APEX CONTRACTING, INC. v. CITY OF PARIS, KENTUCKY
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RENDERED: APRIL 9, 2004; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-001310-MR
APEX CONTRACTING, INC.
v.
APPELLANT
APPEAL FROM BOURBON CIRCUIT COURT
HONORABLE PAUL F. ISAACS, JUDGE
ACTION NO. 01-CI-00198
CITY OF PARIS, KENTUCKY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BARBER, SCHRODER, AND VANMETER, JUDGES.
SCHRODER, JUDGE.
Apex Contracting, Inc. (“Apex”) appeals from
an opinion and order of the Bourbon Circuit Court, entered
May 31, 2002, which granted summary judgment in favor of the
City of Paris, Kentucky (“the City”).
We affirm.
On August 24, 1998, Apex entered into a contract with
the City whereby Apex agreed to perform work on seven city
blocks of Main Street in Paris, Kentucky, in a construction
project known as the Main Street Sidewalks Improvement Project.
According to the record, the City was responsible for
demolishing and clearing existing pavement, curbs and lighting,
installing new electrical systems, installing new water, gas and
sewer lines, and providing new traffic signals.
Apex was to
install new concrete sidewalks, driveway paving, entrance aprons
and steps, construct new brick paving, erect new light poles,
and install the new traffic signals.
As required by this contract, Apex presented the City
with a schedule setting forth the sequence and timing for the
project.
Under this construction schedule, the City agreed to
begin its work on the first block of the project on September 8,
1998.
Every two weeks thereafter, the City was to begin work on
the next block.
Apex was to begin work on the first block on
September 21, 1998, which was immediately after the City
completed its work on the first block.
With this construction
schedule, both Apex and the City recognized that some of the
City’s work would have to be completed before Apex could
commence work.
Both parties originally agreed that Apex would
have 180 consecutive days to complete this project after Apex
received notification from the City to start its work.
On
August 24, 1998, the City informed Apex that it may begin work
on September 8, 1998.
Thus, under the terms of the contract,
April 9, 1999, became the completion date for the entire
project.
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Unfortunately, the City encountered numerous delays in
demolishing and removing the sidewalks and in the installation
of the underground utilities.
The City’s slow performance
required Apex to correspondingly slow its work so as to not
supercede the City’s work.
As a result, Apex completed its
portion of the project in 557 calendar days.
In response to the extra time and resources Apex
expended on this project, Apex submitted a claim to the City for
additional compensation in the amount of $281,224.47.
subsequently rejected this claim.
The City
Thereafter, on July 20, 2001,
Apex filed its complaint against the City in Bourbon Circuit
Court for breach of contract.
In its complaint, Apex asserted
that its “performance of its contract work was impacted,
interrupted and hindered” by the City’s delays, thereby
increasing the amount of time Apex needed to complete its
obligations under this contract.
In response, the City filed a
motion for summary judgment, arguing that the August 24, 1998,
contract contained a “no damage for delay” clause which
specifically precluded Apex from recovering damages caused by
the City’s delayed performance.
On May 31, 2002, the circuit
court granted the City’s motion for summary judgment after
concluding that the contract contained a valid “no damage for
delay” clause and that the City’s actions failed to invoke any
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recognized exception to the enforceability of “no damage for
delay” clauses.
This appeal followed.
The standard for summary judgment in Kentucky has been
definitely announced in Steelvest, Inc. v. Scansteel Service
Center, Inc., Ky., 807 S.W.2d 476 (1991).
In Steelvest, our
Supreme Court adhered to the principle that summary judgment
should be cautiously applied and not used as a substitute for
trial.
Id., at 483.
Summary judgment “should only be used ‘to
terminate litigation when, as a matter of law, it appears that
it would be impossible for the respondent to produce evidence at
the trial warranting a judgment in its favor and against the
movant.’”
Id., quoting Paintsville Hospital Company v. Rose,
Ky., 683 S.W.2d 255, 256 (1985).
Nonetheless, “a party opposing
a properly supported summary judgment motion cannot defeat it
without presenting at least some affirmative evidence showing
that there is a genuine issue of material fact for trial.”
Steelvest, 807 S.W.2d at 482.
Accordingly, our standard for
reviewing a trial court’s award of summary judgment is whether
the trial court correctly found that no genuine issues of
material fact existed and that the moving party was entitled to
judgment as a matter of law.
