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City of Cincinnati v. Triton Services, Inc.

Court of Appeals of Ohio, First District, Hamilton

August 2, 2019

CITY OF CINCINNATI, Plaintiff-Appellee/Counterclaim-Defendant,
TRITON SERVICES, INC., Defendant-Appellant/ Counterclaim-Plaintiff, OHIO FARMERS INSURANCE COMPANY, and MAJID H. SAMARGHANDI, Defendants/Counterclaim-Plaintiffs, and TRITON PROPERTIES, LLC, Defendant. TRITON SERVICES, INC., Plaintiff-Appellant/Counterclaim-Defendant,
CITY OF CINCINNATI, A MUNICIPAL CORPORATION, Defendant-Appellee/ Counterclaim-Plaintiff.

          Civil Appeal From: Hamilton County Court of Common Pleas Trial Nos. A-1405757, A-1500905

         Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause

          Paula Boggs Muething, City Solicitor, Joseph C. Neff, Assistant City Solicitor, and Taft Stettinius & Hollister, LLP, Earl K. Messer and Nicolas J. Pieczonka, for the City of Cincinnati,

          Stites & Harbison, PLLC, William G. Geisen and Andrew J. Poltorak, for Triton Services, Inc., Ohio Farmers Insurance Company, and Majid H. Samarghandi.


          WINKLER, JUDGE.

         {¶1} Appellant Triton Services, Inc., ("Triton") appeals several orders entered against it in favor of appellee city of Cincinnati ("the city") in two consolidated cases. We find merit in four of Triton's eight assignments of error. We therefore affirm the trial court's judgment in part and reverse it in part.

         The Wesselman/Carroll Projects

         {¶2} The record shows that in April 2008, Triton entered into a contract with the city, acting on behalf of the Metropolitan Sewer District ("MSD"). Under the contract, Triton was the general contractor performing sewer work for the Wesselman Road Interceptor Sewer Phase 1A-3 and 1B project ("Wesselman Project"). Subsequently, Triton entered into another contract with the city to perform the Carroll Avenue Sewer Replacement Project ("Carroll Project"). Ohio Farmers Insurance Company provided surety bonds for both projects.

         {¶3} In June 2011, the city issued three checks totaling $496, 256.09 to Triton for the work it had performed on the Wesselman and Carroll Projects. Triton deposited the checks into its bank account. Several months later, the city discovered that Pavement Management, one of Triton's subcontractors, had not been paid. The city took steps to stop payment on the checks it had issued to Triton. The city was erroneously informed by its bank that the payment had been stopped.

         {¶4} Subsequently, Pavement Management filed suit against Triton and the city, seeking the money that it was owed for its work on the projects. To resolve that lawsuit, the city paid $396, 756.09 to Triton and $99, 500 to Pavement Management.

         {¶5} In January 2014, the city discovered that the checks for the original payments of $496, 256.09 had not been stopped because the stop-payment orders had been issued too late. After the city discovered the accidental double payment, it sent numerous letters to Triton requesting the return of the original payment of $496, 256.09. Triton never returned the payment.

         {¶6} Subsequently, in the case numbered A-1405757, the city filed a complaint against Triton alleging unjust enrichment and breach of contract. The city also named Ohio Farmers Insurance Company ("Farmers") as a defendant and made a claim under the surety bonds on the projects. In conducting discovery, it learned that Triton knew that the city's checks were fully deposited into Triton's checking accounts and that the relevant funds were never returned to the city. In fact, the overpayment was transferred between numerous bank accounts.

         {¶7} Consequently, the city amended its complaint to add claims for fraud and punitive damages against Triton and Majid H. Samarghandi, Triton's CEO. In response, Triton and Samarghandi asserted counterclaims for abuse of process and frivolous conduct, in which they alleged that the city had filed the fraud claim to harass them and force them to surrender the payment.

         {¶8} Eventually, the city withdrew its fraud and punitive-damages claims. The trial court granted summary judgment in favor of the city on its unjust-enrichment claim and awarded the city $496, 256.09. The court also granted summary judgment in favor of the city on Triton's claim for abuse of process. As to the claim for attorney fees for frivolous conduct, the court found that the issue should have been raised by motion rather than in Triton's counterclaim. The court stated that the evidence related to frivolous conduct should not be presented to the jury, but that it would allow Triton to raise the issue by motion after the trial of the other issues raised in a consolidated case.

         The Sagebrush Project

         {¶9} In July 2011, Triton entered into a contract with the city to perform work on the Sagebrush Lane, Susanna Drive, and Yellowstone Drive sewer project ("Sagebrush Project"). The original contract amount was $2, 698, 440. The contract incorporated the bid booklet, the State of Ohio Department of Transportation Construction and Material Specifications ("ODOT CMS"), and the city of Cincinnati's supplement to the ODOT CMS.

         {¶10} A geotechnical report was incorporated into the bid booklet. It provided that "excavations for the sewer are anticipated to primarily encounter cohesive soils interbedded occasionally with cohesionless soils." The report stated that no water was found at a majority of the test borings, which led to the recommendation that trench excavations be performed in 50-foot sections with each section being backfilled before proceeding to the next trench excavation. The bid booklet stated that the geotechnical report was for informational purposes only and that the report was not a substitute for actual site inspection.

