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John Spearly Constr., Inc. v. Penns Valley Area Sch. Dist.

Commonwealth Court of Pennsylvania

July 24, 2015

John Spearly Construction, Inc.
Penns Valley Area School District, Appellant

Argued June 15, 2015

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[Copyrighted Material Omitted]

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Appealed from No. 2012-1012. Common Pleas Court of the County of Centre. Grine, J.

Joseph P. Green, Bellefonte, for appellee.



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In this construction contract appeal, the Penns Valley Area School District (District) asks whether the Centre County Court of Common Pleas (trial court)[1] erred in granting the contract claim of John Spearly Construction, Inc. (Contractor), and denying its claim for liquidated damages. The District withheld partial payment from Contractor based on a delay in substantial completion of the work and a dispute as to responsibility for certain tasks. Contractor filed suit to recover the balance due under the contract and damages for delay.

After a non-jury trial, the trial court entered a verdict in Contractor's favor.[2] The trial court found the District actively interfered with Contractor's completion, and awarded Contractor delay damages, penalties and counsel fees, in addition to the contract payment wrongfully withheld. The District appeals, arguing the trial court disregarded the " no damages for

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delay" clause, committed other errors in contract interpretation, and abused its discretion in weighing the evidence. Upon review, we affirm.

I. Background

Contractor and the District entered into a contract for construction of a biomass boiler system (Project). The contract documents consisted of the Standard AIA Form Contract and the General Conditions (Contract). The Contract designated the architect, EI Associates (Architect) as the District's representative through which changes and payments flowed. Reproduced Record (R.R.) at 211a. Contractor was the general contractor[3] responsible for construction of the biomass boiler system, essentially the building to house the boiler plant.

The total value of the Contract was approximately $933,000.00, including additional change order amounts agreed to throughout the Project. In addition to the Contract, other documents associated with the Project included a " project manual," containing general conditions, specifications and plans.

The District entered into other direct contracts with other prime contractors for other components of the Project, such as electrical and heating/ventilating/air conditioning (HVAC). The District had a direct contract with Allied Mechanical & Electrical Inc., its HVAC contractor (Allied), which was responsible for delivering the boiler.

In addition to Architect, the District's Project team included Robert Pacella, the " resident representative" of the District (Resident Representative), (collectively, the Project Team). R.R. at 273a. During the course of the Project, Architect presided over the job conferences held bi-weekly between July 21, 2010, and June 30, 2011, regarding the progress of each prime contractor. Architect maintained minutes of all conferences, which both Architect and Resident Representative attended. According to the initial pre-construction job conference report, " [Architect] will provide general administration for the construction contracts and will provide his best efforts to ensure faithful performance of all parties to the Contracts. This will include rendering decisions to resolve any claims or disputes." R.R. at 277a.

Pursuant to the Contract, construction was to be substantially completed no later than October 18, 2010. Construction began in July 2010. Thus, the parties originally contemplated completion of the Project within three months.

From its inception, the Project was plagued with delays. At the outset, an issue arose relating to the height of the building proposed to house the boiler system. Resident Representative requested a reduction from 28 feet to 22 feet for the window eaves. Contractor provided the price for the requested dimension change and requested confirmation as to how to proceed. Contractor advised he needed the information to complete the shop drawings so the project could move forward. Despite the urgency, the District did not respond for almost a month, corresponding to one-third of the anticipated timeframe for substantial completion. In the end, the District decided to use the original height.

Then, an issue regarding placement of steel columns arose, requiring additional changes to the plan. The District requested

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changes that required a redesign to accommodate large vertical windows. Importantly, each change altered the weight-bearing capacity of the building, requiring engineer review and resulting in additional delays.

Several events transpired between October 2010 and December 2010 causing further delay. Specifically, Allied advised that another foot of floor differential was required for the " shaker table" to operate properly.[4] R.R. at 164a, 358a. Delayed decision-making relating to increasing the elevation affected other issues, including construction of tie-ins, and auger pit location, accounting for delays of two additional months. Disputes between the District and Allied also delayed all prime contractors' progress.

The prime contractors sought time extensions under the Contract. Architect granted the first extension in January 2011, to May 3, 2011. As a result of repeated delays, Architect extended the completion date a second time, upon request, to June 2, 2011.

