A.P. Croll & Son, Inc. v. Clark's General Contractors, Inc.

• Court: Superior Court of Delaware
• Decided: April 30, 2015
• Docket: 13C–07–022
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE IN AND FOR SUSSEX COUNTY

A.P. Croll & Son, Inc., : C.A. No.: S13C–07–022 RFS Plaintiff : : v. : : Clark’s General Contractors, Inc., : Defendant :

MEMORANDUM OPINION

Final Decision and Order

Date Submitted: January 6, 2015

Date Decided: April 30, 2015

Dean A. Campbell, Esquire, Law Office of Dean A. Campbell, LLC, Georgetown Professional Park, North Building, 20175 Office Circle, P.O. Box 568, Georgetown, DE, 19947, Attorney for Plaintiff

Jeffrey J. Clark, Esquire, Schmittinger & Rodriguez, P.A., 414 S. State Street, P.O. Box 497, Dover, DE, 19901, Attorney for Defendant

STOKES, J. 1 Presently before the Court is a breach of contract action brought by

subcontractor, A.P. Croll & Son, Inc., (“Croll”), against general contractor, Clark’s

General Contractors, Inc. (“Clark”). Croll seeks to recover losses sustained

resulting from work related to site preparation and a paving subcontract related to

the construction project for Royal Farms in Georgetown, Delaware. Croll alleges

Clark failed to pay Croll for performance of its obligation in accordance with a

written construction contract for the completion of highway reconstruction work.

Croll seeks payment of $24,188.54, plus interest and reasonable attorney’s fees.

Clark maintains Croll did not perform as contractually obligated and is not entitled

to recover losses.

Following the bench trial and upon review of the parties’ post-trial briefs,

the Court finds Croll is entitled to recover losses sustained in the amount of

$5,489.57, plus costs and present and past interest.1 This amount accounts for a

deduction for back fill and top soil, affords set-offs for work performed on Gordy

Street, the additional stone materials, and the difference between the interest paid

and simple interest for payments made by Clark to a subcontractor on behalf of

Croll.

1 Interest is to be calculated at the simple legal interest rate. See e.g., O'Riley v. Rogers, 2013 WL 4773076, at *1 (Del. Super. Sept. 4, 2013) (applying the legal interest rate); see also, David L. Finger & Louis J. Finger, Delaware Trial Handbook, § 28.10 (1994).

2 FACTS AND PROCEDURAL POSTURE

In April 2012 Croll entered into a contract, prepared by Clark, in which

Croll was to perform work related to highway reconstruction in and around Royal

Farms located in Georgetown, Delaware. 2 The Royal Farms project required

substantial highway reconstruction work at the intersection of US Route 113

(“113”) and Route 404 (“404”).3 Along 113, 404, and Gordy Street is where most

of the work related to the present dispute took place. 4

Emory Hill was hired to oversee the project and Clark was hired as a general

contractor to construct the new store. 5 Clark subcontracted with Croll to complete

roadwork, including site work within the right-of-way as defined by Delaware

Department of Transportation (“Del Dot”), for the agreed upon amount of

$298,353.31. 6

As work progressed, incremental payments were made by Clark to Croll. 7 A

dispute arose after four applications were paid, totaling $192,880.73, leaving an

alleged balance of $105,472.58 owed to Croll.8 In July 2013, Croll filed a

Complaint alleging Clark had breached their contract by failing to pay Croll for

2 Pl’s Ex. E. 3 Id. 4 Id. 5 Id. 6 Id. 7 Pretrial Stipulation and Order at ¶ 3–4. 8 Id.; Compl. at ¶ 7. 3 work performed. 9 Before trial, most of the disputes raised in the Complaint were

resolved.

At this juncture, the parties’ contentions center on a handful of transactions.

