Joseph, DVM v. Dylan Mechanical

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6 7 8 9 IN THE SUPERIOR COURT OF GUAM 10 11 JOEL JOSEPH, DVM, CIVIL CASE NO.: CV0436-19 12 Plaintiff, 13 14 vs. DECISION AND ORDER 15 Re: Plaintiff’s Motion for Summary 16 Judgment 17 DYLAN rVIECHANICAL 18 CONSTRUCTION SERVICES, INC., 19 Defendant. 20

21 INTRODUCTION 22 This matter came before the Honorable Judge Anita A. Sukola on February 15, 23 2021, upon Plaintiff’s Motion for Summary Judgment. The Plaintiff, Joel Joseph, DVM, 24 (“Joseph”) is represented by Mitchell F. Thompson, Esq. The Defendant, Dylan 25 Mechanical Construction Services, Inc., (“Dylan”), is represented by Joseph C. Razzano, 26 Esq. For the reasons set forth below, having reviewed the moving papers of both parties, 27 the Court GRANTS Plaintiffs Motion for Summary Judgement in part and DENIES 28 Plaintiffs Motion for Summary Judgement in part. 29 BACKGROUND 30 Joseph filed a complaint in this matter on April 15, 2019. See Compl. (Apr. 15, 31 2019). On May 7, 2019, Dylan filed a timely answer and counter claim. $ç Answer and 32 Counterclaim. (May 7, 2019). On May 9, 2019, Dylan filed an amended answer and

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page 1 of 9 1 counterclaim. See Amend. Answer and Counterclaim (May 9, 2019). A scheduling order 2 was issued by the Court creating a September 20, 2019, deadline to file amended 3 pleadings. See Scheduling Order ¶ 5 (May 24, 2019). Dylan filed a second amended 4 answer and counterclaim on July 11, 2019. See Second Amend. Answer and Counterclaim 5 (July 11, 2019). Joseph filed an Amended Complaint and Counterclaim on December 12, 6 2019, after seeking leave of this Court to do so. See First Amend. Compl. (Dec. 12, 7 2019); also Pl.’s Mot. to Amend Compi. (Oct. 25, 2019). The motion was unopposed. 8 $ Non-Opp’n to Mot. to Amend (Nov. 22, 2019). Dylan filed an Answer to the 9 Amended Complaint on December 27, 2019. Answer to P1.’s First Amend. Compl. (Dec. 10 27, 2019). Joseph filed a Reply to Dylan’s Amended Counterclaim on January 10, 2020. 11 Pl.’s Reply to Def.’s Amend. Counterclaim (Jan. 10, 2020). 12 Joseph sought leave from the Court to file a Motion for Summary Judgment in 13 order to narrow down the issues for trial. Mm. Entry (Sept. 24, 2020). The arrangement 14 was agreed to by Dylan and the Court allowed it. Id. Joseph filed a Motion for Summary 15 Judgment on October 12, 2020. See Pl.’s Mot. for Summ. J. (Oct. 12, 2020). On 16 November 9, 2020, Dylan filed their Opposition. See Opp’n to Pl.’s Mot. for $umm. J. 17 (Nov. 9, 2020). On November 23, 2020, Joseph filed a reply. See Reply in Support of P1.’s 18 Mot. for Summ. J. (Nov. 23, 2020). 19 Dylan’s counsel, Tim Roberts, Esq., filed a Motion to Withdraw as Counsel on 20 December 3, 2020, which was unopposed, and granted by this Court. $ Mot. to 21 Withdraw as Counsel (Dec. 3, 2020). Dylan was given sixty (60) days to obtain new 22 counsel and new counsel would be allowed to file motions for leave to file supplemental 23 documents. See Mi Entry (Dec. 3, 2020). Dylan hired current counsel, Joseph C. 24 Razzano. The parties stipulated to waive oral arguments on all outstanding motions, and 25 the Court subsequently took this matter under advisement. See Stip. to Waive Oral 26 Arguments (Feb. 11, 2021). 27 DISCUSSION 28 I. Summary Judgment Standard 29 30 Rule 56 of the Guam Rules of Civil Procedure regulates when a court may grant 31 Summary Judgment. Guam R. Civ. P. 56. Summary Judgment is appropriate if the 32 pleadings, depositions, interrogatories, and admissions on file, together with the affidavits,

