Opinion
Case No. 1:02CV283
November 25, 2003
MEMORANDUM OPINION
This matter is before the Court on Defendants' Motion for Partial Summary Judgment [Doc. #33]. For the reasons set forth below. Defendants' Motion will be GRANTED IN PART AND DENIED IN PART.
I.
The facts viewed in the light most favorable to the Plaintiff are as follows: Plaintiff JTE Constructors of North Carolina, Inc. ("JTE") is a Delaware corporation in the business of construction. Defendant Santaro Industries, Inc. ("Santaro") is a New York corporation in the business of construction contracting. Defendant United States Fidelity and Guaranty Company ("USF G") is a Maryland corporation in the business of issuing surety bonds.
In August 1 998, Santaro entered into a contract ("the Contract") with the North Carolina Department of Transportation ("NCDOT") for construction on Interstate 40 in Guilford County, North Carolina. In accordance with the terms of the Contract and the requirements of Chapter 44A of the North Carolina General Statutes, USF G, as surety, issued a payment bond to Santaro, the principal. The payment bond acted to secure payment to those providing labor and materials to Santaro in connection with work on the project.
On November 24, 1998, JTE entered into a subcontract with Santaro ("the Subcontract"). JTE's responsibilities under the Subcontract ("the Project") included construction of soil nail walls, sound barrier walls, and retaining walls. The proposal upon which the Subcontract was based scheduled the Project "to begin in late 1998 and continue until early 2000, a period of no more than 18 months." (Pl.'s Opp'n to Mot. Summ. J. at 18.) However, the Subcontract did not provide a specific time frame for performance of the specified work, nor was the proposal incorporated into the contractual agreement. JTE actually worked on the Project from August 1 999 through March 2002, a period of more than 30 months, due to various delays, including Santaro's failure to make work sites available to JTE in a timely fashion.
"A soil nail wall is a retaining wall constructed by drilling horizontally into the earth and grouting long metal rods known as soil nails into the holes to reinforce the embankment. A concrete face is then applied to the stabilized environment." (Pl.'s Opp'n to Mot. Summ. J. at 2, n. 2.)
JTE began work on the Project in August 1999 with construction of the first soil nail wall ("soil wall 342"). Upon completion of soil wall 342 in October 1999, JTE was ready to begin construction of the next soil nail wall ("soil wall 343"). However, JTE was unable to begin full work on soil wall 343 because Santaro had not excavated the site at that time. JTE notified Santaro in a November 10, 1999 letter that its crew was sitting idle, ready to begin construction on soil wall 343.
By mid-November, it became apparent that soil wall 343 could not be constructed as planned because Santaro had over-excavated the area. Santaro gave JTE no directions as to how to proceed. Instead, Santaro submitted a Value Engineering Proposal (VEP) to NCDOT detailing a plan that would allow the deletion of soil wall 343 from the Project. In preparing the VEP, Santaro asked JTE for a quote of the costs related to soil wall 343 that JTE had already incurred. In other words, Santaro requested JTE's cost of deletion of wall 343 from the Subcontract. JTE submitted its costs as approximately $157,728 in a January 12, 2000 letter (revised January 24, 2000) to Santaro. Santaro agreed to the costs as stated in the letter, and did not request further information or documentation.
"A VEP is a contractor proposal for a change in the contract which will result in a cost savings which is then divided equally between the contractor and NCDOT." (Pl.'s Opp'n to Mot. Summ. J. at 3-4, n. 3.)
Also in early 2000, JTE executed a series of "Affidavits and Partial Waivers of Claims and Liens and Releases of Rights" ("the Waivers"), the last of which was executed on June 19, 2000. The Waivers were drafted by Santaro, and apparently executed pursuant to paragraph 7 of the Subcontract. This paragraph provided that Santaro would pay JTE progress payments as certain portions of work were completed, but that Santaro could require that JTE execute partial lien or claim waivers as a prerequisite for these payments. The Waivers are discussed in further detail in Part III(A).
