Summary
In E.C. Ernst, Inc. v. General Motors Corporation, 482 F.2d 1047 (5th Cir. 1973), the issue was not untimeliness but whether the notice of additional costs provided a sufficient accounting of the actual costs involved.
Summary of this case from Allgood Electric Co. v. Martin K. Eby Construction Co.Opinion
No. 72-2201.
July 24, 1973.
Glower W. Jones, Aubrey L. Coleman, Jr., Atlanta, Ga., for plaintiff-appellant.
R. Byron Attridge, Joseph B. Haynes, Atlanta, Ga., Ross L. Malone, Detroit, Mich., for Gen. Motors Corp.
Charles T. Lester, Jr., James P. Groton, Atlanta, Ga., for Whiting-Turner.
Appeal from the United States District Court for the Northern District of Georgia.
Before JOHN R. BROWN, Chief Judge, and WISDOM and AINSWORTH, Circuit Judges.
The question is whether summary judgment should have been granted below against an electrical subcontractor in an action seeking damages for breach of contract against the general contractor and the owner. The trial court concluded that the action was barred because Plaintiff below had failed to comply with the notice provision in the contract under which it was suing. After carefully reviewing the record, under the usual standard, we have concluded that the court below erred in finding the nonexistence of any triable issue of fact and entering judgment for Defendants below as a matter of law. Dunnington v. First Atlantic National Bank of Daytona Beach, 5 Cir., 1952, 195 F.2d 1017.
E. C. Ernst, Inc.
Whiting-Turner Contracting Company.
General Motors Corporation.
Failure to comply with the notice provision was the basis of the trial court's grant of summary judgment. The court never reached our other separate and distinct defenses raised by Defendants below These were:
(i) Ernst accepted final payment for all work under the contract between it and General Motors, thereby waiving all alleged claims by it under paragraph 6, Article III of the contract and under the electrical work specifications.
(ii) The contract limited the remedy for any purported delay to an extension of time to complete the contract and precluded any claim for damages.
(iii) Ernst failed to prosecute a request for any extension of time under the contract.
(iv) Ernst settled any and all claims cognizable under the contract on October 29, 1968 and received approximately $20,000 therefore.
Summary judgment as envisioned by F.R.Civ.P. Rule 56, 28 U.S.C.A. is a method of testing in advance of trial, not as formerly on bare contentions found in the legal jargon of pleadings, but on the intrinsic merits, whether there is in actuality a real basis for relief or defense. Bruce Construction Corp. v. United States, 5 Cir., 1957, 242 F.2d 873, 874. When a movant makes out a convincing showing that genuine issues of fact are lacking, it becomes incumbent on the adversary to adequately establish by receivable facts that a real, not formal, controversy exists. Stopping short of expressing any opinion as to how the trier should resolve the fact issue ultimately, we think Appellant has made the required showing and should have been allowed to go to trial.
Perspective into the posture of the parties in this dispute may be gained by briefly reciting the events preceding the filing of the suit. On April 18, 1967 Appellant entered into a contract with General Motors Corporation which required that it provide labor and materials to perform electrical work in the construction of the General Motors Lakewood New Final Process Building in Atlanta. The contract required that General Motors pay Appellant $356,950.00 therefor. Though the contract was negotiated and concluded between only Appellant and General Motors Corporation, it was generally understood between the parties that ultimately the contract would be assigned by General Motors to a general contractor such that Appellant would perform its contractual obligations as a subcontractor. In the contract General Motors specifically reserved the right to make such an assignment.
Appellant's contract with GM in paragraph 50 entitled "Assignment of Contract to General Contractor" provided:
The Owner reserves and is hereby granted the right to assign this Contract to the General Contractor and make same a part of the General Contract. The Contractor for this trade agrees that, in the event of such assignment, he will work under the General Contractor in the same manner as he would had the Contract been originally awarded to him by the General Contractor; and, further, that he will be bound to and assume toward the General Contractor all the obligations and responsibilities that he, by this Contract, assumes toward the Owner.
Prior to the conclusion of Appellant's contract, General Motors, on April 6, 1967, had entered into a contract in the amount of $1,279,470.00 with Whiting-Turner Contracting Company for construction of the Lakewood New Final Process Building. The contract specifically provided that Whiting-Turner, as the general contractor for the project, would assume the contract covering the electrical work.
Article IV, paragraph I of the contract between GM and Whiting-Turner provided in part:
In its contract with GM, it was expressly stated that Appellant would be able to (i) "start work immediately and proceed with the utmost dispatch and diligence" and (ii) "complete all work contemplated hereunder in accordance with the schedule set forth on page 1-E-11 of the Special Conditions." It was further declared that "time was to be of the essence."
