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Applied Contracting Corp. v. Ohio Department of Transportation

August 22, 2011

APPLIED CONTRACTING CORP.
PLAINTIFF/COUNTER DEFENDANT
v.
OHIO DEPARTMENT OF TRANSPORTATION, ET AL.
DEFENDANTS/COUNTER PLAINTIFFS AND STATE OF OHIO DEFENDANT



The opinion of the court was delivered by: Judge Joseph T. Clark

The Ohio Judicial Center 65 South Front Street, Third Floor Columbus, OH 43215 614.387.9800 or 1.800.824.8263 www.cco.state.oh.us

DECISION

{¶1} Plaintiff/counter defendant, Applied Contracting Corp. (Applied), brought this action alleging breach of contract and unjust enrichment. Defendants/counter plaintiffs, Ohio Department of Transportation (ODOT) and Ohio Department of Administrative Services (DAS), asserted counterclaims for breach of contract and for liquidated damages. The issues of liability and damages were bifurcated and the case proceeded to trial on the issue of liability.

{¶2} In July 2006, DAS and Applied entered into a contract under which Applied would serve as the lead contractor for the "District 8 Wash Bay Additions" project, which involved making additions to existing structures at two ODOT facilities. (Plaintiff's Exhibit A1.) Specifically, a vehicle wash bay was to be built at ODOT's Wilmington Outpost, and both a wash bay and a service bay were to be built at ODOT's Blue Ash Outpost.

{¶3} While Applied was the lead contractor for the project, DAS also contracted with Airstream Mechanical, LLC (Airstream) for the installation of mechanical, electrical, and plumbing components. Additionally, DAS contracted with Alan Scherr Associates, LLC (ASA) to serve as the associate for the project, in which capacity it provided professional design services and contract administration.

{¶4} On July 20, 2006, DAS issued a "Notice to Proceed" to Applied, directing it to commence work "within one week from the date of this notice, and to complete the work by January 3, 2007." (Plaintiff's Exhibit A3.) Over the course of the project, however, there arose various issues which resulted in the parties agreeing through change orders to extend the contract completion date three times, with the final such date being March 3, 2007. (Defendants' Exhibit 9.)

{¶5} Donald Legg, President of Applied, testified that although Applied substantially completed its work by the March 3, 2007 deadline, ASA deferred the completion date for certain items such as landscaping, execution of punch lists, and remedial work which ASA and defendants requested concerning the floor of the wash bay at the Wilmington Outpost. Legg testified that Applied timely completed all of the deferred work except for a portion of the remedial work which Applied refused to perform because he felt that it was unnecessary; this work included smoothing the concrete floor of the wash bay and then applying an epoxy coating over the floor.

{¶6} The relationship between the parties unraveled as a result of the dispute over the remedial work at the Wilmington Outpost. According to Ryan Meeds, who was the project manager for ASA, Applied completed all of its other work by the beginning of May 2007 and withdrew from the project, in spite of multiple requests from ASA and defendants to complete the few remaining remedial tasks. Legg stated that when ASA sent him a proposed certificate of contract completion, which noted that remedial work remained at the Wilmington Outpost, he refused to sign. (Plaintiff's Exhibit U.)

{¶7} On June 5, 2007, Applied sent ASA a two-page letter titled "Final Notice of Claim and Request for Contract extension to September 1, 2007." (Plaintiff's Exhibit V.) Therein, Applied listed twelve issues that had allegedly delayed the project by a total of 241 days, "as a result of the owner failing to adequately provide management, administration and redesign solutions through the course of the project * * *"; Applied requested additional compensation at a rate of $317.69 per day of delay, for a total of $76,563.29. On June 21, 2007, Applied also sent ODOT several one-page invoices which again requested $76,563.29 for delays, and included various other requests totaling $32,520.70.

{¶8} Applied's June 5 and June 21, 2007 requests for payment were declined by defendants. Further, John Burnie, an ODOT facilities manager who supervised construction at both project sites, testified that defendants terminated Applied's contract and hired another contractor, ISPN, to perform the remaining work at the Wilmington Outpost.

{¶9} On June 16, 2008, Applied filed the instant complaint, asserting that defendants committed a breach of contract both by causing project delays and by wrongfully withholding payments owed under the contract; that defendants were unjustly enriched; and that defendants committed a breach of its contract with Airstream, to which Applied was a third-party beneficiary.

DELAYS

{¶10} In Count One of its complaint, Applied alleges that defendants committed a breach of contract by causing twelve separate project delays totaling 241 days, as set forth in the June 5, 2007 "notice of claims" that Applied submitted to ASA. The court shall address the alleged delays individually.

