collins/snoops Associates, Inc. v. Cjf, LLC

MEREDITH, J. This appeal presents the question of whether a judge who hears a bench trial in a case in which two parties each claim the other breached a contract may deny both claims on the ground that neither party carried its burden of persuading the court that the other party breached the contract. Under the peculiar circumstances of this case, we shall affirm a judgment that denied relief to both the plaintiff and the counterplaintiff. The case arose from a dispute between a contractor and its subcontractor on a project that involved renovations to three Baltimore County school buildings. The general contractor that won the bid for the project was CJF, LLC (hereinafter “Contractor”), the appellee/cross-appellant.

It engaged Collins/Snoops Associates, Inc. (hereinafter “Subcontractor”), appellant/cross-appellee, as a subcontractor to perform over $2.69 million worth of plumbing, heating and air conditioning ¹⁵⁰ mechanical work as part of the renovations. After Subcontractor had completed only a portion of the specified mechanical work, Contractor asserted that Subcontractor was not making acceptable progress in order to meet the strict deadlines required by the County. Contractor terminated Subcontractor and engaged a replacement firm to take over the mechanical work on the schools. Subsequently, Contractor itself was terminated by the County because the County was not satisfied with Contractor’s progress.

Subcontractor sued Contractor, its president, and its bonding company, in the Circuit Court for Baltimore County, claiming that Subcontractor was owed $409,720 for the work and materials it had provided prior to the time it was terminated. Contractor filed a counterclaim against Subcontractor, claiming damages that Contractor alleged it had incurred as a consequence of Subcontractor’s failure to properly perform the obligations under the subcontract. After a bench trial on the merits, the trial court filed a written opinion in which it stated that “the court finds itself in equipoise as to each party’s claim for breach of contract against the other.” The trial court continued: “In brief, this court concludes that neither has [Contractor] proved by a preponderance of the evidence that [Subcontractor] failed to perform nor has [Subcontractor] proved by a preponderance of the evidence that it was wrongfully terminated from the school renovation project by [Contractor].” Accordingly, the trial court granted judgment in favor of the defendants—i.e., Contractor, its president, and its bonding company—“for all claims brought against [them] by [Subcontractor],” and the court granted judgment in favor of the counterdefendant, the Subcontractor, “for all claims brought against it by [Contractor].” Subcontractor and Contractor have both appealed, each seeking to overturn the trial court’s denial of their respective claims for damages. As appellant, Subcontractor raises the following questions: I. Having found that [Subcontractor] provided $409,720 in labor and materials to [Contractor] on the County project, and having further found that [Subcontractor] had not ¹⁵¹ “failed to perform,” was it error for the trial judge not to have awarded [Subcontractor] at least the $409,720 for the labor and materials it provided?

II

Having found that [Contractor] did not prove [Subcontractor] had failed to perform, did the trial judge impermissibly shift the burden to [Subcontractor] to show that its termination was “wrongful”?

III

Having found that [Contractor] did not prove [Subcontractor] had failed to perform, was it error for the trial judge not to have awarded [Subcontractor] its lost profits on the job? As appellee, Contractor rephrases the appellant’s questions as one issue: Whether the trial court sitting as finder of fact correctly held that [Subcontractor] failed to meet its burden of proving breach of contract where the court found the evidence to be in equipoise. Additionally, as cross-appellee, Contractor raises the following issue: Whether the trial court erred in finding that [Contractor] failed to prove its damages. We conclude that the trial court did not err in entering judgment for the respective defendants as to all claims and counterclaims.

