M Electric Corporation v. Phil-Gets (Guam) International Trading Corporation

Opinion

F! LED suprR1CR CSURT

IN THE SUPERIOR COURT OF GUAM lOll ITR 10 PM S 09 2 CLERK OF COURT 3 M ELECTRIC CORPORAnON, ) Civil Case no. $3N1423-10 ) 4 ) Plaintiff, ) 5 ) ~ ) 6 ) ) 7 PHIL-GETS (GUAM) INTERNAnONAL ) DECISION AND ORDER TRADING CORPORAnON dba J&B ) re: Summary Judgment 8 MODERN TECH, and CHUNG KO ) INSURANCE COMPANY, LTD., ) 9 ) ) 10 Defendants. )

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12 INTRODUCTION 13 This matter came before the Honorable Judge Michael J. Bordallo on September 28, 2011. 14 The Plaintiff was represented by Attorney Thomas M. Tarpley, Jr. The Defendants were 15 16 represented by Attorney Seth Forman. After considering the matters presented, the court now

17 issues the following decision and order granting Defendants' motion for summary judgment.

BACKGROUND 18 This matter arises out of a contractual dispute between the parties regarding underground 19 20 power line conversion projects. Defendant J&B was the primary contractor for Guam Power

21 Authority ("GPA") projects. Plaintiffwas a subcontractor to J&B under two subcontracts! to work

22 on the 34.5 KV Overhead Project for GPA covering the areas of Macheche to GIAA and

23 Macheche-Harmon to San Vitores. The subcontracts were to provide for labor, equipment and

24 materials to excavate, install underground pipes and to restore excavated areas and roads.

25 The subcontracts were executed following a written proposal from Plaintiff which was

26 IThe fust contract was dated March 24,2008. The second contract was dated April 16, 2008. DECISION AND ORDER Civil Case no. CV1423-IO 1 accepted and approved by J&B. A dispute arose between the parties because the subcontracts 2 contained a provision that states, "[s]ubcontractor shall procure all permits necessary for carrying 3 on the work." Plaintiff maintains that this clause was inserted by mutual mistake of the parties 4 because the written proposal excluded such duties upon the subcontractor. Plaintiff also argues 5 that subsurface conditions encountered during the course of the project differed materially from 6 those represented to them, which resulted in major changes being made to the location and scope 7 ofPlaintifi"s work. As a result, Plaintiff requests that the court reform the subcontracts to the 8 reflect the true agreement between the parties regarding the responsibility for obtaining building 9 10 permits and allow an equitable adjustment to the subcontract sum despite the "no standby costs

for delay" clause in the subcontracts. 2 11 On June 9, 2011, Defendants filed a motion for summary judgment. They argue (1) the 12 subcontracts provide in plain and unambiguous language that it was the responsibility of the 13 14 subcontractor to obtain permits; and (2) the provisions in both the subcontracts and the prime

15 contracts concerning delay costs are clear and unambiguous. On June 23, 2011, Plaintiff filed its

16 opposition to Defendants' motion for summary judgment. Plaintiffargues that (1) the subcontracts

17 were merely formalities rather than true agreements reached between the parties; (2) there was

18 no consideration to support the subcontract provisions upon which the Defendants rely; (3) the

19 "no damage for delay" clauses are not favored because they impose a forfeiture of a remedy; (4)

20 the no additional excavation costs provision in the general notes do not apply to Plaintiff; (5) and

21 J&B ordered a change in work sequence for which Plaintiff is entitled to overtime. 22 DISCUSSION 23 Summary judgment is appropriate if the pleadings, deposition, interrogatories and

24 admissions on file together with the affidavits, if any show the there is no genuine issue as to any 25

26 2See Complaint.

Page 2 of 7 DECISION AND ORDER Civil Case no. CV1423-1O 1 material fact and that the moving party is entitled to judgment as a mater oflaw. Guam R. Civ. 2 P.56(c). Izuka Corp. V. Kawasho International (Guam), Inc., 1997 Guam 10, ,7. 3 [A] party seeking summary judgment always bears the initial responsibility of 4 informing the district court of the basis for its motion, and identifying those portions of''the pleadings, depositions, answers to interrogatories, and admissions 5 on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. 6 Celotex Corp. v. Catrett 477 U.S. 317,323 (1986). 7 In rendering its decision on a motion for summary judgment, the Court must draw 8 inferences and view the evidence in a light most favorable to the nonmoving party. Bank ofGuam 9 10 v. Flores, 2004 Guam 25, ,7. Ifhowever, the movant can demonstrate that there are no genuine

issues of material fact, the non-movant cannot merely rely on allegations contained in the 11 12 pleading, but must produce at least some significant probative evidence to support the pleading.