Moore v. Mack Trucks, Inc., Ky.
App., 40 S.W.3d 888, 890 (2001).
On appeal, Apex presents three arguments for our
review.
First, Apex argues that the trial court erred in
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granting summary judgment to the City because the contract’s “no
damage for delay” clause does not bar it from recovering damages
arising from the City’s delays.
We disagree.
Apex and the City agree that Paragraph 1.12 of their
contract is a provision commonly known as a “no damage for
delay” clause.
Paragraph 1.12 provides in pertinent part as
follows:
The Contractor shall make no claim for extra
compensation due to delays of the project
beyond its control. Such delays may include
those caused by any act of neglect on the
part of the OWNER or Engineer, or by any
employee of either, or by any separate
contractor employed by the OWNER, or by
changes ordered in the work, or by labor
disputes, fire, unusual delays in
transportation, adverse weather conditions
not reasonably anticipated, unavoidable
casualties, or by delay authorized by the
OWNER pending arbitration, or by and other
cause which the Engineer determines may
justify the delay.
“No-damage-for-delay clauses ‘are commonly used in the
construction industry and generally recognized as valid and
enforceable.’”
John E. Green Plumbing & Heating Co., Inc. v.
Turner Construction Company, 742 F.2d 965, 966 (6th Cir. 1984)
(quoting W.C. James, Inc. v. Phillips Petroleum Co., 485 F.2d
22, 25 (10th Cir. 1973)).
“No damage for delay” clauses have
been recognized as enforceable by Kentucky courts.
See
Humphreys v. J.B. Michael & Co., Ky., 341 S.W.2d 229 (1960),
overruled on other grounds by Foley Construction Co. v. Ward,
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Ky. 375 S.W.2d 392 (1963).
It is a fundamental principle of
Kentucky law that courts “cannot deny enforcement of an
otherwise valid contract merely because its enforcement would
result in inequities in a particular case.”
Ky. 41, 214 S.W.2d 984, 992 (1948).
More v. Carnes, 309
Summary judgment is
appropriate when a party’s claim for damages is barred by a
contractual provision.
Codell Construction Co. v. Commonwealth,
Ky. App., 566 S.W.2d 161, 164-65 (1977).
In this matter, Apex contends that the City breached
this contract by failing to perform its work in accordance with
the mutually agreed upon project schedule and by issuing a
notice to proceed prior to completing its own work.
Apex
concedes that Paragraph 1.12 of this contract bars it from
recovering “delay damages” from the City.
However, the crux of
Apex’s argument is that all other damages are not barred by
Paragraph 1.12.
was delayed.
In essence, Apex is not arguing that its work
Instead, Apex believes that the slow performance
of the City’s work hindered and obstructed Apex from completing
its work on schedule.
In support of its position, Apex relies heavily upon
the Sixth Circuit’s decision in John E. Green Plumbing.
In John
E. Green Plumbing, similar to the case before us, the contractor
claimed that the “no damage for delay” clause was inapplicable
because its claim was not for delay damages, but rather for
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damages caused by hindrances or obstacles created by the
construction manager.
In evaluating this argument, the Sixth
Circuit held that, in the context of a “no damage for delay”
clause, the word “delay” means time lost when work cannot be
performed because the necessary preliminary work had not been
completed.
John E. Green Plumbing, 742 F.2d at 966.
Using this
logic, delay damages that fall under the scope of “no damage for
delay” clauses refer only to the cost of an idle workforce.
Id.
Under this framework, the Sixth Circuit found that a portion of
the contractor’s extra manpower costs were incurred as a result
of the construction manager’s failure to perform tasks that
hindered the contractor’s ability to successfully complete its
work, such as properly coordinating work or providing temporary
heat to the contractor’s employees.
Id., at 967.
We find Apex’s reliance on John E. Green Plumbing to
be misplaced.
First, Apex’s claim for compensation is actually
based on its contention that it incurred expenses because of the
City’s failure to perform its work in a timely manner, not
because the City created extra obstacles or hindrances to Apex’s
ability to timely complete its work.
A close examination of the
record reveals that all of the City’s work was preliminary and
necessary to Apex’s completion of its obligations under the
contract.