In addition to the inefficiencies of coordination and delayed decision-making on the Project, in Spring 2011, the District hired another contractor to repair and replace storm water and sewer pipes and to add more drainage catch basins (Sewer Contractor). Relevantly, this work was not anticipated by the parties when they entered the Contract. Also, the Sewer Contractor did not complete its work until August 2011. This in turn delayed Contractor from installing the curbing and stone paving until two months after the extended completion date.

Also, when attempting to pour the curb, Contractor encountered problems with the sewer lines and grading, as the grading over the sewer lines was not high enough. The District asked Contractor to raise the grading over the sewer lines. This led to a dispute between Contractor and the District as to who was responsible for regrading and reseeding the area over the sewer lines.

Ultimately, the project was not substantially completed until August 11, 2011. This constituted a delay of 279 days from the original completion date, and 79 days after the extended completion date. Tr. Ct., Slip Op., 10/8/14, at 5.

After substantial completion, in September 2011, Contractor submitted " Payment Application No. 11" in the amount of $98,755.16 to the District. That amount included $52,537.26 representing currently due payments, and $46,217.87 in previously invoiced and unpaid payments. Despite requirements for prompt payment, the District made a partial payment over six months later, in April 2012. In the cover letter, the District stated it deducted $35,000.00 in " estimated liquidated damages" and $10,200.00 for " building site grading/seeding." R.R. at 502a. The District did not explain its calculation of liquidated damages. Contractor then filed suit to recover the balance due, $45,200.00, plus delay damages, interest and counsel fees.

The trial court conducted a one-day non-jury trial where both parties presented testimony and documentary evidence. Contractor presented testimony of owner, David Spearly and its Project foreman, James McCloskey. Contractor also presented testimony of its subcontractor Nevin

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Stitzer, and Frank Halderman, a representative of Allied, regarding the cause of the delays. Of note, the District did not submit testimony of Architect or Resident Representative despite knowing their whereabouts. R.R. at 197a. The District presented testimony of its Superintendent and of its Business Manager regarding its delay damages. Superintendent testified that in a letter dated April 26, 2011, Architect requested an additional $5,000 per month starting in January 2011, for a total of $35,000. This correlated to the amount the District claimed for liquidated damages.

Based on the evidence, and after considering the parties' proposed findings of fact and conclusions of law, the trial court rendered a verdict in favor of Contractor, and against the District.

Citing its poor communication and lack of responsiveness, the trial court found the District committed active interference. The trial court found the delay in completion was attributable to actions of the District and those of its Project Team. Ultimately, the trial court concluded Contractor was entitled to delay damages by showing " the delay was caused solely by [the District's] actions and inaction." Tr. Ct., Slip. Op. at 9-10. Specifically, the trial court found

the lengths of time it took the [District] to decide on those changes and to make other decisions related to the building (in some cases, several months) caused the majority of the delays in this case. Additionally, the [District's] decision to bring in [Sewer Contractor] to work on the site further hampered [Contractor's] ability to finish the [P]roject within the contract terms.

Id. at 6.

To the extent the District claimed $10,200.00 in damages for regrading and reseeding of the area because of Sewer Contractor's work, that cost was not attributable to Contractor. The trial court found the hiring of Sewer Contractor was not contemplated by the parties at the time of contracting. The trial court also found the parties modified Contractor's original grading responsibilities so that Contractor would raise the grade and the District would provide topsoil and reseed the area once grading was completed. Then the District reneged on providing the topsoil. The trial court found the District's failure to honor its modification precluded it from claiming damages related to Contractor's nonperformance of the original grading and seeding responsibilities.

The trial court found Contractor proved the $82,057.00 sought as damages for delay. The trial court noted the District only contested the legal entitlement to delay damages, not the factual proof necessary for calculation. The trial court also imposed a 1% penalty per month for the District's wrongful withholding of payment pursuant to Section 12(a) of the Contractor and Subcontractor Payment Act (CSPA),[5] 73 P.S. § 512(a). In addition, the trial court awarded $3,515.00 in counsel fees to Contractor as the substantially prevailing party under Section 12(b) of the CSPA, 73 P.S. § 512(b).

The trial court found the District did not support its claim for delay damages, or its apportionment of half of the overall delay damages to Contractor. The trial court reasoned the District was not entitled to delay damages because the District's lack of prompt decision-making and a contractual dispute with Allied, and actions of Sewer Contractor, hired by the District, caused the ...

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