Accordingly, we shall affirm the judgments entered by the circuit court. FACTS AND PROCEDURAL HISTORY In 2001, the County entered into a contract with Contractor to renovate three public elementary schools: Chase, Victory Villa, and Hawthorne Elementary. Appellee Carolina Casualty Insurance Company (“Carolina”) issued a payment bond to guarantee that Contractor’s subcontractors would be paid in the event Contractor wrongfully failed to pay amounts due the subcontractors for supplying labor and materials on the project. ¹⁵² Contractor engaged Subcontractor to perform plumbing and mechanical work on the heating and air-conditioning systems at the three schools. Contractor asked Subcontractor to sign Contractor’s “standard” form subcontract agreement, but Subcontractor refused to sign.

Nevertheless, the trial court found that Subcontractor, by its conduct, adopted or assented to the terms in the document that it refused to sign. Citing Porter v. General Boiler Casing Co., 284 Md. 402, 410-12 , 396 A.2d 1090 (1979), the trial court concluded that the Contractor’s form subcontract agreement “constitutes the contract between [Contractor] and [Subcontractor],” despite not being signed by Subcontractor. That finding is not challenged by either party on appeal. The subcontract agreement contains numerous references to the Contractor’s need for timely performance, including a statement that “[i]t is UNDERSTOOD AND AGREED by and between the parties that time is and shall be considered the essence of the contract on the part of the said Subcontractor. ...” The subcontract further required Subcontractor to “promptly begin said work” and “complete said work as rapidly as said Contractor may judge that the progress of the structure will permit.” Similarly, the subcontract called for diligent and uninterrupted performance by Subcontractor: The Subcontractor agrees to cooperate with the Contractor and with other Subcontractors in the diligent performance of the work and to prosecute regularly, diligently and uninterruptedly at such rate of progress in such a manner as to enable the Contractor to complete the entire structure within the time specified.

The subcontract called for Contractor to compensate Subcontractor as follows: IN CONSIDERATION WHEREOF, the said Contractor agrees that he will pay to the said Sub-contractor, in monthly payments, the sum of TWO MILLION SIX HUNDRED NINETY SIX THOUSAND EIGHT HUNDRED SIXTY DOLLARS. PRICE FIRM—NOT SUBJECT TO ESCALATION ¹⁵³ $2,696,860.00 DOLLARS for said materials and work, said amount to be paid as follows: Ninety per cent. (90%) of all labor and materials which has been placed in position and for which payment has been made by [the County] to said Contractor, to be paid on or about the 7th (approx. 5 weeks) of the following month, except the last payment, which the said Contractor shall pay to said Sub-contractor immediately after said materials and labor installed by said Subcontractor have been completed and approved by the said Architect. It is specifically understood and agreed that the payment to the Subcontractor is dependent, as a condition precedent, upon the Contractor receiving contract payments, including retainer, from the Owner.

Subcontractor will only receive retainage after completion of all outstanding punch list items and having furnished warranties and as-built required by the Contract Documents. On April 30, 2001, Contractor instructed Subcontractor to begin work the next day. From the beginning, Subcontractor’s progress was characterized by delays. The cause of Subcontractor’s delays was the major point of contention at trial.

There was evidence that Subcontractor was slowed because the County failed to timely reply to Subcontractor’s requests for information, that the County hindered Subcontractor’s work by allowing public access to the schools during potential work hours, and that the Subcontractor’s unexpected discovery of asbestos in the school required Subcontractor to suspend work until the asbestos was abated. On the other hand, there was evidence that Subcontractor itself was unduly slow in performing its work, largely because it failed to provide enough qualified manpower and to secure necessary equipment and materials. Furthermore, Subcontractor’s subcontractors caused several mishaps at the work site. On May 22, 2001, Subcontractor sent Contractor a payment application for work Subcontractor had completed at Hawthorne.

On June 22, 2001, Subcontractor sent a second payment application for work done at Hawthorne in the previous ¹⁵⁴ month, as well as first payment applications for work done so far at Victory Villa and Chase. In July 2001, representatives of the County met with principals of Contractor and Subcontractor and threatened to terminate Contractor if progress on the project did not pick up. On July 24, 2001, Contractor sent a termination letter to Subcontractor, stating: “By reason of your persistent failure to properly man the projects and your failure to progress with the work ... your right to proceed under the Subcontract Agreement is terminated” effective that day. The next day, Subcontractor sent to Contractor three payment applications (one for each school), requesting payment for all of its work through July 24, 2001.

