Continental Constr. LLC v State of New York

[*1] Continental Constr. LLC v State of New York 2012 NY Slip Op 52438(U) Decided on September 17, 2012 Ct Cl McCarthy, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 17, 2012
Ct Cl

Continental Construction LLC, Claimant

against

The State of New York, Defendant.



113176



Claimant's attorney:CASE & LEADER, LLP

By: Henry J. Leader, Esq.

Defendant's attorney:ERIC T. SCHNEIDERMAN

Attorney General of the State of New York

By: G. Lawrence Dillon, Esq., AAG

Christopher J. McCarthy, J.

Claimant, Continental Construction Company LLC ("Claimant," or "Continental"), failed to establish by a preponderance of the credible evidence that it should be reimbursed for expenses it incurred in performing excavation work as part of a contract for the construction of new sewer/water systems at a State park. Claimant contends that it encountered differing subsurface soil conditions which it could not have reasonably anticipated when it bid the project. It further alleges that Defendant did not share material information in its possession during the bidding process which would have made clear the subsurface conditions that Claimant might [*2]expect to encounter. A unified trial of the Claim, addressing both liability and damages issues, was held on April 3, 2012 at the Court of Claims in Utica, New York. There were four witnesses: Timothy Fairbanks, Continental's manager for the project; Robert L. Fagel, P.E., Continental's expert witness; Mark E. Spaulding, Defendant's employee who designed the project; and Donald K. McGrath, the State's on-site park engineer. Thereafter, the parties requested and were granted additional time to submit post-trial memoranda.

FACTS

In the Summer of 2004, Continental and the State, acting by and through the Office of Parks, Recreation and Historic Preservation (the "Office") entered into Contract No. D003242 for the construction of new sewer and water systems at Robert Moses State Park in the Town of Massena, St. Lawrence County, New York (respectively, the "Project" and the "Park") at a contract bid price of $570,700 (see Ex. 1). The contract documents specified that the work to be performed included any earth excavation required in connection with the Project, including, but not limited to, digging trenches for the placement of pipes (Ex. 1, Detailed Specifications, pp. 02300-4-02300-5). Earth excavation is defined as the "removal of all surface and subsurface material not classified as rock" (id., p. 02300-1). Rock, in turn, includes "boulders with a volume greater than 1.0 cubic yard" (id.).Mr. Fairbanks said that he had bid on other projects for State agencies in the past and reckoned that he had been the successful bidder about 20% of the time. He agreed that the contract documents for this Project included a number of standard, boilerplate provisions commonly found in New York State construction contracts which allocate to the contractor the risk of encountering unforeseen, latent subsurface conditions. For example, prospective bidders were urged to visit the Project site prior to submitting a bid. It was further noted that they "[a]ssume the risk of encountering any subsurface or other latent physical condition which can be reasonably anticipated on the basis of documentary information provided by [the Office] and from inspection and examination of the site" (id., Instructions to Bidders, p. 1; see also, id., General Conditions, Site Conditions, p. 10). Mr. Fairbanks and Claimant's expert, Mr. Fagel, each agreed that the contract documents do not affirmatively indicate the subsurface conditions to be encountered at the Project site, nor do they state that the State performed any borings or soil tests. Mr. Spaulding said that Defendant made no test borings at the Park in order to determine subsurface conditions.

In preparing Claimant's bid, Mr. Fairbanks reviewed the contract documents provided by the Office (Ex. 1), as well as the site plans (see Ex. 2). In addition, he visited the Park and, using the site plans, walked unescorted through the area in order to assess the equipment and manpower Continental would need to perform the work. Mr. Fairbanks said that the area he observed "was a campground. It looked like a golf course. There were no obstructions, no outcroppings of rock, or anything like that. It was very well groomed."[FN1] He also drew upon his experience constructing a smaller water/sewer project some years earlier at a site about 10 miles distant from the Project. He did not dig any test holes to determine subsurface conditions, [*3]although Mr. Spaulding said it would not have been possible to do so during the bid period because the Park was open to the public at the time. Mr. Fairbanks anticipated that Continental would encounter "loamy soil, something you could dig with a round-point shovel" and determined that it would be possible to use excavation equipment that was suitable for use in sandy, loamy soil, or gray clay (see also Ex. 3, p. 6).

