Encon Utah, LLC v. Fluor Ames Kraemer, LLC

• Decision Date: 27 January 2009
• Docket Number: No. 20070557.,20070557.
• Citation: 2009 UT 7,210 P.3d 263
• Parties: ENCON UTAH, LLC, Plaintiff and Appellee, v. FLUOR AMES KRAEMER, LLC, Fireman's Fund Insurance Company, and St. Paul Fire and Marine Insurance Company, Defendants and Appellants.
• Court: Utah Supreme Court

210 P.3d 263

2009 UT 7

ENCON UTAH, LLC, Plaintiff and Appellee, v. FLUOR AMES KRAEMER, LLC, Fireman's Fund Insurance Company, and St. Paul Fire and Marine Insurance Company, Defendants and Appellants.

No. 20070557.

Supreme Court of Utah.

January 27, 2009.

Rehearing Denied June 24, 2009.

Robert F. Babcock, Justin E. Scott, Salt Lake City, Bret Gunnell, Ronald M. Eddy, Denver, CO, for plaintiff.

Bryan H. Booth, Ryan M. Nord, Salt Lake City, for defendants.

DURRANT, Associate Chief Justice:

INTRODUCTION

¶ 1 Utah Department of Transportation ("UDOT") contracted with Fluor Ames Kraemer, LLC, ("FAK") to construct the Legacy Parkway ("the project"). FAK then subcontracted with Encon Utah, LLC, ("Encon") to manufacture and install bridge girders for the project. UDOT partially terminated the project, and, as a result, FAK terminated Encon's subcontract. Encon filed suit against FAK and FAK's sureties, Fireman's Fund Insurance Company and St. Paul Fire and Marine Insurance Company, (collectively, "FAK parties") to recover the amounts it claimed it was owed under the termination provision of the subcontract. The FAK parties and Encon filed motions for partial summary judgment regarding the interpretation of that termination provision.

¶ 2 The trial court granted Encon's motion for partial summary judgment and denied the FAK parties' motion. After a four-day bench trial, the court entered judgment in favor of Encon and jointly against the FAK parties, awarding Encon termination damages, prejudgment interest, and attorney fees and costs. In total, the court awarded Encon $1,699,563.50. The FAK parties timely appealed, claiming that the court erred in

(1) applying the termination provision of the subcontract and interpreting that provision such that Encon received an excessive award of compensation for early termination;

(2) awarding Encon $50,000 in claim preparation costs;

(3) awarding Encon prejudgment interest on its termination damages; and

(4) interpreting Utah Code section 63-56-38(4) such that Encon's bond claim was timely filed, and, as a corollary matter, awarding attorney fees based on Encon's bond claim.

BACKGROUND

¶ 3 In December 2000, UDOT entered into a Design-Build Contract ("prime contract") with FAK to construct the Legacy Parkway. As the general contractor, FAK provided a payment bond for the project; the bond was issued by Fireman's Fund Insurance Company and St. Paul Fire and Marine Insurance Company as co-sureties.

¶ 4 In May 2002, FAK entered into a subcontract with Encon, under which Encon would manufacture, furnish, and install concrete bridge girders. The total amount Encon was to be paid under the subcontract was $6,842,342.

¶ 5 In April 2003, UDOT partially terminated the prime contract with FAK due to an injunction obtained by an environmental organization enjoining the project's construction. In May 2003, FAK sent Encon a notice of partial termination of the subcontract.

¶ 6 The last work performed by Encon under the subcontract was the hauling and installation of 13 precast concrete girders in March 2004 for which Encon was paid in full in May 2004. Encon filed a complaint in the Third District Court against the FAK parties in September 2004. The complaint asserted a claim for breach of contract and a claim under Utah's payment bond statute.

¶ 7 Encon and the FAK parties filed motions for partial summary judgment regarding the interpretation of the subcontract provision that capped the amount of compensation Encon was entitled to recover for early termination of the project. The court granted Encon's motion for partial summary judgment and denied the FAK parties' motion. Shortly before trial, the FAK parties filed a motion to stay the trial to allow an interlocutory appeal of the summary judgment issues. On the first day of trial, the court denied the motion and directed the parties to proceed with trial. After a four-day bench trial, the court entered judgment in favor of Encon and jointly against the FAK parties, awarding Encon termination damages, prejudgment interest, and attorney fees. The total amount awarded to Encon was $1,699,563.50.

¶ 8 The judgment was made up of three components: (1) termination damages totaling $1,260,778, consisting of compensation for work performed by Encon totaling $1,062,901, and termination costs totaling $197,877; the termination costs included $50,000 in claim preparation costs; (2) prejudgment interest totaling $337,128.30, and (3) attorney fees totaling $101,657.20.

