Perkins v. Cedar Mountain Sewer Imp. Dist.

• Decision Date: 09 December 2004
• Docket Number: No. 04-79.,04-79.
• Citation: 199 S.W.3d 667
• Parties: Richard A. PERKINS, Appellant, v. CEDAR MOUNTAIN SEWER IMPROVEMENT DISTRICT NO. 43 OF GARLAND COUNTY, Arkansas, Appellees.
• Court: Arkansas Supreme Court

Page 667

199 S.W.3d 667

Richard A. PERKINS, Appellant, v. CEDAR MOUNTAIN SEWER IMPROVEMENT DISTRICT NO. 43 OF GARLAND COUNTY, Arkansas, Appellees.

No. 04-79.

Supreme Court of Arkansas.

December 9, 2004.

Rose Law Firm, by: Michael N. Shannon, Little Rock, for appellant.

Perkins & Trotter, PLLC, by: Scott C. Trotter and Julie DeWoody Greathouse, Little Rock, for appellee.

ANNABELLE CLINTON IMBER, Associate Justice.

This appeal arises out of a lawsuit in which Richard A. Perkins, an engineer, sued the Cedar Mountain Improvement District of Garland County for breach of contract when the district abandoned a contemplated improvement project. The trial court awarded Perkins damages and ruled that he was entitled to recover the entire amount of damages through a tax levy pursuant to Ark.Code Ann. § 14-92-238 (Repl.1998). The trial court also awarded post-judgment interest, but declined to award prejudgment interest. Finally, the trial court awarded attorney's fees to Perkins as a prevailing party, but then ruled that those fees were not "preliminary expenses" under section 14-92-238. On appeal, Perkins contends that he was entitled to prejudgment interest and should be able to recover his attorney's fees through a tax levy. On cross appeal, the District contends that the trial court erred when it awarded Perkins damages under the contract as payment was contingent on actual construction of the improvement. As an alternative argument on appeal, the District claims that, even if the contract was not contingent, the trial court erred in ruling that all of the damages awarded to Perkins were "preliminary expenses" under section 14-92-238.

We agree with the District's alternative argument and, therefore, reverse and remand for the trial court to determine the portion of compensatory damages awarded that qualify as "preliminary expenses" under Ark.Code Ann. § 14-92-238. The trial court's judgment is affirmed on all other points.

1. Factual Background

In 1996, Cedar Mountain Sewer Improvement District of Garland County ("District") was created pursuant to Ark. Code Ann. §§ 14-92-201 et. seq. (2004), for the purpose of constructing a complete sewer collection and treatment system in the Cedar Mountain area located in Hot Springs, Arkansas.¹ The District initially entered into a contract with Malone & Associates for the engineering services required for the design and construction of the sewer facility. The District's Board of Commissioners ("Board") subsequently voted on June 24, 1997, to terminate the contract with Malone & Associates, and selected a new civil engineering firm, Perkins & Associates, to design the sewer collection and treatment system.² On August 21, 1997, Perkins entered into a contract with the District, whereby he agreed to perform various professional engineering services for the design and construction of the District's proposed sewer collection system. The contract indicated that time was of the essence in completing the engineering work. Perkins agreed to perform the engineering work within 150 calendar days or pay liquidated damages of $150.00 per day for every day after the 150th day. The 150-day provision could, however, be extended for delays caused by regulatory agencies in providing information necessary to complete the engineering work on the project. This contract is the subject of the instant appeal.

On September 12, 1997, the Board sent a letter to the property owners in the District informing them of the contract between the District and Perkins for the design and preparation of the sewer collection system. By November 6, 1997, Perkins wrote a letter to the District's chairman, Billy Wilson, advising him that the work was 75% completed, and attaching a preliminary estimate for the cost of the project in the amount of $1,512,957. In the same letter, Perkins stated that his work should be completed within 30 days; however, because he was still waiting to hear about the possible formation of a Fountain Lake Sewer Improvement District, the Hot Springs portion of the project could potentially be affected. In addition, he had not been notified as to whether the Assembly of God Camp Ground and the Fountain Lake School District wanted to be included in the sewer design, which would in turn have an impact on the final line locations and sizes in that area.