{¶11} "Utility pole relocation necessitated by failure to properly design the project. 30 days."

{¶12} On July 20, 2006, Legg sent a request for information to ASA in which he noted that a utility pole at the Wilmington Outpost needed to be relocated in order to begin excavation. (Plaintiff's Exhibit F.) Burnie and Meeds stated that ASA arranged for the owner of the pole, Dayton Power & Light, to relocate the pole outside the project site, and that the site was ready for work on August 18, 2006. According to Legg, this issue delayed Applied from working at the Wilmington Outpost from July 26, 2006, to August 18, 2006.

{¶13} On December 15, 2006, the parties signed Change Order No. G-02, which states, in part: "This Change Order is to provide the contractor a no cost, time exten[s]ion to the project completion date due to previous weather related conditions and unforseen utility relocation requirements. During this time exten[s]ion there will be no cost penalties assessed to the contractor for lack of project completion. If however the projects are not completed by this new [February 18, 2007] completion date penalties will be assessed per the original bid documents." (Defendants' Exhibit 6.)

(Emphasis added.) All change orders executed during the project also stated: "This Change Order identifies and provides full and complete satisfaction for all direct and indirect costs, including interest and all related extensions to the time for Contract Completion, for the described changes in the Scope of the Work."

{¶14} Burnie testified that he believed the change order resolved all issues concerning the utility pole relocation. Legg also admitted that the parties intended for the change order to resolve the utility pole relocation, and he acknowledged that all change orders signed by the parties were negotiated. Legg stated, though, that he later decided that the change order failed to adequately redress the issue and that he therefore requested additional compensation in the June 5, 2007 notice of claim.

{¶15} Article GC 7 of the contract provides, in part:

{¶16} "7.1.1 The Department, without invalidating the Contract, may order changes in {¶17} the Work consisting of additions, deletions or other revisions, including without limitation revisions resulting from an extension granted in accordance with Paragraph GC 6.4. To the extent the time for Contract Completion or the Contract Price is affected, the Contract may be equitably adjusted by Change Order in accordance with this Article and the Change Order Procedure and Pricing Guidelines (CO). * * *

{¶18} "7.1.1.4 The Contractor understands and agrees that agreement to a Change Order is final and without reservation of any rights."

{¶19} "Where the parties to a construction contract agree to a change order which they intend to provide complete compensation for a given change in the project, the party being compensated by the change order will be contractually foreclosed from seeking additional compensation related to that same project change." Rabin v. Anthony Allega Cement Contractor, Inc., Franklin App. Nos. 00AP-1200 & 00AP-1241, 2001-Ohio-4057. Furthermore, change orders constitute part of the contract between the parties. High Voltage Systems Div., The L.E. Myers Co. v. Ohio Dept. of Transp. (Dec. 19, 1978), Franklin App. No. 78AP-88.

{¶20} The evidence demonstrates that the parties intended for Change Order No. G-02 to be a final and complete resolution of the issues relating to the utility pole relocation. As such, the court finds that the terms of Article GC 7 and Change Order No. G-02 bar Applied from seeking additional compensation in relation to the utility pole relocation.

{¶21} 2. "Downspout relocation necessitated by existing concealed conditions which was belabored by the design group to an appropriate resolution. 37 days."

{¶22} Legg testified that when Applied began to excavate at the Wilmington Outpost, a significant amount of groundwater was discovered. According to Legg, Applied attempted to pump the water out of the excavated foundation trenches, but the ground remained too saturated to build the foundation according to the project specifications. Legg stated that this problem resulted from naturally occurring groundwater, a downspout on the existing structure which emptied rainwater onto the project site, and water accumulating in a pit within the project site where an underground storage tank was once located. According to Legg, groundwater issues delayed Applied from working at the Wilmington Outpost from August 29, 2006, to October 4, 2006.

{¶23} On October 27, 2006, the parties signed Change Order No. 1, which stated that "[g]roundwater was encountered during initial excavation at Wilmington site" and that, as a result, Applied was to install perforated drainage tile at the site which would empty into an existing catch basin. (Defendants' Exhibit 7.) Change Order No. 1 provided that Applied would receive $650 in additional compensation and that the contract completion date would be extended from January 3, 2007, to January 12, 2007.

{¶24} Additionally, on December 28, 2006, the parties signed Change Order No. 5, which stated that, "due to water infiltration problems," Applied was to excavate an additional six inches in the foundation trench and then pour a concrete "mud pad" in the trench so as to provide a stable surface on which to lay the footer. (Defendants' Exhibit 8.) Change Order No. 5 provided that Applied would receive additional compensation in the amount of $2,413.61.