         {¶11} Triton began work on the Sagebrush Project in September 2011. Soon after, it discovered differing soil conditions than it had expected. Triton claimed that it had encountered sloughing soils, trench cave-ins, excessive groundwater, and extremely wet conditions, which caused it to incur substantial increased expenses.

         {¶12} The contract spelled out what should occur if Triton encountered differing site conditions. ODOT CMS ¶ 104.02(B) provided:

During the progress of the Work, if subsurface or latent physical conditions are encountered at the site differing materially from those indicated in the Contract Documents or if unknown physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the Work provided for in the Contract Documents, are encountered at the site, notify the Engineer as specified in 104.05 of the specific differing conditions before they are disturbed or the affected Work is performed.
Upon notification, the Engineer will investigate the conditions and if it is determined that the conditions materially differ and cause an increase or decrease in the cost or time required for the performance of any Work under the Contract, the Department will make an adjustment and modify the Contract as specified in 108.06 and 109.05. The Engineer will notify the Contractor of the determination whether or not an adjustment of the Contract is warranted.

         The "Engineer" was defined as a "[d]uly authorized agent of the Department acting within the scope of its authority for purposes of engineering and administration of the Contract." ODOT CMS ¶ 101.03.

         {¶13} ODOT CMS 104.05(D), as amended by the city supplement, required the contractor to:

Give written notice of any circumstance or dispute on the project that may result in a claim. Give early notice by the end of the second working day following the discovery of the occurrence of the circumstance or dispute. Maintain records on the Superintendent's daily report of the additional labor, equipment, and materials used on the disputed work or made necessary by the circumstance. Begin record keeping when the project personnel are aware of the circumstance of dispute. Submit these records on a weekly basis.

         This section further states that "[f]ailure to give early notice or keep and submit cost records will be a sufficient reason for the City to deny the claim."

         {¶14} According to Triton, Brian Gessner, Triton's director of site development, discussed the differing site conditions frequently with city representatives throughout the project, including Steve Jones, the supervising engineer for the Sagebrush Project. Triton also contended that it sent numerous written notices to the city relating to the differing site conditions.

         {¶15} On February 1, 2012, Gessner sent an email to Sara Cramer, MSD's construction manager for the Sagebrush Project. Gessner advised Cramer of the poor condition of the water mains at the site and that there had been three water main breaks at the site, causing "undue saturation" of the "surrounding subsurface." He also expressed concern about the future impact of the water mains on Triton's work.

         {¶16} On March 7, 2012, Gessner sent a letter to Cramer stating, As I am sure you have witnessed by your numerous site visits, review of the inspector's daily notes as well as Tritons [sic] notifications both verbally and as was addressed in last week's meeting, the bore and trench excavations have exposed poor ground conditions at every excavation completed on the upper subdivision part of the project and are currently experiencing [m]ajor delays. The soil strata have consisted of large seams of sand as well as groundwater that are inconsistent with the bore reports. He stated that the field operations should be delayed and asked for a meeting to discuss the problems.

         {¶17} On March 15, 2012, Gessner sent another email to Cramer discussing the wet site conditions. At that time, the differing site conditions had brought Triton's work on the project to a standstill, and it was waiting on a proposal from MSD so that it could continue with its work on the project. Gessner also stated that he had been in "continuous communication" with Jones on those issues.

         {¶18} On March 16, 2012, Gessner sent Cramer documentation regarding additional trench protection that Triton's crews would need to use due to the site conditions. He advised her that the additional trench protection would cause Triton to incur additional costs. As of March 19, 2012, work remained at a standstill. Gessner sent an email to Cramer and Jones requesting that they approve the extra costs associated with more substantial trench boxes, the use of which was necessitated by the sloughing and saturated soils. MSD agreed to pay those costs, and Triton was able to continue work on the project.

         {¶19} On May 21, 2012, Gessner sent an email to Cramer advising her that soil conditions on the west end of Susanna Drive were unsuitable due to saturated and sloughing soils and approximately four inches of water, which would cause Triton additional costs. He asked Cramer to confirm conditions with MSD's field staff and to confirm that MSD would pay for Triton's additional costs.

         {¶20} In early June 2012, Gessner and Cramer exchanged emails regarding the deteriorated and unsuitable subbase on the project. Gessner advised Cramer that the unforeseen conditions had caused compromised trench walls during the mainline pipe operations, causing Triton to incur costs for additional materials and labor.

         {¶21} Gessner also indicated that work on the project had been delayed. Triton contended that while work was stopped, Jones had directed Gessner to wait and submit all costs incurred due to differing site conditions at the end of the project. The city contends that Jones only told him to submit costs for certain discrete parts of the project.

         {¶22} On June 26, Gessner sent an email in which he requested that Cramer visit the job site. He attached a photograph showing sloughing soils, trench cave-ins and deteriorated subbase. In July, he sent Cramer a series of photographs ...

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