First, Emory Hill paid Croll directly for work related to the back fill and top-soil

on 404 and 113 and subtracted the amount due, $8,884.50, to Clark. 10 Second,

Clark paid $11,870 to an alternative contractor, Stanley’s Asphalt, to pave Gordy

Street and $520.08 for additional stone material to complete work allegedly within

Croll’s responsibility under the contract. 11 Lastly, Croll disputes the payment

Clark paid to Shea Concrete, LTD (“Shea”), a party subcontracted by Croll.12

Croll contends Shea was not entitled to interest in the first instance, and in the

alternative argues to reduce the amount of interest paid from $2,914.96, calculated

at a rate of twenty-four percent, to $339.35 in order to reflect interest calculated at

the legal interest rate.13

Croll maintains Clark has breached the contract by failing to pay for work

performed. 14 Defendant Clark asserts Croll failed to perform the work as

9 See generally, Compl. (asserting a total sum due to Croll). 10 Pl.’s Post Trial Closing Reply Mem. at 1–2; Def.’s Closing Mem. at 2–3. 11 Pl.’s Post Trial Closing Reply Mem. at 4–5; Def.’s Closing Mem. at 3–4. 12 Pl.’s Post Trial Closing Reply Mem. at 4–5; Pretrial Stipulation and Order at ¶ 4 (alleging “Clark paid Shea Concrete $26,522.34 on behalf of Croll”). 13 Pl.’s Post Trial Closing Reply Mem. at 4–5. 14 See generally, Compl. (seeking damages for failure to pay for work performed); Pl.’s Post Trial Closing Reply Mem. 4 contractually obligated resulting in a breach of contract.15 As such, Clark asserts

funds are not due to Croll, and in the alternative that set-offs are due to Clark.16

Following a bench trial held on November 19, 2014 the Court reserved

decision pending receipt of post-trial briefs.

DISCUSSION

Both parties in this matter have abundant experience; both parties are

particularly knowledgeable about their chosen profession. Moreover, some of the

parties involved in this dispute have a history; some parties even have a prior

course of dealings. In fact, Croll and Clark were known to each other.

Looking at the issue globally, both sides are not without fault in terms of

how things fell apart. On Clark’s side of the ledger, an amount of $24,188.54 was

owed.17 On the other hand, Croll, after making an initial payment failed to pay—

even the principal amount—which escalated into the demand of interest by Shea at

a rate of twenty-four percent. 18

Moreover, with Croll’s knowledge as a subcontractor in this large project

Croll was aware the bills were paid by Clark in order to obtain a release for the

15 Def.’s Closing Mem. at 5. 16 Id. 17 Pl.’s Opening Post Trial Closing Mem. at 2. 18 Pl.’s Post Trial Closing Reply Mem. at 4–5. 5 Royal Farms project. Although, Croll was not paid in full for the work performed,

it is not tenable in the trade to fail to pay subcontractors, such as Shea in this case,

based on the failure to receive all funds due under Delaware law. 19 The evidence

does not reflect a finding of intent to make Clark’s payment to Croll a condition

precedent of Croll’s payment to Shea.20 As such, some of the present controversy

regarding Shea could have been avoided had Croll paid Shea when their right to

payment matured.

Turning to contract formation, the contract itself was finalized in April. 21 It

is important to note Croll’s proposal was submitted one month before the contract

was finalized.22 The proposal offered more details, including line items, compared

to the scant contract developed in April by Clark.23 The bottom line of Croll’s

work was $298,353.31; however, the proposal was not signed by Clark and the

19 See e.g.,Worthy Bros. Pipeline Corp. v. Acierno, 1996 WL 527347, at *2 (Del. Super. July 26, 1996) aff'd, 693 A.2d 1066 (Del. 1997) (resolving a dispute against a subcontractor raised by a paving company finding when a reasonable time expires the paving company’s right to payment matures notwithstanding receipt of payment from a general contractor in the absence of an unambiguous expression of the parties’ intent to make receipt of payment a condition precedent). 20 Pl’s Trial Ex. E; see e.g., Volair Contractors, Inc. v. Coastal Mechanical, Inc.,1986 WL 13982, (Del. Dec. 1, 1986) at *1 (requiring an unambiguous expression of intent to establish a condition precedent). 21 Pretrial Stipulation and Order at ¶ 1. 22 Pl’s Trial Ex. C. 23 Id. 6 scope of work in the resulting contract was different. 24 Accordingly, the Court

