Trinity Contracting, Inc. v. Municipal Sewage Authority of the Twp. of Sewickley and Gibson-Thomas Engineering Co., Inc.

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Trinity Contracting, Inc. :
: No. 523 C.D. 2015
v. : Argued: November 16, 2015
:
Municipal Sewage Authority of :
the Township of Sewickley and :
Gibson-Thomas Engineering Co., Inc., :
:
Appellants :
Trinity Contracting, Inc., :
: No. 524 C.D. 2015
Appellant : Argued: November 16, 2015
:
v. :
:
Municipal Sewage Authority of :
the Township of Sewickley and :
Gibson-Thomas Engineering Co., Inc. :
BEFORE: HONORABLE BERNARD L. McGINLEY, Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY SENIOR JUDGE FRIEDMAN FILED: December 15, 2015
The Municipal Sewage Authority of the Township of Sewickley
(Authority) and Gibson-Thomas Engineering Company, Inc. (Gibson) (together,
Appellants) appeal from the December 22, 2014, order of the Court of Common Pleas
of Westmoreland County (trial court) denying their post-trial motions. Trinity
Contracting, Inc. (Trinity) has also cross-appealed from the trial court’s December
22, 2014, order denying its post-trial motion.1 We affirm.
In 2012, Trinity filed a complaint against Appellants, alleging, inter alia,
claims for breach of contract and negligent misrepresentation relating to the
construction of a sewage treatment plant (Project) in Sewickley Township,
Pennsylvania. Sewickley Township commissioned the Authority to finance, plan,
and construct a public sanitary sewer system. The Authority entered into a contract
with Gibson to design the Project, perform the engineering work, and oversee the
Project.
Gibson hired Dr. James Hamel as its geotechnical consultant for the
Project. On March 28, 2007, Dr. Hamel wrote a letter to Gibson identifying five
geotechnical problems with the Project site: (1) surface subsidence from abandoned
mining operations; (2) total and differential soil settlement from surface mining;
(3) landslides in excavated slopes on the east side of the site; (4) mine drainage from
surface and underground mining operations; and (5) dewatering.
Thereafter, Gibson hired Professional Service Industries, Inc. to perform
boring work and prepare a geotechnical engineering services report (Geotechnical
Report) for the Project. Gibson completed its site design and Project layout in
August 2007. After receiving the Geotechnical Report in January 2008, Gibson did
not change the Project design or layout.
1
The appeals have been consolidated for disposition in this court.
2
The Authority put the Project out for bid on March 6, 2009. The Project
was solicited as a “plan-and-spec” project, meaning that Gibson completely designed
the Project, and interested bidders were instructed that if they followed Gibson’s
plans and specifications, they could successfully complete the Project. Gibson did
not supply a copy of the Geotechnical Report to prospective bidders.
In August 2009, Gibson awarded Trinity the construction contract
(Contract) in the amount of $4,872,648.40. The scope of Trinity’s work included
performing the general and mechanical construction necessary for a complete sewage
treatment plant. Planned activities included subsurface mine grouting, pressure
grouting, extension of the water lines, and construction of the sanitary sewer force
main. Under the Contract, Trinity agreed to substantially complete the work by
November 10, 2010.
After construction began, Trinity and its subcontractors encountered
unforeseen, subsurface conditions and geotechnical difficulties at the site, which
required Gibson to modify the Project design and layout. Throughout the course of
the Project, the Authority and Trinity entered into five Change Orders, which resulted
in several site redesigns and eventually increased the Contract amount to
$5,362,627.79. The Change Orders also moved the substantial completion date to
February 25, 2011.
By letter dated January 5, 2012, Gibson notified Trinity that its work
was deemed substantially complete on November 8, 2011, and, as a result, Gibson
3
was assessing liquidated damages against Trinity in the amount of $210,050. Trinity
filed the instant suit against Appellants on January 27, 2012.
In March 2014, the trial court held a seven-day, non-jury trial, after
which the parties submitted proposed findings of fact and conclusions of law. On
September 30, 2014, the trial court entered judgment in favor of Trinity and against
Appellants in the amount of $1,049,011.632 plus $18,140.39 in interest, with interest
accruing at a rate of $17.70 per day until the underlying award is satisfied. The trial
court also found in the Authority’s favor with respect to Trinity’s counterclaim for
bad faith. Appellants and Trinity filed post-trial motions, which the trial court denied
on December 22, 2014. These appeals followed.3
Appellants’ Appeal
Appellants first assert that the trial court erred in concluding that the
Authority breached its contract with Trinity by failing to give Trinity additional time
and money that was not contemplated by the Change Orders. Appellants claim that
because the Contract documents, including the Change Orders, addressed all of the
issues that arose during the course of the Project, the Authority properly denied
Trinity’s requests for additional time and money. We disagree.