In those applications for payment, Subcontractor claimed to have performed 20% of the work at Hawthorne, 10% of the work at Victory Villa, and 15% of the work at Chase. The total claimed for all three schools was $409,820. The Contractor refused to pay any of the claims. Contractor replaced Subcontractor with subcontractor M. Nelson Barnes, a mechanical contractor that provided substantially greater manpower to the project.

Nevertheless, on September 11, 2001, the County terminated Contractor for failing to perform the work on schedule. On September 14, 2001, the County made its only payment—ie., the only payment prior to a negotiated settlement of subsequent litigation—-to Contractor in the amount of $695,697, for work performed by all subcontractors at all three schools. Contractor’s vice president, John Higgins, testified at trial that the money received was devoted solely to paying M. Nelson Barnes and the suppliers of materials Subcontractor had ordered. Contractor sued the County for wrongful termination, and, in the course of that litigation, Contractor took the position that the County itself was the source of the delays.

Contractor and the County ultimately settled the suit, and Contractor was paid an additional $875,000. Contractor claims to have incurred additional costs in excess of that amount during its ¹⁵⁵ efforts to complete the project after terminating Subcontractor. After the settlement between County and Contractor, Subcontractor filed the complaint that is the subject of this appeal on April 13, 2006. Each of the four counts in the complaint claimed damages in the amount of 1409,72o. 1 The first count of the complaint alleged that Contractor breached the contract with Subcontractor by failing to pay the sums owed.

The second count, labeled as an “alternative count,” prayed that, “[i]n the event that [the circuit court] finds that there was no express contract between [Subcontractor] and [Contractor,] then in the alternative,” Contractor “has been unjustly enriched by its receipt of labor and materials on the three Baltimore County Elementary School projects----” The third count named Carolina as a defendant, and asserted a claim under the payment bond. The fourth and final count named as a defendant C.J. Frank, the founder and president of Contractor, and asserted a claim that he was personally liable to Subcontractor under the Maryland Construction Trust Statute, Maryland Code (1974, 2003 Repl.Vol.), § 9-202 of the Real Property Article (“RP”). Subcontractor later amended its complaint to add to the first and third counts claims for lost profits in the amount of $358,357. At the beginning of the trial, Subcontractor added a claim for attorney fees pursuant to RP § 9-303.

Contractor filed a counterclaim against Subcontractor, asserting that Subcontractor had breached its contract by performing in a manner that “was significantly deficient in terms of quality, productivity, progress and manpower.” Contractor asserted that Subcontractor breached its agreement with [Contractor] by failing to perform its work in accordance with plans and specifications for the Project, failing to meet time frames established by its own progress schedule, failing to achieve the required quality standards of the project, failing to attain productivi ¹⁵⁶ ty requirements, failing to accomplish any meaningful progress in the prosecution of the work, and failing to appropriately and adequately man the Project. In four counts, all based upon the premise that Subcontractor had breached its agreement, Contractor sought damages for the additional cost of engaging a replacement subcontractor to try to complete the project on time, the profit Contractor lost as a consequence of being terminated by the County for untimely performance, and other consequential costs caused by the County’s termination of Contractor. After the trial, the court issued a written opinion. The court made numerous findings of “proven facts,” including the following: 7. [Subcontractor] performed in accordance with the drawings listed in the Subcontract Agreement. 13.

The mechanical work comprised approximately 50% of the entire scope of work on the three schools; therefore, [Subcontractor] was the lead subcontractor. 14. The electrical work for the three schools comprised 22% of the overall work. The electrical subcontractor, GPI, worked in the same areas as [Subcontractor]. 15. By the end of July 2001, GPI invoiced from 14 to 78% work completed on the three schools and the County paid those invoices. 24.