In early 2001, the VEP for deletion of soil wall 343 was officially approved by NCDOT, and on February 5, 2001, Supplemental Agreement 21 was issued, eliminating soil wall 343 from the scope of Santaro's work under the Contract. Before the VEP was officially approved, JTE had received from Santaro $32,609.29 for materials supplied for the deleted wall and $16,946.00 for work performed on the wall. Upon approval, Santaro received $221,068.91 from NCDOT for deletion of the wall, but did not inform JTE of the NCDOT approval. Instead, JTE learned of the approval directly through NCDOT. JTE then requested that Santaro provide a copy of the approved VEP, but Santaro refused. JTE claimed it was still owed payment in connection with deletion of the wall. Therefore, JTE and Santaro scheduled a meeting for November 13, 2001 to resolve this and other outstanding issues concerning the Project.
Tom Elmore and Chris Clements of JTE, and Dan Lenzen and Mike Lucarelli of Santaro attended the November 13, 2001 meeting. At the meeting, Santaro agreed that JTE was entitled to payment for an additional $110,920.82 in connection with the deletion of soil wall 343. Mr. Lucarelli indicated Santaro's agreement to this payment by marking "ok" on JTE's proposed change order.
Mr. Elmore was President and Owner of JTE. Mr. Clements was a Vice President of JTE, and JTE's Project Manager for the work under the Subcontract.
Mr. Lenzen was Santaro's North Carolina District Manager, and Mr. Lucarelli was Santaro's Chief Financial Officer.
After the meeting, Mr. Elmore prepared minutes of the meeting stating that, "Santaro's Mike Lucarelli and Dan Lenzen agreed to JTE's entitlement of $110,920.82. . . ." The minutes were delivered to Mr. Lenzen under handwritten cover of November 21, 2001. The cover requested that Mr. Lenzen "notify [JTE] if any additions or modifications are needed." The minutes were delivered to Mr. Lucarelli under cover dated November 16, 2001. This letter requested that Mr. Lucarelli "review the minutes . . . to confirm that we have accurately put in writing what we agreed to and what we didn't agree to." Neither Mr. Lenzen nor Mr. Lucarelli responded to the cover letter and copy of the minutes that each received.
In early 2002, Santaro negotiated the transfer of its Contract with NCDOT to another company, APAC-Carolina, Inc. (APAC). The Contract assignment was effective March 15, 2002. JTE did not learn of the assignment until it was contacted by APAC regarding continuing work on the Project.
On April 12, 2002, JTE filed a Complaint against Santaro and USF G in the Middle District of North Carolina. [Doc. #1]. There is complete diversity of citizenship, and jurisdiction in the federal courts is proper pursuant to 28 U.S.C.A. § 1332(a)d).
JTE's Complaint seeks relief from Santaro under the Subcontract on a breach of contract theory. The Complaint seeks relief against USF G pursuant to the terms of the payment bond and North Carolina's "Little Miller Act," N.C. Gen. Stat. § 44A-25 to 44A-30. Specifically, JTE claims that Santaro and USF G are jointly and severally liable for approximately $207,300 under the Subcontract, and approximately $201,000 for lost profits and extended field and home office overhead due to delay. The portions of the $207,300 requested under the Subcontract that are relevant to the Motion before the Court are as follows: (1) $23,000.02 from the November 2001 invoice, and $20,118.57 from the December 2001 invoice ("the unpaid invoices" for sound barrier wall work); and (2) $110,920.82 as compensation for the deletion of soil wall 343.
Santaro filed an Answer and Counterclaim [Doc. #8] on May 28, 2002. Santaro's Counterclaim asserts three claims for relief: (1) breach of warranties and breach of the Subcontract causing damage in excess of $10,000; (2) misrepresentation in the "schedule of values and progress billings" under the Subcontract causing damage in excess of $10,000; and (3) breach of a second agreement (regarding a different project) causing damage in excess of $10,000.
On August 20, 2003, Defendants Santaro and USF G filed a Motion for Partial Summary Judgment [Doc. #33]. The Defendants request that this Court find as a matter of law that: (1) JTE executed "the Waivers" which waived any of JTE's claims accruing before June 19, 2000, specifically the claims for compensation for deletion of wall 343 and for extended overhead; (2) JTE's claims relating to the extended field and home office overhead and lost profits are speculative and unsubstantiated, and therefore cannot be sustained; (3) JTE's claims relating to the unpaid November and December 2001 invoices fail because JTE has actually been overpaid, and is not entitled to additional payment for any work on the sound walls.