Mr. Fairbanks also indicated that he does not typically consult public records in assessing a project and in preparing a bid. Thus, he was unaware of a 1925 soil survey of St. Lawrence County that was prepared by the United States Department of Agriculture (the "1925 Soil Survey") (see Ex. B, Attachment C). Claimant's expert, Mr. Fagel, agreed that the 1925 Soil Survey is a public record and a reasonable resource that can be used by consulting and construction engineers as a general indicator of soil conditions in an area. Defendant's Mr. Spaulding also believed it to be a public record. He was not sure whether or not he consulted the 1925 Soil Survey in drawing up the Project plans, though he agreed that the Office possesses copies of such soil surveys for a number of counties. In any event, he said that he does not typically append such surveys to the bidding and contracting documents he prepares.

Mr. Spaulding said that he had circled the Project location on the map included in the 1925 Soil Survey, and testified that the map key indicates that two types of soil are to be found in that area: Madrid loam; and Lyons stony loam (see Ex. B, Attachment C). The Soil Survey describes the color and consistency of the soils to be found at various depths for both types of loam. It further states that, in Madrid loam, "[v]arying numbers of rounded stones and bowlders [sic] of limestone, quartzite, and granite were scattered over the surface and through the soil in its virgin state. Most of these have been removed from the surface in cultivated areas Madrid loam occurs throughout the northern part of the county [and] is one of the most important soils in the county" (id.). The Soil Survey similarly describes Lyons stony loam as containing "varying amounts of rounded bowlders [sic] and rock fragments, largely quartzite, granite, and limestone This soil occurs in the northern part of the county in association with Madrid loam (id.). The Court notes that the Park and Project are along the St. Lawrence River and, thus, in the northern part of the county. At trial, the 1925 Soil Survey's descriptions of Madrid loam and Lyons stony loam were read to Mr. Fairbanks, who agreed that they were consistent with the conditions he encountered on this Project.

Mr. Spaulding testified that at or shortly after the July 15, 2004 date upon which the Project bids were opened, he authored a storm water pollution prevention plan (the "SWPPP"), dated August 2004, that was developed by the Office to address State Department of Environmental Conservation permitting issues in connection with the Project (see Ex. 11). In discussing the existing conditions at the Project site, the SWPPP states:

The soils at the surface in the areas of construction were observed to be a clay material. According to the [1925 Soil Survey], the soils in these areas are classified as loamy material, however, the surface soil material [may] have been altered during the Seaway Project in the 1950s with dredged spoils being placed at various locations and at unknown depths. Some testing was performed, in the form of percolation testing, during the design process for the proposed sewer treatment fields. The percolation rate of water through the upper 24" layer of soil was very slow and hindered by a clay layer (id., p. 4). [*4]

Mr. Spaulding was examined extensively by both counsel concerning the above-referenced paragraph. The gist of his testimony was that only clay materials were observed at the surface of the site. He included the description from the 1925 Soil Survey to provide comprehensive information concerning soil conditions in the area. He further indicated that dredged spoils from the 1950s Seaway Project might have been deposited in the area, but stressed that he did not know if that was true.

Mr. Spaulding agreed that it is important that the Office provide bidders with all of the information it possesses concerning a construction project. He testified, however, that he did not know at the time the contract bid documents were prepared that the Project area might have been a spoils site for the Seaway project. He did not recall having communicated that possibility to the bidders, but said he would have done so if he had known for certain that such spoils had been deposited there. Mr. McGrath also testified that he had heard that the area had been a dump site for the Seaway Project. It is not clear from the record, however, when it was, and from whom, that he heard that statement.

A Project meeting was held at the Park prior to the commencement of construction in the Autumn of 2004. Representatives from Continental, the Office and the New York Power Authority ("NYPA") were in attendance. Mr. Fairbanks testified that, when he described the means and methods he proposed to use to carry out the Project, the NYPA representative stated that some of the equipment Claimant proposed to use would be inadequate to the task because the site was full of boulders. It was at that point that Claimant did test digs, which indicated that NYPA was correct. Mr. Fairbanks stated, however, that the Claim arises not because of the need to alter the means and methods that had to be used, but, rather, because of the expense that resulted from the larger size, width, and depth of the trenches that had to be dug on account of the many large rocks that were encountered during the construction.

Mr. Fairbanks testified that he communicated regularly with Mr. McGrath, who was Defendant's representative at the Project, as well as Mr. Spaulding, during the construction of the Project to keep them apprised of the conditions Continental was encountering, in particular, with respect to the large number of rocks and boulders. Mr. Spaulding made periodic visits to the construction site. He said that the excavated soil appeared to be clay material with some stones in it, though he acknowledged that he did see some large rocks/boulders like the ones shown in Exhibit 15. Mr. McGrath, who was present on a near daily basis, also said that he saw boulders that were larger than 1.0 cubic yard that had been excavated during the trenching process.