Through May 31, 2001, [Subcontractor] billed less than 3% complete at Hawthorne Elementary School. 25. Through May 31, 2001, [Subcontractor] did not bill any completed work at Victory Villa Elementary School or Chase Elementary School. 26. On June 14, 2001, [Subcontractor’s] subcontractor cut through a natural gas line while demolishing toilets in Hawthorne Elementary School. ¹⁵⁷ 27. The use of an acetylene torch on an active gas pipe was an unsafe practice. 30.

On June 27, 2001, employees of [Subcontractor’s] subcontractor, Tri-Source, set fire to fiberglass insulation materials while continuing to demolish equipment in the boiler room at Hawthorne Elementary. 36. On July 18, 2001, Mr. Higgins [a vice president of Contractor], Mr. Frank and Mr. Snoops [principal of Subcontractor] met with County representatives to discuss the progress of the school renovation project. 37. County representatives indicated that [Contractor] would be terminated if improvement in the progress and performance of the work on the three schools did not occur. 38. [Subcontractor] performed the work at Chase, Victory Villa, and Hawthorne Elementary Schools as described in Plaintiff’s Exhibits 11, 17 and 14. 39. [Subcontractor] completed 15% of the contract work at Chase Elementary, not including demolition work. 40. Through June 30, 2001, [Subcontractor] billed 9.5% complete at Hawthorne Elementary; 2.5% complete at Victory Villa Elementary; and 1% complete at Chase Elementary. 41.

When M. Nelson Barnes arrived at the site, valves and strainers that should have been delivered to the site by [Subcontractor] were not available. 42. William Gough III [the project manager for M. Nelson Barnes] testified that as soon as M. Nelson Barnes began work it attempted to confirm releases and deliveries of equipment and specialties from suppliers and subcontractors, but learned that material and equipment critical for scheduling had not been released by [Subcontractor]. ¹⁵⁸ 43. Tyco pumps, necessary to perform heating system work, had not been released by [Subcontractor] prior to its termination by [Contractor]. 44. [Subcontractor] failed to have roof curbs and fans, balancing fittings, and circuits [sic] setting valves delivered prior to its termination by [Contractor]. 45. Prior to its termination, [Subcontractor] had failed to perform hole cutting necessary for fan installation. 43. [Subcontractor] did not purchase louvers or wall boxes associated with the HVAC equipment for any of the three schools; nor had the cutting necessary for the installation of the louvers and wall boxes been performed by [Subcontractor], 47.

Prior to its termination, [Subcontractor] had failed to purchase heat timer boiler controls for Chase and Victory Villa. 54. [Contractor] sent numerous letters to [Subcontractor], demanding that [Subcontractor] provide sufficient manpower to all three schools. 55. [Subcontractor] did not respond to said letters. 56. County officials advised that staffing levels for electrical and mechanical activities were inadequate. ❖ Hi Hi 61. M. Nelson Barnes provided substantially greater manpower for plumbing and mechanical work than had [Subcontractor]. The trial court’s opinion noted that there was evidence in the record that would support Subcontractor’s contention that the delays were caused by factors beyond its control, and there was evidence in the record to support Contractor’s claim that Subcontractor failed to provide sufficient manpower to make satisfactory progress on the project, as demonstrated by the fact that progress accelerated after a replacement subcontractor was engaged.

The court then stated that it was not ¹⁵⁹ persuaded that either Contractor or Subcontractor had proven that the other breached the contract: Having carefully weighed all the evidence, the court finds itself in equipoise as to each party’s claim for breach of contract against the other. [Contractor’s] evidence supports its contention that [Subcontractor] failed to put sufficient numbers of qualified mechanics at the three schools, and used subcontractors who were barred from the job by the County for performing in a substandard manner. On the other hand, the record contains substantial evidence that the County caused much