Handex of Carolinas v. County of Haywood

• Court: North Carolina Court of Appeals
• Writing for the Court: McCULLOUGH.
• Citation: Handex of Carolinas v. County of Haywood, 168 N.C.App. 1, 607 S.E.2d 25 (N.C. App. 2005)
• Decision Date: 18 January 2005
• Docket Number: No. COA03-1658.,COA03-1658.
• Parties: HANDEX OF THE CAROLINAS, INC., Plaintiff, v. COUNTY OF HAYWOOD, and Municipal Engineering Services Company, P.A., Defendants.

607 S.E.2d 25

168 NC App. 1

HANDEX OF THE CAROLINAS, INC., Plaintiff, v. COUNTY OF HAYWOOD, and Municipal Engineering Services Company, P.A., Defendants.

No. COA03-1658.

Court of Appeals of North Carolina.

January 18, 2005.

Roberts & Stevens, P.A., by Sarah Patterson Brison Meldrum and Walter L. Currie, Asheville, for plaintiff appellant-appellee. Jeffrey W. Norris & Associates, P.L.L.C., by Jeffrey W. Norris, Waynesville, for defendant appellant-appellee County of Haywood.

Van Winkle, Buck, Wall, Starnes & Davis, P.A., by Philip J. Smith and W. James Johnson, Asheville, for defendant appellee Municipal Engineering Services, Inc. McCULLOUGH, Judge.

This appeal arises from the alleged breaches of duties owed by all parties under a contract for the extension of an existing landfill ("the landfill" or "the project") site in the White Oak section of Haywood County. The extension was to create a new landfill cell, approximately ten acres in surface area, to meet the County's solid waste disposal needs. Parties to the appeal are: County of Haywood (County), who solicited bids and then was contractually bound for the additional excavation of the landfill; Handex of the Carolinas, Inc. (Handex), who upon submitting the lowest bid was awarded the contract for the project by the County ("the contract"); and Municipal Engineering Services ("MES"), who was contracted by the County to provide a number of engineering services related to the bidding and performance of the project (the "County-MES contract"). Due to a number of problems arising from the performance of the contract, Handex brought suit against MES for professional negligence and breach of contract, and against the County for breach of contract. The County counterclaimed for breach of contract.

The Facts

I. The Bidding Process

The County-MES contract consisted of the following engineering services: providing design services, reviewing and obtaining lump-sum bids, administering contract performance, and reviewing and advising on change orders by the contractor. For the project, MES prepared the contract documents and specifications along with the lump-sum bid advertisement, instructions to bidders, and the bid form. This was made part of the contract. The bids were based on certain specifications, specifically that the site work for the project consisted of "approximately 160,000 cubic yards of spoil, excavation, compaction, tests, waste disposal, berm construction, etc." The bid form and instructions called for a base bid portion, plus bids on Alternative 1 (utilizing a clay liner) and Alternative 2 (utilizing a synthetic liner). Handex was the low bidder for both alternatives and was awarded the contract for Alternative 1, as notified by letter 14 September 2000. In that letter, MES informed Handex that Notice to Proceed was expected for 21 September 2000, after a Permit to Construct had been issued by North Carolina Waste Section ("NCWS"). MES informed Handex that a preconstruction meeting was required to be held.

II. Notice to Proceed

The preconstruction meeting was held with NCWS in mid-October 2000. The record indicates NCWS had recently modified their requirements, and was then allowing liner systems like that in the County's advertised bid as Alternative 2. Handex's bid for Alternative 2 was $8,960.00 less than their bid for Alternative 1. Testimony of the County Manager, Mr. Jack Horton ("Mr. Horton"), asserted that Handex insisted on Alternative 2, and that the contract had to be re-awarded. Mr. Horton testified further that he believed that the County accepted Alternative 2 because "Alternative 2 would actually be a lot quicker and shorten the time of construction as compared to Alternate 1." Handex's representative at the preconstruction meeting testified that it was an "open discussion" upon which Alternative 2 was generally decided. Alternative 2 was bid for a total lump-sum price of $2,272,343.61. The County and Handex entered into a written contract for the base bid work and Alternative 2 on or about 13 October 2000. In a letter dated 8 November 2000, MES gave Handex "Notice To Proceed" as of 13 November 2000.