Notwithstanding the urgency expressed in the contract, and through no fault of its own, Appellant was unable to begin work immediately. The project, initially scheduled to be fully completed in less than one year hence, was seriously delayed from the beginning by GM's rough grading contractor who was approximately six weeks behind schedule in site preparations. GM's Field Representative at the project site testified that the reasons for the delay, at least partially, were that the rough grading contractor had failed to follow instructions, failed to have sufficient men and equipment on the job, and failed to have adequate supervision on the job. Appellant was formally advised of this delay at a "contractors progress meeting" held on May 1, 1967. Immediately after this meeting Appellant protested its inability to begin work "without delay" by a letter addressed to Whiting-Turner.
* * * * *
infra.
Black Grading Co. Advised that the site for the Process Facility Building would not be ready before June 12, 1967. Whiting-Turner stated that work on the building would not proceed in this area until all of the site is in proper condition for engineering and layout work.
supra
2. Subcontractors will arrange with Whiting-Turner superintendent the location for all office and tool trailers. Subcontractor's office trailer must also have telephone.
3. 110 Volt temporary electrical service will be provided for subcontractors hand tools, source of supply to be located by Whiting-Turner superintendent.
4. Subcontractors advised to go through Whiting-Turner superintendent with all questions and clarifications in lieu of going directly to Resident Engineer. Each field superintendent will also be advised of this procedure.
5. Certificates of Insurance (3 copies) shall be mailed to Whiting-Turner's office as soon as possible.
6. Subcontractor shall be responsible for cleaning up daily and removing from the jobsite all trash and debris resulting from his operations. If he fails to fulfill this obligation, the General Contractor will take necessary measures to accomplish this clean up and will backcharge the Subcontractor accordingly.
7. Subcontractors will furnish badges to their personnel working within fenced plant area and they much check in each day with proper security guards. Only authorized personnel will be allowed within plant. Cold drink machines inside plant are off limits to construction personnel, however, cafeteria in front of plant will be available.
8. Breakdown of subcontractor's lump sum price for billing purposes shall be in Whiting-Turner's office by Thursday, May 4. Each month's percentage of work in place must first be verified in Whiting-Turner's office before invoices are prepared. Invoices must be in Whiting-Turner's office by the 27th of each month. Waiver of lien forms must be executed and in Chevrolets accounting office before the next month's invoice from Whiting-Turner becomes payable.
As of this date Whiting-Turner has not received any contract documents (plans, specifications, purchase orders) for the assigned subcontractors. It will be necessary for these documents to be delivered before work can progress and bulletin changes can be quoted.
"We bring to your attention that there are many outstanding directives which have not been covered by Change Orders.
We suggest that a meeting be set up as soon as possible in order to thoroughly discuss and settle all outstanding directives, claims, etc."
By the terms of Appellant's contract, the building was to be ready for GM's beneficial occupancy on or before December 1, 1967, with the entire project due to be completed on or before April 11, 1968. To assist in meeting these contract completion dates, Appellant's contract required that the Critical Path Method (CPM) be used to plan and schedule all phases of the project. The preparation and final submitted to GM of a CPM, which was the responsibility of Whiting-Turner, had not been accomplished as late as September 26, 1967. The result was that Ernst and others working on the project received written instructions in the form of progress meeting minutes and bar charts which reflected changing beneficial occupancy dates. The beneficial occupancy date finally achieved was not until late March or early April of 1968 with final completion of the project not occurring until September of 1968. On January 5, 1969, Appellant presented to GM a 180 page "claim booklet" seeking payments in the amount of $134,000.00 for purported delays and inefficiencies in completion of the project.
The suit below, initially filed in state court, alleged breach of an electrical construction contract in that Defendants delayed and disrupted Plaintiff's performance, thereby requiring Plaintiff to perform its contract over an extended period of time and in an inefficient and more costly manner. After removal, Defendants entered general denials and pled certain defenses which were to also provide the grounds for their motion for summary judgment which was made after discovery. On Defendant's motion for summary judgment the court held that the Plaintiff's entire cause of action as to both Defendants was barred by the Plaintiff's failure to strictly comply with the notice provisions contained in paragraph 52 of the contract, entitled "Procedure for Alleged Change in Cost — Contractor's Supervision." The court specifically found that the procedure contained in section (c-1) of paragraph 52 was directly applicable to claims such as Plaintiff's which sought "damage or loss because of any action or omission of the owner, or others engaged by the owner, during the performance of the work * * * " (note 9, supra).
