Ark Wrecking Co. of Oklahoma, Inc. v. Vargas Construction Co.

2016 OK CIV APP 67, 394 P.3d 261, 2016 Okla. Civ. App. LEXIS 35, 2016 WL 6539307
CourtCourt of Civil Appeals of Oklahoma
DecidedFebruary 5, 2016
DocketCase No. 114,163
StatusPublished

This text of 2016 OK CIV APP 67 (Ark Wrecking Co. of Oklahoma, Inc. v. Vargas Construction Co.) is published on Counsel Stack Legal Research, covering Court of Civil Appeals of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ark Wrecking Co. of Oklahoma, Inc. v. Vargas Construction Co., 2016 OK CIV APP 67, 394 P.3d 261, 2016 Okla. Civ. App. LEXIS 35, 2016 WL 6539307 (Okla. Ct. App. 2016).

Opinion

Opinion by

Larry Joplin, Judge:

¶ 1 PlamtiffiAppellant, Ark Wrecking Co., seeks review of the trial court’s order granting the cross-motion for summary judgment of Defendant/Third-Party Defendant, Independent School District No. 1, Tulsa County, Oklahoma (Tulsa Public Schools or TPS). Ark Wrecking/Appellant sought summary judgment against Defendants, Vargas Construction Co. and Tulsa Public Schools, arguing that under Oklahoma’s Little Miller Act (61 O.S. 2001 § 1) payment and performance bonds should have been posted by the general contractor, Vargas, to protect subcontractors from nonpayment. Tulsa Public Schools filed a combined response and cross-motion for summary judgment, asserting Vargas was a construction manager of the school renovation project, not a general contractor, and as such was not required to post bonds under the authority provided in McMaster Constr. v. Bd. of Regents of Oklahoma Colleges, 1997 OK 21, 934 P.2d 335.

¶ 2 Vargas Construction and Tulsa Public Schools entered into a construction management agreement on June 20, 2011. Section 8.1 of the construction management contract provided, “[t]he Construction Manager shall not be required to furnish bonds covering performance of the Contract and payment of obligations arising thereunder except as required by the Act on portions of the Work which the Construction Manager self perform (sic).” The construction management contract also provided for a guaranteed maximum price and to the extent the cost of the work exceeded the guaranteed maximum price, the construction manager (Vargas) shall bear the costs in excess of the guaranteed price. The construction management contract gave Vargas the right to self-perform any of the work required for the project, and in such an event, Vargas was to be treated as any other bidder, including being subject to the Competitive Bidding Act, 61 O.S. §§ 101 et seq.

¶ 3 On December 2, 2012, Tulsa Public Schools and Ark Wrecking entered into a $149,000 contract for demolition work for what was known as the Eisenhower Project. The TPS-Ark contract contained an acknowledgment the contract “has been or will be assigned to Vargas Construction Company, the Projects (sic) Construction Manager[.]” About two weeks after entering into the contract, December 17, 2012, the TPS-Ark contract was assigned to Vargas. The Executive Director of Bond Projects and Energy Management for Tulsa Public Schools signed an affidavit attesting that the school district paid to Vargas the $149,000 provided for in the demolition contract. Ark asserts Vargas has not paid those funds to Ark for the demolition work it performed and that Vargas is no longer financially viable, and therefore judgment proof. Vargas argued the demolition work was not performed properly and funds were needed to correct problems caused by Ark’s performance of the demolition.

¶ 4 Ark’s motion for summary judgment argued the McMaster case does not create an exception to the requirements of the Little Miller Act and Vargas was required to post a payment and performance bond. Ark asserts Vargas’ failure to post the required bond and the school’s refusal to make Vargas do so, circumvented public policy, harming the subcontractors that were intended to be protected by the bond requirements.