Based upon the rationale of John E. Green Plumbing,
Apex’s claim for compensation is barred because a “delay” that
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falls under the “no damage for delay” clause includes time that
is lost because a contractor’s work cannot be performed due to
the necessary preliminary work not being timely performed by
another party.
Additionally, in this contract, Apex cannot
point to any provision requiring the City to complete work that
is not considered to be preliminary and necessary to Apex
commencing and completing its work under the contract.
Thus,
there is no evidence, as required by John E. Green Plumbing,
that Apex incurred “other” damages from events, obstacles or
hindrances that were not the direct result of the City’s failure
to timely complete preliminary work.
Moreover, our review of the record reveals that,
unlike the contractor in John E. Green Plumbing, Apex incurred
its increased costs primarily because its workforce came to a
standstill numerous times.
In a document entitled “Labor
Efficiency/Impact Costs” that was submitted in its May 3, 2001,
revised claim to the City, Apex alleged that “[t]he erratic and
untimely demolition by the Owner caused our forces to ‘stop and
stand’ on several occasions and be unable to perform an
efficient flow of work.”
Moreover, in its complaint, Apex
alleged that the City’s failure to complete its work in
accordance with the project’s schedule “substantially slowed or
stopped Apex’s performance of its work on the Project.”
result of these work stoppages, Apex incurred its claimed
As a
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additional overhead and equipment costs.
As such, it appears to
us that Apex’s claim for damages is also directly the result of
maintaining its own idle workforce on this project, a result
that is specifically barred by John E. Green Plumbing and
contrary to Apex’s own argument.
Finally, we believe that Codell, 566 S.W.2d 161, is
dispositive to this matter before us.
In Codell, the contractor
attempted to recover extra compensation from the Commonwealth
for additional work caused by changed conditions.
This Court,
however, rejected this claim after finding that a provision of
the contract notified all potential contractors to conduct a
private investigation into potentially changing conditions that
could affect the completion of the project.
at 164.
Codell, 566 S.W.2d
In rejecting the contractor’s claim, the Court opined:
In the instant situation the contractor bid
and entered into a bad bargain in the final
analysis, but this Court has no basis to
salvage the operation. Unanticipated
difficulties in completing the contract do
not give rise to subsequent awards when the
parties are in an equal position as to
knowledge and information surrounding the
contract.
Id., at 165.
Likewise, Apex submitted its bid and freely entered
into this contract with the City.
From the terms of their
agreement, Apex was fully aware that the City was responsible
for performing work on the project before Apex was to continue
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its own work.
Apex, then, was placed on notice that any delays
that could occur with the City’s work could hinder its own
performance under this contract.
Paragraph 1.12 of the contract
clearly states that Apex “shall make no claim for extra
compensation due to delays of the project beyond its control.”
Since Apex entered into this agreement with full knowledge that
the express terms of Paragraph 1.12 prohibited it from seeking
extra compensation for any delays caused by the City, Codell
precludes Apex from submitting a claim for damages.
Hence, this
“no damage for delay” clause is enforceable under Kentucky law.
Apex next asserts that, even if the “no damage for
delay” clause is valid under Kentucky law, its claim for extra
compensation from the City falls within one of the recognized
exceptions to the enforceability of such clauses.
We are
compelled to reject this assertion.
Apex first argues that its claim is valid under the
unreasonable duration exception to the enforceability of such
clauses.
In Humphreys, 341 S.W.2d at 235, Kentucky’s highest
court adopted the opinion of a New York court in Mack v. State,
202 N.Y.S. 344 (N.Y. Ct. Cl., 1923), which held that a “no
damage for delay” clause, by its very nature, eliminates the
necessity of deciding whether a delay is reasonable.
Apex has
identified no Kentucky precedent that conclusively accepts the
unreasonable duration exception as a valid defense.
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As such, it
appears that Kentucky law has not embraced the unreasonable
duration exception to the enforcement of no damage for delay
clauses.
Thus, we believe that Apex’s claim under the
unreasonable duration exception is not tenable.
Next, Apex contends that it is exempt from the “no
damage for delay” clause because the City actively interfered
with its work performance.
The active interference exception
arises from the concept that other parties owe an implied
obligation to refrain from doing anything that would
unreasonably interfere with a contractor’s opportunity to
proceed with its work in a manner provided by a contract.
U.S.
