we address Patriot’s contention that the trial court erred in denying its
pretrial motion to dismiss VKES’s complaint for failure to state a claim.
As an initial matter, we note that Maryland’s appellate courts have not yet addressed
whether a party may appeal from the denial of a motion to dismiss for failure to state a
claim or whether success at trial on the merits of an issue renders such an appeal moot. In
the absence of clear direction from the Supreme Court, we assume without deciding that
such an order is appealable and proceed to the merits.4
3
We also note that, even if we agreed with Patriot that the trial court did not comply
with Rule 2-522(a), the remedy would be a remand for a more comprehensive articulation
of the facts and reasoning underlying its ruling on this issue, not, as Patriot argues, a remand
for a new trial. See Shum v. Gaudreau, 322 Md. 242, 243-44 (1991).
4
It is Patriot’s view that the circuit court erred in denying its motion to dismiss and
that it should be able to test the legal sufficiency of VKES’s complaint despite its loss at
trial. In support of this, Patriot points to Maryland Rule 8-131(e), which provides—without
qualification—that “[a]n order denying a motion to dismiss for failure to state a claim upon
which relief can be granted is reviewable only on appeal from the judgment.” MD. R. 8-
131(e); see also Planning Bd. of Howard Cnty. v. Mortimer, 310 Md. 639, 653-54 (1987)
(explaining that the denial of a motion to dismiss “merely maintains the status quo of the
litigation and … is inherently an interlocutory order”); City of Dist. Heights v. Denny, 123
Md. App. 508, 518-19 (1998) (noting that “the denial of [a] motion to dismiss [does] not
constitute a final judgment on the merits”). VKES, by contrast, argues that by prevailing
at trial it has demonstrated that relief on its claim can, in fact, be granted, and the appeal of
the issue should now be moot. In support of this, VKES points us to significant out-of-state
authority, see, e.g., Bennett v. Pippin, 74 F.3d 578, 585 (5th Cir. 1996) (reasoning that
“[w]hen the plaintiff has prevailed after a full trial on the merits, a [trial] court’s denial of
a [motion to dismiss for failure to state a claim] becomes moot. The plaintiff has proved,
not merely alleged, facts sufficient to support relief. Any pleading defect may be cured by
22
We review the grant or denial of a motion to dismiss to determine whether the trial
court was legally correct. Blackstone v. Sharma, 461 Md. 87, 110 (2018); Myers v. State,
248 Md. App. 422, 430-31 (2020). “‘A motion to dismiss for failure to state a claim tests
the sufficiency of the pleadings.’” Iglesias v. Pentagon Title & Escrow, LLC, 206 Md. App.
624, 644 (2012) (quoting Afamefune v. Suburban Hosp., Inc., 385 Md. 677, 681-82 n.4,
(2005)). In such a motion, the defendant asserts that “‘despite the truth of the allegations,
the plaintiff is barred from recovery as a matter of law.’” Id. at 644-45 (quoting Porterfield
v. Mascari II, Inc., 374 Md. 402, 414 (2003)). When we review the trial court’s decision,
we must assume the truth of all well-pleaded facts and allegations contained in the
complaint, and view those facts, as well as all inferences that may reasonably be drawn
from them, in the light most favorable to the non-moving party. Greater Towson Council
of Cmty. Assoc. v. DMS Dev., LLC, 234 Md. App. 388, 408 (2017). An order granting
dismissal is appropriate “‘only if the allegations and permissible inferences, if true, would
not afford relief to the plaintiff.’” Id. (quoting Gomez v. Jackson Hewitt, Inc., 427 Md. 128,
142 (2012)).
In its motion to dismiss, Patriot relied on the same grounds that it later argued at
trial and that it has now also presented on appeal—that VKES’s complaint fails to state a
a motion … and the sufficiency of the plaintiff’s evidence may be tested by an appeal on
that issue”); Denali Real Estate, LLC v. Denali Custom Builders, Inc., 926 N.W.2d 610,
621 (Neb. 2019) (In matter of first impression, “[w]e hold that generally, the denial of a
motion to dismiss ... becomes moot after trial”), although we have some questions about
whether the appellate systems in those jurisdictions are, in relevant respects, analogous. A
definitive resolution of this interesting, if unusual, question is a matter for the Supreme
Court of Maryland, either through its adjudicative or its rulemaking function.
23
claim and should have been dismissed because of the failure to satisfy the condition
precedent in the contract and that the suit was filed beyond the statute of limitations. Thus,
although we have already discussed both questions at length, we will briefly address them
once more.
In its complaint, VKES alleged that in addition to the initial subcontract work and
the two formal change orders, “VKES performed certain additional work on a time and
material work ticket[] outside of the scope of the Subcontract and Change Order work” in
a timely and workmanlike manner and that Patriot and the MPO accepted the work but
refused to pay. VKES specified that it had “satisfied all conditions precedent, or those
conditions have been waived, for initiating this action and VKES may now pursue its cause
of action in this Court.” Patriot argues that VKES’s assertion that any condition precedent
had been satisfied or waived is too conclusory to overcome the motion to dismiss. The trial
court disagreed, as do we.
Patriot asserted that VKES had failed to satisfy the condition precedent of written
authorization for the first time in its motion to dismiss. Until shortly before the filing of its
complaint, VKES believed Patriot would pay the ticket work when the MPO paid Patriot.
When VKES was eventually notified that it would not be paid, the reason given was that
the outstanding invoices had been covered by the “inflated” $200,000 change order. It
would be illogical to expect VKES to have alleged more specific facts in response to a
defense that had not yet been raised and of which it was unaware. Patriot’s motion to
dismiss did not show a legal deficiency in VKES’s complaint, but rather that the
24
satisfaction of the condition precedent was a disputed fact. The trial court was thus legally
correct in denying the motion to dismiss for failure to state a claim.
Finally, we note that “a motion to dismiss ordinarily should not be granted by a trial
court based on the assertion that the cause of action is barred by the statute
of limitations unless it is clear from the facts and allegations on the face of the complaint
that the statute of limitations has run.” Litz v. Md. Dep’t. of Env’t, 434 Md. 623, 641 (2013).
As we have already discussed, due to the pay-when-paid provision of the contract, the
statute of limitations did not begin to run until Patriot was paid by the MPO in October
2019. Thus, VKES’s complaint, filed in June 2020, was well within the three-year statute
of limitations and the trial court properly denied the motion to dismiss on the grounds that
it was time-barred.
JUDGMENT OF THE CIRCUIT
COURT FOR ANNE ARUNDEL
COUNTY AFFIRMED; COSTS TO
BE PAID BY APPELLANT.
25