2
This amount included the contract balance of $325,288.83; schedule-related damages of
$359,785.54; and additional work-scope damages of $363,937.26. (Trial Ct. Order, 9/30/14, at 1.)
3
Our review of an order denying post-trial motions is limited to determining whether the
trial court abused its discretion or committed an error of law. Wright v. Denny, 33 A.3d 687, 688
n.2 (Pa. Cmwlth. 2011).
4
We conclude that the trial court correctly determined that the language
contained in the Contract and Change Orders, when read together, constituted a
reservation of rights to additional compensation. The Contract stated that the
Contract times and/or price “will be equitably adjusted” if the existence of differing
subsurface or physical conditions at the site cause an increase or decrease in Trinity’s
costs or the time required to perform the work. (Trial Ct. Op. at 9 (citing Section
4.03.C of the Contract).) In addition, the Change Orders expressly “exclude[d] any
and all work not specifically listed above.” (Id. at 10.) The trial court concluded that
by this language, Trinity reserved its right to request equitable adjustments to the
Contract price and times at a later date due to unforeseen, differing site conditions.4
We find no error.
Moreover, the evidence showed that Trinity incurred a significant
amount of additional work and costs as a result of Gibson’s Project redesigns, which
fell outside the scope of work described in the Change Orders. Thus, the trial court
4
The trial court explained:
To the extent that language of the contract or change orders was vague, it was so
necessarily, as the parties were encountering unknown issues and could not insert
values for items such as the additional number of days it would take to complete
certain tasks, or the additional costs, duties and obligations to be undertaken in the
event that unforeseen conditions arose. In other words, the language of the contract
was not vague, but rather drafted with the foresight that unanticipated problems often
arise during construction, and in such events, it is sometimes wise for the parties to
evidence their desire to complete the project nonetheless. This is in fact what was
contemplated by the contract here at issue. Further, this was drafted with an eye
toward providing fairness to both parties: fair compensation to Trinity in exchange
for the promise of fair completion of the project in spite of unanticipated difficulties.
(Trial Ct. Op. at 11.)
5
correctly determined that the Authority breached the Contract by failing to equitably
adjust the Contract time and price to account for delays and costs incurred by Trinity
due to unforeseen site conditions.
Next, Appellants contend that the trial court erred in concluding that
Gibson negligently misrepresented geotechnical information to Trinity. We disagree.
In Bilt-Rite Contractors, Inc. v. Architectural Studio, 866 A.2d 270, 287
(Pa. 2005), the Pennsylvania Supreme Court held that a building contractor can
maintain a claim for negligent misrepresentation against a design professional
without privity of contract, stating:
[W]e hereby adopt Section 552 [of the Restatement
(Second) of Torts] as the law in Pennsylvania in cases
where information is negligently supplied by one in the
business of supplying information, such as an architect or
design professional, and where it is foreseeable that the
information will be used and relied upon by third persons,
even if the third parties have no direct contractual
relationship with the supplier of information.
Here, the evidence established that Gibson, the Project design
professional, negligently misrepresented the site conditions to Trinity. While it is
true that Gibson did not possess the Geotechnical Report until after it had finalized
the initial Project design, that fact does not undermine the trial court’s finding of
negligence. Gibson had actual notice of the geotechnical data 14 months before the
bid solicitation, yet it failed to revise the Project design in light of that data. Gibson
represented to Trinity that the Project could be constructed as originally designed,
6
despite knowing that the Geotechnical Report showed otherwise. Contrary to
Appellants’ assertion, Trinity could not have conducted its own independent review
of the geotechnical data before bidding on the Project because Gibson failed to
include the Geotechnical Report in the Contract documents. In any event, it was not
Trinity’s burden to independently verify the representations Appellants made to
Trinity during the bidding process before Trinity could rely on such information, and
Appellants offer no legal support for such an argument.
Finally, Appellants assert that the trial court erroneously concluded that
the Authority was not entitled to liquidated damages, even though Trinity did not
substantially complete the work within the Contract time. A liquidated damages
clause “ensures recovery in cases where computation of actual damages would be
speculative.” A.G. Cullen Construction, Inc. v. State System of Higher Education,
898 A.2d 1145, 1162 (Pa. Cmwlth. 2006). The party seeking to enforce a liquidated
damages clause has the burden of showing that the contract work was not completed
by the agreed-upon date and that liquidated damages are due and owing. Id. The
burden then shifts to the contractor to show that any delays were excusable and that
the contractor should be relieved of all or part of the damages assessed. Id.Here, the trial court found that Trinity “acted with due diligence in
attempting to complete the contract on time, in spite of difficulties encountered at the
site,” and that Trinity “made efforts to mitigate damages.” (Trial Ct. Op. at 9-10.)