II.
Summary judgment is proper only when there is no genuine issue of any material fact and the movant is entitled to judgment as a matter of law. Fed.R. CIV. P. 56(e). The material facts are those identified by controlling law as essential elements of claims asserted by the parties. In other words, the materiality of a fact depends on whether the existence of the fact could cause a jury to reach different outcomes.Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986);Cox v. County of Prince William, 249 F.3d 295, 299 (4th Cir. 2001). An issue is genuine as to such facts if the evidence is sufficient for a reasonable trier of fact to find in favor of the nonmoving party.Anderson, 477 U.S. at 248. No genuine issue of material fact exists if the nonmoving party fails to make a sufficient showing on an essential element of its case as to which it would have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
In evaluating a motion for summary judgment, the court must view the facts and inferences reasonably to be drawn from them in the light most favorable to the nonmoving party. See Fed.R. CIV. P. 56(e). Summary judgment requires a determination of the sufficiency of the evidence, not a weighing of the evidence. Anderson, 477 U.S. at 249. In essence, the analysis concerns "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."Id. at 251-52. Trial is unnecessary if "the facts are undisputed, or if disputed, the dispute is of no consequence to the dispositive question." Mitchell v. Data General Corp., 12 F.3d 1310, 1315-16 (4th Cir. 1993).
III.
Defendants' Motion for Partial Summary Judgment will be GRANTED IN PART AND DENIED IN PART. The Defendants move for summary judgment on three grounds: (1) JTE executed "the Waivers" which waived any of JTE's claims accruing before June 19, 2000; (2) JTE's delay claims for extended overhead and lost profits are speculative and unsubstantiated, and thus cannot be sustained; and (3) JTE's claims relating to the unpaid November and December 2001 invoices fail because JTE has actually been overpaid, and is not entitled to additional payment for any work on the sound walls. The three grounds are considered in turn below.
The substantive law of North Carolina will be applied to all disputes in this case. When federal jurisdiction rests on diversity of citizenship, as it does here, the federal court applies the substantive law of the state in which the federal court sits. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
A.
Defendants' Motion for Summary Judgment that JTE waived and/or released any claims for additional compensation for the deletion of soil wall 343, and any claims for extended overhead will be DENIED. The Defendants claim that JTE waived these claims through execution of "the Waivers" in early 2000.First, JTE argues that Defendants' release/waiver argument is not properly before the Court, because it was not pled in the Defendants' Answers. Federal Rule of Civil Procedure 8(c) provides, "[i]n pleading to a preceding pleading, a party shall set forth affirmatively . . . [any] matter constituting an avoidance or affirmative defense." The general rule is that a party's failure to raise an affirmative defense in the appropriate pleading waives that affirmative defense. Brinkley v. Harbour Recreation Club, 180 F.3d 598, 611-12 (4th Cir. 1 999). However, "absent unfair surprise or prejudice to the plaintiff, a defendant's affirmative defense is not waived when it is first raised in a pre-trial dispositive motion." Id. In Brinkley, an affirmative defense first raised in a summary judgment motion was not waived where the plaintiff had "fair warning" that the defense was likely to arise (because it had been discussed in prior EEOC proceedings), and had "ample opportunity to respond" to the motion that raised the defense. Id. at 613.
Both release and waiver are affirmative defenses. Fed.R. CIV. P. 8(c). Therefore, release/waiver should have been raised in Santaro's and USF G's Answers. Santaro did not raise waiver at all in its Answer. USF G briefly raised waiver in its Fifth Affirmative Defense, which stated, "USF G pleads payment, estoppel, laches, and waiver as a defense to Plaintiff's claims herein." Santaro's failure to plead release/waiver in its Answer, and USF G's inclusion of only a very general statement implicating release/waiver do not act as a waiver because there has been no unfair surprise or prejudice to JTE. Both Defendants mentioned waiver as a defense in their discovery responses, and the Waivers were introduced as an exhibit during the deposition of JTE's President and Owner, Mr. Elmore. Because the defense was discussed in discovery, JTE had fair warning that this defense may be relied upon by Defendants, and JTE has not shown that it is prejudiced by a failure to plead the defense in the Answers. Therefore, Defendants' release/waiver defense is properly before the Court, and can be considered.
