Opinion
Case No. 07-CV-455-PJC.
December 30, 2009
OPINION AND ORDER
This matter is before the Court on the cross-motions for summary judgment of Plaintiff Larry Snyder and Co. ("Snyder") [Dkt. Nos. 63 64] and Clark Miller d/b/a American Underground Utilities ("Miller"). [Dkt. No. 68]. For the reasons set forth below, the Snyder Motion is DENIED and the Miller Motion is GRANTED as set forth below.
I. Factual Background
The Factual Background is taken from the parties' undisputed facts and uncontested supporting exhibits.
In July 2005, Snyder entered into a construction contract with the Housing Authority of the Osage Tribe ("HAOT") for construction of the Stoneridge Estates Project, an apartment complex with parking lot and underground utilities. The contract between Snyder and HAOT consisted of two American Institute of Architects ("AIA") standard forms. AIA-A101 is a form agreement between the Owner and Contractor where the basis of payment is a stipulated sum. [Dkt. No. 64, Exh. "D"]. AIA-A201 sets out the general conditions of the construction contract. [Dkt. No. 64, Exh. "E"]. AIA-A101, executed on July 18, 2005, expressly incorporated by reference the general conditions set forth in AIA-A201 which had been executed four days earlier. The contract sum as between HAOT and Snyder was $2,770,330.00.
The contracting parties were Larry Snyder Company and Stoneridge Estates Associates, L.P. HAOT is the owner of the Stoneridge project and Kaw Valley Engineering ("Kaw") was HAOT's representative overseeing the contract. For consistency, HAOT will be referred to as the contracting party for the construction project.
On Aug. 30, 2005, Snyder entered into a subcontract agreement (the "Subcontract") with Miller whereby Miller was to "complete the site work, erosion control, water distribution, sanitary sewer, storm sewer system and parking lot base rock per plans and specifications." [Dkt. No. 64, Snyder Statement of Facts ("SOF") No. 1 and Exh. "A", ¶ 2(I)]. In particular, Miller was to install in-ground utilities to service the Stoneridge Estates Project. [Dkt. No. 64, Exh. "A," ¶ 2(I)(17)-(22)]. Utility lines were placed in trenches which were then covered by an asphalt parking lot. A separate subcontractor performed the asphalt work on the parking lot. Miller was to receive $363,000 for work under its Subcontract. [Dkt. No. 64, Exh. "A," at 1].
Among other things, the Subcontract provided that Miller was:
Responsible for all bedding and compaction of trenches per contract documents, city requirements and the geotechnical report. This is to include 18 minimum of crushed stone base material placed in 8 lifts in all utility and storm sewer trenches under areas receiving paving per plans. All trenches to be compacted to 95% per contract documents. In the event that settlement or failure should occur under parking lots, sidewalks, curb and gutter, and landscaped areas resulting in damage to other trades work, this subcontractor is responsible to remove the damaged area, acquire proper compaction and replace area at this subcontractor's expense.
[Dkt. No. 64, Exh. "A" at ¶ 2(I)(28) (emphasis added)].
The prime contract between Snyder and HAOT required that Snyder include a so-called "flow-through" clause in every subcontractor agreement:
Contractor shall include with every Subcontractor agreement the following language: Subcontractor binds itself to Contractor and Owner and is obligated to Contractor and Owner in the same manner and to the same extent that Contractor is bound and obligated to Owner under the Prime Contract. All rights which owner may exercise and enforce against Contractor may be exercised and enforced by Contractor against Subcontractor, in the event of any dispute between the Owner and Contractor. Subcontractor shall be bound by all decisions, directives, interpretations and rulings of the Owner or the Architect, at Owner's option, including Owner's termination or suspension of Contractor.
[Dkt. No. 64, Exh. "D," AIA-A101 § 7.6.3].
Accordingly, this language was made an express part of the Subcontract with Miller. [Dkt. No. 64, Exh. "A" at 3].
The prime contract also provided that:
The Contractor shall bear the cost of correcting destroyed or damaged construction, whether completed or partially completed, of the Owner or separate contractors caused by the Contractor's correction or removal of Work which is not in accordance with the requirements of the Contract Documents.
[Dkt. No. 64, Exh. "E," AIA-A201 § 12.2.4].
