Page 1of 12 Q' or O \ BACKGROUND 2 This matter arises out of Plaintiff M Electric Corp.'s ("MEC") August 19, 2010 3 Complaint alleging non-payment for two subcontracts with Defendant Phil-Gets (Guam) 4 5 International Trading Corp. ("J&B"). On February 10, 2012, the Court granted Defendants'
6 Motion for Sulmnary Judgment finding that the "no damage for delay" ("NDFD") clauses in
7 the subcontracts exculpated J&B from liability to Plaintiff for damages resulting from delays in
8 the pedorrnance of Plaintiffs work. Dec. & Order, 7 (Feb. 10, 2012). On March21, 2012,
9 MEC tiled a Notice of Appeal. On December 27, 2012, the Supreme Court of Guam reversed
:Of this Court's Decision and Order and remanded the matter for further proceedings. The
12 Supreme Court of Guam determined that NDFD clauses are enforceable in Guam and that
13 surmnary judgment was improper because exceptions to theNDFD could apply in tllis matter.
14 M Electric Corp. v. Phil-Gets (Guam) Int'l Trading Corp., 2012 Guam 23 'I 49.
15 The Court conducted a bench Md on November 5 and 13, 2014 where the parties
: presented the testimony of witnesses and other evidence. Based on the Court's factual findings,
18 it concluded that no exceptions to the NDFD clauses applied to the subcontracts. Additionally,
19 the Court denied MEC's excavation claim. On June 17, 2015, MEC filed a Notice of Appeal.
20 The Supreme Court of Guam found, inter alia, that the NDFD clauses stated in the prime
21 contracts covers the type of delays incurred by MEC. M Electric Corp. v. Phil-Gets (Guam)
Z Int'l Trading Corp., 2016 Guam 35 'I 98 ("M Elec. I"). The Supreme Court of Guam remanded
24 the issue back to this Court, tasking it to "determine whether the delays giving rise to MEC's
25 standby claim satisfy the fist recognized exception, given the facts and circumstances." M- 'I
26 88. On remand, the Court ordered the parties to submit supplemental briefs on the NDFD issue
27 by October 27, 2017. The Court took the matter under advisement on November 20, 2017. 28
Page 2 of 12 l ISSUE 2 1. Whether the first exception to a No Damage for Delay clause applies in this matter. 3 FINDINGS OF FACTS 4
By a preponderance of evidence, the Court makes the following Findings of Fact: 5
6 1. Guam Power Authority ("GPA") solicited bids for the Macheche-GIAA and Macheche-
7 Harmon San Vitores projects in local newspapers of general circulation. 8 2. A pre-bid conference was held on September 13, 2007 and was open to the public. 9 3. At the Conference GPA's Joven Acosta informed those in attendance that GPA was 10 unsure of the location of underground utilities and that it had been challenging to secure 11
12 encroachment permits from the Department of Public Works ("DPW"). Acosta warned
13 bidders of the no damages for delay clauses in the contracts and indicated that bidders 14 should increase their bids if they were concerned about delays. GPA anticipated that 15 project delays were likely. Further, because GPA knew its design work was prepared 16 with insufficient data and adjustments would have to be made in the field, it wanted to 17
18 make sure that bidders would not be surprised with addidonad costs.
19 4. Noel Lon tong and Carlos Nunez were present at the pre-bid conference. Both Mr.
20 Nunez and Mr. Lon tong identified their company as "M Electric" on the sign in sheet. 21 Mr. Nunez was employed by MEC at the time of the conference and gave MEC's phone 22 number as his contact number. Mr. Lon tong was MEC's project engineer. 23
24 5. GPA awarded J&B the contracts for the Macheche-GIAA and Macheche-Harmon San .
25 Vitores projects.
26 6. On March 24, 2008, MEC became a subcontractor to J&B, the prime contractor on the 27 Machete GIAA project pursuant to the plans and specifications prepared by TG 28 Engineer. MEC's subcontract was for $2,000,000.00 and had a completion date of
Page 3 of 12 1 December 2008. 2 7. On April 16, 2008, MEC became a subcontractor to J&B, the prime contractor for the 3 Machete-Harmon San Vitores project pursuant to the plans and specification prepared 4 by W inzler & Kelly. MEC's subcontract was for $3,490,000.00 and had a completion 5
6 date of January 13, 2009.
7 8. Both subcontracts stated that "time was of the essence in the subcontractor's 8 performance of this agreement." Section 10.1 of each subcontract provided that MEC 9 would get all pennies necessary for completing the work. At first, J&B tried to have 10 MEC get the permits, but since MEC could not afford to do so, J&B got the permits in ll
12 an effort to avoid delays.
