BAKERS CONSTRUCTION SERVICES, INC.
GREENEVILLE-GREENE COUNTY AIRPORT AUTHORITY
Session March 11, 2015.
Appeal from the Chancery Court for Greene County No. 20110352 Hon. Douglas T. Jenkins, Chancellor
Ronald W. Woods, Jeffrey M. Ward, and Brandy M. Burnerte, Greeneville, Tennessee, for the appellant, Greeneville-Greene County Airport Authority.
Reggie E. Keaton, Knoxville, Tennessee, and C. Thomas Davenport, Jr., Bristol, Tennessee, for the appellee, Baker's Construction Services, Inc.
JOHN. W. MCCLARTY, J., delivered the opinion of the Court, in which CHARLES D. SUSANO, JR., C.J., and D. MICHAEL SwiNEY, J., joined.
JOHN W. McCLARTY, JUDGE.
On September 4, 2009, Baker's Construction Services ("Plaintiff) entered into a $2, 039, 811.60 contract with Greeneville-Greene County Airport Authority ("Defendant") to provide grading, excavation, embankment, utilities, and drainage work necessary to extend the runway and taxiway of the Greeneville-Greene County Airport. The extension was intended to correct a line of site deficiency on the runway. The project was federally funded through the American Recovery and Reinvestment Act ("ARRA") and administered through the Tennessee Aeronautics Division of the Tennessee Department of Transportation ("TDOT"). Barge Waggoner Sumner Cannon, Inc. ("BWSC") served as the design engineer firm for the project.
The job site was surrounded by private property. Defendant was tasked with securing the properties and providing rights-of-way for the area where the work was to be performed. Prior to signing the contract, Plaintiff was informed that some of the properties had not been secured. Four days later, Defendant issued a notice to proceed, requiring Plaintiff to commence operations the following day, September 9, 2009. Plaintiff was tasked with completing the project within 260 days. While Plaintiff commenced operations on the project, the contract was revised several times to correct clerical errors. The final contract was not received by Plaintiff until October 21, 2009.
On October 26, 2009, Plaintiff submitted a notice of claim asserting that Defendant's failure to provide access to the job site impeded the work of excavation and embankment. Thereafter, Plaintiff continually requested access to the job site and repeatedly informed Defendant of problems caused by the lack of access. Despite the repeated requests, Plaintiff did not obtain full access to the job site until September 24, 2010.
On December 6, 2011, Plaintiff filed suit against Defendant, alleging breach of contract because Defendant impeded Plaintiffs efforts by failing to provide access to the job site. Plaintiff argued that its inability to utilize the site caused disruption and delay damages; additional costs; general administrative expenses; and other damages. Plaintiff requested damages in excess of $2, 351, 000, prejudgment interest, and discretionary costs. Defendant requested dismissal of the complaint, asserting that it informed Plaintiff prior to the execution of the contract that the rights-of-way had not been acquired but that work needed to commence by a certain date in order to secure funding. Defendant asserted that Plaintiff had waived any claim for breach of contract by proceeding with the work with the knowledge that the rights-of-way were not secured.
The case proceeded to a bench trial. Bart Allen Devore, who served as the vice president and project manager for Plaintiff during the time period in question, stated that Plaintiff was responsible for clearing and grading the site before the paving of the runway could be completed in the second phase of the project. Prior to signing the contract at issue, he attended a pre-construction meeting on September 3, 2009.
A tape of the pre-construction meeting was played for the court. Mr. Devore; Chad Baker, Plaintiff's President; Ed McHugh, who worked for BWSC; Rick Hudgens, a TDOT employee; Janet Malone, Chairman of the Airport Authority; and others not pertinent to this appeal were present at the meeting. During the meeting, Mr. McHugh asked if they should discuss the property acquisition issues. Rick Hudgens replied, "Let's hold off on that." Later in the meeting, Mr. Devore was informed that there was property along the existing taxiway that had not been acquired. Mr. Hudgens proclaimed that Defendant was "pretty close" to getting the right of entry if they had not already closed on the property. Ms. Malone stated that Defendant had not closed on any of the properties. Mr. Devore opined that "developing the schedule was really critical" in order to understand which fill areas were needed. Ms. Malone later expressed concern regarding a piece of property at the end of the runway, namely the Solomon Property. She related that the occupants would need access to the property, thereby impeding Defendant's ability to close the nearby road for construction purposes. Mr. Baker expressed concern regarding the fact that they would have to "hopscotch around" the job site because some of the properties had not been acquired.