Plaintiff's rejoinder below, and its contention here on appeal, is two-pronged. The first prong alleges that the provision of paragraph 52 which is applicable to its claims is section (a) which deals with increases in costs resulting from verbal instructions from the Purchasing Department [of General Motors] (see note 9, supra). Appellant contends that notice was not required because the increased costs resulted from written directives from Appellees. These written directives, it is contended, were in the form of minutes of progress meetings, letters and bar charts. Part (c) of paragraph 52, appellant maintains, only applies to extra work situations.
The trial judge, while agreeing with that the increased costs claimed by Appellant were not barred by part (a) of paragraph 52 as the continuing delay was confirmed in writing, found that part (c) of the paragraph was applicable to the claims and that compliance with its provisions was, as a result of part (d), a condition precedent to any recovery. After studying the provisions of the controverted contract and in view of the settled law in Georgia that the construction and legal effect of a written contract is for determination by the court, Goodwin, Inc. v. City of Lafayette, 5 Cir., 1969, 418 F.2d 698, we cannot conclude that the court's holding on this part of Appellant's argument was clearly erroneous.
The second prong of Appellant's argument upon appeal, however, alleges that it did in fact give notice to Appellees sufficient to satisfy paragraph 52(c-1) by a letter dated May 1, 1967.
The trial court rejected this latter contention holding that the letter failed in several respects to comply with the strict terms of part (c-1) of paragraph 52. Specifically, the trial court held that the letter was inadequate notice under the contract because (i) it was not sent to the Architect-Engineer (Argonaut, a division of GM) and the Purchasing Department of GM as expressly required by the contract, and (ii) the letter did not contain the amount of the claim and all details in connection therewith as required expressly by the contract. Appellant retorts here that, since its contract with General Motors (GM) envisioned from the beginning that the contract would be assigned from GM to the general contractor for the project (Whiting-Turner) and GM's contract with the general contractor made such assignment mandatory, it was not thus unreasonable for Appellant to have understood that any letters regarding delays should be sent to Whiting-Turner. Furthermore, it is argued that, considering the ostensible, if not yet formalized, relationships between GM, Appellant and Whiting-Turner, Appellant's letter of May 1, 1967 to Whiting-Turner should have served as notice to GM. Appellant asserts as supportive of this proposition the agenda transacted at the first project progress meeting held on May 1, 1967. It is argued that paragraph 25 of its contract made mandatory Appellant's attendance at these progress meetings and full compliance with the instructions promulgated therein.
In response to the lower court's holding that Appellant did not state in its letter the "amount of the claim and all details in connection therewith," it is submitted on appeal that such a detailing and allocating of the additional costs involved here would have been virtually impossible at that time. Appellant contends that it was impracticable for it to arrive at a dollar measurement with any degree of accuracy until the project was completed. It is alleged that the original delay complained of in Appellant's May 1 letter was of a continuing nature, with further delays and resultant inefficiencies emanating therefrom, necessitating that notice only be given once to adequately apprise Appellee that it had a grievance.
A careful review of the record has convinced us that threshold dismissal of Appellant's claims as a matter of law on grounds that it failed to strictly comply with the notice provisions of the contract was unwarranted. Here, Appellant's contention that the instructions given at the first progress meeting acted to modify the contractual reporting procedures and responsibilities is certainly made more believable by the common knowledge among all involved that assignment of the "subs" contract to the general contractor was predetermined. It is settled that the question of whether such modification actually occurred may not be summarily decided but must be preserved for the trier of fact. Farnsworth Co., Inc. v. TriState Construction Co., 5 Cir., 1959, 271 F.2d 728.
The lower court apparently considered it significant that Appellant's letter of May 1 referred only to damages for delay itself and not costs due to inefficiencies. The court concluded that the letter could not thus be considered to cover increased costs due to inefficiencies. We disagree. As already discussed, the vast majority of the inefficiencies complained of were either closely connected to or emanated from the initial delay complained of in the letter. The purpose of a notice provision in a contract is to alert the other party that the claimant has a grievance against it. We are of the opinion that notice that one cannot be responsible for extra costs inherent in a delay encompasses those inefficiencies caused by severe winter working conditions which would not have been incurred but for the delay.
The district court, while conceding that Appellant, at the time of its letter, probably could not have known the costs due to delay, held against Appellant in any event, because Appellant did not make known the amount of the claim when an official start date was given or as the increased costs were actually incurred. Our reading of the record has not convinced us that an official start date was ever in fact given to Ernst. Furthermore, since the initial delay appears to have been a continuing one, thereby causing certain stages of the work to be done under severe weather conditions with an absence of corresponding support as contractually required. notice given "as the increased costs were actually incurred" would have practically required Appellant to give daily notice. Bearing in mind the generally accepted purpose of the notice provision, which is to alert the other party of a grievance against it, we think the giving of such daily notice is more of a burden than a contract or the law should impose.