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page 2 of 9 1 if any, show that there is no genuine issue as to any material fact and that, taken in the 2 light most favorable to the non-movant, the moving party is entitled to judgment as a 3 matter of law. Guam R. Civ. P. 56(c). See Izitka Corp. v. Kawasho International, (Guam), 4 Inc., 1997 Guam 19 ¶ 7, 8. A genuine issue of material fact exists “if there is ‘sufficient 5 evidence’ which established a factual dispute requiring resolution by the fact-finder.” 6 Fajardo ex i-el. Fajardo v. Liberty House Guam 2000 Guam 4 ¶ 5 (quoting Jzuka Corp., 7 1997 Guam 19 ¶ 7.). A material fact is “one that is relevant to an element of a claim or $ defense and whose existence might affect the outcome of a suit.” Id. 9 A court must draw inferences and view the evidence in the light most favorable to 10 the nonmoving party. See Edwards v. Pacific Financial Corp., 2000 Guam 27 ¶ 7. See 11 also Castro v. Peck, dba B.B.H.S. Contracting and Standard Plytrade Corp., 1998 Guam 12 10, ¶ 7. “If the movant can demonstrate that there are no issues of material fact, the non- 13 movant cannot merely rely on allegations . . . but must produce probative evidence.” 14 Edwards, 2000 Guam 27 ¶ 7. Thus, the court’s “ultimate inquiry is to determine whether 15 the ‘specific fact’ set forth by the nonmoving party, coupled with undisputed background 16 or contextual facts, are such that a rational or reasonable jury might return a verdict in its 17 favor based on that evidence.” Ittka, 1997 Guam 10 ¶ 8. 1$ The issues presented in this case are: (1) whether Joseph breached the contract by 19 failing to pay on time; (2) whether Joseph breached the contract by failing to adhere to the 20 implied covenant of good faith and fair dealing; (3) whether Joseph is entitled to 21 liquidated damages if the contractor abandoned the project as a matter of law; and (4) 22 whether Joseph delayed the progress of construction in any way, thus affecting liquidated 23 damages. 24 It is undisputed that a contract was entered into for “Program Management and 25 Engineering Services” related to the construction of a dog kenneling and disposal facility. 26 See Decl. of Joel Joseph, DMV, Lx. 4 (Oct. 12, 2020). Likewise, it is undisputed that 27 Dylan refused to perform further services on the construction after October 22, 2018. See 2$ Id., Ex. 13 (Oct. 12, 2020). Therefore, the issues before us become whether Joseph 29 breached the contract, thereby excusing performance from Dylan and sustaining 30 Defendant’s counterclaim, and whether liquidated damages, as provided within the 31 contract are legally and factually appropriate. 32

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page 3 of 9 1 II. Joseph Had No Obligation to Pay Installment Payments as a Matter of 2 Law and Therefore Did Not Breach the Contract Through Untimely 3 Payments. 4

5 Under Guam Law, when a contract is silent as to the time for performance of an 6 act, the law imposes either a reasonable time period for performance or a deadline of 7 immediate performance upon exact ascertainment of the thing to be done. The statute $ provides: 9 10 If no time period is specified for the performance of an act required to be performed, a 11 reasonable time period is allowed. If the act is in its nature capable of being done 12 instantly - as, for example, if it consists in the payment of money only, it must be 13 performed immediately upon the thing to be done being exactly ascertained. 14 15 l8GCA87l23. 16 17 Title 1$ of the Guam Code Annotated, Section 87123, is identical to California Civil 18 Code Section 1657, and as such, California case law interpreting section 1657 is persuasive. 19 See Gibbs v. Holmes, 2001 Guam 11, ¶15 (“[T)o the extent that the New York. . . statutes 20 contain provisions that are. . . identical. . . to Guam’s statutes, we find New York law to 21 be persuasive). California case law shows that when “the time of payment [is not) fixed, 22 the presumption arises that it was due and payable immediately or on demand when 23 plaintiffs contract.. was completed.” Hammond Lumber Co. v. Richardson Building & .