The Project delays were attributable to unforeseen site conditions that required extra
work of Trinity. We agree with Trinity that this case is similar to Department of
Transportation v. Cumberland Construction Company, 494 A.2d 520 (Pa. Cmwlth.
7
1985). In Cumberland, this court held that the Department of Transportation (DOT)
was not entitled to retain delay damages from the amount due to Cumberland
Construction Company under a construction contract because:
[t]he record clearly shows that any delay for which
liquidated damages were assessed by [DOT] were properly
attributable to extra work ordered by [DOT] and unforeseen
conditions encountered at the job site for which
Cumberland is not responsible and of which [DOT] was
aware but failed to reveal to Cumberland.
Id. at 524. As in Cumberland, the delays here were caused by unforeseen site
conditions about which Appellants were aware but failed to reveal to Trinity before
the Project. Because the evidence showed that Trinity was not responsible for the
delays, the trial court properly denied Appellants’ liquidated damages claim.
Trinity’s Cross-Appeal
In its cross-appeal, Trinity asserts that the trial court erred in denying its
claim for penalties and attorneys’ fees under section 3935 of the Commonwealth
Procurement Code (Code), 62 Pa. C.S. §3935.5 Trinity claims that the evidence
demonstrates that the Authority acted in bad faith by: withholding $75,000 for
masonry work, even though it was satisfied with the quality of the work; withholding
money for punch-list items; and withholding an unjustifiable amount of liquidated
damages. We cannot agree.
5
Section 3935(a) of the Code permits the trial court to impose “a penalty equal to 1% per
month of the amount that was withheld in bad faith . . . to the extent that the withholding was
arbitrary or vexatious.” 62 Pa. C.S. §3935(a). Section 3935(b) of the Code provides that the trial
court may also award the prevailing party reasonable attorneys’ fees. 62 Pa. C.S. §3935(b).
8
The trial court has “great latitude and discretion” in deciding whether to
award penalties and attorneys’ fees under section 3935 of the Code. A.G. Cullen, 898
A.2d at 1164. A trial court’s denial of bad faith damages “is within its sound
discretion, and we will only reverse [if we find] a clear abuse of discretion.”
Department of General Services v. Pittsburgh Building Company, 920 A.2d 973, 990
(Pa. Cmwlth. 2007). Under section 3935 of the Code, “bad faith” is the arbitrary or
vexatious withholding of payment to a contractor. 62 Pa. C.S. §3935(a) & (b). A
withholding is arbitrary if it is “‘based on random or convenient selection or choice
rather [than] on reason or nature.’” Department of General Services, 920 A.2d at 991(citation omitted). A withholding is vexatious if it “‘is committed without sufficient
ground in either law or in fact with the purpose of causing annoyance.’” Id. (citation
omitted).
Here, the trial court concluded that the evidence did not support a
finding of bad faith. Throughout the course of the Project, many unanticipated
problems arose, and the parties frequently disagreed as to how to handle those
problems. Despite their differences, the Authority and Trinity worked together on
several occasions to make changes to the Contract to address those problems. As the
trial court observed, the parties “continu[ed] to work with one another, trusting one
another that their problems would eventually be resolved,” which “allowed the
[P]roject to be completed ultimately, but also gave rise to a culture which left
significant room for confusion and misunderstanding.” (Trial Ct. Op. at 25.) The
trial court, as the factfinder, determined that the Authority’s decisions to withhold the
funds at issue were based on reasonable, bona fide concerns and were neither random
9
nor undertaken with the sole purpose of annoying Trinity. We find no clear abuse of
discretion. See James Corporation v. North Allegheny School District, 938 A.2d 474,
489-90 (Pa. Cmwlth. 2007) (stating that an appellate court may not reject a
factfinder’s bad faith determination absent a clear abuse of discretion).
Accordingly, we affirm.
___________________________________
ROCHELLE S. FRIEDMAN, Senior Judge
10
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Trinity Contracting, Inc. :
: No. 523 C.D. 2015
v. :
:
Municipal Sewage Authority of :
the Township of Sewickley and :
Gibson-Thomas Engineering Co., Inc., :
:
Appellants :
Trinity Contracting, Inc., :
: No. 524 C.D. 2015
Appellant :
:
v. :
:
Municipal Sewage Authority of :
the Township of Sewickley and :
Gibson-Thomas Engineering Co., Inc. :
ORDER
AND NOW, this 15th day of December, 2015, we hereby affirm the
December 22, 2014, order of the Court of Common Pleas of Westmoreland County.
___________________________________
ROCHELLE S. FRIEDMAN, Senior Judge