Ernst v. Koppers, supra, 476 F. Supp. at 740, 752-753. All of the delays occasioned by these extensive drawing revisions would necessarily fall after January of 1975.
As for those revisions made before January of 1975, as we have previously noted, the plaintiff would have felt their impact sometime after the revision itself was made. See Ernst v. Koppers, supra, 476 F. Supp. at 752. Therefore, it is also fair to conclude that many of these changes affected Ernst's operations after January of 1975.
The impact of these delays on Ernst's operations is dramatically demonstrated by a comparison of two of plaintiff's trial exhibits (numbered 258 and 224). Plaintiff's Exhibit 224, dated August 8, 1974, is a weekly breakdown of Ernst's projected manpower requirements for this project from August 1974 to August 1975. Plaintiff's Exhibit 258 is a Koppers' memorandum dated June 1, 1977, which contains a graph indicating the approximate man power allegedly used by Ernst on the project. Comparing Ernst's projected man power allocations with its actual man power usage we find that the two were remarkably consistent through November of 1974. Thereafter, the actual manpower allocations began to deviate significantly from the projections until, by August of 1975, actual manpower on the job was three times greater than that projected by Ernst at the outset of construction. At this time Ernst had nearly 200 men at work on this construction site. Moreover, these enormous manpower allocations by Ernst continued far beyond the original completion date of the project, June, 1975. Ernst continued to employ over 100 men on this project until December of 1975, some five months after the anticipated completion date of the work. In fact, Ernst continued to assign laborers to this project well into the early part of 1976.
All of this evidence, we believe, demonstrates that delay damages in this case should be allocated to the year 1975. As a follow-on contractor Ernst could not begin its work until other contractors had performed their construction tasks. As we have seen delays from the outset of this project made it impossible for Ernst to begin much of its contract work until sometime after January 1975. This delay in the contract work was further aggravated by the numerous drawing revisions made by Koppers on this project. Again the impact of the vast majority of the drawing revisions fell on Ernst after January, 1975. Ultimately we find that, while Ernst was able to work within its manpower projections throughout 1974, the manpower it allocated to this job had to be increased far beyond all projections in 1975. This enormous outlay of man hours in 1975 admittedly represents a number of factors, including work done on drawing revisions and field authorizations. However, we also feel that it represents the impact of Koppers' inefficiencies and delays upon Ernst's operations. We, therefore, will allocate all of the delay hours occurring on this project to the year 1975.
In reaching this result we recognize that we are not allocating delay hours with absolute mathematical certainty. We do not feel, however, that such certainty is required in a case such as this where the defendant's responsibility for all delays has been conclusively established. Rather, in this case, we feel that proof of damages to a reasonable certainty is all that is necessary or possible. See e.g. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562-63, 51 S. Ct. 248, 250, 75 L. Ed. 544 (1931); Ernst v. Koppers, supra, 626 F.2d at 327; Compania Pelineon de Navegacion v. Texas Petroleum Co., 540 F.2d 53, 56 (2d Cir. 1976), cert. denied 429 U.S. 1041, 97 S. Ct. 741, 50 L. Ed. 2d 753 (1977).
We believe that we have obtained such certainty in this case. Admittedly some of these delays may have been felt by Ernst as early as 1974. But, on the other hand, it is apparent that Ernst worked on this project well into the winter of 1975-1976. See Ernst v. Koppers, supra, 476 F. Supp. at 737. In fact some drawing revisions were still being made on the project in 1976. See Ernst v. Koppers, supra, 476 F. Supp. at 752. Therefore, Ernst may well have encountered some delays as late as 1976. On balance, however, the evidence in this record convinces us that the overwhelming majority of the delay hours encountered by Ernst occurred in 1975. Accordingly, we will use the labor rate agreed upon by the parties for 1975 in assessing delay damages. In 1975 Koppers agreed to pay Ernst, $ 20.77 per hour for its journeymen labor. Applying this labor rate to the total number of delay hours, 87,010, we obtain a sum of $ 1,807,197.70. This amount we believe accurately represents Ernst's losses due to Koppers' inefficiency and delays on this project.
Finally, we believe that Ernst is entitled to an award of prejudgment interest on this Count I damage claim. Under Pennsylvania law, "(if) a claim is liquidated, the party whose payment ... has been withheld is entitled to prejudgment interest as a matter of right...." Sun Shipbuilding & Dry Dock Co. v. U.S. Lines, Inc., 439 F. Supp. 671, 675 (E.D.Pa.1977), aff'd. 582 F.2d 1276 (3d Cir. 1978). Moreover, as the Court of Appeals noted in this case, the mere fact that liability is contested does not mean that damages cannot be liquidated. See, Ernst v. Koppers, supra, 626 F.2d at 332-33.