24 Engineering Co., 285 P. 85i, 853 (Cal. 1930). See also Winkler v. Jerrue, 129 P. 804, 806 25 (Dist. Ct. App. Cal. 1912) (“no time having been agreed upon for making deferred 26 payments, such money is to be deemed payable upon delivery of the deed”). finally, 27 “when no time of payment is fixed, our courts have held that a reasonable time within 22 which to pay is inferred . . . .“ Pitzer v. Wedel 165 P.2d 971, 974 (Dist. Ct. App. Cal. 29 1946). A leading treatise on the subject sums it up succinctly stating, “[if] there is no 30 express stipulation as to the time of payment, payment to the design professional is 31 ordinarily due upon completion of construction.” 2 Steven G.M. Stein, Construction Law 32 § 5.02(6)(c).

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page 4 of 9

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1 Here, it is undisputed that the contract does not provide for a time for Joseph’s 2 payment. See Decl. of Joel Joseph, DMV, Ex. 4 (Oct. 12, 2020). Dylan instead argues that 3 the California case law is distinct from the case before us because those cases “rel[y] upon 4 performance of a single event or limited number of events, in which case installment 5 payments would make no sense and payment would normally he due upon completion of 6 such a time-limited performance.” See Opp’n to Pl.’s Mot. for Summ. J. (Nov. 9, 2020). 7 Dylan further argues, “[p]rogress payments against completed work was implied and 8 anticipated by the contract, although not specifically mentioned.” Id. 9 It is undisputed that Dylan drafted the contract, and any ambiguities are to be 10 construed against the drafter. See 18 GCA § 87120. Thus, if Dylan wanted progress 11 payments to be a part of the contract, they could have negotiated and drafted their 12 inclusion. However, as the contract was drafted, there was no time agreed for payments, 13 and as such, Joseph was not obligated to pay until the project had been completed. The 14 project was never completed, and therefore, Joseph had no obligation to pay. Dylan was 15 not excused from performance of the contract for reasons of untimely payment as a matter 16 oflaw. 17 1$ III. Whether Joseph Breached the Implied Covenant of Good Faith and Fair 19 Dealing is a Question of Fact. 20 21 The implied covenant of good faith and fair dealing is present in all contracts. 22 Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999). “Good faith 23 performance. . . of a contract emphasizes faithfulness to an agreed upon common purpose 24 and consistency with the justified expectations of the other party.” Restatement (Second) 25 of Contracts § 205(a). Further, “[tjhe covenant of good faith finds particular application in 26 situations where one party is invested with a discretionary power affecting the rights of 27 another. Such power must be exercised in good faith.” Marsu, 185 F.3d at 937. The 28 covenant of good faith and fair dealing “cannot impose substantive duties or limits on the 29 contracting parties beyond those incorporated in the specific terms of their agreement.” 30 Guz v. Bechtal Nat’l Inc., 8 P.3d 1089 (Cal. 2000). Finally, whether a party breached the 31 covenant is a question of fact for the fact finder. Wells Fargo Bank v. Ariz. Laborers,

CV0436-19, Joel Joseph v, Dylan Mechanical Construction Services, Inc. Page 5 of 9 1 Teamsters & Cement Masons Local No. 395 Pension Trttst Fund, 38 P.3d 12, 2$ (Ariz. 2 2010).

3 Here, Dylan claims that Joseph breached the implied covenant of good faith and 4 fair dealing, by refusing to “sign off on necessary documents and . . . not hav[ing] the 5 money to pay for . . .“ clearing and grubbing services, the design contract, and contracts 6 and proposals for the engineers’ fee for structural and underground plumbing drawings. 7 $ Opp’n to Pl.’s Mot. for Summ. J. (Nov. 9, 2020); $g also Dep. of Dylan Mechanical $ Services, Inc. at 17 (Feb. 7, 2020). Joseph responds by arguing that “Dr. Joseph was not 9 obligated to accept any or all of Dylan Mechanical’s proposals or suggestions as to the 10 project. As the project owner, he had discretion to accept or reject Dylan Mechanical’s 11 work product.” $ Reply in Support of P1.’s Mot. for Summ. J. (Nov. 23, 2020). 12 According to Joseph, courts will not impose obligations outside of the contract and “there 13 was no specific obligation on the part of Dr. Joseph to accept any of this.” Id. 14 This Court agrees that the implied covenant of good faith and fair dealing does not 15 impose any obligations on a party that do not already exist in the contract. However, 16 Joseph’s discretion to approve or disapprove spending related to the project, was explicitly 17 written in the contract, and thus, Joseph must use good faith when exercising that 1$ discretion. Decl. of Joel Joseph, DMV, Ex. 4 (Oct. 12, 2020) (“[e]ach 19 commitment for a purchase order or contract on the project will be approved by the Owner 20 prior to issuance.”); See also Marsit, 185 F.3d at 937. 21 Dylan has alleged “[ut is not true that Joseph told me when he first met me that he 22 needed a bank loan to finance the construction of this kennel.” See Decl. of Harold D. 23 Cullick (Nov. 9, 2020). They further allege, “the project schedule was not in [Dylan’s] 24 control but rather Dr. Joseph’s,” and while Dylan “helped Dr. Joseph procure surveying 25 services, archaeological services, and design services . . . there has not been any clearing 26 on the property.” Id. Further, according to Dylan, the project was in the control of Joseph, 27 and Dylan was apprehensive that he could not afford to pay for the services procured. Id. 28 It is undisputed that Joseph did eventually obtain a loan to finance the construction. Decl. 29 of Joel Joseph, D.V.M., Ex. 29 (Oct. 12, 2020). Thus, a rational jury could conclude that 30 Joseph did not have the necessary funds to complete the project and never made Dylan 31 aware of that fact while negotiating and performing the contract. Such an omission could 32 contradict both the agreed upon purpose of the contract and the justified expectations of

