Questar v. Cb Flooring, 153, September Term, 2008.

CourtCourt of Special Appeals of Maryland
Citation978 A.2d 651,410 Md. 241
Docket NumberNo. 153, September Term, 2008.,153, September Term, 2008.
Decision Date25 August 2009



Questar Builders, Inc. ("Questar") is a general contractor hired to construct a luxury midrise apartment and townhome complex known as Greenwich Place at Town Center ("Greenwich Place") in Owings Mills, Maryland. After receiving bids from three flooring subcontractors, Questar selected CB Flooring, LLC ("CB Flooring") to install carpeting at Greenwich Place for a total price of $1,120,000. Another bidder, Creative Touch Interiors ("CTI") submitted a proposal to complete the project for a total price of $1,240,0001; however, Questar rejected that bid in favor of CB Flooring's lower bid.2 On 29 September 2005, Questar and CB Flooring entered an agreement (the "Subcontract"), pursuant to which CB Flooring agreed to "[f]urnish all labor, materials, equipment and services necessary for and incidental to the execution and completion of all carpet and resilient flooring" for the project's 120 garage townhomes and 212 apartments, as well as its common areas and storage rooms, in exchange for $1,120,000. The Subcontract provided that the agreement was to remain effective "through [] DURATION OF THE PROJECT."

The focal point of this litigation concerns Paragraphs 12 and 14 of the Subcontract. Paragraph 12 provided in pertinent part:

Breach: Failure of Subcontractor to perform Work in accordance with each and every term and provision of this Subcontract shall be deemed to be a breach of this Subcontract. In the event of any breach, Contractor may avail itself of any or all of the following remedies: ... (d) to terminate this Subcontract by written notice and take over all or any work tools, equipment, materials and, which shall be effective upon receipt by Subcontractor, supplies of Subcontractor and complete the Work by whatever means Contractor deems appropriate, whereupon Subcontractor shall receive no further payments until the work is completed and shall be fully liable for any costs in excess of the Subcontract sum (Paragraph 2 hereof)[3] resulting from Contractor's completing the Work (if Subcontractor is not in breach then such termination shall be deemed termination for convenience pursuant to Paragraph 14 hereof)....

(italics added). Paragraph 14 provided:

Termination for Convenience: If this Subcontract Agreement is terminated for convenience, Subcontractor shall be entitled, as its sole compensation, to be paid that portion of the total price provided in this Subcontract Agreement that is equal to the reasonable value of the authorized materials, equipment and incidentals furnished and delivered to the job site prior to the termination plus the reasonable value of properly authorized materials fabricated and properly stored ("Stored Materials") by Subcontractor prior to the termination, and of properly authorized special inventory items specifically purchased ("Special Inventory") by the Subcontractor for this project prior to the termination. The Subcontractor shall only be paid for Stored Materials and Special Inventory after the Subcontractor has delivered, at its expense, such Stored Materials and Special Inventory to a location specified by the Contractor and the Contractor has inspected and acknowledged in writing the acceptance of the Stored Materials and Special Inventory.

Three additional provisions of the Subcontract are also relevant to this matter. First, Paragraph 7 provided:

Changes: Contractor may, at any time, unilaterally or by agreement with Subcontractor, make changes in the Work. Any change order or agreement shall be in writing. Subcontractor shall perform the Work as changed without delay. Subcontractor shall be entitled to an equitable adjustment pursuant to Paragraph 13 hereof if the change involves an adjustment in the Subcontract sum (Paragraph 2 hereof) or the time of performance (Paragraph 4 hereof)[4].

Second, Paragraph 13 provided, in pertinent part:

Settlement of Disputes and Claims: (a) With respect to any dispute between Contractor and Subcontractor or any Claim by Subcontractor, Contractor shall make a good faith, unilateral determination as to the equitable adjustment, if any, to be allowed, and issue a decision which shall be followed by Subcontractor. Subcontractor shall continue to perform the Work without deficiency, interruption or delay, pending such determination. If Subcontractor's claim is allowed by Contractor or by arbitration as provided for in Paragraph 1[65] hereof, Subcontractor shall be entitled to an equitable adjustment in the Subcontract sum (Paragraph 2 hereof) and/or the Subcontract time of performance (Paragraph 4 hereof) as its sole remedy. Notification of any such claim for equitable adjustment must be made in writing with complete supporting data within twenty (20) days of Subcontractor's knowledge of the claim.