After Mr. Devore and Mr. Baker left the meeting, Mr. Hudgens stated,
All right. This property thing, it pissed me off to the point of I'm tired of messing with - it's ridiculous. We have got - we have got some property out here that we know today we could go to the property owner and say this is what it's worth. This is what we are going to give to you, and we ain't got s**t.
The remaining parties, Ms. Malone, Mr. McHugh, Mr. Hudgens, and others not pertinent to this appeal, then discussed the extensive problems related to acquiring the properties.
Mr. Devore testified that he was not apprised of the extent of the problems related to acquiring the properties prior to signing the contract. He identified a provision in the contract that provided as follows:
[Defendant] will be responsible for furnishing all rights-of-way upon which the work is to be constructed in advance of [Plaintiffs] operations.
He claimed that Defendant failed to provide the rights-of-ways as provided in the contract. He identified several properties that were not available prior to the issuance of the notice to proceed. He related that the project was dependent upon a sequence of moving material back and forth in an effort to dry the soil before filling certain areas in compliance with the airport's modified compaction requirements. He opined that they needed to place 50 percent of the fill material in an area that was unavailable and that they could have utilized rock material from another piece of unavailable property.
Mr. Devore testified that he submitted a request for information, dated September 19, 2009, that provided as follows:
The construction traffic control sign plans for Old Wilson Road cannot be installed per bid plans due to acquisition of property. We have discussed the need to close off this road to all but local traffic as we will need to cross Old Wilson Road to access stockpile area and obtain the "more suitable" soil from across Old Wilson Road for embankments and haul the "less suitable" soil to stockpile location. We plan to start cul-de-sac and turn around construction as soon as possible. The construction signage plans call for Old Wilson road to be closed to thru traffic with barricades placed across the roadway.
We request a revised plan due to liability reasons should we deviate from the approved plans and construction signage plan. Please see attached existing plans and forward a revised plan for this work on Old Wilson Road due to property acquisition issues.
He explained that it was extremely important to access the soil across the road because of the moisture content levels. They needed the use of the dryer soil to maintain production and progress. He stated that they were required to cross the road through an access gate because they were unable to completely close the road. Use of the access gate was inefficient because only one unit could pass through the gate at a time, causing delay as the unit traveling in the opposite direction was left to wait its turn.
Mr. Devore identified the notice of claim, dated October 26, 2009, which provided, in pertinent part, as follows:
[Plaintiff] is hereby giving notice in accordance with [the contract] that the work of excavation and embankment is being severely impeded and the project cannot be constructed as bid because [Defendant's] property acquisition issues have limited jobsite area available to [Plaintiff] for the performance of its work. [Plaintiff's] cost and the time required to perform earthwork operations is being increased by lack of access to the entire project site for [Plaintiff] to best utilize cut and fill areas to maximize excavation efficiency. The inability to place embankment in the project area between station 45 and station 61퍏 restricts the volume of project embankment that can be placed by approximately 50%. The existing soil moisture content makes the amount of available area for embankment placement that much more critical to [Plaintiffs] ability to control the cost to perform this work. Another area of the project unavailable for work is excavation area station 86 to 92퍏 right, where our exploration uncovered rock that needs to be utilized in the lower fill areas.
The time frame for these areas to be available to work is unknown as of this date. At this time [Plaintiff] cannot quantify the total impact of this ongoing impediment on its Work but hereby submits notice as required under the Contract that a claim for adjustment will be submitted for additional compensation and for an extension to the Contract Time when the total impact can be ascertained.
He explained that they only had limited areas available to manipulate fill soil back and forth and that access to more area as anticipated during the bidding process would have increased their ability to dry soil and continue placing fill material.