Santaro's Answer to Interrogatory 5 states, ". . . the documents contained in JTE Exhibit #45 [the Waivers] introduced during the depositions of Chris Clements and Tom Elmore constitute a waiver of JTE's claims."
Interrogatory 6 to USF G provided, "[s]tate all the facts and circumstances that support your contention in your Fifth Affirmative Defense that Plaintiff's claims are barred by payment, estoppel, laches, and waiver." USF G's Supplemental Answer to Interrogatory 6 states, "[s]ee also Defendant Santaro Industries, Inc.'s Supplemental Responses to Plaintiff's Interrogatories and Requests for Production of Documents," an answer which implicates Santaro's Answer to Interrogatory 5, stated above.
JTE argues that the Waivers did not act to release/waive the claims at issue as they were ambiguous, not intended to waive the claims, and not supported by consideration. Further, JTE argues that even if the Waivers were otherwise valid, they should be avoided based on a theory of mutual mistake. This Court finds that the Waivers are supported by consideration only if viewed as part of the contractual agreement of the Subcontract, and that such an interpretation does not unambiguously show that the Waivers released the claims at issue. Therefore, Defendants' Motion for Summary Judgment must be denied.
A release is a contractual agreement, and must therefore be supported by consideration to be valid. All in One Maintenance Svc v. Beech Mtn Constr. Co., 70 N.C. App. 49, 55, 318 S.E.2d 856, 860 (1984). The consideration must be "new," a compromise as to a disputed claim, and not "merely a payment of an amount indisputably due." id. A recital on the face of the release that consideration was received is not controlling. If the amount actually received represents payment for an amount already due, and nothing more, new consideration is not present, and the release fails. See id.
Here, Defendants claim that the series of Waivers acted as a release of JTE's claims for compensation for deletion of soil wall 343 and for extended overhead. The relevant language of the Waiver is as follows:
In addition, for and in consideration of the amounts and sums received, the undersigned hereby waives, releases and relinquishes any and all claims, rights, causes of action whatsoever arising out of or in the course of the work performed on the aforementioned project, contract, or event transpiring prior to the date hereof, excepting the right to receive payment for work performed and properly completed and retainage, if any, after the date of the above-mentioned payment application or invoice.
A separate provision of the Waivers included a recital of consideration: "[i]n consideration of the amounts and sums received, . . ." However, the "amounts and sums received" was nothing more than payment under the Subcontract for the work performed. Therefore, the Waivers are not supported by separate consideration, and each would fail as a separate and independent contractual agreement.
However, given the language of paragraph 7 of the Subcontract, the series of Waivers should be interpreted as part of the initial contractual agreement between the parties, that is, as part of the Subcontract. The relevant language of the Subcontract is as follows.
When required by the Contractor, and as prerequisite for payment, the Subcontractor shall provide, in a form satisfactory to the Owner and the Contractor, partial lien or claim waivers; affidavits certifying that all labor and material used in the work has been paid . . . (emphasis added).
Therefore, Santaro, as Contractor, could require execution of the Waivers under the Subcontract. If so required, execution of the Waivers by JTE was a necessary prerequisite to receiving payment for portions of work completed. This interpretation eliminates the need for each Waiver to be supported by independent consideration. Instead, the Waivers are supported by the same consideration that supported the execution of the Subcontract itself.
The Defendants claim that the language of the Waivers is clear and unambiguous. However, the meaning of the Waivers must be deduced through reference to the language of both the Waivers and the Subcontract, as they are part of the same contractual agreement. The Subcontract's use of the phrase "prerequisite for payment" suggests that any required waivers would act only to release claims stemming from the specific work for which JTE received payment by fulfilling the prerequisite of executing a waiver. This interpretation does not support Defendants' claim that JTE waived its right to receive payment for deletion of soil wall 343 or extended overhead. JTE did not receive any payment related to soil wall 343 or the extended overhead under the Waivers.