Miller performed its utility trench work and the asphalt parking lot was completed. After the asphalt was installed, the utility trenches settled. [Dkt. No. 64, Snyder SOF No. 3 as admitted in part by Miller]. Miller agreed to perform a repair as initially proposed by Snyder. [Dkt. No. 64, Snyder SOF No. 6]. Snyder made this repair proposal to HAOT and Kaw, but it was rejected. [Dkt. No. 64, Snyder SOG No. 7]. Instead, Kaw and HAOT insisted that the entire parking lot be milled down 1 ½-inch and a new top layer of asphalt applied. [ Id.]. Initially, Snyder advised Kaw and HAOT that it felt that milling the entire parking lot was unreasonable.
While Miller agrees that settlement occurred, it disputes that its workmanship caused the settlement. [Dkt. No. 68 at 2]. However, the dispute as to causation is immaterial to the Court's ruling herein on interpretation of the Subcontract.
Miller contends that it agreed to this repair request in order to preserve an on-going business relationship with Snyder and not because it believed it was contractually obligated to do the work. [Dkt. No. 68, Response to Snyder's Statement of Facts no. 9]. Again, this distinction is immaterial to the Court's ruling.
Due to the fact that soil compaction and moisture content test (sic) were performed by Standard Testing at the beginning of the project and all but one area was within acceptable limits we feel as though the recommendations to replace the entire parking lot proposed by Kaw Valley is unreasonable.
[Dkt. No. 67, Exh. G].
Nevertheless, when Kaw and HAOT insisted on having the entire parking lot milled and a new asphalt top applied, Snyder acquiesced and demanded that Miller do the more expensive repair. Miller refused and Snyder then hired other subcontractors to perform the work. [Dkt. No. 64, Snyder SOF No. 8].
Snyder now seeks from Miller $285,352.92 — the cost Snyder alleges it incurred in the milling and resurfacing of the parking lot. Snyder's motion asks the Court to grant summary judgment in favor of Snyder on its breach of contract claim against Miller.
Miller disputes that Snyder was required to perform the repair demanded by Kaw and HAOT and further disputes that Snyder's alleged damages are entirely attributable to repair work demanded as a result of settlement. [Dkt. No. 68, Response to Snyder's SOF No. 9]. These disputed issues are immaterial to the contract interpretation question.
Miller contends that the Subcontract does not require the repair work ultimately demanded by Snyder and that Miller offered to perform appropriate repair work under the terms of the Subcontract. Miller asks the Court to grant summary judgment in its favor and hold that under the Subcontract the most that Miller was required to do was to repair areas where settlement occurred, not mill and resurface the entire parking lot.
Miller also contends that it fully performed its contractual duties and that settlement was caused by poor performance of the asphalt subcontractor. In support of these and other contentions Miller has submitted the unsworn expert report of Michael J. Berryman. This report does not qualify as an affidavit or otherwise admissible evidence for purpose of Rule 56, and, thus, has been disregarded by the court. See City of Tulsa v. Tyson Foods, Inc., 258 F. Supp. 2d 1263, 1272, n. 4 (N.D.Okla. 2003) ( vacated pursuant to settlement July 16, 2003); 11 Moore's Federal Practice ¶ 56.14[1][e][i] (Matthew Bender 3d ed.).
II. Applicable Legal Principles
Summary judgment pursuant to Fed.R.Civ.P. 56 is appropriate where "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Windon Third Oil Gas v. FDIC, 805 F.2d 342, 345 (10th Cir. 1986). In Celotex, the Supreme Court stated:
[t]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.477 U.S. at 322.
A party opposing a properly supported motion for summary judgment must offer evidence, in admissible form, of specific facts sufficient to raise a "genuine issue of material fact." Anderson, 477 U.S. at 247-48. The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. Id. at 252. Thus, to defeat a summary judgment motion, the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita v. Zenith, 475 U.S. 574, 585 (1986).
In essence, the inquiry for the Court is "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." Anderson, 477 U.S. at 250. In its review, the Court must construe the evidence and inferences therefrom in a light most favorable to the nonmoving party. Committee for the First Amendment v. Campbell, 962 F.2d 1517, 1521 (10th Cir. 1992).
The central issue presented by the pending summary judgment motions is one of contract interpretation. "The cardinal rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention. Where there is no ambiguity in the contract the intention of the parties is to be gathered from it and it alone, and it becomes the duty of the court and not the jury to state its clear meaning." Preferred Physicians Mutual Management Group, Inc. v. Preferred Physicians Mutual Risk Retention Group, Inc., 961 S.W.2d 100, 102 (Mo.App. 1998) (citations omitted). Under Missouri law if the Court concludes that a contract is ambiguous then the question of contract interpretation is an issue of fact to be resolved by the jury. Teets v. American Family Mut. Ins. Co., 272 S.W.3d 455, 461 (Mo.App. 2008).