13 Edwards v. Pacific Financial Corporation, 2000 Guam 27, '7. Consequently, the court's

14 "ultimate inquiry is to determine whether the 'specific facts' set by the nonmoving party, coupled

15 with undisputed background or contextual facts, are such that a rational or reasonable jury might

16 return a verdict in its favor based on that evidence." Edwards, 2000 Guam 27, ,7; Iizuda, 1997

17 Guam 10, ,8; Guam Top Builders, Inc. V. Tanota Partners, 2006 Guam 3, '8. A material fact

18 is one that is relevant to an element of a claim or defense and whose existence might affect the

19 outcome of the suit. Disputes over irrelevant or unnecessary facts will not preclude a grant of

20 summary judgment. Edwards, at ,7; Guam Top, at '9. 21 The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make 22 a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such 23 a situation, there can be no genuine issue as to any material fact, since a complete failure of proof concerning an essential element of the nonmoving party's case 24 necessarily renders all other facts immaterial. 25 Celotex Corp. at 322-323 (1986)(intemal citations omitted). 26

Page 3 of 7 DECISION AND ORDER Civil Case no. CV1423-10 1 Declaratory Relief Concerning Permits 2 As to the claim for declaratory relief concerning the permits, Plaintiff's complaint states, 3 a dispute arose between the parties because the subcontracts contained a provision that states, 4 "[s]ubcontractor shall procure all permits necessary for carrying on the work." Plaintiff maintains 5 that this clause was inserted by mutual mistake of the parties because the written proposal 6 excluded such duties upon the subcontractor. On the other hand, the Defendants argue the 7 subcontracts provide in plain and unambiguous language that it was the responsibility of the 8 subcontractor to obtain permits, which precludes declaratory relief as a matter of law. 9 A party seeking to state a claim for reformation of a contract under the doctrine of mutual 10 mistake must allege four elements: (1) the parties to the contract were mistaken in their belief 11 12 regarding a fact; (2) that mistaken belief constituted a basic assumption underlying the contract;

(3) the mistake had a material effect on the bargain; and (4) the contract did not put the risk of the 13 14 mistake on the party seeking reformation. Atlas Corp. v. United States, 895 F.2d 745, 750 (C.A.

15 Fed. 1990). The court fmds that all ofthe evidence regarding the permits presented by the Plaintiff

16 shows there may be a issue as to that fact, but the court is not ready to fmd it is a material fact

17 without first addressing the "no damage for delay" clause issues.

18 Plaintiff also argues that many of the provisions in the subcontracts are unenforceable

19 because they are not found in the proposals. The court disagrees because, "[g]enerally, a price

20 quotation or proposal is not an offer, but is an invitation to enter into negotiations or a preliminary

21 solicitation of an offer." Master Palletizer Systems, Inc. v. T.S. Ragsdale Co., Inc., 725 F.Supp.

22 1525, 1531 (D.Colo.1989). Here, the court fmds that the proposals were preliminary negotiations

23 not binding contracts thus, they were preliminary solicitations of an offer. Furthermore, the court

24 fmds that "the execution of a contract in writing ... supersedes all the negotiations or stipulations

25 concerning its matter which preceded or accompanied the execution of the instrument." See 18 26

Page 4 of 7 DECISION AND ORDER Civil Case no. CV1423-1O 1 GCA § 86107. Therefore, the subcontracts superseded the proposals and the tenns of the 2 subcontracts are binding upon the Plaintiff and J&B. 3 Furthennore, the court recognizes that either J&B or the Plaintiff may have been 4 responsible for obtaining the permits, but the evidence shows that J&B were the ones that were 5 obtaining them throughout the entirety of the project. The Plaintiff makes no allegations that the 6 permits were either not received on time or the cause for the delays. Instead, Plaintiff alleges that 7 the delays were due to the subsurface conditions being materially different from those represented 8 to it by J&B. Thus, even if J&B was responsible for obtaining the permits, there are no genuine 9 issues as to any material fact regarding the permits because there are no allegations that J&B did 10 11 not act in accordance with the nonnal permit procurement processes.