In addition, events subsequent to the execution of the Waivers support JTE's claim that neither party intended that the Waivers release JTE's right to receive payment for the deletion of wall 343. At the November 13, 2001 meeting, attended by JTE and Santaro, Santaro agreed that JTE was entitled to payment for an additional $110,920.82 in connection with the deletion of wall 343. Santaro marked "ok" on JTE's proposed change order, and did not object to the meeting minutes stating that it had agreed to JTE's right to this payment. Santaro never mentioned the Waivers in connection with JTE's right to payment for deletion of the wall. This suggests that Santaro did not intend, or even contemplate, at the time the Waivers were executed that they applied to the deletion of soil wall 343.
In short, Defendants have not shown that there is no genuine issue of any material fact and that they are entitled to judgment as a matter of law that JTE waived its claims for deletion of wall 343 and extended overhead. Therefore, Defendants' Motion for Summary Judgment on the waiver issue will be DENIED.
B.
Defendants' Motion for Summary Judgment that JTE cannot establish the basis for or amount of its delay damages claim will be GRANTED. While, the proper amount of damages in a case is generally a question of fact, the proper standard with which to measure those damages is a question of law. Olivetti Corp. v. Ames Bus. Sys., Inc., 319 N.C. 534, 548, 356 S.E.2d 578, 586 (1987).
Defendants argue that they are entitled to summary judgment on the extended overhead and lost profit claims because JTE is not able, as a matter of law, to establish the delay damages. Specifically, the Defendants claim that (1) JTE has not shown that any delay by Santaro proximately caused JTE harm; (2) the contract did not contemplate that Santaro would be liable to JTE for this kind of delay; and (3) JTE cannot establish the basis for calculation of its delay damages. For the reasons discussed below, it is determined that JTE has not provided sufficient evidence from which delay damages can be calculated.
A party seeking damages has the burden to prove them.Olivetti, 319 N.C. at 547, 356 S.E.2d at 586 (1987). In general, "the party seeking damages must show that the amount of damages is based upon a standard that will allow the finder of fact to calculate the amount of damages with reasonable certainty." Id. at 547-48, 356 S.E.2d at 586. The general rule requiring "reasonable certainty" has been applied specifically to construction delay damages, Bolton Corp. v. T.A. Loving Co., 94 N.C. App. 392, 380 S.E.2d 796 (1989), and to lost profit damages, Iron Steamer. Ltd. v. Trinity Restaurant, Inc., 110 N.C. App. 843, 431 S.E.2d 767 (1993), each of which is discussed below.
In Bolton, the North Carolina Court of Appeals held that a plaintiff prime contractor's evidence of duration-related damages resulting from the defendant general contractor's "undue delay" in a public construction contract, would be allowed. 94 N.C. App. at 406, 380 S.E.2d at 805. However, to show delay damages, "[t]he method of proof must be as specific as circumstances will allow," id. and regardless of circumstances, be shown to a "reasonable certainty,"see id. at 405, 380 S.E.2d at 804. Furthermore, the plaintiff must present evidence to tie the loss to the delay caused by the defendant, and "must also demonstrate why better or more certain evidence is not obtainable." Id. at 406, 380 S.E.2d at 805 (citations omitted).
In Iron Steamer, the North Carolina Court of Appeals held that, "to recover damages for lost profits, the complainant must prove that except for the breach of contract, profits would have been realized, and he must ascertain such losses with 'reasonable certainty.'" 110 N.C. App. at 847, 431 S.E.2d at 770 (citation omitted). Lost profit damages cannot be based upon "hypothetical or speculative forecasts of losses." id Furthermore, testimony providing an estimate of anticipated profits is not enough of a factual basis for the issue to reach a jury. Catoe v. Helms Constr. Concrete Co., 91 N.C. App. 492, 496, 372 S.E.2d 331, 335 (1984).
Here, JTE seeks a total of $200,215.82 in delay damages (based on extended field overhead, extended office overhead, and lost profit). This total is based on estimated field overhead of $165,467.62. From that figure, office overhead is estimated at $16,546.76, by taking ten percent (10%) of the field overhead. Therefore, total extended overhead requested by JTE is $182,014.38. From that figure, lost profit is estimated at $18,201.44, by taking ten percent (10%) of the total overhead. Therefore, total overhead and lost profit damages requested by JTE equal $200,215.82.
The deposition of Mr. Elmore lays out the calculation of JTE's requested delay damages. (Docs. Supp. D's Mot. Summ. J., Ex. F at 292-95.)
