LK Comstock & Co., Inc. v. Becon Const. Co.

• Decision Date: 25 April 1994
• Docket Number: Civil Action No. 89-61.
• Citation: 932 F. Supp. 948
• Parties: L.K. COMSTOCK & COMPANY, INC., Plaintiff, v. BECON CONSTRUCTION COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

932 F. Supp. 948

L.K. COMSTOCK & COMPANY, INC., Plaintiff, v. BECON CONSTRUCTION COMPANY, Defendant.

Civil Action No. 89-61.

United States District Court, E.D. Kentucky.

April 25, 1994.

William H. McCann, Wyatt, Tarrant & Combs, Lexington, Kentucky, Harry L. Griffin, Jr., Frank M. Crittenden, John D. Marshall, Jr., Griffin, Cochrane & Marshall, Atlanta, GA, for Plaintiff.

V. Thomas Fryman, Jr., Michael C. Slone, Greenebaum, Doll & McDonald P.L.L.C., Lexington, Kentucky, for Defendant.

MEMORANDUM OPINION AND ORDER

WILHOIT, District Judge.

I.

This matter is before the Court on the motion of L.K. Comstock & Company, Inc. (Comstock) to confirm Special Master's Findings of Fact and Conclusions of Law. Becon Construction Company (Becon) opposes the motion.

The Court referred Counts VII and VIII of the Complaint for trial by Special Master by Order of April 27, 1993. These counts relate to the parties' dispute over the proper pricing of certain additional work performed by Comstock for Becon on the Toyota plant construction project. Both parties agree Sections 5.3 and 4.C of the Subcontract govern pricing, but each interpret these pricing provisions differently.

Special Master conducted the trial of Counts VII and VIII and has issued his Findings of Fact and Conclusions of Law. Pursuant to the order of reference, Special Master's factual determinations are conclusive and unreviewable by the Court. See also Fed.R.Civ.P. 53(e)(4).

II.

Special Master concludes that the Subcontract is ambiguous on its face, and therefore, he resorts to extrinsic evidence presented at trial to interpret the agreement. Special Master finds that the parties' prior negotiations and contemporaneous conduct and declarations reveal their mutual understanding that the Subcontract requires pricing the additional work subject to Counts VII and VIII according to unit rates found in the MCAA Manual. Also, Special Master finds, based on the same evidence and the testimony of a representative of the MCAA, that page 17-2 of the MCAA Manual provides the applicable unit rate for pricing the additional work. In sum, Special Master agrees with Comstock's construction of the Subcontract. In addition to finding Becon should pay Comstock according to MCAA Manual unit rate, Special Master also finds Becon should be assessed pre-judgment interest.

III.

A.

Becon has filed lengthy and exhaustive objections to Special Master's report. In reply, Comstock argues that Becon's objections go primarily to factual determinations, which are not reviewable by the Court. Comstock's argument is critical to the present motion because only objections to Special Master's legal rulings are reviewable by the Court. Special Master's factual findings will not be disturbed.

The central issue at trial was the proper interpretation of the pricing provisions of the Subcontract. Generally, construction of written contracts is a question of law reserved for the court to be answered solely by reference to the four corners of the written documents. However, the Court, in overruling Becon's motion for summary judgment on Counts VII and VIII, found that the pricing provisions of the Subcontract were ambiguous and therefore extrinsic evidence would be necessary for their interpretation. Special Master's trial of Counts VII and VII, in essence, was the taking of such extrinsic evidence, and, in turn, Special Master's report represents his construction of the Subcontract in light of that evidence. When the effect of a written contract depends largely on extrinsic evidence, the construction of the contract is essentially a finding of fact, not law. See Cook United, Inc. v. Waits, Ky. 512 S.W.2d 493 (1974); Neel v. Wagner-Shuck Realty Co., Ky.App., 576 S.W.2d 246 (1978). In the present case, since the Special Master's construction of the Subcontract's pricing provisions is predominately influenced by extrinsic evidence, his conclusions are findings of fact that may not be reviewed by the Court.

B.

Becon's objections to issues of law, which may be reviewed de novo by this Court, are three in number: 1) whether extrinsic evidence is admissible to interpret the Subcontract pricing provisions for additional work, 2) whether Special Master properly relied on certain rules of construction, and 3) whether Special Master's award of prejudgment interest is within the scope of reference.

Prior to referring Counts VII and VIII to Special Master, the Court ruled that extrinsic evidence would be necessary to interpret the pricing provisions of the Subcontract. Thus, the Special Master correctly admitted extrinsic evidence to aid in the construction of the Subcontract.