In this case the Court of Appeals has evinced a belief that delay damages can be accurately assessed. See, Ernst v. Koppers, supra, at 329. Our independent review of the record has demonstrated that these damages can be established with reasonable certainty. Therefore, we feel that these claims are not so speculative as to prevent the awarding of prejudgment interest as a matter of right.
However, even if this claim is not liquidated, and the plaintiff is not entitled to prejudgment interest as a matter of right, we would still award such interest in this case. Under applicable Pennsylvania law "if... (a) claim is not for a liquidated sum, the decision on whether (to) award (prejudgment) interest is within the sound discretion of the court." Glus v. G. C. Murphy Co., 629 F.2d 248, 258 (3d Cir. 1980); see, e.g. Sun Shipbuilding & Dry Dock Co., supra; Hussey Metals Division v. Letromelt Furnace Division, 417 F. Supp. 964 (W.D.Pa.1976), aff'd. 556 F.2d 566 (3d Cir. 1976). In this case we believe that the equities lie heavily in favor of the plaintiff, Ernst. Therefore, the proper exercise of our discretion would require the payment of prejudgment interest on this claim.
Koppers Company was aware, from the outset of construction, that the Aliquippa project was encountering enormous delays. Koppers could, and apparently did, recognize that these delays would result in additional costs for itself and its subcontractors, including Ernst. Yet Koppers refused to recognize the validity of these claims, even after Ernst submitted a request for delay damages on May 31, 1977. By doing so Koppers has successfully evaded any payment of these claims for more than four years. Furthermore, the structure has been completed and in use by the owner for all of this period.
Given these facts we feel that it is proper that Koppers now be required to pay interest on this delay damage claim. Therefore, we will order the payment of prejudgment interest on the plaintiff's Count I damage claim at the rate of 6% per annum, from May 31, 1977 to the present. See, Sun Shipbuilding & Dry Dock Co., supra.
III. COUNT II DAMAGES
The second issue for our consideration on remand involves the trial court's deduction of $ 62,080 from the plaintiff's Count II claim for drawing revision damages. In its opinion the court concluded that these deductions were required under paragraph six of the purchase order, which states that:
(A reasonable change in the contract is a) drawing revision that constitutes an addition or deletion due to changes in motors which cause an increase or decrease in conduit and wire size, addition or deletion of lighting, addition of drives, starters, etc., not shown in the bid drawings or not contained in the intent of the specifications furnished. A claim for the above will be reviewed on the strict basis that the initial cost (labor and/or materials) of $ 500 is to the account of the Seller (Ernst).
At the time of trial counsel for the parties presented two differing interpretations of this provision. Defendant contended that paragraph six represented a deductible clause. Under defendant's interpretation the initial $ 500 in costs attributable to each and every drawing revision claim would be absorbed by Ernst. The plaintiff rejected this interpretation of the purchase order agreement. Instead, the plaintiff asserted that paragraph six established a claims threshold. This construction of the purchase order resulted in the exclusion of all drawing revision claims valued at less than $ 500, but required full payment of any claim in excess of $ 500.
The practical effect of these two different theories can easily be demonstrated by a hypothetical example. Assume in a given case that Ernst performed $ 550 in additional work as a result of a drawing revision made by Koppers. Under the defendant's theory this drawing revision would result in $ 50 worth of additional liability on Koppers' part. ($ 550 minus $ 500 deductible equals $ 50 claim). Under the plaintiff's theory, however, once the $ 500 threshold is exceeded all drawing revision costs are owed. Accordingly, in our hypothetical, Koppers would owe Ernst the full cost of the drawing revision, $ 550. Of course, in instances where the drawing revision costs were less than $ 500 the effect of the "deductible" and "threshold" theories is the same.
At trial the plaintiff presented testimony which supported its construction of paragraph six of the purchase order. Despite this testimony the District Court, in its opinion, concluded that the clause operated as a deductible. See Ernst v. Koppers, supra, 476 F. Supp. at 741; 476 F. Supp. at 756. The District Court's discussion of this issue, however, was quite cursory. In fact, the District Court's opinion completely failed to mention the parol evidence submitted by the plaintiff on this issue. Instead, without discussion, the court adopted the construction of paragraph six urged at trial by Koppers.
On appeal Ernst challenged the District Court's construction of this contract provision, contending that the trial judge improperly disregarded the parol evidence submitted by the plaintiff. In its opinion the Court of Appeals noted that "the District Court merely stated a conclusion on the question (of the interpretation of paragraph six) without any elaboration whatsoever." Ernst v. Koppers, supra, 626 F.2d at 331. Because the District Court's discussion of this parol evidence was incomplete the Court of Appeals concluded that it could not "determine ... whether the District Court disregarded this testimony because it thought it was barred by the parol evidence rule or whether it admitted the evidence but disregarded it because it found the testimony not worthy of belief." Ernst v. Koppers, supra, 626 F.2d at 331. The Court of Appeals, therefore, elected to remand this issue to the District Court for further findings of fact and conclusions of law.