III. Implementation of the Contract

The contract provided Handex 180 days from the Notice to Proceed to achieve Substantial Completion on the landfill, and 45 days from Substantial Completion to be ready for Final Payment. The date of Substantial Completion was to be 12 May 2001 and Final Completion 45 days thereafter. If Handex did not complete within those times, the contract allowed the County to retain $1,000.00 for each day Handex was late in reaching Substantial Completion, and $500.00 for each day until Final Completion. Under the contract, these were to be assessed as liquidated damages should Handex finish late, obligating the County to pay only the difference of monies owed under the contract upon Final Completion. Handex completed the work 93 days beyond the Substantial Completion date, and 10 days beyond Final Completion.

The contract contained three sections: the General Conditions section, the General Specifications section, and the Project Specifications section. The Project Specifications section covers only requirements differing from what appears in the General Specifications section. The contract required that, if Handex desired to make a claim during the course of the project as to one of its terms, or a Change Order for time or money, these claims would be submitted to MES. Section 9.09 of the General Conditions states in pertinent part:

A. ENGINEER will be the initial interpreter of the requirements of the Contract Documents and judge of the acceptability of the Work thereunder. Claims, disputes and other matters relating to the acceptability of the Work, the quantities and classifications of Unit Price Work, the interpretation of the requirements of the Contract Documents pertaining to the performance of the Work, and Claims seeking changes in the Contract Price or Contract Times will be referred initially to ENGINEER in writing, in accordance with the provisions of paragraph 10.05, with a request for a formal decision.

B. When functioning as interpreter and judge under this paragraph 9.09, ENGINEER will not show partiality to OWNER or CONTRACTOR and will not be liable in connection with any interpretation or decision rendered in good faith in such capacity.

Section 10.05 of the General Conditions of the contract provided:

A. Notice: Written notice stating the general nature of each Claim, dispute, or other matter shall be delivered by the claimant to ENGINEER and the other party to the Contract promptly (but in no event later than 30 days) after the start of the event giving rise thereto. Notice of the amount or extent of the Claim, dispute, or other matter with supporting data shall be delivered to the ENGINEER and the other party to the Contract within 60 days after the start of such event.

During the course of the project construction, there were eight attempts made to modify or change the contract terms or specifications. Of these, the County and MES approved only one, and MES recommended another be modified which was denied by the County. Handex appealed each of the seven denials by the County. Additionally, under the terms of the contract, Handex took issue with the delayed start time of the project, additional expenses absorbed by Handex in finishing the project, and timber removal from the project site by the County.

III. Litigation/Judgment/Issues on Appeal

On 21 December 2001, Handex filed a complaint initiating this action against MES for professional negligence and breach of contract and against Haywood for breach of contract. MES filed their answer 8 March 2002. The County filed their answer and a counterclaim seeking to recover the agreed upon amount for liquidated damages under the contract and engineering fees from Handex.

A trial was held 7-17 April 2003. At the close of all evidence, MES and the County moved for directed verdict pursuant to N.C. Gen.Stat. § 1A-1, Rule 50(a) (2003). The trial court granted a directed verdict in favor of MES, dismissing all claims against MES with prejudice. In a later order, the trial awarded MES "costs" in the amount of $6,919.17. Handex appealed both of these orders.

At the close of all evidence, the trial court denied the County's motion for directed verdict. The court also denied the County's request that the jury be given a detailed verdict sheet, and instead allowed the jury a single figure verdict sheet. This verdict sheet also provided for the award of liquidated damages and engineering costs to the County. The jury rendered a verdict against the County for breach of contract and awarded Handex damages. The judgment entered by the court ordered the County to pay the following: $201,928.41 for the damages of the breach of contract, less $1.00 in damages Handex could have avoided; and, $137,107.60 of monies owed to Handex under the contract, as this figure was the difference between the $153,107.60 retained by the County as liquidated damages and the $16,000.00 the jury actually awarded. The County filed a motion for judgment notwithstanding the verdict ("JNOV"), a motion to amend the judgment, or in the alternative, a motion for a new trial. These motions were denied in an order by the trial court. The court further awarded Handex "costs." The County appealed.

Additional evidence, facts, and relevant contract provisions are raised as necessary in the legal analysis below.

Handex's Appeal

In their appeal, Handex raises two issues: Handex argues that the trial court erred in granting a directed verdict in favor of MES; and that the court erred in awarding MES costs. We address these in turn.

I. Directed Verdict in Favor of MES

A. Standard of Review

When ruling on a motion for a directed verdict, the trial court must consider the evidence in the light most favorable to the nonmovant, taking the evidence supporting the...