finds the proposal is a mere offer and is not a contract. 25

After analyzing the record, it is clear the April agreement did not adopt the

proposal, nor was the proposal incorporated by reference.26 Consistent with

Delaware law, the Court finds Croll’s proposal was an offer that was not accepted

because the terms were not identical.27 Instead, Clark presented a counter-offer,

the contract at issue, which became a contract when Croll accepted the terms as

evidenced by their signed agreement.28 Under Delaware law, Croll accepted

Clark’s counter-offer by manifesting intent to be bound by Croll’s terms in

consideration for payment for work performed forming a valid contract. 29

Prior to signing a binding contract, both parties ought to have been aware of

the scope of work the contract entailed before electing to be bound by the terms.

To a certain extent, the parties were cautious enough to include a modification

24 Compare Pl’s Trial Ex. C, with, Pl’s Trial Ex. E. 25 See e.g., Blakeley v. Scanlon, 604 A.2d 416 (Del. 1991) (holding “[u]nder Delaware law, it is an elementary principle that an acceptance of an offer, in order to be effectual, must be identical with the offer and unconditional. One aspect of the principle is stated in Restatement, Contracts, § 60: “A reply to an offer, although purporting to accept it, which adds qualifications or requires performance of conditions, is not an acceptance but is a counter offer.” (internal citations removed) (emphasis removed)). 26 Compare Pl’s Trial Ex. C, with, Pl’s Trial Ex. E. 27 See generally, Friel v. Jones, 206 A.2d 232, 233 (Del. Ch. 1964); see also, 1 Arthur L. Corbin, Corbin on Contracts § 82 (1963). 28 Id.; see also, Pl’s Trial Ex. E. 29 Friel, 206 A.2d at 233. 7 clarifying their responsibilities with respect to the south side of 404; however, the

parties failed to delineate the specifics for the remainder of the project. 30

The modification itself does not define the sole limitation of Croll’s

expected work performance. 31 As such, it is difficult at this latent stage to

determine the total expected scope of work performance based on the four-corners

of the contract alone. 32 The general idea seems to be Croll would do the outside

work because Croll had the Del Dot experience, Clark would do the inside work,

and Del Dot presumably would submit approvals along the way. 33

To the extent the parties’ intent can be ascertained and aligned with the

simple facts giving meaning to the contract, the contract will dictate the outcome

of the controversy. 34 Where the contract is highly susceptible to different

interpretations by a reasonable person in the parties’ position, the contract shall be

interpreted against the drafter, Clark. 35

30 Pl’s Trial Ex. E. (containing the following handwritten script, “on south side of 404 only” under a diagonal dash from the work sidewalks followed by the capital letters “CT”). 31 Id. 32 Id. 33 Def.’s Closing Mem. at 2; Shea Dep. 28:17–19. 34 Holland v. Hannan, 456 A.2d 807, 815 (D.C. 1983) (adopting the principle “[a contract] is not ambiguous where the court can determine its meaning without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends”) (quoting Burbridge v. Howard Univ., 305 A.2d 245, 247 (D.C. 1973)). 35 Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992) (explaining the doctrine of contra proferentum which requires ambiguous language to be construed against the drafter). 8 BACK FILL AND TOP SOIL

Croll refused to do the work accounting for the back fill and top soil on 404

and 113 without a separate payment. 36 As a result, Emory Hill paid Croll directly

and thusly reduced the amount paid to Clark. 37 Back fill and top soil work was

required between the curb and the sidewalk. 38 This work is not clearly spelled out

in the contract, but this work is alluded to in the contract by the term “top soil and

seeding” and as necessary components to the related work. 39 According to contra

proferentem this portion of the contract would be interpreted against Clark,40

however; Croll’s interpretation of the contract is not reasonable when looking at