Steel Corp. v. Missouri Pacific Railroad Co., 668 F.2d 435, 438
(8th Cir. 1982), cert. denied, 459 U.S. 836, 103 S. Ct. 80, 74 L.
Ed. 2d 77 (1982).
Kentucky recognized the active interference
exception in Humphreys, 342 S.W.2d 229.
In Humphreys, the Kentucky Department of Highways
issued a notice to proceed to a contractor despite knowing that
the work site would not be ready for the contractor’s work
within the specified time.
Humphreys, 341 S.W.2d at 231.
The
contractor complied with the notice to proceed and mobilized to
the project site.
Id.
After arriving at the project site,
however, the contractor’s crew became idle and its work was held
in a state of abeyance.
Id.
Despite the “no damage for delay
clause” in the construction contract, the contractor claimed
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that it was entitled to recover because of the highway
department’s failure to provide site access and active
interference.
Id., at 232.
The Court rejected the contractor’s
claim, holding that a contractor cannot allege active
interference unless the owner has issued an order or directive
requiring the contractor to keep its crew and equipment at the
site in a state of readiness to proceed with its work.
234-35.
Id., at
Since the highway department issued no such order or
directive, the Court found that the contractor’s claim for extra
compensation was barred by the contract’s “no damage for delay”
clause.
Id., at 235.
Thus, Humphreys stands for the principle
that, in Kentucky, an owner’s act of issuing a notice to proceed
before it had completed the preliminary work is not an act of
active interference sufficient to render the no damage for delay
clause unenforceable.
Id.
In this matter before us, Apex, similar to the
contractor in Humphreys, was free to make its own decision
concerning the use of its personnel and equipment.
Apex’s
contention that, fearing the City’s request for liquidated
damages, it mobilized its personnel and equipment at the job
site despite knowing that the City’s work had not been completed
is completely without merit.
There is simply no evidence in the
record supporting this contention.
Moreover, the City never
directed or otherwise ordered Apex to keep its personnel and
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equipment at the job site in a state of readiness.
Thus, it is
clear to us that Apex’s claim does not fall under the active
interference exception to the enforceability of “no damage for
delay” clauses.
Apex also asserts that its claim falls within the
breach of fundamental obligation exception to the enforceability
of a “no damage for delay” clause.
Our review of the record,
however, reveals that Apex failed to present this assertion to
the trial court.
“It is an elementary rule that trial courts
should be given the opportunity to rule on questions before
those issues are subject to appellate review.”
Swatzell v.
Commonwealth, Ky., 962 S.W.2d 866, 868 (1998), overruled on
other grounds by Rapier v. Philpot, Ky., _____ S.W.3d _____
(2004).
Since this issue was not presented to the trial court
or otherwise preserved for appellate review, we shall not
consider it now.
Finally, Apex argues that the trial court’s order
granting summary judgment to the City was erroneous because Apex
is entitled to recover damages from the City under the
contract’s suspension of work clause.
We disagree.
Paragraph 1.65, the suspension of work clause,
provides as follows:
The OWNER shall have the authority to
suspend Work in whole or in part by giving
five (5) consecutive calendar days notice to
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the Contractor in writing. The written
notice shall fix the date on which the Work
shall be resumed, and the Contractor shall
resume the Work on the date so fixed. The
OWNER shall reimburse the Contractor for
expenses incurred by him in connection with
the Work under this Contract as a result of
suspension if the suspension of the Work is
caused through no fault of the Contractor
himself.
Humphreys involved a similar contractual provision.
In assessing that contractual provision, that Court held that
“the right to suspend the work . . . was a discretionary
prerogative which was exclusively reserved to the defendant for
its sole benefit.”
Humphreys, 341 S.W.2d at 235.
The
suspension of work clause in the contract herein only
contemplates work suspensions ordered at the discretion of the
City.
The record is clear that the City ordered no suspensions
of work, nor directly asked Apex to demobilize.
Accordingly, we
believe the trial court correctly granted the City’s motion for
summary judgment because no genuine issue of material fact
exists regarding this issue.
For the aforementioned reasons, the judgment of the
Bourbon Circuit Court is affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
G. Bruce Stigger
ALBER CRAFTON, PLLC
Louisville, Kentucky
Buckner Hinkle, Jr.
Cassidy E. Ruschell
STITES & HARBISON, PLLC
Lexington, Kentucky
Henry Watson, III
Cynthiana, Kentucky
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