{¶25} Legg, Burnie, and Meeds testified that Change Orders Nos. 1 and 5 were intended to address all groundwater issues, including the downspout which emptied water onto the project site. Legg testified that despite signing the change orders on behalf of Applied, he felt that they did not adequately compensate Applied, particularly to the extent that they failed to include compensation for overhead and profit.

{¶26} Upon review of the evidence, the court finds that the parties intended for Change Orders Nos. 1 and 5 to provide complete and final resolution of all groundwater issues. Although Legg testified that he did not agree with these change orders, he nonetheless signed them on behalf of Applied. As previously stated, Subparagraph GC 7.1.1.4 of the contract provides that agreement to a change order is "final and without reservation of any rights." Accordingly, the terms of Article GC 7 and Change Orders Nos. 1 and 5 bar Applied from seeking additional compensation in relation to the groundwater issues.

{¶27} 3. "The existing out of level building concealed condition that when brought to the attention of the design group failed to give appropriate direction and redesign as requested by Applied Contracting Corp. 80 days."

{¶28} When Applied prepared to lay the footer and foundation for the addition to the Blue Ash Outpost, it discovered that the footer on the existing structure was approximately three inches out of level. There is no question that this issue was previously unknown to all parties and that it was thus not addressed in the project plans. Legg and Burnie testified that when Applied requested instructions from ASA on how to proceed in light of this discovery, ASA directed Applied to proceed with the block foundation as planned, but to match the profile of the existing structure, even though this would result in the addition also being out of level.

{¶29} Applied built the foundation according to ASA's directive. Afterward, Applied grouted the foundation blocks with cement and used vertical rods as reinforcement; however, while this was the method of construction shown in the project drawings, the project specifications stated that an additional wire-mesh reinforcement product known as Durawall was to be installed within the mortared joints of the block foundation. Legg acknowledged that Applied must have failed to review the project specifications.

{¶30} On September 20, 2006, ASA issued a field work order directing

Applied to remove the block foundation "for non-conformance with the contract documents" and to replace it with a poured concrete foundation. Burnie and Meeds stated that the order to replace the block wall with a poured concrete wall resulted from Applied's failure to install Durawall and Applied's failure to keep the footer dry during construction, which could weaken the foundation. In contrast, Legg testified that he believed defendants raised the Durawall issue in order to provide a convenient reason for retracting ASA's original directive to build the addition out of level.

{¶31} On December 15, 2006, the parties executed Change Order No. 4, which states, in part: "The existing CMU foundation was required by the associate to be removed due to multiple work and site related conditions. The conclusion by all parties was that a poured concrete foundation wall was the best alternative to achieve a level foundation elevation to begin CMU block walls." (Defendants' Exhibit 3; Plaintiff's Exhibit J.) Change Order No. 4 provided that Applied would receive additional compensation in the amount of $8,897. In conjunction with Change Order No. G-02, which pertained to the utility pole issue and was executed on the same day, the contract completion date was extended from January 12, 2007, until February 18, 2007.

{¶32} Burnie testified that the parties intended for Change Order No. 4 to resolve all issues associated with the foundation problems. Legg testified that he believed Change Order No. 4 pertained to certain costs associated with the foundation problems, but that the matter of delays which Applied consequently incurred was a separate issue which the change order did not redress.

{¶33} The weight of the evidence establishes that the parties intended for Change Order No. 4 to provide complete and final resolution of the issues pertaining to the construction of the foundation at the Blue Ash Outpost. Accordingly, the terms of Article GC 7 and Change Order No. 4 bar Applied from seeking additional compensation in relation to the foundation issue.

{¶34} 5. "Lateral design delay which the design group failed to properly design according to the existing conditions. 13 days."

{¶35} 8. "Catch basin addition on the new lateral line which the design group failed to design for the storm sewer conflict even after warned of the conflict by their own representative and Applied Contracting Corp. 2 days."

{ΒΆ36} Paragraphs five and eight of Applied's June 5, 2007 notice of claim are similar in nature and shall be addressed together. The design plan for the Wilmington Outpost contemplated that wastewater inside the new wash bay would drain along the sloping cement floor of the bay, into a trench drain located in the middle of the floor, through an oil separator, and then through a buried lateral pipe which would connect with an existing sanitary sewer. This design plan contemplated that water would naturally flow through the buried lateral pipe by force of gravity, dropping in elevation from the oil separator to the sanitary sewer. However, the parties discovered during construction that there was not a sufficient drop in elevation from the oil separator to the sanitary sewer to allow ...


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