¶ 5 The trial court granted Tulsa Public School’s cross-motion for summary judgment and denied the motion for summary judgment of Ark Wrecking by order on July 2, 2015. In the order, the trial court found Tulsa Public Schools did not impermissibly waive any statutory bond requirements. Second, the court found Tulsa Public School’s assignment of the contract to Vargas was valid and enforceable. Third, the court said Ark had abandoned all its claims against Vargas, except for a single declaratory judgment claim; and having found the assignment of the con[263]*263tract was enforceable, the court found the declaratory judgment claim must be resolved in favor of Vargas. Finally, the court determined the only remaining claims were those of Vargas and Tulsa Public Schools that were brought in the third-party petition and the answer to the third-party petition, but Vargas and TPS filed a joint dismissal without prejudice, and these claims were deemed dismissed.

¶ 6 In its motion for summary judgment, Ark argued Oklahoma’s Little Miller Act, 61 O.S. § 1 et seq., requires payment and performance bonds be posted by a general contractor on all contracts exceeding $60,000, involving the construction or repair of a public building on public property.1 TPS argued Vargas was not a contractor, but instead a construction manager, so that Vargas was not subject to the Competitive Bidding Act and was not required to post a payment or performance bond. McMaster Constr., Inc. v. Bd. of Regents of Oklahoma Colleges, 1997 OK 21, 1997 OK 23, 934 P.2d 335.

¶7 The McMaster court found that the two construction manager contracts at issue were not subject to the Competitive Bidding Act. In deciding the construction managers were not like general contractors, the McMaster court said the following:

In the case of the construction management contracts, the management companies do not put together any of [the] constituent parts or supply any of the materials. Rather, the companies act as personal representatives of [the university] by providing services which require expertise in coordinating and managing the building process. When a construction management company acts solely in this capacity, it is not performing construction as defined by Oklahoma competitive bidding statutes.

McMaster, 934 P.2d at 338-39 (emphasis added).

¶ 8 The McMaster court explained the construction managers developed detailed schedules, costs analysis, assisted in soliciting and awarding bids and supervised and coordinated the contractors and delivery of materials. Id. at 337. However, the court found the construction managers did not do any of the following: the managers did not “actually construct any part of the building”; they did not subcontract for the actual construction or supply any of the material for the construction; nor did either construction manager guarantee maximum fixed costs or reap any benefit of cost-cutting measures for the projects. Id. Due to the limited role of the construction managers, the McMaster court found they were more like agents of the university and not general contractors.

¶ 9 Ark argued the assignment of the contract by TPS to Vargas was invalid, because the bonding requirements of the Little Miller Act cannot be waived, citing Carpet City, Inc. v. Stillwater Mun. Hosp. Auth., 1975 OK 75, 536 P.2d 335, 339. TPS argued the assignment was valid because Vargas did not perform construction work with respect to the demolition and therefore was not required to post a bond.

¶ 10 In the alternative TPS argued, even assuming for the sake of argument that Vargas was required to post a payment or performance bond, Ark is still not entitled to seek any payment from TPS, because Ark cannot look to the public entity for payment of damages. Haskell Lemon Const. v. Indep. School Dist. No. 12 of Edmond, 1979 OK 5, [264]*264589 P.2d 677, overruled on other grounds by Boren v. Thompson & Assoc., 2000 OK 3, 999 P.2d 438 (court found the cause of the contractor’s damages was the contractor’s failure to ascertain whether the statutory bond had been given prior to furnishing the construction materials).2

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Related

Carpet City, Inc. v. Stillwater Municipal Hospital Authority
1975 OK 75 (Supreme Court of Oklahoma, 1975)
Boren v. Thompson & Associates
2000 OK 3 (Supreme Court of Oklahoma, 2000)
McMaster Construction, Inc. v. Board of Regents
1997 OK 21 (Supreme Court of Oklahoma, 1997)

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Bluebook (online)
2016 OK CIV APP 67, 394 P.3d 261, 2016 Okla. Civ. App. LEXIS 35, 2016 WL 6539307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ark-wrecking-co-of-oklahoma-inc-v-vargas-construction-co-oklacivapp-2016.