Beka Indus. Inc. v. Worcester County Bd. of Educ..

• Decision Date: 26 April 2011
• Docket Number: No. 47,Sept. Term,2010.,47
• Citation: 267 Ed. Law Rep. 245,18 A.3d 890,419 Md. 194
• Parties: BEKA INDUSTRIES, INC.v.WORCESTER COUNTY BOARD OF EDUCATION.
• Court: Maryland Court of Appeals

419 Md. 194

18 A.3d 890

267 Ed. Law Rep. 245

BEKA INDUSTRIES, INC.

v.WORCESTER COUNTY BOARD OF EDUCATION.

No. 47

Sept. Term

2010.

Court of Appeals of Maryland.

April 26, 2011.

David D. Gilliss(Eric G. Korphage and Sean P. Foley of Pike & Gilliss, LLC, Timonium, MD), on brief, for petitioner/cross-respondent.James W. Almand(Ayres, Jenkins, Gordy & Almand, P.A., Ocean City, MD), on brief, for respondent/cross-petitioner.Leslie Robert Stellman(Shani K. Whisonant of Hodes, Pessin & Katz, P.A., Towson, MD), on brief, for respondent/cross-petitioner.William M.Huddles, Esq., Kenneth K. Sorteberg, Esq., Huddles Jones Sorteberg & Dachille, PC, Columbia, MD, for Amicus Curiae brief of Associated Builders and Contractors, Inc., Baltimore, Metro Chapter, and the Surety & Fidelity Association of America.Adam C. Harrison, Esq., Eli Robbins, Esq., Harrison Law Group, Towson, MD, for Amicus Curiae brief of American Subcontractors Association, the American Subcontractors Association of Baltimore, and the D.C. Metropolitan Subcontractors Association.

John E. Bloxom, Esq., County Atty., Snow Hill, MD, for Amicus Curiae brief of County Commissioners of Worcester County, Maryland.Stephen C. Bounds, Esq., Director of Legal and Policy Services, Maryland Association of Boards of Education, Annapolis, MD, for Amicus Curiae brief of Maryland Association of Boards of Education.Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.GREENE, J.

This case arises from a written contract dispute between Beka Industries, Inc.(“BEKA”) and the Board of Education of Worcester County(“the County Board”).¹Between 2004[419 Md. 200] and 2006, BEKA was one of twenty trade contractors to be awarded a lump sum contract to contribute to the construction of a new public school, Ocean City Elementary School, in Worcester County.Dissatisfied with the method and amounts of the County Board's payment for its work, BEKA filed suit in the Circuit Court for Worcester County and obtained a judgment against the County Board.The County Board appealed that judgment to the Court of Special Appeals and succeeded in obtaining a reversal of the judgment and an order for a new trial.BEKA has appealed the intermediate appellate court's judgment and before us contends that the trial court's judgment should be fully reinstated.We affirm the Court of Special Appeals's judgment that a new trial is warranted because the County Board was precluded from presenting evidence on its recoupment claim and BEKA may have been awarded impermissible “delay damages” under the contract.But, we reverse the intermediate appellate court's holding that the County Board's governmental immunity is not waived unless and until BEKA proves that there is a funding mechanism to satisfy a judgment for money damages rendered against the Board.Accordingly, we affirm in part, reverse in part, and remand the case to the intermediate appellate court with direction to remand to the Circuit Court for a new trial.

FACTUAL AND PROCEDURAL BACKGROUND

On June 8, 2004, the County Board executed a written contract with BEKA to perform site clearing, excavation, grading, site utilities, curb and gutter work, and paving for a new elementary school.The “lump sum bid” proposed for the work by BEKA and accepted by the County Board was $1,856,000.Subsequent to execution of the contract, the parties agreed to three approved change orders, totaling $105,913, that increased the total contract price to $1,961,913.BEKA's work on the contract began in June 2004 and was completed by May 2006.During that time, there were numerous disputes regarding BEKA's responsibilities under the original contract as well as the monetary consequences of modifications made by the County Board.To date, the Board has paid BEKA a total of $1,421,852.

Alluded by resolution to their dispute, BEKA filed a Complaint for Money Damages and Other Relief in the Circuit Court for Worcester County.BEKA's original complaint sought damages in the amount of $1,157,053.75, as well as pre-judgment interest, post-judgment interest, costs and attorney's fees.BEKA tabulated that figure alleging that the County Board owed it $361,991.47 under the original contract and an additional $795,062.28 for alterations made to the scope of BEKA's work under the contract.The County Board generally denied liability, raising 12 affirmative defenses in its first Answer; a recoupment claim for “credits, backcharges, and/or setoffs” in the amount of $531,979.52 in its Amended Answer and Counter–Complaint; combining the recoupment claim and the 12 affirmative defenses in its Second Amended Answer; and adding four more defenses to its Third, and final, Amended Answer.²The County Board conceded at trial that it owes at least $361,991.47 on the balance of the original contract.Numerous motions were filed during the course of the litigation and are discussed with particularity infra.