13 9. MEC did not have the bonding capacity to apply for the permits and the bonds that are 14 required by DPW. J&B obtained the pennies and paid the premiums for the bonds and 15 never back-charged MEC for those costs. 16 10. Each subcontract provided that MEC would provide a construction survey, staking and 17
18 Ground Penetration Radar (GPR). The purpose of GPR was to trace the location of the
19 existing underground utilities.
20 11. The prime contracts each provided that change orders would be determined by the 21 actual cost of labor, permanent materials, equipment rental, power and consumable 22 supplies, insurance and a fixed fee not to exceed 15% of the net cost for supervision, 23
24 overhead, bond, profit, and other general expenses.
25 12. Both of MEC's subcontracts provided,
26 Section 3.3. In the event the Subcontractor is delayed in completing the Work by the 27 act, neglect, delay or default of the Contractor or the Owner, or of any other subcontractor employed by the Contractor, then the time fixed for completion of the 28 Work shall be extended for a period equivalent to the time lost, in the sole discretion of the Contractor, provided that no extension shall be granted unless written claim is made
Page 4 of 12 1 by Subcontractor within five (5) days from the inception of such delay. The extension of time hereinabove provided for shall be Subcontractor's exclusive remedy in the event 2 of such a delay, no matter how or by whom caused. 3 13. Both the prime contracts provided that no charge for extra work would be approved 4
5 unless approved in writing.
6 14. After MEC signed the Macheche-GIAA subcontract on March 24, 2008, it was notified
7 to begin its survey of the site with GPR in June 2008. Noel Lon tong completed this 8 survey in August 2008. Survey drawings E2.6 through E2.9 show that subsurface 9 utilities existed that were not shown on the design drawings where TG Engineers 10
11 planned the placement of manholes 8 through 13.
12 15. J&B gave MEC notice to begin highway excavation in the last week of September 13 2008. Subsequently, MEC mobilized all the heavy equipment necessary to perform the 14 work. 15 16. MEC worked continuously on the project until March 30, 2009. On that date, it was 16
17 unable to proceed with excavation between manholes 8 to 13 because the necessary
18 highway encroachment permits from DPW had not been granted. A permit from the 19 U.S. Air Force to dig below an existing fuel line that was correctly shown on the 20 contract drawings had also not yet been obtained. 21
17. From March 30, 2009 to July 11, 2009, MEC did not have the necessary pennies to 22
23 continue work. During this time, MEC incurred heavy equipment rental charges on a
24 daily basis. MEC was able to lay off its labor force during this delay and did not incur 25 any standby labor costs. 26 18. DPW would only issue permits for one segment of the work at a time, generally from 27
28 manhole to manhole. A separate traffic control plan was required for each segment.
Page 5 of 12 1 Even if the contractor had all GPR work done for the entire project, DPW would only 2 issue permits for one segment at a time. MEC had prior knowledge and experience with 3 this rule 4
19. GPA's Joven Acosta testified that it typically takes a month or so to get DPW permits 5
6 but that on earlier projects there was a lot of unreasonableness from DPW. The parties
7 here were verbally advised by GPA that they should factor delays into their bids 8 because permits from DPW could be a challenge. 9 20. INIEC resumed work on July 11, 2009. On August 17, 2009, MEC stopped work 10
ll because manhole 9 needed to be relocated because of an existing Guam Telephone
12 Authority ("GTA") line underneath its proposed location and the necessary permit had 13 not been acquired. 14 21. There were problems with permits for excavations from manholes 8 to 10 in the 15 Machete-GIAA project which resulted in delays. GPR showed a sewer line in the 16
17 vicinity of the location for manhole 9 on Route 16. DPW advised J&B to try and
18 relocate the manhole because of the sewer line. After several meetings involving GPA, 19 DPW, MEC and J&B, DPW agreed to the relocation of the manhole to a place at the 20 back of Midpac Far East, pending a survey of the new location. 21
22. There were also problems with fuel lines owned by the federal government between 22
23 manholes 4, 5, 12, and 13. Prior to obtaining approval for these xnanholes, J&B had to
24 obtain environmental assessments. While it took time to complete these assessments, 25 the issues with the fuel lines should not have delayed trenching. 26 23. MEC resumed work on October 15, 2009, and there were no further delays on the 27
28 project.