the simple facts. 41

Under Delaware law, a court need not adopt an interpretation of a contract

“contrary to both the plain meaning of the document and logic, and to reach an

absurd, unfounded result.”42 After careful analysis of the record, Croll’s

interpretation is unreasonable. The contract outlining Croll’s duty to perform

states: “the highway reconstruction work within right away of U.S. 113, Route

36 Def.’s Closing Mem. at 2. 37 Id. 38 Id.; see also, Def.’s Ex. 1. 39 Pl’s Trial Ex. E. 40 Rhone-Poulenc Basic Chemicals Co., 616 A.2d at 1196. 41 Pl.’s Post Trial Closing Reply Mem. at 2–3. 42 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010). 9 18/404 Gordy road necessary…top soil and seeding” [sic]. 43 The top soil and

backfill work in dispute were necessary highway reconstruction work for this

project located between the curb and the line of construction, thus within the right

of way indicated in the contract. 44 Accordingly, performing back fill and top soil

work appear to be within Croll’s duty to perform under this contract. 45

Moreover, finding back fill and top soil work within Croll’s responsibility is

consistent with the bulk of evidence provided in the record. The record provides

testimony from Emory Hill, testimony from Del Dot representatives, e-mail

correspondence between Emory Hill and Croll, and Croll’s own testimony that

bolster the reasonableness of this interpretation. 46 As such, a reasonable person in

the parties’ position would have interpreted the contract as defining the back fill

and top soil work within Croll’s responsibility, as did “everyone on the project,

with purportedly the exception of Croll.” 47 Thus, the Court finds set-off in the

amount of $8,884.50 will be charged against Croll as Emory Hill back-charged the

same amount to Clark.

43 Pl.’s Trial Ex. E. 44 Def.’s Ex. 1. 45 Id. 46 Def.’s Closing Mem. at 2–3 (providing a detailed description of the testimony at trial and quoting the following pertinent portion of the e-mail correspondence between an Emory Hill representative and Croll: “[i]n talking with the DelDOT inspector the area along RT 113 up to the LOC is perceived as the DelDot ROW and based on this AP Croll would own the top soil between the curb and the LOC line”). 47 Def.’s Closing Mem. at 3. 10 GORDY STREET

Croll disputes whether there was a duty under the contract to perform the

paving work on Gordy Street. 48 Essentially, Croll asserts Gordy Street is not a

‘highway,’ therefore work on Gordy Street could not be considered necessary

highway reconstruction work.49

Generally, “[c]ourts will not torture contractual terms to impart ambiguity

where ordinary meaning leaves no room for uncertainty.” 50 Here, at issue is the

term highway. The Delaware Court of Chancery held the word highway “is a

“generic name for all kinds of public ways including country and township roads,

streets, and alleys.” 51 The Court finds a reasonable person in the parties’ position

would interpret the term highway to include Gordy Street. With this reading, Croll

was under a contractual obligation to perform paving on Gordy Street.

Additionally, the contract specifically refers to “Gordy Street” and “asphalt

paving.”52 These references combined with the parties’ respective course of

performance indicate Croll was under a duty to perform site work on Gordy

48 Pl.’s Post Trial Closing Repy Mem. at 3. 49 Id. 50 Zullo v. Smith, 427 A.2d 409, 412 (Conn. 1980). 51 Scureman v. Judge, 626 A.2d 5, 11 n.3 (Del. Ch. 1992) aff'd sub nom. Wilmington Trust Co. v. Judge, 628 A.2d 85 (Del. 1993). 52 Pl.’s Trial Ex. E. 11 Street. 53 The work performed on the north and south side of Gordy Street in

accordance with the state inspection also dovetails with the general intent of the

parties who collaborated in order to capitalize on Croll’s expertise in working with

Del Dot.54

Croll did the preparatory work 55 for the road but failed to pave it.56 The

proffered reason at trial—Croll did the work gratuitously—is not persuasive and

inconsistent with the evidence on the record. 57 Moreover, Croll had the billings for

this work yet did not object to the work itself, only the interest rate as to Shea.58

As such, the contract, logic, course of performance, and trade norms demonstrate a

reasonable mind would interpret Croll’s responsibilities under the contract as

including paving and other necessary work on Gordy Street.