Following a four day bench trial, the Circuit Court for Worcester County“compromised the claim” between what the trial judge viewed to be BEKA's final claim for $1,215,035,80 (exclusive of prejudgment interest) and the County Board's claim for $505,487 and entered a judgment in favor of BEKA for $1,100,000, excluding prejudgment interest and not awarding attorney's fees or post-judgment interest.³The County Board appealed the judgment and filed a “Motion to Stay Enforcement of the Judgment,” which was denied by the trial judge, but granted on appeal on the condition that a supersedeas bond be filed in the Circuit Court for Worcester County.The County Commissioners of Worcester County fulfilled the bond requirement and the intermediate appellate court heard the case.

The Court of Special Appeals reversed the judgment of the trial court and remanded the case to the Circuit Court for purposes of a new trial.Board of Ed. v. BEKA,190 Md.App. 668, 989 A.2d 1181(2010).BEKA petitioned for certiorari and the County Board filed a conditional cross-petition, both of which were granted, BEKA v. Worcester County Bd. of Educ.,415 Md. 38, 997 A.2d 789(2010), to address the following questions, rephrased for clarity:

1.Is the doctrine of sovereign immunity applicable to a suit against a county board of education for breach of a written contract?

2.Did the Court of Special Appeals incorrectly apply the abuse of discretion standard in reviewing the trial judge's ruling on BEKA's “Motion in Limine to Exclude Evidence of Backcharges?”

3.Did the Court of Special Appeals err by reversing the trial judge's ruling on BEKA's Motion for Partial Summary Judgment precluding the County Board from presenting evidence on its recoupment claim?

4.Did the Court of Special Appeals err as a matter of law by allowing the County Board to raise its recoupment claim when the trial judge had stricken the pleadings that raised the claim?

5.Did the Court of Special Appeals err in determining that the contract contains a broad “no-damages-for-delay” clause in light of other contract provisions allegedly providing for recovery of damages?

6.Did the Court of Special Appeals err in reversing the trial court's judgment because of non-compliance with Md. Rule 2–522(a)?

As Cross–Petitioner, the County Board has asked:

1.Does Md.Code(2006 Repl.Vol.), § 5–518(c) of the Courts and Judicial Proceedings Article(“C.J.P.”) apply to contract claims against a county board of education?⁴

We answer each question above in the negative.We affirm the Court of Special Appeals's judgment that sovereign immunity is legislatively waived in the action against the County Board based on a written contract for the construction of a public school.We reverse, however, that part of the Court of Special Appeals's holding that requires BEKA to prove a source of funding in order to obtain a judgment at a new trial.Additionally, as discussed infra,we affirm the intermediate appellate court's judgment concerning the treatment of the County Board's recoupment claim and concerning procedural defects in the trial court's judgment.

I.Public School Construction in Maryland

We have recognized there exists “a carefully conceived legislative structure in which the respective powers and limitations of local school boards, the State Board of Education and county governments are delineated and balanced.”Bd. of Ed. v. Montgomery County,237 Md. 191, 197, 205 A.2d 202, 205(1964).The construction of public schools exemplifies those interwoven roles; State and local governments provide funding, and, along with the county boards of education, they provide oversight for the construction of public schools in Maryland.

The Maryland State Board of Education(“MSBE”) establishes standards and planning guidance for construction projects and the State Superintendent must approve of all plans for new construction and the remodeling of school buildings exceeding $350,000.Md.Code(2008 Repl.Vol.), §§ 2–205( l ), 2–303(f) of the Education Article(“E.D.”).Annually, the MSBE must submit a public school budget to the Governor including appropriations for the Department itself and for aid to “counties ... for the construction of school buildings.”E.D. § 2–205(j);see alsoE.D. § 5–101(requiring county boards to submit an annual budget including “estimated receipts” and “ requested appropriations” for local school construction that has been approved by the local government).The Interagency Committee on School Construction, established by the Board of Public Works pursuant to E.D. § 5–302, provides a recommendation to the Board of Public Works on which submitted, locally approved construction projects should be funded through the Public School Construction Program.The General State School Fund, established by E.D. § 5–201, is a source of funding for school building construction aid described in E.D. § 5–301(c), which requires the State to pay the excess costs above available federal funds for approved...