Page 6 of 12 1 24. J&B tried to assist MEC so it could complete the work quickly. It subsidized MEC's 2 purchase of materials, such as paying MEC's first billing before the construction started 3 to help MEC purchase steel plates needed for the project. It also helped MEC with 4
problems getting materials from Hawaiian Rock. 5
6 25. In November 2009, MEC completed its projects and was later paid the full contractual
7 amount under the subcontracts for the two projects. 8 26. On November 27, 2009, MEC presented to J&B its claim for equipment standby costs 9 as a result of the delays. The total direct cost claimed is $321,699.60 for 162 calendar 10
11 days of delay. To this, MEC added 25% for overhead and then 10% profit plus 4. 17%
12 for GRT for a total claim of $460,782.40. 13 27. While the projects were underway, MEC did not present J&B with billings or 14 documents for standby costs or additional trenching costs. The subcontract required 15 prior approval of change orders and normally subcontractors request changes to 16
17 compensation promptly after encountering problems.
is 28. When MEC encountered delays, it was not notified how long the delay would last, Ir 19 was simply instructed to stand by. MEC therefore determined it was necessary for it to 20 keep its equipment ready. 21
29. MEC's claim for delay damages included both rental costs for equipment rented by 22
23 MEC and charges for equipment owned by MEC. Of the $1,985.80 per day claimed by
24 MEC for equipment rental, $879.50 was for equipment owned by MEC. 25 30. MEC's President, Mr. Moises, testified that the standby damages MEC claimed for the 26 equipment it owned were less than the standby damages it claimed for rented 27
28 equipment. However, MEC claimed delay damages of $6.65 per day for rented 6' x 20'
Page 7 of 12 1 steel plates, and claimed the same $6.65 per day for MEC-owned6' x 20' steel plates. 2 31. MEC did not produce any invoices, bills, or receipts for equipment rental. 3 32. MEC claims delay damages or standby costs for the Macheche-GIAA project for two 4
5 periods of time when work was delayed pending issuance of permits: (1) from March
6 30, 2009 to July ll, 2009, for whichME C claims 103 days; and (2) from August 17,
7 2009 to October 15, 2009, for which MEC claims 59 days. The alleged delays total 162 8 days. These are the only delay damages claimed by MEC. 9 33. MEC could only perform open trench excavation. Open trench excavation cannot be 10
ll done during inclement weather and rain. During the time periods encompassed by
12 MEC's claim for delay damages, there were 33 days when work was or would have 13 been delayed due to heavy rain. 14
15 CONCLUSIONS OF LAW 16
17 Based on the above findings of facts, the Court makes the following Conclusions of
18 Law .
19 Exception to the No Damage for Delay clause 20 No damage for delay ("NDFD") clauses "exculpate an owner from liability for damages 21 resulting from delays in the performance of the contractor's work by ordinarily limiting a 22
23 contractor's remedy to an extension of time." M Elem. I, 2012 Guam 23 1 33. These clauses are
24 enforceable in Guam, subject to the following exceptions: (l) unreasonable delays not 25 contemplated by the parties when the agreement was made; (2) delays not covered by the plain 26 language of the clause, (3) delays caused by the contractor's bad faith or its willful, malicious, 27 or grossly negligent conduct, and (4) delays resulting from a breach of a fundamental 28
obligation of the contract. M Electric Corp. v. Phil-Gets (Guam) Int'l Trading Corp., 2016 Page 8 of 12 1 Guam 35 'I 73 ("M Elec. IP'). InM Elec H, the Supreme Court of Guam ("Supreme Court") 2 . . . . found that the "delays at Issue fall wlthln the scope of the N D F D clause, subject to any 3 applicable exceptions." LL 'I 78. 4 On remand, the Supreme Court tasked this Court to "determine whether the delays 5
6 giving rise to MEC's standby claim satisfy the first recognized exceptions, given the facts and
7 circumstances." Q. *I 88. To aid in madding this determination, the Supreme Court provided a
s great dead of guidance on the issue. The Supreme Court explained 9 In order to satisfy the first exception, the Md court must find either (1) that both 10 the type of delays was unforeseeable and the actual delays experienced were of an unreasonable duration, or (2) that the duration of delay reached the level of 11 manifestly extreme unreasonableness - even if the delays were of a type 12 theoretically contemplated. L. Putting it another way, the Supreme Court clarified that "if the type of delays was 13
14 foreseeable, then the first NDFD exception does not apply unless the delays were of a
15 manifestly extreme duration." L. 16 The first part of this Court's analysis is to determine whether the delays at issue were 17 foreseeable or contemplated by the parties in malting the agreement. The delays MEC claims 18 19 were caused by the inability to timely procure highway encroachment permits and the
20 necessary adjustments made when encountering existing subsurface utilities. The Court finds
21 that GPA's Joven Acosta apprised everyone present at the pre-bid conference that securing
22 highway encroachment pennies from DPW posed a challenge to the timely completion of a 23 project. Further, the Court finds that MI. Acosta advised potential bidders to account for the 24 25 possible delays associated with DPW pennies in their bid. Additionally, the Court finds that
26 Mr. Acosta informed those present at the pre-bid conference that because GPA was worldng
27 with limited data with respect to existing utilities, adjustments would need to be made out in 28 . . . the field. The Court also finds that MEC had two representatives at thls pre-b1d conference,
Page 9 of 12 1 Mr. Nunez and Mr. Lumtong. Thus, the Court finds that M E C was aware of the risks involved 2 . . .. in the Machete-GIAA project and that these asks could result in delays. Addxtxonally, the 3 contract between MEC and J&B included theNDFD provision indicating that the parties 4 5 contemplated the possibility of delays. The Court has not been presented with sufficient
6 evidence to prove that the parties were unaware or did not contemplate the challenges posed by
7 the need for highway encroachment permits and the existing subsurface utilities. Under these
s facts, the Court concludes that the delays caused by untimely procurement of highway 9 encroachment permits from DPW and the necessary on-field adjustments were foreseeable 10 delays. 11
12 Because the Court determines that the delays at issue were foreseeable, the next part in
13 this Court's analysis is to determine whether the delays were of a manifestly extreme duration.