Following this reasonable interpretation and the course of performance of

the parties, Croll was under a duty to perform the work on Gordy Street and Clark

is due a set-off of $11,870.

53 Id.; see also, Def.’s Closing Mem. at 3–4. 54 Def.’s Closing Mem. at 3; Shea Dep. 28:17–19 (demonstrating “[e]verybody just knew Croll was doing the state work and I [, Shea,] was doing the curb work for them”). 55 Shea Dep. 34:13–19 (attributing the following work to Croll: “demo[ing] the existing concrete, roto-mill[ing] the street to get the blacktop out of the way,” getting the “sub-base ready, put[ing] the stone in, which is required by the state under my work”). 56 Def.’s Closing Mem. at 3–4. 57 Id. 58 Id. 12 ADDITIONAL MATERIAL REQUIRED TO FILL RIGHT-OF-WAY

With respect to the additional materials, the 22 tons of stones, Clark will also

be afforded a set-off in the amount of $520.08. 59 This amount has been

unchallenged by Croll and the stones were an anticipated expense related to the

project.60

INTEREST PAYMENT TO SHEA

It is undisputed that Clark paid money owed to a subcontractor, Shea, on

behalf of Croll.61 Ultimately, at issue before the Court is the past-due interest paid

by Clark to Shea totaling $2,914.96.62 Croll contends there was not a specified

contractual term which entitled Shea to a payment of interest. 63 Thusly, Croll

maintains Clark wrongfully paid Shea interest because he was not entitled to any

interest per their contractual arrangement. 64 Croll disputes the entire interest

payment made to Shea, and in the alternative seeks a set-off utilizing an alternative

59 Id. at 4–5. 60 Id. 61 Pl.’s Post Trial Closing Br. at 4–5; Pretrial Stipulation and Order at ¶ 4 (alleging “Clark paid Shea Concrete $26,522.34 on behalf of Croll”). 62 Pl.’s Post Trial Closing Reply Mem. at 4–5. 63 Id. 64 Id. 13 interest rate. 65 The interest payment was calculated at a rate of twenty-four

percent. 66 Croll suggests employing the legal interest rate of 5.75 percent. 67

Generally, “[i]nterest is money awarded to a successful plaintiff in a civil

action beyond the amount of the judgment to compensate the plaintiff for

additional losses resulting from being deprived of the use of the money during the

period between the injury and payment.” 68 Here, Shea, although not a party to this

case, ordinarily would be entitled to interest for being deprived of the use of money

while awaiting payment.69

After establishing that interest was due to Shea in the ordinary course of

business, the question remaining is what interest rate should be applied. 70 This

Court has held interest should be calculated using the same rate when possible.71

As interest is due to Croll at the legal interest rate, the interest rate for this dispute

shall be calculated at the same rate. 72 As such, the Court finds Croll is responsible

65 Id. 66 Id. 67 Id.; see also, O'Riley, 2013 WL 4773076, at *1 (explaining “[t]he rate of interest allowed in actions at law generally is equated to the ‘legal rate’ of interest described in 6 Del. C. § 2301 (quoting David L. Finger & Louis J. Finger, Delaware Trial Handbook, § 28.10 (1994))). 68 O'Riley, 2013 WL 4773076, at *1. 69 Id. 70 Id. 71 Id. (holding interest should be calculated using the same rate rather than two separate rates referring to pre-judgment and post-judgment interest). 72 Id. 14 for past-due interest calculated at the legal interest rate.73 Utilizing the legal

interest rate would reduce the interest amount from $2,914.96 to $339.35.74 As

such, a set-off for will be afforded to Croll in the amount of $2,575.61.

CONCLUSION

For the foregoing reasons, an award of $5,489.57, accounting for the above-

mentioned set-offs, plus costs and present and past interest calculated at the legal

interest rate is to be entered for Plaintiff, Croll.

IT IS SO ORDERED

/s/ Richard F. Stokes

________________________

Richard F. Stokes, Judge

cc: Prothonotary

73 Id. 74 Pl.’s Post Trial Closing Reply Memo. at 4–5. 15