In establishing Santaro's delay, JTE first points to the fact that it worked on the Project for more than 30 months, as opposed to the no more than 18 months referenced in its proposal (but not incorporated into the Subcontract). JTE then concedes that "[t]he exact times during which JTE were delayed are difficult to determine precisely because Santaro did not schedule the job . . . [and] [a]s a result, JTE was required to stand by waiting for work to become available resulting in major delay to the project." (Pl.'s Opp'n to Mot. Summ. J. at 19.) JTE claims that although these delays exceeded one year, it reduced the period supporting its delay claim to 8.5 months based upon information received from Santaro that NCDOT had granted an 8.5 month extension for work under the Contract.
JTE calculates total project field overhead due to the delay as $165,467.62, by multiplying an estimate of its monthly field overhead (composed of numerous constituent elements) by 8.5. JTE provides no evidence supporting the monthly value used for each constituent element in the calculation. In addition, JTE provides no evidence that can be used to calculate extended office overhead and lost profit. Instead, JTE uses the method described above of taking ten percent of field overhead to get office overhead, and then taking ten percent of that new subtotal to get lost profit. Therefore, the entire calculation hinges on the 8.5 month delay allegation, an allegation not supported by any facts. In fact, undisputed evidence on the record shows that the extension NCDOT granted to Santaro was actually 110 days. (Docs. Supp. D's Mot. Summ. J., Ex. G at 117 Ex. H.) Further, even if the extension had been 8.5 months, JTE has provided no support for its contention that a reasonable way to calculate its own delay damages is by using the length of the extension granted to Santaro by NCDOT.
In short, not only is JTE's suggested calculation insufficient as a matter of law to support delay damages, but JTE has not provided evidence upon which a jury could perform any calculation of extended overhead and lost profit based on delay to a "reasonable certainty." Therefore, Defendants' Motion for Summary Judgment as to these claims will be GRANTED.
C.
Defendants' Motion for Summary Judgment that JTE has been overpaid for its work on the sound barrier walls and is not entitled to additional compensation will be GRANTED IN PART AND DENIED IN PART. JTE seeks payment of $43,118.59 for work performed on the sound walls and billed to Santaro in JTE's November and December 2001 invoices. JTE contends that Santaro withheld this amount from JTE, although it had received payment from NCDOT for JTE's work on the sound walls during these two months. For the reasons stated below, JTE is not entitled to the requested $43,118.59, but whether JTE is entitled to some smaller sum involves disputed issues of fact, and is therefore reserved for trial.
The $43,118.59 consists of $23,000.02 from the November 2001 invoice, and $20,118.57 from the December 2001 invoice. (Docs. Supp. D's Mot. Summ. J., Ex. E, Attach. 1-1-1.)
Paragraph 6 of the Subcontract provides: "[f]or all work performed by Subcontractor under this Agreement, the Contractor will pay Subcontractor . . . in accordance with the following unit prices." (emphasis added). Several units of work are then listed, including Item 140, "Sound Barrier Wall," with a total unit price of $1,719,040. Construction of sound walls consists of three main parts: drilling piers, installing posts, and installing sound wall panels. Therefore, under the Subcontract JTE was responsible for installing the piers, posts, and panels for the necessary sound walls for a total price of $1,719,040.
To aid in the calculation of progress payments owed to JTE as it performed parts of the sound wall work, JTE submitted to Santaro a schedule of values ("the Schedule") on March 20, 2000. The Schedule suggested that JTE be paid based on the number of piers, posts, and panels installed when each progress payment became due. The Schedule provided the following "sub-unit" prices for each of the three parts:
Piers: 370 each @ $1,400.00 =$518,000.00 Posts: 370 each @ $1,475.00 =$545,750.00 Panels: 357 each @ $1,823.31 =$650,921.67 Adjustment: 1 lump sum @ $0.50 =.50 TOTAL $1,714,672.17
The sub-unit prices were calculated so that their total, $1,714,672.17, equaled the total unit price allocated to sound wall construction under the Subcontract.
Santaro did not object to the Schedule, and promptly forwarded it to NCDOT. NCDOT would count the number of piers, posts, and panels completed, pay Santaro based on the Schedule, and Santaro would, in turn, pay JTE. The Schedule never became a contractual agreement, but instead was used as a convenient means to calculate and pay progress payments for sound wall work.