14 This Court looks to other jurisdictions for guidance in determining whether the delays were of a 15 manifestly extreme duration. In New York, one exception to the enforcement of a NDFD 16 clause is whether the delays axe "so unreasonable that they constitute an intentional 17 18 abandonment of the contract by the contractee." Travlers Ca. & Sur. Co. v. Dormitory
19 Authoritv-State of New York, 735 F.Supp.2d 42, 58 (S.D. N.Y. 2010); see also Corinno Civetta
20 Const. Com. v. Citv ofNew York, 493 N.E.2d 905, 912 (Ct. App. N.Y. 1986) (explaining that 21 in order to avoid NDFD clause delay must be "so unreasonable that they connote a 22 relinquishment of the contract by the contractee with the intention of never resuming). 23
24 I n Law Co.. Inc. v. Mohawk Const. & Supplv Co.. Inc., the District Court found that an
25 eight-month delay was not "sufficient to deny the application" of the NDFD clause. Law Co..
26 Inc. v. Mohawk Const. & Supplv Co.. Inc., 702 F.Supp.2d 1304, 1324 (D. Kan. 2010). The 27 . . . . . . court found that during the delay, the pomes were in frequent commumcauon regarding the 28 delay and efforts to shorten it. Q. As a result, the court found that the evidence demonstrated
Page10of12 1 that a reasonable contractor would not have understood the eight-month delay as an 2 abandonment of the contract. L. Additionally, in White Oak Corp. v, Dept. Transl., the 3 Supreme Court of Connecticut found that a sixth-month delay was not unreasonable and did not 4 5 constitute an exception to the NDFD clause. W hite Oak Corp. v. Dept. Transl., 585 A.2d 1199,
6 1204-05 (Conn. 1991). Further, the White Oak court found that the delay was insufficient to
7 constitute an abandonment of the contract. Id. 8 In this case, MEC experienced two delays totaling 162 days - 103 days from March 30, 9 2009 to July 11, 2009 and 59 days from August 17, 2009 to October 15, 2009. Individually and 10 collectively, the delays are of a smaller duration than those analyzed inMohawk and W hite ll 12 Oak. Additionally, like the projects inMohawk and White Oak, the delays did not cancel or
13 end the project, and MEC completed its performance. Further, the Court has not been
14 presented with sufficient evidence to prove that the delays constituted an abandonment of the 15 contract. Both parties understood that timely securing highway encroachment permits and 16 malting on-field adjustments around existing utilities were challenges that could result in 17
is delays. The project was not abandoned when these challenges arose. Instead, MEC continued
19 its work when the issues were resolved. Accordingly, the Court Ends that the 162-day delay
20 was not of a manifestly extreme duration. Based on the facts and circumstances of this matter, 21 the Court concludes that the first exception to the enforceability of theNDFD clause is neither 22 satisfied nor applicable in this case. 23
24 \\
26 \\
28 \\ Page l l of 12 CONCLUSION AND ORDER
For the reasons set forth above, the Court finds that the first exception to the enforceability
of the no damage for delay clause in the subcontract between MEC and J&B is not satisfied.
MEC is unable to recover damages for its standby claim.
SO ORDERED, this 2 7 4 1ay of I/Lwé 2018.
\
HONORABLE MICHAEL J. BORDALLO Judge, Superior Court of Guam
Page12 of 12