Paragraph 16 of the Subcontract provides: "This Agreement and all issues concerning the performance or breach shall be governed by Missouri law." [Dkt. No. 64, Exh. "A," ¶ 16].
Thus, whether a contract is ambiguous is a question of law. Klonoski v. Cardiovascular Consultants of Cape Girardeau, Inc., 171 S.W.3d 70, 72 (Mo.App. 2005). The Court must consider the entire contract and the natural and ordinary meaning of the language in determining whether a contract is ambiguous. Id. at 72-73. A contract is ambiguous if the language in dispute taken in the context of the entire contract is "reasonably susceptible of more than one construction giving the words their plain and ordinary meaning as understood by a reasonable, average person." Id. at 73. An ambiguity arises when there is "duplicity, indistinctness, or uncertainty in the meaning of the words used in the contract." Rodriguez v. General Accident Ins. Co. of America, 808 S.W.2d 379, 382 (Mo. 1991) (en banc). The ambiguity must appear from the four corners of the contract itself; extrinsic evidence cannot be used to create an ambiguity. Kelly v. State Farm Mut. Auto. Ins. Co., 218 S.W.3d 517, 522 (Mo. App. 2007).
In interpreting a contract specific terms and exact terms are given greater weight than general language. Restatement (Second) of Contracts § 203(c). In choosing among reasonable meanings of an agreement, the Court will interpret the agreement against the party who drafted it. Id. § 206.
III. Discussion
Both parties contend that there is no ambiguity in the contract at issue. Snyder contends that the contract is clear that Miller had an absolute obligation under the contract at issue to repair settling of the utility trenches at Stoneridge Estates as demanded by Kaw/HAOT, regardless of the cause of the settling. [Dkt. No. 69 at 2]. Snyder contends that by refusing to perform the repair demanded by Kaw and HAOT, Miller breached the contract and is liable for the damages Snyder incurred in having the repair work performed by other contractors.
Miller contends that the Subcontract expressly limits its responsibilities in the event of settlement under the parking lot where utility trenches were dug. Miller says it was not required to grind the entire parking lot surface as HAOT demanded because the Subcontract states that it is only responsible "to remove the damaged area, acquire proper compaction and replace area at this subcontractor's expense." [Dkt. No. 64, Exh. "A", ¶ 2(I)(28)]. Miller contends it offered to perform the remedial work required under the Subcontract and, thus, it is entitled to summary judgment based on the language of the contract.
The essential conflict presented is between the specific language of Paragraph 2(I)(28) of the Subcontract and the so-called "flow-through clause" in which Miller agreed to be bound "in the same manner and to the same extent" that Snyder was bound to HAOT under the prime contract. HAOT required that Snyder put the flow-through provision in all subcontracts. See AIA-A101 § 7.6.3. [Dkt. No. 64, Exh. "D"] and AIA-A201 § 5.3.1. [Dkt. No. 64, Exh. "E"]. The goal of such a provision is to ensure that the owner receives a project that complies with the contract documents. To that end, "the owner insists that the prime contractor obtain a commitment from subcontractors to attain that objective." Jonathan J. Sweet, Sweet on Construction Industry Contracts: Major AIA Documents § 17.05n [2009]. The flow-through clause is a general provision requiring a subcontractor's commitment, to the extent of his work under his subcontract, to comply with the terms of the prime contract. The question before the Court is how this general flow-through provision is to be interpreted and reconciled with the specific language found in Paragraph 2(I)(28) of the Subcontract.
The Court's first task is to determine whether the Subcontract is ambiguous, in particular do the contract clauses cited above create an ambiguity. This is a question of law for the Court. Klonski, 171 S.W.2d at 72. The Court has considered the entire contract and the natural and ordinary language contained therein. Id. The Court finds no "duplicity, indistinctiveness, or uncertainty in the meaning of the words used in the Subcontract. See Rodriguez, 808 S.W.2d at 382. Both parties contend that the Subcontract is not ambiguous, and the Court agrees.