¶ 9 On appeal, the FAK parties challenge each of these components, claiming that the trial court erred in

(1) applying the termination provision of the subcontract and interpreting that provision such that Encon received an excessive award of compensation for early termination;

(2) awarding Encon $50,000 in claim preparation costs;

(3) awarding Encon prejudgment interest on its termination damages; and

(4) interpreting Utah Code section 63-56-38(4) such that Encon's bond claim was timely filed, and, as a corollary matter, awarding attorney fees based on Encon's bond claim.

We affirm each of the trial court's rulings.

¶ 10 We have jurisdiction pursuant to Utah Code section 78A-3-102(3)(j) (2008).

STANDARDS OF REVIEW

¶ 11 "We accord a trial court's interpretation of a contract no deference and review it for correctness."¹ We review a trial court's factual findings for clear error and will overturn a factual finding only if it is against "the clear weight of the evidence."² A trial court's decision to award "prejudgment interest presents a question of law which we review for correctness."³ "Matters of statutory construction are questions of law that are reviewed for correctness."⁴

ANALYSIS

I. THE TRIAL COURT DID NOT ERR IN APPLYING OR INTERPRETING THE TERMINATION PROVISION OF THE SUBCONTRACT

¶ 12 The FAK parties first claim that the trial court erred in applying and interpreting article 17.3, the termination provision of the subcontract. They claim that the trial court should have instead applied section 15, the termination provision of the prime contract. They also claim that in interpreting the termination provision of the subcontract, the trial court should have capped Encon's recovery. The FAK parties ask this court to reduce Encon's award by $1,083,335.

¶ 13 We hold that while the prime contract was incorporated into the subcontract, section 15 of the prime contract does not govern the issue of Encon's compensation for early termination of the subcontract. Rather, article 17.3 of the subcontract governs. Additionally, the court correctly applied article 17.3; thus, no reduction in Encon's award is warranted in this regard.

A. Article 17.3 of the Subcontract Governs Encon's Compensation for Early Termination of the Subcontract

¶ 14 The trial court determined that article 17.3 of the subcontract, entitled "Termination At Company's Option," governed Encon's compensation for early termination. The FAK parties argue that section 15 of the prime contract, entitled "Termination For Convenience," governs because the prime contract was explicitly incorporated into the subcontract.

¶ 15 In interpreting a contract, we look to the language of the document to determine its meaning and the intent of the contracting parties.⁵ We also "consider each contract provision ... in relation to all of the others, with a view toward giving effect to all and ignoring none."⁶ Where "the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law."⁷

¶ 16 The question presented here is whether the language of the subcontract provides that article 17.3 governs the issue of Encon's compensation for early termination. We hold that it plainly does and address the following provisions that inform our decision: (1) section 15 of the prime contract, entitled "Termination For Convenience," (2) article 17.3 of Part III of the subcontract, entitled "Termination At Company's Option," (3) article 2.0 of Part IV of the subcontract, entitled "Incorporation Of The Prime Contract Documents Into The Subcontract," and (4) article 1.0 of Part I of the subcontract, entitled "Description Of Work."

¶ 17 Section 15 of the prime contract, "Termination For Convenience," establishes the right of UDOT to terminate FAK's services at any time as well as FAK's compensation upon such termination. Specifically, subsection 15.1.1 provides that in the event of termination for convenience, FAK may recover "out-of-pocket cost[s]" for work performed, including reasonable overhead, "fair and reasonable" profit on those costs, and reasonable costs occasioned by the termination. Subsection 15.5.3 limits FAK's compensation to "the value of the Work performed."

¶ 18 Article 17.3 of the subcontract, "Termination At Company's Option," establishes a similar right on the part of FAK to terminate Encon's services at any time. It, too, establishes the compensation of Encon upon such termination, providing that Encon may recover actual costs of work performed pre-termination, reasonable overhead and profit on those costs, and reasonable costs occasioned by the termination. It does not, however, limit Encon's recovery to the value of the work performed.

¶ 19 By their terms, these provisions apply to different relationships and establish different termination compensation schemes. Where section 15 applies to UDOT and FAK and limits FAK's recovery to the value of work performed, article 17.3 applies to FAK and Encon and contains no such limitation. Our analysis of which provision governs Encon's compensation for early termination, however, does not end here.

¶ 20 Article 2.0, "Incorporation Of The Prime Contract Documents Into The Subcontract," provides, in pertinent part, that "[t]he [prime] Contract and Appendices thereto, except as specifically excluded, are incorporated in,...