Finally, Paragraph 16 expressed the parties' mutual agreement to arbitrate all disputes concerning amounts less than $50,000, as well as Questar's right to elect arbitration for disputes concerning amounts greater than $50,000.

The complicated series of events from which this appellate "magic carpet ride" springs began even before the Subcontract was signed. The architectural drawings that Questar supplied to CB Flooring, upon which CB Flooring based its bid, specified that Shaw Custom ("Shaw") "field" carpet was to be used in the corridors of Greenwich Place. The drawings did not indicate that "border" carpet would be installed in the corridors. Yet, the Subcontract, when drafted by Questar, plainly called for CB Flooring to install border carpet. The CB Flooring salesmen reviewing the draft Subcontract realized the discrepancy and sought to strike-out this proposed requirement; however, he failed to notice that his proposed change was not incorporated in the final draft.

In its executed form, the Subcontract required CB Flooring to install field and border carpets in the corridors of Greenwich Place and specified that the carpeting would be the same as the carpeting at Russett at Concord Park ("Concord Park"), a similar residential complex developed by Questar. The parties now agree that the corridors of Concord Park were furnished with Shaw field carpet and Bigelow Preview II ("Bigelow") border carpet.

Matters became more complicated after execution of the Subcontract when the interior design firm working on the Greenwich Place project changed the carpets to be installed in the clubhouse and corridors from Shaw and Bigelow carpets to Bentley Prince Street ("Prince Street")6 field carpet with Bentley New Stratford ("New Stratford") border carpet. In December 2005, the interior designer issued a set of plans, referred to as ID Drawings7 (the "70% ID Drawings"), specifying Prince Street as the new field carpet. The plans were only 70% complete and did not include any change with respect to the border carpeting; however, approximately one month later, the interior designer issued a complete set of plans (the "100% ID Drawings"), specifying New Stratford as the new border carpet.8

Before CB Flooring responded to either set of ID Drawings, however, Questar contacted CTI about installing carpeting at Greenwich Place, assertedly because it was "trying to keep CB Flooring honest" in the event that CB Flooring requested more money on account of the carpeting changes advanced by the interior designer. CTI submitted a new bid to Questar, proposing to install carpeting at Greenwich Place for $1,119,000; however, CTI's figures were based on the Shaw and Bigelow carpets used at the Concord Park project, not the Prince Street and New Stratford carpets specified by the ID Drawings. On 23 February 2006, CB Flooring, as anticipated, submitted a change order requesting an upward adjustment of $33,566 to the Subcontract price. Four days later, Questar sent an unexecuted subcontract to CTI, pursuant to which CTI would install carpeting at Greenwich Place in exchange for $1,120,000.

On 3 March, CB Flooring, citing a mathematical error, submitted a revised change order to Questar, changing its requested adjustment from $33,566 to $103,371 above the original Subcontract price. Shortly thereafter, Charles Bode, CB Flooring's Vice President, spoke by telephone with Donald Richards, Questar's Vice President and Production Manager, about the requested adjustment. Bode and Richards testified to quite different recollections of what transpired in that conversation. In any event, Bode asked Richards to call him back later in the week so that they could discuss the matter further, but Richards did not do so. Instead, in a letter dated 23 March 2006, Questar's Senior Vice President, Frank Maccherone, notified CB Flooring that Questar was terminating the Subcontract.

In the termination letter, Maccherone stated that the termination was for cause, charging that CB Flooring materially breached the Subcontract by refusing to perform; however, he iterated that, even in the absence of a breach by CB Flooring, Questar nevertheless enjoyed a right to terminate the Subcontract for convenience under Paragraph 14, entitling CB Flooring to no compensation. The letter also accused CB Flooring of acting in bad faith by using the interior designer's changes to seek an unwarranted increase in the Subcontract...

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