Since there is no ambiguity in the Subcontract, it is now the Court's duty as a matter of law to determine the parties' intention from the four corners of that document. Preferred Physicians Mutual Management Group, Inc., 961 S.W.2d at 102. In interpreting and reconciling these provisions, the Court has sought to avoid any reading of the provisions that would render one meaningless surplusage. Where necessary, the Court has interpreted the Subcontract against Snyder as the party that drafted it, and has given greater weight to the specific provision contained in Paragraph 2(I)(28) over the general language contained in the flow-through clause. Employing this methodology, the Court finds that Miller was obligated under the flow-through provision to generally follow the terms of the prime contract and the directions of the owner in performing its contractual obligations. For example, Miller was required to perform its work safely and in a timely manner and in accordance with the specifications in the contract documents. Miller was also obligated to repair any defective work. However, with respect to the specific problem of settlement of the utility trenches, the Subcontract expressly provided that Miller's obligation was to remove the sunken area, obtain proper compaction of the sub-surface and replace the damaged area. [Dkt. No. 64, Exh. "A", ¶ 2(I)(28)].
The Court concludes that the parties intended that the Subcontract between Snyder and Miller would limit Miller's obligations in the event of settlement of the utility trenches. In reaching this conclusion, the Court has followed the basic rules of contract interpretation set forth in the Restatement (Second) of Contracts:
In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable:
(a) an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect;
(b) express terms are given greater weight than course of performance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade;
(c) specific terms and exact terms are given greater weight than general language;
(d) separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.
Restatement (Second) of Contracts § 203. See Hayward v. Taylor, 807 S.W.2d 171, 173 (Mo.App. 1991) (recognizing the principles of Restatement § 203).
These rules apply to "all manifestations of intention and all transactions." Id. Comment (a). They apply "only in choosing among reasonable interpretations." Id. The Subcontract between Snyder and Miller is an integrated agreement that supercedes all prior agreements. [Dkt. No. 64, Exh. "A" ¶ 17]. The Subcontract was executed after the prime contract and, thus, would supercede any conflicting provisions that Snyder seeks to impose on Miller via the flow-through clauses. Restatement (Second) of Contracts § 213. In addition, the interpretation of the Subcontract advocated by Snyder would render Paragraph 2(I)(28) superfluous. The limitation on Miller's responsibility for trench settlement would be meaningless in light of the extensive duties Snyder seeks to impose through the flow-through clauses.
Where an integrated agreement has been negotiated with care and in detail and has been expertly drafted for the particular transaction, an interpretation is very strongly negated if it would render some provisions superfluous.
Restatement (Second) of Contracts § 203, Comment (b).
Furthermore, the specific language of Paragraph 2(I)(28) better reflects the intention of the parties at the time of the contract than the general language of the flow-through clauses. "Attention and understanding are likely to be in better focus when language is specific or exact, and in case of conflict the specific or exact term is more likely to express the meaning of the parties with respect to the situation than the general language." Id., Comment (e). Finally, in choosing among reasonable interpretations of a contract that meaning is generally preferred that operates against the party that drafted the agreement. Id., § 206. See Highland Inns Corp. v. American Landmark Corp., 650 S.W.2d 667, 674 (Mo.App. 1983) (recognizing the principles of Restatement § 206). Here, since Snyder drafted the Subcontract it should be construed in favor of Miller.
Applying these principles to the Subcontract, the Court concludes that while Miller was generally obligated to perform its work in accordance with the prime contract, Snyder and Miller entered into a specific agreement that in the event of settlement over the utility trenches Miller was only obligated to remove the damaged area, acquire proper compaction and replace the damaged area. Thus, when the trench areas settled Miller was obligated to make this specific repair — a repair that Snyder was agreeable to. When HAOT rejected this proposal, Snyder considered its obligations to HAOT under the prime contract and concluded that milling the entire lot was appropriate; however, the Subcontract does not impose this more extensive obligation on Miller. Paragraph 2(I)(28) reflects the parties' intention that Miller's obligations in this regard are limited. Although Snyder may have remained obligated pursuant to the prime contract to perform the repair demanded by HAOT, Miller's responsibilities were limited by the Subcontract. The Court concludes that this interpretation reflects the intentions of Snyder and Miller at the time they entered into the Subcontract in August 2005.
IV. Summary
For the reasons set forth above, the Court DENIES Snyder's Motion for Summary Judgment [Dkt. No. 63 64]. Miller did not breach the Subcontract by refusing to perform the repair demanded by HAOT and Snyder because the Subcontract did not require Miller to perform this more extensive repair work. The Court GRANTS Miller's Motion for Summary Judgment [Dkt. No. 68] as to the interpretation of the Subcontract and Miller's obligations thereunder. The Courts finds no ambiguity in the Subcontract and further finds that Miller's repair obligations in the event of settling of the utility trenches was limited by Paragraph 2(I)(28).
In light of this Opinion and Order, the parties shall advise the Court at or before the scheduled Pretrial Conference whether there are any issues remaining for trial in this case.