E.B. Jones Const. Co. v. City and County of Denver

• Decision Date: 20 February 1986
• Docket Number: No. 82CA0985,82CA0985
• Parties: E.B. JONES CONSTRUCTION COMPANY and Stewart-Decatur Security Systems, Inc., Plaintiffs-Appellees, v. CITY AND COUNTY OF DENVER, a municipal corporation, Defendant-Appellant. . II
• Court: Colorado Court of Appeals

Page 1009

717 P.2d 1009

E.B. JONES CONSTRUCTION COMPANY and Stewart-Decatur Security

Systems, Inc., Plaintiffs-Appellees, v. CITY AND COUNTY OF DENVER, a municipal corporation,

Defendant-Appellant.

No. 82CA0985.

Colorado Court of Appeals,

Div. II.

Feb. 20, 1986.

As Modified on Denial of Rehearing

March 20, 1986.

DeMoulin, Anderson, Campbell & Laugesen, P.C., Laird Campbell, Denver, for plaintiff-appellee E.B. Jones Const. Co.

Douglas John Traeger, Denver, for plaintiff-appellee Stewart-Decatur Sec. Systems, Inc.

Stephen H. Kaplan, City Atty., Stan M. Sharoff, Sidney Biderman, John Eckhardt, Joel Kohn, Asst. City Attys., Denver, for defendant-appellant.

STERNBERG, Judge.

Defendant City and County of Denver appeals from a judgment entered in favor of plaintiffs, E.B. Jones Construction Company (Jones) and Stewart-Decatur Security Systems, Inc. (Stewart). We affirm in part, reverse in part, and remand.

This action arose out of disputes regarding substantial delays in the construction, between 1974 and 1978, of the Denver Police Administration and Pre-Arraignment Detention Facility. The trial court made extensive, detailed findings of fact, overwhelmingly substantiated by the record, which may be summarized as follows.

Construction of the facility, a complex and difficult project, was among Denver's first efforts to plan, manage, and supervise major construction without the services of a general contractor. Under prior well-established procedures and as provided in the Denver Charter, Denver would select a general contractor after taking competitive bids. The general contractor would be responsible for management of subcontractors bidding on and performing various components of the actual construction, including coordination and scheduling of both preparatory and on-site phases of their work. In order to assure timely, efficient, and proper performance, thus protecting Denver's interests under the general contract, experienced City and County engineering and public works personnel would be responsible for direct supervision of the general contractor.

This project, however, was to be managed as a co-venture pursuant to the terms of a Project Management Agreement made with N.G. Petry Construction Co. and C.M. Associates, Inc., (Petry-CM). By the terms of this agreement Petry-CM was to "establish and implement a comprehensive management program, including all direction, procedures, coordination, administration, review, expediting and counseling required to assist the City and its designated consultants and contractors in completing the Project in a timely, economical and acceptable manner." This contract was secured without competitive bidding, and compensation for Petry-CM was fixed by negotiation rather than by bid. The trial court found that the Agreement established Petry-CM as professional agent of Denver in all phases of design and construction of the facility.

It was contemplated that the project was to be managed under a method known as "phased" or "fast-track" construction. This is a technique whereby plans and specifications are prepared after construction has begun and only as they become necessary in order to proceed with each of the various stages of the construction process, including contract bidding and both the preparatory and on-site work of contractors. As compared with management by a general contractor, its purpose is to shorten the construction process by obviating the need to complete plans for an entire project before opening it for bid. The use of this method demands exacting coordination and scheduling of the various contract components of a project and precise management of on-site conditions if work is to be performed efficiently and without delay.

Through Petry-CM, Denver was to control progress pursuant to express conditions inserted at the suggestion of Petry-CM in each of the twenty-two contracts entered into for the project. General Condition C-49 provided for termination by Denver. Special Condition 12 stated that "[a]ll Contractors understand and agree that all work must be performed in an orderly and closely coordinated sequence so that the date for substantial completion may be met ..." and gave Denver options to enforce timely performance. Each contract further specified a time frame within which performance was to occur.

