District of Columbia v. Pierce Assoc.

• Decision Date: 11 June 1987
• Docket Number: No. 86-375.,86-375.
• Parties: DISTRICT OF COLUMBIA, et al., Appellants, v. PIERCE ASSOCIATES, INC., et al., Appellees.
• Court: D.C. Court of Appeals

527 A.2d 306

DISTRICT OF COLUMBIA, et al., Appellants, v. PIERCE ASSOCIATES, INC., et al., Appellees.

No. 86-375.

District of Columbia Court of Appeals.

Argued May 6, 1987.

Decided June 11, 1987.

Lutz Alexander Prager, Asst. Deputy Corp. Counsel, Washington, D.C., with whom James R. Murphy, Acting Corp. Counsel, and Charles L. Reischel, Deputy Corp. Counsel, were on the brief, for appellants.

Jack Rephan, Washington, D.C., with whom Andrew W. Stephenson was on the brief, for appellees.

Before PRYOR, Chief Judge, and NEBEKER, Associate Judge, and PAIR, Senior Judge.

PRYOR, Chief Judge:

Pursuant to a contract with the District of Columbia, appellees Pierce Associates (Pierce) performed construction work on the District of Columbia Convention Center. When the District failed to make timely payment of its final balance due, Pierce brought this action for breach of contract. After the complaint was filed, the District paid the principal of this final payment, but a dispute remained concerning the amount of interest the District owed Pierce in compensation for the loss of the use of the funds during the period in which the final payment was withheld. Pierce moved for summary judgment, arguing that D.C. Code 15-109 (1981) permitted the trial court to exercise its discretionary authority to award compensatory prejudgment interest as an element of damages, and thereby sought an interest rate of 15.99% (representing Pierce's stated rate of return during the contested, period). The District filed a cross-motion for summary judgment, arguing that the rate of interest was limited by D.C. Code 28-8802 (a) (1981 & 1986 Supp.) to 6%. The trial court granted Pierce's motion for summary judgment, setting the rate at 15.99% and calculating the interest as running from the date which it determined Pierce had substantially performed its duties under the contract, April 1, 1988, until the date of payment by the District, September 25, 1985.

The District appeals arguing (1) that, as a matter of law, prejudgment interest for liquidated debts or damages in breach of contract actions is, in the absence of an express contractual provision, limited by D.C. Code § 28-3302(a) (1981 & 1986 Supp.) to 6%; (2) that even if that limit does not apply, summary judgment was inappropriate because a genuine issue of material fact existed concerning the dates on which the interest began to accrue. We conclude that the trial court erred in its calculation of the rate of interest, and hold that an award of prejudgment interest, in the absence of an express contractual provision, must be limited to the 6% rate in accord with D.C. Code § 28-3802(a).¹ We also conclude that the court erred in granting summary judgment based on its determination that the District's final payment was due upon substantial performance by Pierce, not upon the dates of final acceptance by the District of its work, as was provided in the contract. Material issues of fact remain concerning the dates of final acceptance by the District. We must remand the case to the trial court to determine the dates of the District's final acceptance of the debt, with instructions that the award of interest shall begin to run from these dates in accord with D.C. Code § 15-108 (1981), and shall be limited to the 6% statutory rate expressed in § 28-3302(a).

I

Most of the facts are not in dispute. Pierce Associates is the surviving partner of a joint-venture that entered a June 9, 1981 contract with the District of Columbia to install the mechanical portion of the District's Convention Center. The contract obligated the District to pay the joint-venture $10.6 million for the work. Article 8 of the contract provided for a "change order" procedure by which the District could request modifications to the original construction plans. Under this arrangement, the District authorized and approved requested work with the issuance of change order tickets. Within 80 days of completion of such work, it was to submit these change order tickets, together with its request for payment for such modifications, to the District's contracting officer for approval. The contracting officer reviewed such work tickets and then approved or settled the amount due according to an "equitable adjustment" clause.² Through subsequent equitable adjustments, the contract price was revised to approximately $11.77 million.