Mr. Fairbanks also said that, early during the construction, he presented a written change order for a $1,600 item in the manner prescribed by the contract documents. He said that he was told that he should not submit any further change orders until after the work was completed, and that any outstanding issues would be resolved then. After the Project was complete, Continental did submit several dozen change orders. Most concerned relatively small items and amounts and all but one were paid in an aggregate amount in excess of $30,000 (see Ex. 10). One change order was rejected, however, for additional amounts in connection with the excavation of the rocks and boulders. Several meetings and letters between Continental and the Office followed.

Continental had assumed that subsurface conditions would be "sand and light gravel" (Ex. 10, September 28, 2005 letter from Continental to Office, p. 2). It stated that it incurred [*5]significant additional costs "as the result of unanticipated and subsurface conditions" including "thousands of boulders and other unsuitable material" (Ex. 10, February 15, 2006 letter from Continental to Office, p. 2). Claimant maintained that, "[p]rior to the start of excavation, there was no way Continental could have anticipated the type of materials it would encounter at the site. There were no site borings available. There were no provisions made in the Project specifications for rock removal. In order to determine the conditions in the various locations of the work, [Claimant] would have had to dig numerous test pits. This was not feasible since the [P]ark was in use during the summer season, when the Project was being bid. It was only after [it] commenced work at the site that [Continental was] told that the [P]ark had been built upon a spoils area for rock and unsuitable materials excavated during the construction of the St. Lawrence Seaway Project. Although construction of the Park had been performed after the completion of the Seaway project, there was no mention of the unsuitable site conditions in the specifications" (id.).

The Office rejected the justification proffered by Continental for additional amounts, noting that the "contract documents specify that excavation is classified as either earth excavation or rock removal" as clearly defined in the project specifications, and that Continental's "assumption that the soil conditions were sand and light gravel is not supported by the contract documents" (Ex. 13, p. 1). The Office did go on to state, however, that additional compensation would be warranted for any stones removed that were larger than 1.0 cubic yard in volume.

Claimant hired Mr. Fagel, who co-authored a report (the "CMC-North Coast Report") to help bolster its claim for additional payments (see Ex. 3). The report asserts that, when "Continental commenced excavation, it discovered that the soil was not the sandy loam or gray clay that was typical in this locale, but was rather a mixture of gravel, large stones and boulders It was not until after it commenced work that Continental learned that the [P]ark site had been used as a spoil area for unsuitable materials and boulders during the construction of the St. Lawrence Seaway Project in the 1950's" (id., pp. 6-7). "The conditions encountered by Continental could not have been anticipated [emphasis in original] based on the documentary information (Project Manual and Project Plans) or by the site visit upon which Continental observed well graded and established lawns and trees Unbeknownst to Continental, the site had been used as a spoil area during the construction of the St. Lawrence Seaway Project. The material in which Continental excavated the trenches was unsuitable rubble that had been disposed of on the site during construction of that Project. The site was later developed by [the Office. The Office] would have knowledge of the subsurface conditions from construction of the facility as well as maintenance of the existing utilities. This knowledge should have been communicated to the bidders so that they could price their bids reflecting the actual site conditions" (id., p. 11). The CMC-North Coast Report concluded that Continental was entitled to recover an additional $194,478.73 (the amount sought in the Claim) to compensate it for the extra work it had to perform "through no fault of its own" (id., p. 14).

Defendant rejected Continental's claim for this additional amount. Mr. Spaulding, writing to his supervisor on July 27, 2006, disagreed with the CMC-North Coast Report's assertion that St. Lawrence Seaway spoils had been dumped at the Project site. He believed that conditions prior to and during construction at the Project site, as well as the 1925 Soil Survey, [*6]"should demonstrate [that] the soil conditions the contractor encountered during trenching operations was native soil and not spoils as stated" (Ex. B, p. 1). He also relied upon a 1996 map and survey study prepared for NYPA which, he said, included the entire Park. He further indicated that most of the areas where the study found disturbed soils were outside of Continental's Project area and those that were within the Project were probably connected to an unrelated building overlooking the river and a parking area, both of which had been built during the development of the Seaway (id., p. 2).