In alternative to his reliance on extrinsic evidence, Special Master made reference to certain principles of contract construction set out in the Restatement (2d) of Contracts to bolster his conclusions. A careful reading of Special Master's report indicates that these principles are not essential to the report's conclusions. Thus, this Court will not review Special Master's use of these principles of contract construction since such a review would have no bearing on the overall legitimacy of the report.

Becon argues that the issue of pre-judgment interest is beyond the scope of reference because Comstock did not specifically pray for pre-judgment interest in Counts VII and VIII. This objection is primarily technical in nature. Comstock's Complaint makes a general prayer for pre-judgment interest which implicitly relates back to all counts seeking monetary damages. Thus, it would appear that the issue of pre-judgment interest is within the scope of Counts VII and VIII. Logically, the issue of pre-judgment interest should be determined in relation to each count. The parties have exhaustively briefed the pre-judgment interest issue in their memoranda to Special Master, and the Court finds Special Master's analysis of the pre-judgment interest to be a correct reading of the law. Thus, no purpose would be served in re-litigating the pre-judgment interest issue.

Accordingly, the Court ORDERS,

1) that Comstock's Motion to Confirm, (D.E. # 240), is SUSTAINED,

2) that Special Master's report, (D.E. # 234), is CONFIRMED and adopted by and for the opinion of the Court.

SPECIAL MASTER'S FINDINGS OF FACT AND CONCLUSIONS OF LAW

THOMAS J. STIPANOWICH, Special Master.

On February 16, 1989, Plaintiff L.K. Comstock & Company, Inc. ("Comstock") commenced this action against Defendant Becon Construction Company ("Becon"). Comstock filed a seventeen-count complaint against Becon for certain claims for additional compensation arising from labor, material, and services provided by Comstock to Becon in connection with the Toyota Automotive Manufacturing Facility in Georgetown, Kentucky (the "Project"). The District Court severed Count 17 of Comstock's Complaint concerning Comstock's claims that the changes in the work to be performed by Comstock were so extensive as to constitute an abandonment of the contract or a "cardinal change." The hearing on Count 17 was referred to Thomas J. Stipanowich, Professor of Law at the University of Kentucky College of Law, as Special Master pursuant to Rule 53 of the Federal Rules of Civil Procedure. After lengthy hearings, the Special Master concluded that Comstock did not sustain the burden of proving an abandonment of the contract or a cardinal change. The Special Master's findings of fact and conclusions of law were adopted in full by the District Court.

Comstock moved for a trial of Counts 7 and 8 before a special master. On April 2, 1993, the Court sustained Comstock's motion. Subsequently, the parties waived jury trial and stipulated to trial before Special Master Stipanowich pursuant to Fed.R.Civ.P. 53(e)(4). The Special Master presided at the trial of Counts 7 and 8, which began June 21, 1993 and finished June 24, 1993. Counsel submitted post-trial memoranda, and Counts 7 & 8 are ready for determination.

The issue raised by Counts 7 and 8 is one of contract interpretation — specifically, whether or not Comstock is entitled to be reimbursed for additional supplemental steel work at a rate determined by an industry manual referenced in the parties' contract. For the reasons stated below, the Special Master concludes that Comstock's interpretation is consistent with the express language of the agreement and surrounding circumstances including course of performance and usage of trade, and that Comstock is entitled to the relief requested under Counts 7 and 8 of the Complaint.

I. BACKGROUND AND ISSUES

A. The Characters and the Setting

This dispute arose out of the construction of an automotive assembly plant in Georgetown, Kentucky for Toyota Motor Manufacturing, U.S.A., Inc. ("Toyota"). Toyota contracted with Ohbayashi Corporation ("Ohbayashi") for construction management services on the Project. Beneath Ohbayashi were nine general contractors, and beneath them over 200 subcontractors and more than 400 sub-subcontractors. Giffels Associates, Inc. ("Giffels") was the engineer for the Project.

Becon was the general contractor for the plant's utility area, which was designed to supply steam, electricity, and other essentials for plant operation. Becon subcontracted with Comstock to perform the electrical and mechanical work for the utility area. Most of Comstock's work involved the utility building (Area 500), but Comstock also performed work on the trestle (Area 501), the waste water treatment building (Area 502), the water pump house building (Area 503), the electrical switch gear building (Area 504), the diesel fuel pump house building (Area 505), and the liquid tank farm area.

B. The Controversy

Section 5.3 of the subcontract between Becon and Comstock contained a provision establishing a mechanism for pricing of changes to the work. P.E.1955.¹ Under this provision, unit rates for installation of mechanical work — that is, the number of hours required to do a particular unit of work — were...