The trial court found that these factors--the agreement with Petry-CM, the management method chosen, and the language of individual contracts as relied upon by contractors in fixing their bids--combined to impose upon Denver the responsibility "to organize, schedule, coordinate, expedite and generally supervise and manage the work of all twenty-two contracts in order that each ... could perform its work under its contract" in a timely, economical, and acceptable manner and "to select a manager which had the expertise, capability and qualifications to do so." The court found that this responsibility arose both as a material and mutually contemplated contractual duty and as a duty of reasonable care in the circumstances.

Petry-CM, however, had no experience in managing projects such as the construction of the facility. This fact was known to Denver prior to its agreement with Petry-CM. Petry-CM represented to Denver that it would select a construction manager who had the requisite experience but it did not do so. In fact, the construction manager selected by Petry-CM did not have experience with the phased construction management methods used on the project. Denver became aware of these facts also but did nothing to cause Petry-CM to substitute a more qualified manager.

Further, the procedures through which City and County offices had supervised and administered construction contracts were bypassed by Denver's creation of a new office to supervise construction of the facility. This office was under the initial direction of an ex-sportscaster and, later, a man professionally trained as a traffic engineer, neither of whom had the required construction experience. These persons were given control of all scheduling while more highly qualified City and County personnel were relegated to ministerial roles.

The trial court specifically found that, prior to awarding the project contracts, Denver and Petry-CM knew or should have known that compliance with the schedules specified therein was impossible. The trial court also found that Petry-CM knew, through prior experience with General Condition 49 and Special Condition 12, that these methods of control actually slowed and hindered construction rather than expediting it.

Jones was the successful bidder on the contract for placing building concrete. Time of performance was to be 365 days beginning October 1, 1975. Jones received a notice to proceed beginning January 5, 1976. Because of various delays on the project, it could not begin until February 25. Jones was also to perform "site work," including such tasks as paving sidewalks and ramps, but when this work was to be begun the areas to be paved were in use for storage of materials used by other contractors.

In spite of the fact that installation of the concrete was to be completed before installation of the facility's security system began, the system was initially planned to be installed between October 10, 1975, and July 1976. Stewart was the successful bidder on this contract. As it turned out, Stewart received a notice to proceed dated April 8, 1975, at which time the project was still clearly not at the stage required for Stewart's work. Later notice ordered Stewart to begin work September 1, 1976, a full month after its work was to have been completed under its contract.

The trial court found that both plaintiffs did everything reasonably possible to expedite efficient performance of their contract obligations and that both would have finished performance as specified in their contracts but for breach of the duties assumed by Denver through gross mismanagement of the project by Denver and Petry-CM. The court found that there was no other cause for the expensive delays suffered by plaintiffs.

Further, in early 1976, when plaintiffs first notified Denver and Petry-CM of increased expenses because of delays, Petry-CM advised them to submit claims with substantiating data after completion and acceptance of their individual work and clearly represented that their claims would be paid. However, in February 1977, Denver determined not to pay such claims. Petry-CM was made aware of this decision soon thereafter. Jones was not notified of this change of position until November 1977, and Stewart was not notified until February 1978, after each had completed work.

The trial court found that Denver, by failing to advise plaintiffs of its change of policy, knowingly made false representations to plaintiffs that their claims would be paid with the intention of inducing plaintiffs to continue and finish work. It further found that Denver accepted the facility as a quality structure unjustly and inequitably obtained at plaintiffs' expense.

The trial court concluded that Denver was liable to each plaintiff under theories of breach of contract, estoppel by representation, unjust enrichment, and negligence. Both Jones and Stewart were awarded damages including delay costs and moratory interest, court costs, and, pursuant to post-trial motion and order, attorney fees.

I. Basis of Recovery

Denver's principal argument is that the Denver City Charter Provision A6.15 bars any recovery based in contract. This provision states that:

"Neither the council nor any officer shall have authority to make any contract or do anything binding on, nor impose upon the City and County any liability to pay money, until a definite amount of money shall have been appropriated for the liquidation of all pecuniary liability of the City and County under such contract, or in consequence thereof. Such contract shall be ab initio, null and void as to the City and County for any...