The relationship of an electrical subcontractor with a general contractor on an overall project is in the nature of symbiosis. The performance of one is dependent on prior performance by the other, and so on until completion, with their combined efforts producing, in this case, a building. The general contractor, however, as the assignee of the "sub's" contract, has the ultimate responsibility for completion of the project. Here, though the subcontractor's attempt to give notice of its grievance was limited to its letter of May 1, 1967, there is ample evidence in the record that GM was notified of the hardships being experienced by its contractors due to the delays and the consequent severe winter working conditions.
Our decision here should in no way be construed as relieving the parties to a contract of strict compliance with notice provisions and the like. To the contrary, it results from our conclusion that, under the particular facts of this case, Appellant complied with the notice provision contained in paragraph 52 of its contract to the extent reasonable. When a contract calls for such a specification of damages as the one here, obviously it cannot exact of a claimant the impossible, and no Georgia court would so require. The question we have answered here is — need Appellant, at the time of its May 1 letter, have made their notice any more specific than it did? Our answer to that is one well supported in general contract law — if it could have, it should have. We think the record supports the conclusion that here it did all it could have done.
Though never reached by the trial court, defendants below asserted four alternative grounds for summary judgment (see note 4, supra). One of them, we think, merits treatment here. On October 29, 1968, at the behest of Appellant, a meeting was held between representatives of GM, Whiting-Turner and Appellant to settle "outstanding directives which had not been covered by change orders." At this meeting Appellant accepted payment of more than $20,000 in settlement of these "outstanding directives." Appellees argue that all claims, including the claims which are the subject of this suit, are barred by the settlement reached at the October 29 meeting. We disagree.
Though we would agree that Appellant's letter evidences a poor choice of language, we do not think that their intention there was to settle the claims at bar here. To so hold would not only be to read that particular phrase out of context with the rest of the letter, but, in view of the nature of the other claims settled at the October 29 meeting, such a holding would be illogical. The record supports the conclusion that Appellant requested this meeting to settle various directives from GM to perform extra work incurred during the course of the project, but for which no price had been agreed upon between the parties. The only thing which remained on these claims of record was for the parties to meet and negotiate the prices.
Appellant here has demonstrated to our satisfaction that genuine triable issues of fact are in existence. Where such a showing is made, summary judgment may not be substituted for trial. Bruce Construction Corp. v. United States, supra.
Vacated and remanded.
* * * * *
It is agreed that the Owner [GM] will assign to the General Contractor [Whiting-Turner], and the General Contractor shall assume, as Subcontractors, the Purchase Order and Contracts entered into by the Owner covering Mechanical Trades, Electrical and Fire Protection Work in connection with the construction and completion of the project contemplated hereunder;
* * * * *
* * * * *
infra.
Black Grading Co. Advised that the site for the Process Facility Building would not be ready before June 12, 1967. Whiting-Turner stated that work on the building would not proceed in this area until all of the site is in proper condition for engineering and layout work.
supra
2. Subcontractors will arrange with Whiting-Turner superintendent the location for all office and tool trailers. Subcontractor's office trailer must also have telephone.
3. 110 Volt temporary electrical service will be provided for subcontractors hand tools, source of supply to be located by Whiting-Turner superintendent.
4. Subcontractors advised to go through Whiting-Turner superintendent with all questions and clarifications in lieu of going directly to Resident Engineer. Each field superintendent will also be advised of this procedure.
5. Certificates of Insurance (3 copies) shall be mailed to Whiting-Turner's office as soon as possible.
6. Subcontractor shall be responsible for cleaning up daily and removing from the jobsite all trash and debris resulting from his operations. If he fails to fulfill this obligation, the General Contractor will take necessary measures to accomplish this clean up and will backcharge the Subcontractor accordingly.
7. Subcontractors will furnish badges to their personnel working within fenced plant area and they much check in each day with proper security guards. Only authorized personnel will be allowed within plant. Cold drink machines inside plant are off limits to construction personnel, however, cafeteria in front of plant will be available.
8. Breakdown of subcontractor's lump sum price for billing purposes shall be in Whiting-Turner's office by Thursday, May 4. Each month's percentage of work in place must first be verified in Whiting-Turner's office before invoices are prepared. Invoices must be in Whiting-Turner's office by the 27th of each month. Waiver of lien forms must be executed and in Chevrolets accounting office before the next month's invoice from Whiting-Turner becomes payable.
As of this date Whiting-Turner has not received any contract documents (plans, specifications, purchase orders) for the assigned subcontractors. It will be necessary for these documents to be delivered before work can progress and bulletin changes can be quoted.
"We bring to your attention that there are many outstanding directives which have not been covered by Change Orders.
We suggest that a meeting be set up as soon as possible in order to thoroughly discuss and settle all outstanding directives, claims, etc."