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page 6 of 9 1 Dylan. The Court must view the evidence in the light most favorable to the nonmovant, 2 and therefore, this Court finds that genuine issues of material fact exist regarding a 3 potential breach of the implied covenant of good faith and fair dealing. Summary 4 judgment is inappropriate on this point. 5 6 IV. The Liquidated Damages Clause is Enforceable when the Project is 7 Abandoned as a Matter of Law 8 9 The Guam Supreme Court has recognized the validity of liquidated damages 10 clauses, stating “[i]t is generally agreed that a liquidated damages clause does not violate 11 public policy when, at the time the parties enter into the contract containing the clause, the 12 circumstances are such that the actual damages likely to flow from a subsequent breach 13 would be difficult for the parties to estimate or for the nonbreaching party to prove. . .

14 Pangelinan v. C’ainacho, 2008 Guam 4 n. 14 (citing 24 Richard A. Lord, Wiltiston on 15 Contracts § 65:1(4th Ed. 2007). The Supreme Court explicitly recognized the utility of 16 liquidated damages provisions in construction contracts. $. B.M. Co. t’. Avery, 2001 17 Guam 27 ¶ 39. See also Inland Builders Corp. v. Guam Economic Development Atithority, 18 CVOO7O-17 (Super. Ct. Guam, Oct. 31, 2017). 19 However, Dylan correctly points out that in all the above precedent “the liquidated 20 damages involved a delay in a completed project and not abandonment.” Opp’n to 21 Pl.’s Mot. for Summ. J. (Nov. 9, 2020). Both parties brought forth case law that suggests 22 there is a split of authority on the issue in California, and as it appears, in the United States 23 at large. Dylan cites a case that holds, “this clause has relation only to damages resulting 24 from delay only, and has no bearing upon the measure of damages for an abandonment of 25 the contract and failure to complete work at all.” Bacigalupi v. Phoenix Bldg. & Const. 26 Co., 112 P. 892, 894 (Dist. Ct. App. Cal. 1910). See also Six Companies of Cahfornict v. 27 Joint Highway Dist. No. 13 of Stctte of Caifornia, 311 U.S. 180 (1940). 28 In response, Joseph cites a later California case which holds, “the contractor’s 29 abandonment of the project after the date set for completion does not alone render 30 inapplicable the contract clause providing for liquidated damages for delayed completion.” 31 Pacific Employers Ins. Co. v. City of Berkeley, 204 Cal. Rptr. 387, 394 (Dist. Ct. App. 32 1984) (emphasis added). The facts in Pacific Employers are distinguishable from the case