Communications between the District and Perkins continued over the next several months. On November 20, 1997, Perkins sent a letter advising the District that the major portion of the engineering work with the District was completed, but Perkins needed to know whether treatment of the sewage would be handled by transporting it to the City of Hot Springs or by the District constructing its own treatment plant. In order to avoid further delay, a deadline of January 5, 1998, was given to the District to resolve that issue.³ In addition, on November 26, Perkins sent a pre-application package to the Arkansas Department of Pollution Control and Ecology that was signed by the District's chairman, Billy Wilson. Attached to the pre-application package was the preliminary engineering report that listed a total estimated price of $1,934,000 for the cost of building the sewer within the district boundaries and a total estimated price of $1,107,000 for the cost of transporting sewage to Hot Springs, or a total price of $3,041,000 for the entire project.

On January 16, 1998, Perkins sent another letter to Billy Wilson asking for authorization to conduct additional engineering services pursuant to Section D of the Contract, which granted Perkins the express authority to perform additional engineering services when approved by the Board. The Board unanimously approved the request. On January 21, 1998, Perkins sent applications signed by Billy Wilson to the Arkansas Soil and Water Commission with an attached preliminary engineering report. Although the 150-day period had already expired,⁴ the District sent a letter to Perkins on January 26, 2004, thanking him for his continued work on the project.

On May 1, 1998, Perkins sent a letter and a revised cost estimate to the District stating that the total project cost, including the connection fee for transporting the sewage to the City of Hot Springs, would be $3,533,000. On June 9, 1998, the Board discussed bids from bond houses for financing. Final approval for transporting the sewage to the City of Hot Springs was given by that city's board of directors on July 6, 1998. On July 27, 1998, Ray Owen, the District's assessor, reported to the Board that the final assessments would be available within two weeks.⁵ Also on July 27, the Board authorized Perkins to advertise for construction bids. Perkins then sent out the advertisement for bids on August 12, 1998.

On October 1, 1998, the Chancery Court of Garland County⁶ entered a temporary restraining order prohibiting the District from selling any bonds or executing any contracts on behalf of the District for a 75-day period, or until the County Court of Garland County had an opportunity to consider a petition for removal filed by a resident of the District on September 23, 1998. Following a recall vote held on November 11, 1998, the County Court ordered the removal of the members of the Board on November 23, 1998. With one exception, a whole new Board was elected, and, by December 14, 1998, the new Board had voted to rescind the assessment. The County Court entered an order rescinding the levy of tax on January 4, 1999.

Meanwhile, Perkins had sent invoices to the District on December 1, 1998, and January 4, 1999, which contained additional charges for interest. He met with the new Board on January 12, 1999, to answer any questions, and on January 14, 1999, he advised the District that if the project were to be discontinued, 100% of the design fee would become due and payable. On February 8, 1999, the Board unanimously voted to dismiss Perkins and Owen from the project, and the District subsequently made no payment to Perkins.

On June 13, 2000, Perkins filed a lawsuit against the District for breach of contract and a lien for "preliminary expenses" pursuant to Ark.Code Ann. § 14-92-238 (Repl.1998). His complaint also requested prejudgment interest and attorney's fees. Following a bench trial, the trial court awarded Perkins damages in the principal amount of $212,151.39 and awarded first-lien status to the entire amount under section 14-92-238, thereby insuring payment through a tax levy. In addition, the court ruled that Perkins was entitled to post-judgment interest at the rate of 10% per annum pursuant to Ark.Code Ann. § 16-65-114 (Repl.2004), but declined to award prejudgment interest. Lastly, Perkins, as the prevailing party, was awarded attorney's fees in the amount of $87,901 and costs of $1,216.01 pursuant to Ark. R. Civ. P. 54(e), with interest on that amount to accrue at the rate of 10% per annum. Although the trial court concluded that the attorney's fees and costs awarded to Perkins were not "preliminary expenses" contemplated by section 14-92-238, and therefore could not be collected through a tax levy, it also ruled that the attorney's fees in the amount of $118,179.50 awarded to the District's attorneys were collectible as "preliminary expenses" under section 14-92-238.

In the instant appeal, Perkins contends that prejudgment interest is a "preliminary expense" under Ark.Code Ann. § 14-92-238. In addition, he claims that his attorney's fees and costs are "preliminary expenses" under Ark.Code Ann. § 14-92-238.

On cross appeal, the District contends that the trial court erroneously awarded Perkins damages for breach of contract because payment under the contract was contingent upon the actual construction of the sewage system. The District also argues that even if the contract was not contingent, the trial court erred in finding that all of the damages awarded to Perkins were "preliminary expenses" under Ark. Code Ann. § 14-92-238. The...