As we understand the Circuit Court's opinion, our task on remand is to resolve two distinct, but closely interrelated questions. First, is parol evidence properly admissible in this case to explain or modify the terms of paragraph six of the purchase order? Second, does paragraph six act as a deductible provision or does it establish a claims threshold?
In this instance we believe that paragraph six of the purchase order is clear and unambiguous on its face. Therefore, we conclude that that provision is not susceptible to parol modification. Moreover, we feel that paragraph six requires the deduction of $ 500 from each and every drawing revision claim. We, therefore, hold that this provision acts as a deductible clause. Accordingly, we will not disturb the conclusions arrived at by the Trial Judge with respect to the Count II damages.
The parol evidence rule is something of a misnomer. It is, in fact, not a rule of evidence at all. Rather, it is a substantive rule of contract law "which in the absence of fraud, accident or mistake, prohibits resort to extrinsic evidence to vary the meaning of a contract when the language of the contract is unambiguous." Whitmer v. C.I.R., 443 F.2d 170, 173 (3d Cir. 1971). See, e.g. Mellon Bank, N.A. v. Aetna Business Credit, 619 F.2d 1001, 1008-1014 (3d Cir. 1980); Chuy v. Phila. Eagles Football Club, 595 F.2d 1265, 1271 (3d Cir. 1979); In re Breyer, 379 A.2d 1305, 1309, 475 Pa. 108 (1977); Robert F. Felte, Inc. v. White, 302 A.2d 347, 451 Pa. 137 (1973). Moreover, in Pennsylvania the parol evidence rule applies with particular force when, as in this case, the contract being construed is an integrated document. See, e.g. F.D.I.C. v. Barness, 484 F. Supp. 1134, 1146 (E.D.Pa.1980); Meyer v. W. R. Grace & Co., 421 F. Supp. 1331, 1334 (E.D.Pa.1976), modified 565 F.2d 152 (3d Cir. 1977); Friestad v. Travelers Indemnity Co., 393 A.2d 1212, 1218, 260 Pa.Super. 178 (1978); National Building Leasing Inc. v. Byler, 381 A.2d 963, 252 Pa.Super. 370 (1978).
The plaintiff in this case does not argue that this contract was entered into through fraud, accident or mistake. Instead, the plaintiff relies exclusively on the alleged ambiguity of the contract to support its attempt to introduce extrinsic evidence. Ambiguity is defined as "intellectual uncertainty... the condition of admitting of two or more meanings, of being understood in more than one way, or of referring to two or more things at the same time." Webster's Third New International Dictionary, 66 (1966). Therefore, language in a contract is ambiguous "if, and only if, it is reasonably or fairly susceptible of different construction; it is not ambiguous if the court can determine the meaning without any guide other than a knowledge of simple facts on which, from the nature of language in general, its meaning depends." Gerhart v. Henry Disston & Sons, Inc., 290 F.2d 778, 784 (3d Cir. 1961). In this case examining the language of paragraph six of the purchase order, we can find no such ambiguity. In pertinent part, that section provides that "a claim for (drawing revision expenses) will be reviewed on the strict basis that the initial costs, (labor and/or materials) of $ 500 is to the account of the seller (Ernst)." In our view this language in no way supports a construction of paragraph six as a claims threshold. Quite the contrary, the language explicitly provides that, on all claims for extra work arising out of drawing revisions, "the initial cost ... of $ 500" is to be borne by Ernst. The contract therefore by its express terms requires a $ 500 deduction from any drawing revision claim.
In its brief Ernst presents two arguments in support of its contention that this language is ambiguous. First, Ernst contends that the meaning of paragraph six of the purchase order is unclear from the face of the document itself. The plaintiff points out that the drawing revisions which are the subject of this claims provision are defined in the contract as "an addition or deletion due to changes in motors which cause an increase or decrease in conduit and wire size, addition or deletion of lighting, addition of drives, starters, etc. not shown in the bid drawing or addition of drives, starters, etc. not contained in the intent of the specification furnished." According to Ernst, if reasonable contract revisions include deletions from drawings then a contract revision could actually reduce the amount of work expected of Ernst on this project. Yet paragraph six of the purchase order requires that Ernst be charged with the first $ 500 in costs resulting from every drawing revision. Therefore, Ernst argues, this paragraph could conceivably allow Ernst to be charged with the initial cost of drawing revisions that required no work on its part. For this reason Ernst contends that paragraph six is facially ambiguous.