Article 8 of the contract obligated the District to make monthly progress payments on itemized estimates submitted by Pierce and approved by the contracting officer. Article 8 also authorized the District to withhold a retainage of 10% of progress payments "until completion and acceptance of the Contract work."³ After substantial completion of the work, the contracting officer was empowered, but not required, to release excess retainages if the District's interests were adequately protected.⁴ Final payment of the retainage was due only upon completion and acceptance of all work by the contracting officer and after Pierce had executed a final voucher and release of all claims arising under the contract. Article 11 of the contract provided for inspection of all work by the District; the District agreed to make acceptance and payment "as promptly as practicable after completion and acceptance of all work required by the Contract."

Although the District timely paid the bulk of the contract price through progress payments to Pierce as the work proceeded, a dispute arose as to when certain final payments under the contract were due. Pierce's complaint alleges that it "substantially completed" its contractual obligations and had "expended 99.5% of its final recorded costs" as of April 1, 1983, and that the District's final payments became due at this time. The District disputed that Pierce substantially completed its obligations under the contract as of this date. It is undisputed, however, that Pierce submitted change order vouchers throughout the summer and fall of 1983 and that on November 4, 1983, Pierce submitted a list of change proposals for which it had not been paid. This list contained a request for payment of $362,822 for work completed or billed after April 1, 1983. The District made payments on several, but not all, of these requested change orders after April 1.

On December 5, 1983, Pierce presented, at the District's request, its final bill to the District's contracting officer for all outstanding payments due. This statement indicated that the District had made payments of $11.28 million, and that $485,283.85 remained unpaid. The bill was accompanied by a form release, dated December 6, 1983, specifying that Pierce would release the District from all further claims upon payment of the remaining amount. In December 1983 and January 1984, the District's contracting officer approved the remaining change orders submitted by Pierce, and, in a May 1, 1984 letter, agreed that the District owed Pierce $485,283.85. Although the District acknowledged its indebtedness, it did not pay Pierce this amount until September 25, 1984, over a month after the complaint in the instant case was filed on August 16, 1984.⁵

II

In its complaint in the Superior Court, Pierce, relying on D.C. Code § 15-109 (1981),⁶ claimed that the debt was unliquidated and that the District should pay interest on the late payment sufficient to "fully compensate" it for its loss of the use of the funds during the period in which the debt was unpaid, and moved for summary judgment. In support of its motion for summary judgment, Pierce submitted an affidavit from its comptroller stating that its recent five-year average investment rate of return had been 15.99%, and that this rate should be the measure of compensation.

The District also filed a motion for summary judgment. In its motion, the District argued that, as a matter of law, any interest due Pierce should be restricted by D.C. Code § 15-108 (1981) and § 28-3302(a) (1981 & 1986 Supp.) to 6%.⁷

The trial court entered summary judgment for Pierce,⁸ holding that interest at a rate of 15.99% was to be paid by the District for the period in which it delayed payment of the principal debt of $485,288.85. In an oral opinion, the court concluded that the debt was disputed, and therefore unliquidated, because the District failed to pay the debt for a significant period of time after it became due. The court therefore determined that D.C. Code § 15-109 applied, which the court interpreted as authorizing judicial discretion to award a rate of interest which could fully compensate the plaintiff. In making this interpretation, the court concluded that the 6% statutory limit of D.C. Code § 28-3302(a) did not limit its discretion to award a higher rate, because such a limit would "frustrate" the compensatory purpose of § 15-109.

Alternatively, the trial court held that even if the debt was deemed acknowledged and liquidated, the 6% limit still could not apply, because "public policy and basic equity" required that awards under § 15-109 also not be so restricted. The court determined that under either Code section, the loss caused by delayed receipt of the final payment could only be determined by the then prevailing market rate. The court adopted Pierce's affidavit as to its current rate of return, and fixed the interest to be paid by the District at 15.99%. The court found that the debt was due on April 1, 1983, the date which Pierce averred that its performance under the contract was substantially complete, and that under either section, this was the appropriate starting date for the accrual of interest.

III

The District first contends that the trial court erred by imposing the market rate of interest because such interest is limited by D.C. Code § 28-3302(a) to 6%, regardless of whether § 15-108 or § 15-109 is deemed applicable. Appellee Pierce argues in turn that the debt is unliquidated, and that § 15-109 therefore applies, which provides the trial court with discretion to award such...