LAW

Claimant asserts that it is entitled to additional compensation on this contract because of unanticipated subsurface soil conditions that created additional work. In order to prevail in such a differing soil condition claim, Claimant must prove six elements: "[1] the contract documents must have affirmatively indicated the subsurface conditions, [2] [Claimant] must have acted as a reasonably prudent contractor in interpreting the contract documents, [3] [Claimant] must have reasonably relied upon the indications of subsurface conditions in the contract, [4] the subsurface conditions actually encountered must have differed materially from those indicated in the contract, [5] the actual subsurface conditions encountered must have been reasonably unforeseeable[,] and [6] [Claimant's] claimed damages must have been solely attributable to such materially different subsurface conditions" (Fruin-Colnon Corp. v Niagara Frontier Transp. Auth., 180 AD2d 222, 226 [4th Dept 1992]).

The ultimate guide in determining whether or not Claimant is entitled to additional compensation is the contract itself (Savin Bros. v State of New York, 62 AD2d 511, 515 [4th Dept 1978]). The role of the courts in interpreting the language of a contract "is to ascertain the intention of the parties at the time they entered into the contract" (Evans v Famous Music Corp., 1 NY3d 452, 458 [2004]). "Where the contract contains positive representations as to conditions, substantially amounting to a warranty, recovery may be had, but if the parties intended the contractor to rely upon its own investigation, no recovery for extra work may be had, absent a showing of fraud or misrepresentation as to existing conditions" (Savin Bros. v State of New York, supra).

On the other hand, liability may attach to the State notwithstanding representations about existing conditions affecting the contract work, together with an exculpatory clause that purports to relieve the State from liability and which directs the contractor to inspect the contract site in person, in the event that "said conditions are not as represented and (1) inspection would have been unavailing to reveal the incorrectness of the representations, or (2) the representations were made in bad faith" (Grow Constr. Co. v State of New York, 56 AD2d 95, 98 [3d Dept 1977], quoting Warren Bros. Co. v New York State Thruway Auth., 34 AD2d 97, 99 [3d Dept 1970], affd 34 NY2d 770 [1974] [citations omitted]).

DISCUSSION

The Court has considered all of the evidence, including a review of the exhibits and listening to the witnesses testify and observing their demeanor as they did so. The Court found that Messrs. Fairbanks and Fagel provided generally sincere and forthright testimony, even though Mr. Fagel's conclusions ultimately were not persuasive for the reasons discussed below. By contrast, the recollections of Messrs. Spaulding and McGrath were spotty in places and, in other instances, their testimony appeared to be somewhat guarded. Nevertheless, the Court finds [*7]that Claimant has failed to meet its burden, and did not establish by a preponderance of the credible evidence that it should receive additional compensation because of the subsurface soil conditions it encountered during the excavation work on the Project.

First, the Court concludes that Claimant failed to establish the existence of differing soil conditions. The contract documents do not make any affirmative statements concerning the subsurface conditions Continental might encounter in performing its excavation work. To the contrary, both Messrs. Fairbanks and Fagel agreed that the contract documents are silent on this point. Thus, Continental could not have reasonably relied upon indications of subsurface conditions that did not exist in the contract documents. Likewise, the subsurface conditions actually encountered could not differ materially from the contract documents when none were described.

The Court further concludes that the actual subsurface conditions encountered were not reasonably unforeseeable. Mr. Fagel agreed that the 1925 Soil Survey is a public record and a reasonable resource that can be used by consulting and construction engineers as a general indicator of soil conditions in an area. It is not Mr. Fairbanks' general practice, however, to consult public documents in preparing responses to contract bid requests. Accordingly, he was unaware of the 1925 Soil Survey when he bid on the Project. Mr. Fairbanks agreed that the soil descriptions contained in the 1925 Soil Survey were consistent with the conditions he encountered on the Project. Thus, the Court determines that the actual subsurface conditions at the Project site could have been reasonably foreseen by Continental had Mr. Fairbanks consulted the 1925 Soil Survey.

Second, Mr. Fairbanks had bid successfully in the past on other New York State construction contracts and was familiar with the boilerplate provisions contained in the contract documents which allocate to the contractor the risk of encountering unforeseen, latent subsurface conditions. Thus, the Court concludes that the intention of the parties at the time they entered into the contract is clear: they intended that Continental rely upon its own investigation.

Third, Claimant did not establish that the State misrepresented subsurface conditions, or withheld material information such that liability should attach to Defendant notwithstanding the parties intention that Claimant do its own inspection of the Project site. No representations of any kind having been made, it cannot be said that any misrepresentation was made concerning the subsurface conditions.