Santaro now contends that the Schedule was not accurate in its allocation of total price between the sub-units. Specifically, it contends that too much of the $1,714,672.17, relative to the reasonable market values, was allocated to the piers and posts, and too little to the panels. Santaro contends that JTE constructed the Schedule in this fashion so that it would receive more payment up-front (the piers and posts must be installed before the panels). However, no objection to this effect was made when the Schedule was presented and used for initial sound wall payments.
According to the Schedule, JTE was to be paid a total of $650,921.67 for fabrication and installation of panels for the sound walls. However, JTE did not, ultimately, provide or install any panels. In March 2001 Santaro entered into a contract of sale with Concrete Precast Systems, Inc. ("CPS") whereby Santaro agreed to purchase the needed panels for $917,346.68. It is undisputed that JTE was aware of this purchase, and in fact, initially suggested the purchase, and participated significantly in the negotiation of the terms of the CPS contract.
On April 6, 2001, Santaro issued a change order to the Subcontract, which provided that Santaro had directly purchased the panels that originally had been JTE's responsibility under the Subcontract. The order states the following:
1. Line Code 140 Sound Barrier Wall — deduct $986.880.00 Santaro Industries on behalf of JTE Constructors has issued a purchase order to [CPS] for — sound wall panels for the project. Santaro Industries will be paying CPS directly. . . . Originally JTE was responsible for this portion of the work, (emphasis added).
The full price of the CPS Contract was $986,880.00, of which $917,346.68 is attributed to the sound wall panels.
JTE responded to this order through an April 27, 2001 letter in which it agreed to the change (subject to some clarifications irrelevant to the issue at hand). The letter states, "JTE's only relationship concerning the P.O. [the CPS purchase order] is the lump sum deduction from our contract with Santaro for this item." (Docs. Supp. D's Mot. Summ. J., Ex. G, Attach. 12.)
It is clear that JTE suggested, participated, and agreed to the plan involving the purchase from CPS, with the purchase price to be deducted from JTE's contract. However, JTE claims that the change order is not valid because JTE did not sign the order, as required by the Subcontract. To the extent that the signature of Mr. Clements on the April 27, 2001 letter does not fulfill this contractual requirement, the requirement is found to be waived, based on the clear evidence of JTE's acceptance of the change order.
Paragraph 17 of the Subcontract provides, "Contractor may add to or subtract from the scope of Subcontractor's work by written change order which shall set forth the increase in compensation or deduction from compensation to Subcontractor and shall be signed by Contractor and Subcontractor."
The parties disagree as to the manner in which the $917,346.68 should be deducted. Specifically, JTE contends that the sum should be deducted from the total contract price due under the Subcontract, a method that supports its claim for $43,118.59 for sound wall work still due under the November and December 2001 invoices. Santaro contends, instead, that the sum must be deducted from the subtotal allocated to sound barrier wall work under the Subcontract.
According to the plain language of Paragraph 6 of the Subcontract, JTE was to be paid in accordance with the specified unit prices. The entire Project was divided based on these "units" of work. Sound barrier walls were a discrete unit of work. Therefore, the $917,346.68 deduction that relates only to the sound barrier wall unit must be deducted from the Subcontract total for that unit, $1,714,672.17. This deduction leaves a Subcontract unit value of $797,325.49 ($1,714,672.17 — $917,346.68). It is undisputed that JTE has already been paid $755,084.22 for its work on the sound barrier walls, leaving a remaining maximum Subcontract unit value of $42,241.27.
It is clear, therefore, that $42,241.27 is the maximum amount that JTE could be owed for work on the sound walls; therefore, its claim for additional compensation of $43,118.59 fails as a matter of law. However, disputed issues of fact remain as to whether JTE is owed some amount ($42,241.27 or less) for sound wall work performed under the Subcontract. Therefore, Defendants' Motion for Summary Judgment on the unpaid invoices claim will be GRANTED IN PART AND DENIED IN PART. Specifically, JTE is not entitled to the requested $43,118.59, but whether JTE is entitled to some amount equal or less than $42,241.27 is reserved for trial.