CV0436-19, Joel Joseph v. Dylan Mechanical Construction Services. Inc. Page 7 of 9 1 at bar because here, the abandonment occurred before the set completion date of the 2 project, but it presents a compelling argument nonetheless. However, Pacific Employers 3 also manages to distinguish the present case from the law cited by Dylan, stating “‘... In 4 these cases [Bacigaltipi v. Phoenix Co. and like decisions], the plaintiff made no claim to 5 collect liquidated damages for delay, as well as the increased cost of completing the 6 abandoned work. They are not, therefore, authorities for the alleged nile that he cannot do 7 so....” Id. at 393 (citing Southern Pacific Co. v. Globe Indemnity Co., 21 F.2d 28$ (2nd 8 Cir. 1927). 9 The split of authority on the issue within the United States is trending towards the 10 allowance of liquidated delay damages in the case of abandonment. See Construction 11 Contracting & Management, Inc. t’. McConnell, $15 P.2d 1161, 1167 (N.M. 1991) 12 (“[a]lthough the general rule in the early part of this century was that liquidated damages 13 clauses were inapplicable when the contractor had abandoned the contract, by the 1940’s 14 the trend was to the contrary”); See also Damages — Liquidated Damages — Clctuse 15 Relating to Delay Held Appflccibte Where Contractor Abandons Work, 52 Harv. L. Rev. 16 160 (“[t]hat the more probable intention of the parties is to provide compensation to the 17 owner for loss from delay, even if caused by abandonment, finds support in the more 18 recent cases”). 19 Further, there is a compelling policy reason shadowing the rule which holds, “a 20 contrary rule would permit a party to limit his liability for liquidated damages by totally 21 abandoning the work and would deny the injured party those damages which were agreed 22 to as fairly measuring damage caused by delay.” City of Boston v. New England Sales & 23 Mfg. Corp., 43$ N.E. 2d. 68, 70 (Mass. 1982). See also Sotttheast Alaska Constr. Co. t’. 24 State, DOT & Pitblic facilities, 791 P.2d 339 (Alaska 1990). However, in the interest of 25 fairness, “the period of delay for which liquidated damages may be recovered must be 26 limited to the period of reasonable delay. The injured party must act with reasonable 27 promptness to complete the work.” Id. 2$ Dylan urges this Court that California cases preceding Guam’s adoption of their 29 code should control as “[w]hen Guam enacted its Civil Code, the Legislature could have 30 considered cases such as Bacigaltipi . . . [t]he Legislature could not have foreseen or 31 considered the decision in Pacific Employers.” Opp’n to Pl.’s Mot. for Summ. J. 32 (Nov. 9, 2020). However, regardless “[ajccordingly, we will disregard another

CV0436-19. Joel Joseph v. Dylan Mechanical Construction Services, Inc. Page $ of 9 1 jurisdiction’s construction if it is ill reasoned, based on antiquated grounds, or simply 2 inapplicable to Guam.” Cttstodio v. Boomprakong, 1999 Guam 5 ¶ 11. Here, it is apparent 3 to the Court that the recent trend is toward the allowance of liquidated delay damages in 4 the case of abandonment, and we will not be bound to antiquated California cases. 5

6 V. The Amount of Liquidated Damages and Whether Joseph Caused the 7 Delays are Questions of Fact. 8 9 As stated above, “the period of delay for which liquidated damages may be 10 recovered must be limited to the period of reasonable delay.” City of Boston, 438 N.E. 2d. 11 at 70. The reasonableness of the delay is a question of fact for the factfinder. Id. Likewise, 12 the contract itself states, “{1]iquidated damages will be assessed at the rate of $600.00 per 13 calendar day stating on August 2, 2019 until the Occupancy Permit is obtained provided 14 the Owner has not delayed progress in any way.” Decl. of Joel Joseph, D.V.M., Ex. 4 15 (Oct. 12, 2020). Thus, the reasonableness of the delay, and whether Joseph had delayed 16 progress of the construction are both questions of fact, and as outlined in Section III of this 17 Decision and Order, a rational jury could conclude that Joseph did delay construction and 18 thus the delay was unreasonable. Therefore, as the Court must view the evidence in the 19 light most favorable to the nonmoving party, summary judgment as to these issues is 20 inappropriate at this time. 21 CONCLUSION 22 23 Based on the foregoing, the Court GRANTS Plaintiff’s Motion for Summary 24 Judgement in part and DENIES Plaintiffs Motion for Summary Judgement in part. 25 1/

26 SO ORDERED this / Z’j Z<) 27 ( / 28 SERVICE VIA E-MAIL

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- HONORA3LE ANITA A. SUKOLA Judge, Superior Court of Guam

Mechanical Construction Services. Inc. Page 9 of 9 Decision and Order (MOtion for Summary Judgment).