Fourth, the Court concludes that Continental did not establish that debris from the 1950s St. Lawrence Seaway construction, in fact, was deposited at the Project site. Neither of the State's employees testified that they knew that to be the case. Rather, Mr. Spaulding thought (and noted in the SWPPP) that dredged spoils might have been deposited in the area, but stressed in his testimony that he did not know whether or not that was true. Unfortunately, the record does not indicate why he thought spoils might have been dumped there. Mr. McGrath, likewise, testified that he had heard something to that effect, but was not asked when, or from whom, he acquired that information. The Office made no test borings "and did not possess any detailed special knowledge of the subsoil conditions" (Conduit & Found. Corp. v State of New York, 52 NY2d 1064, 1066 [1981]).

Assertions in the CMC-North Coast Report about St. Lawrence Seaway spoils having been dumped at the Project site (see Ex. 3, pp. 6-7) appear to be based, largely, upon information [*8]gleaned second-hand from Mr. Fairbanks' conversations with State employees. In addition to the documents enumerated in the CMC-North Coast Report (see Ex. 3, p. 2), Mr. Fagel said that he has an extensive personal library of resource materials that he routinely consults in formulating his opinions, but he described those resources only in very general terms. He had some soils information, but did not think he reviewed the 1925 Soil Survey. Continental did not provide him with any NYPA project documents regarding the construction of the 1950s Seaway project, nor could he recall having otherwise acquired them. He did mention having looked at some historical documents that referred generally to the reconfiguration of islands in the St. Lawrence River and the dumping of spoils as part of the Seaway project, having seen informational displays for the general public during visits to NYPA's Robert Moses dam, and his general knowledge as a longtime resident of the area. The Court finds that the conversations and other materials Mr. Fagel relied upon in formulating his opinion do not provide concrete grounds, or an authoritative basis, for the proposition that Seaway spoils were dumped at the Project site and that Continental encountered those spoils during its excavation work. In fact, Mr. Fagel's testimony itself appeared to be less definitive than the CMC-North Coast Report when he stated that the Project areas depicted in the site plans (see Ex. 2) "could have been" areas where spoils were deposited (emphasis supplied). Moreover, he could not state with certainty that the photographic exhibits depict Seaway spoils.

For all the foregoing reasons, the Court concludes that statements in the record concerning the possibility that Seaway spoils were deposited in the area of the Project are anecdotal and speculative. Claimant offered no other witness, or any documentary evidence, to establish, by a preponderance of the credible evidence, that the Project site was, in fact, a repository for spoils from the Seaway construction. Thus, the Court further concludes that Claimant failed to establish that the State acted in bad faith in failing to disclose that such spoils might have been dumped in the area. That conclusion is bolstered by Mr. Fairbanks' admission that the subsurface soil conditions encountered by Continental were consistent with those in the 1925 Soil Survey which described virgin soil conditions to be found in St. Lawrence County some thirty years before any disturbance that might have been caused by the Seaway project.

Finally, Mr. Fairbanks said that the Park had the well-tended appearance of a golf course. To the Court's mind, such a groomed environment, almost by definition, presents the aspect of an artificial landscape that has been shaped by human activity. As such, it would seem to offer few clues by which to ascertain subsurface conditions in that vicinity. As Mr. Fagel observed, "[u]nfortunately, in our industry, nobody has perfected the Superman x-ray vision that can look into the ground and see if the ground is all very nice and uniform material, or whether there [are] large boulders, bedrock and other surprises." Yet, Mr. Fairbanks does not routinely review public documents, like the 1925 Soil Survey, which, he agreed, described subsurface conditions like those Continental encountered. The Court concludes that it was that failure to review available reference materials that accounted for Continental's surprise at the soil conditions at the Project site. The contract documents certainly contemplated that rocks and boulders would have to be excavated because they specifically assign to Continental the responsibility of removing all surface and subsurface material, other than boulders that exceed 1.0 cubic yard in size. Mr. McGrath stated that he did see some boulders that were larger than 1.0 cubic yard. It is not [*9]possible from the record to determine, however, the extent of such boulders, or the portion of the amount claimed that can be fairly attributed to them. Thus, the Court is constrained to make no award for the expenses Continental incurred in their removal.

Based on the foregoing, the Court finds that Claimant failed to establish its case by a preponderance of the credible evidence and the Claim is dismissed.

All motions upon which the Court reserved decision at trial are hereby denied.

Any objections upon which the Court reserved decision at trial are now overruled.

The Chief Clerk is directed to enter judgment accordingly.

Appendices: Footnotes

Footnote 1:All quotations not otherwise attributed are taken from the electronic recording of the trial and/or the Court's trial notes. Mr. Spaulding agreed that, prior to the Project, the area was a well-groomed State park that was free of rocks. Elsewhere, he described the site as "a State Park consisting of mowed lawn areas with areas of tree cover" (Ex. 11, p. 4).