We do not feel, however, that this strained construction of paragraph six justifies the conclusion that that provision is ambiguous. It is a basic principle of contract law that "contracts should be interpreted in a way which makes sense." Operative Bricklayer's U. No. 64 v. Bricklayer's Local U. No. 1., 45 F.R.D. 429, 431 (E.D.Pa.1968). In this case Ernst contends that the language of paragraph six is ambiguous. However, to support this contention Ernst proposes an alternate reading of that section that is both unreasonable and contrary to the language of the contract. Paragraph six of the purchase order does not state that Ernst will be liable for the first $ 500 in costs resulting from every drawing revision made on the project. Such an interpretation of the contract would be nonsensical since many drawing revisions required no work by Ernst. See Ernst v. Koppers, supra, 476 F. Supp. at 753. Instead paragraph six speaks exclusively in terms of claims for compensation resulting from extra work done by Ernst on drawing revisions. It provides that $ 500 will be deducted from each such claim. Obviously, if a drawing revision did not require additional work on Ernst's part then no claim would be appropriate and the deductible clause would not be applied.
In sum, then, we do not feel that this language is "reasonably or fairly susceptible of (the) different construction" urged by Ernst. Accordingly we conclude that this language is not facially ambiguous.
Ernst also argues that the use of parol evidence is appropriate in this case even if paragraph six of the purchase order is not facially ambiguous. Essentially, Ernst contends that the interpretation urged by Koppers is so inherently unbelievable and unreasonable that it demonstrates an ambiguity in the otherwise clear language of the contract. Therefore, extrinsic proof of the contract's meaning is necessary. To support this proposition the plaintiff relies upon the Pennsylvania Supreme Court's decision in Consolidated Tile & Slate Co. v. Fox, 410 Pa. 336, 189 A.2d 228 (1963).
We feel, however, that such reliance is misplaced in this case. Fox involved a construction contract which provided that "there shall be... no extra charges for additions or alterations which may be required to complete the work." Although this language appeared on its face to be unambiguous the court allowed the introduction of parol evidence. In its opinion the court emphasized that a literal reading of the clause could obligate the contractor to perform potentially limitless additional work at no charge. Since this literal reading of the clause led to such an unusual, inequitable result the court concluded that extrinsic evidence was necessary to explain the real meaning of the agreement.
In this case, however, a literal reading of the clause in question does not lead to a bizarrely inequitable result. The plaintiff in this case is not required to undertake voluminous additional work without any prospect of reimbursement as was the plaintiff in Fox. Quite the contrary, Ernst has already received $ 1,421,920 plus interest for the work it did on these drawing revisions. Nor can it be argued that the construction of paragraph six as a deductible is totally without reasonable business justification. In fact this construction of paragraph six is completely consistent with the business justification proffered by Ernst to support its interpretation of the contract.
In its brief the plaintiff argued that the purpose behind the $ 500 clause in paragraph six was to prevent the processing of drawing revision claims involving less than $ 500. The parties apparently felt that it was uneconomical to pursue these claims because the processing costs involved would exceed the amount of the claim.
If this is the rationale behind paragraph six of the purchase order then, as we have previously noted, on claims of less than $ 500 the effect of either a deductible clause or a threshold clause would be exactly the same. Both will bar the processing of minor drawing revision claims. Only when a drawing revision claim exceeds $ 500 do these clauses act differently. On claims exceeding $ 500 a deductible clause has the additional effect of taxing the processing costs of the claim to Ernst. It is hardly surprising, however, to discover that the contract provides a method for allocating these claims processing costs. Nor does it appear unusual that the costs of processing these claims should be allocated to the party making the claims, Ernst. Therefore, we can find nothing so unusual or inequitable about the operation of this clause to justify the admission of parol evidence.
Accordingly, we conclude that parol evidence is not admissible in this case to modify the express terms of paragraph six of the Ernst-Koppers purchase order. We further conclude that that paragraph works as a deductible clause, requiring the deduction of $ 500 from each and every drawing revision claim submitted to Koppers by Ernst.
Finally Ernst argues that Koppers waived this provision because on several instances Koppers' claims adjusters accepted claims without making any deductions. See Ernst v. Koppers, supra, 476 F. Supp. at 755-756. We recognize that some claims were accepted in their entirety. We do not believe, however, that these isolated instances justify the conclusion that Koppers waived this contract provision. We, therefore, hold that Koppers did not waive the deductible clause contained in paragraph six.
Pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, the additional findings of fact and conclusions of law ordered by the Court of Appeals are embodied in this Opinion.
An appropriate order will issue.