Mr. Devore testified that he attended a progress meeting with Defendant and that he documented the minutes of the meeting in an email that provided, in pertinent part, as follows:
[Plaintiff] asked about the liability of blasting as close as possible to the yellow house as it will be purchased by [Defendant] in the future. Blasting to the limit would generate additional fill for rock fill areas that is the only feasible fill on-site that can be accomplished with the wet conditions. The answer was [Plaintiff] is totally liable until property is purchased by airport. This property will be taken by condemnation after the holidays.
[Plaintiff] inquired as to the status of remaining property purchase by airport. Status is property acquisition is in progress and offers have been made to property Owners. No firm date as of this meeting for property to be turned over to construction.
The status of Cemetery relocation was discussed, no firm date for relocation.
The demolition of yellow house was determined to be an extra to the contract. This parcel was noted in bid process that it would be gone before construction started.
[P]laintiff asked about demo of Old Wilson Road pavement. The roadway must stay for access to yellow house and other two properties on existing road or stone placed if asphalt removed. Airport is to notify residents of pending road closure next week.
He explained that Plaintiff planned to work through the winter by acquiring as much rock as possible because the rock could be placed when the weather was too damp to place the soil. He related that they were unable to work through the winter, in part, because they did not have access to the job site. He opined that the work could have "been close" to completion if they had worked through the winter. He conceded that his bid schedule reflected a shutdown during the winter months due to weather.
Mr. Devore identified a letter that he sent to Defendant in April 2010, inquiring whether the property issues had been resolved and advising Defendant that the work would be more costly as a result of the property issues. He reminded Defendant of his initial letter in October 2009 and requested a response within 10 days of receipt of the letter. He never received a response from Defendant.
Mr. Devore conceded that he only submitted one construction schedule throughout the course of the project, despite the fact that the contract required him to provide construction schedules on a bi-monthly basis. He testified that he informed Defendant by email in May 2010 that he was unable to provide a construction schedule because they did not have access to the entire job site. He stated that he advised Defendant that he would craft a schedule once he knew when the site would be available. He was informed that negotiations for acquisition of the property were ongoing and that acquisition had been delayed because Defendant had not secured grants to purchase the properties. He testified that at the time of contracting, Defendant did not explain that it needed to secure grants to purchase the properties. He advised Defendant that the loss of access to just one of the properties, the Solomon Property, cost approximately $7, 000 per day.
Mr. Devore testified that they resumed work on June 28, 2010, despite the fact that they still did not have access to the job site. At that time, they had utilized 87 of the 260 planned working days. He testified that Plaintiff incurred remobilization costs to fence an area that was previously unavailable at the start of the project and that they were unable to drill and blast to secure rock material because the Solomon Property was unsecured. He conceded that the airport project had generated a profit by June 30, 2010.
Mr. Devore notified Defendant once again in July 2010 that Plaintiff was hindered in its ability to perform efficiently due to the unavailability of the job site. He explained that they were unable to utilize the warm weather in the summer months because the site remained unsecured. He stated that his request to increase efficiency regarding the closure of Old Wilson Hill Road was denied. He agreed that some properties were available as the work progressed and that he was provided access to other properties even though they were not officially acquired. He also agreed that he could have refused to sign the notice to proceed because Defendant could not provide access to the job site.
Plaintiff secured access to the entirety of the job site in September 2010; however, Mr. Devore claimed that issues regarding the job site remained because they had to haul materials in a less efficient manner. They also experienced additional costs because they were unable to finish before Phase II of the project began. He believed that they would have finished prior to the start of Phase II if the properties had been available as anticipated in the bid documents. He conceded that he was aware from the beginning of the project that Phase II was set to begin in Spring 2010.
Mr. Devore stated that they suspended work once again in December 2010 due to weather conditions. They resumed work in May 2011, and 20 working days were added to the contracting period. He related that the project was substantially completed by July 1, 2011, within 334 working days. He asserted that they remained on the project to perform maintenance issues and erosion control until November 2011.
Earl Buchanan, the Chief Financial Officer for Plaintiff, testified that the total cost for the airport ...