12 "No Damage For Delay" Provisions

As to the claim for declaratory relief concerning the "no damage for delay" provisions, 13 14 Plaintiff's complaint states, a dispute arose between the parties over the fact that the subcontracts

15 contained a provision that no extended overhead or standby costs shall be awarded/granted as a

16 result of delays from the Civil work. Plaintiff maintains that the subsurface conditions

17 encountered during the course of the project differed materially from those represented to them,

18 which resulted in major changes made to the location and scope of Plaintiff's work and which

19 required new permits to be obtained. Plaintiff argues that this caused unreasonable and

20 unanticipated delays, which costs approximately 44% overrun in expenses. On the other hand,

21 J&B argue that the provisions in both the subcontracts and the prime contracts concerning delay

22 costs are clear and unambiguous and that contracts should be enforced. 23 A clause which exculpates a contractee from liability to a contractor for damages resulting

24 from delays in the perfonnance of the latter's work is valid and enforceable and is not contrary

25 to public policy if the clause and the contract of which it is a part satisfy the requirements for the 26

Page 5 of 7 DECISION AND ORDER Civil Case no. CV1423-10 1 validity of contracts generally. Corinno Civetta Construction Corp. v. City of New York, 502 2 N. Y.S .2d 681, 685 (1986). The rule is not without its exceptions, however, and even exculpatory 3 language which purports to preclude damages for all delays resulting from any cause whatsoever 4 are not read literally. Generally, even with such a clause, damages may be recovered for (l) delays 5 caused by the contractee's bad faith or its willful, malicious, or grossly negligent conduct, (2) 6 uncontemplated delays, (3) delays so unreasonable that they constitute an intentional 7 abandonment of the contract by the contractee, and (4) delays resulting from the contractee's 8 breach of a fundamental obligation of the contract. Id. at 685-86 (citations omitted). 9 As stated in the previous section, the subcontracts are valid agreements between the 10 parties. Thus, the no damage for delay provisions in the contracts are enforceable as a matter of 11 law, and the only way for damages to possibly be recovered by the Plaintiff is if they have 12 sufficiently alleged one ofthe above mentioned exceptions. In the instant case, Plaintiffhas failed 13 14 to sufficiently allege anyone of the four exceptions. They have not alleged any bad faith, willful,

15 malicious, or grossly negligent conduct on behalf of J&B.

16 They do argue that the above mentioned delays were uncontemplated. The court disagrees

17 because both subcontracts provide that Plaintiff would provide construction survey, staking and

18 Ground Penetration Radar in order to trace the location of the existing underground utilities.

19 Furthermore, the subcontracts provide, ''the subcontractor has examined the site on which the 20 work is to be performed and is fully familiar with the physical conditions." Thus, the court fmds

21 that Plaintiff knew or should have known that it was there responsibility to determine the correct

22 location of the underground lines. The fact that they may not have exercised due care does not

23 give them a valid reason to argue for uncontemplated delays. 24 Plaintiff also argues that the delays were unreasonable. Once again, the court disagrees

25 because the Plaintiff may not have exercised due care in determining the correct location of the 26

Page 6 of 7 DECISION AND ORDER Civil Case no. CV1423-10 1 underground lines. The Plaintiff had a clear duty to examine the site on which the work was to 2 be performed and become fully familiar with the physical conditions. Furthermore, the exception 3 defines the delay as "intentional abandonment". The projects were completed and there are no 4 allegations that J&B did anything to cause so unreasonable a delay that they constitute an 5 intentional abandonment of the contract. Therefore, because the Plaintiff may not have exercised 6 due care and because the projects were completed they cannot argue unreasonable delays. 7 Lastly, the Plaintiff has not alleged delays resulting from the contractee's breach of a 8 fundamental obligation of the contract. As a result, the court fmds that Plaintiff has failed to 9 10 sufficiently allege anyone of the above mentioned exceptions.

CONCLUSION 11 12 Based on the foregoing. the court finds that the "no damage for delay" clauses in the

13 subcontracts exculpates J&B from liability to Plaintiff for damages resulting from delays in the

14 performance of the latter's work. Therefore, there is no genuine issue as to any material fact

15 because Plaintiff has failed to prove they can recover any cost resulting from the delays alleged

16 in their complaint. Thus, the court finds that Plaintiff has failed to assert an essential element of

17 their case rendering all other allegations, including the permit issue, immaterial. For these reasons,

18 the court hereby GRANTS the Defendants' motion for summary judgment. 19

20 21 SO ORDERED, this 1-2- day of £d 2012.

22 23 LE MICHAEL J. BORDALLO 24 • Superior Court of nllam-"'Ythatthe'o<~' lao~ ftd ~coP)'oIiIlt ,n... Ie 1\ full .. ____ • of the original on file 1ft • ",.~ 25 derI< of ItM $4IperiOI' ('MJrt of Guam· OIMdat~Gucrn

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Page 7 of 7 JaIIle8 R. Borja .•'>; ~ Suptrior CW1 of G~