Sutton Corp. v. Metropolitan Dist. Com'n

• Decision Date: 16 July 1996
• Citation: 423 Mass. 200,667 N.E.2d 838
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: SUTTON CORPORATION v. METROPOLITAN DISTRICT COMMISSION.

Page 838

667 N.E.2d 838

423 Mass. 200

SUTTON CORPORATION v. METROPOLITAN DISTRICT COMMISSION.

Supreme Judicial Court of Massachusetts,

Middlesex.

Argued March 6, 1996.

Decided July 16, 1996.

Harvey B. Heafitz, Newton, (Carol McKenna with him) for the plaintiff.

Christopher W. Morog, Assistant Attorney General (Jason Barshak & James A. Sweeney, Assistant Attorneys General, with him) for the defendant.

Hugh J. Gorman, III & Joel Lewin, Boston, for Utility Contractors Association of New England, amicus curiae, submitted a brief.

Joseph M. Corwin & Sally A. Corwin, Boston, for Associated Subcontractors of Massachusetts, Inc., amicus curiae, submitted a brief.

Joel Lewin & Hugh J. Gorman, III, Boston, for Associated General Contractors of Massachusetts, Inc. & another, amici curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, ABRAMS, LYNCH and GREANEY, JJ.

LYNCH, Justice.

Sutton Corporation (Sutton) brought this action against the Metropolitan District Commission (MDC) in April, 1982, for damages relating to site preparation work done on the replacement of the General Lawrence Bridge (bridge) in Medford. ¹ A master was appointed under Mass.R.Civ.P. 53, as amended, 386 Mass. 1237 (1982), who issued a report containing extensive findings of fact and rulings of law. A Superior Court judge adopted the master's report in its entirety and awarded Sutton $255,504.61 plus $346,903.72 in interest. The MDC appealed from the judgment; Sutton cross appealed. The Appeals Court reversed the decision of the Superior Court. Sutton Corp. v. Metropolitan Dist. Comm'n, 38 Mass.App.Ct. 764, 652 N.E.2d 627 (1995). We granted Sutton's application for further appellate review and now affirm the decision of the Superior Court. ²

A. Facts. We recite the significant facts as found by the master. ³ Sutton bid for and was awarded a contract with the MDC to conduct site preparation as part of the replacement of the bridge. As part of its contract, Sutton was responsible for the installation of sand drains on the site of the bridge. Sutton contracted with Vibroflotation Foundation Company for the use of Vibroflotation's patented system of sand drain installation utilizing the "Dutch Bailor" method, which was one of the methods sanctioned in the contract specifications. ⁴

Sutton agreed to charge $3 per linear foot for a total of 141,362 linear feet of sand drains. Sutton estimated that it would take approximately twenty minutes to install each of 1,570 sand drains over a period of thirty-five working days for a total cost of $424,086.

Sutton began installing trial sand drains on April 13, 1981, and immediately encountered a multitude of problems. Use of the "Dutch Bailor" method, as designed, resulted in sand drains that did not meet contract specifications. In attempts to explain these problems, on-site observers hypothesized that either the clay material in one of the layers of the soil was overcompacted or the clay in another layer contained more gravel than anticipated. Everyone agreed that the conditions at the site were unusual and that the resulting sand drains were unacceptable. On April 24, 1981, after two weeks of failed attempts to improve the situation, Sutton stopped installing sand drains. ⁵

By a letter dated April 27, 1981, Sutton advised the MDC that it had encountered a "changed condition" within the scope of G.L. c. 30, § 39N (1994 ed.), and requested permission to use a substitute system for compacting the soil. Sutton conducted some successful tests of the substitute "wick drain" system (which was paid for by the MDC), but ultimately the MDC declined to authorize its use. ⁶ Eventually, Sutton resumed work using a highly-modified Dutch Bailor system. With the new system, Sutton was able to install sand drains acceptable to the MDC, but only at much greater cost and time than anticipated. ⁷

As a result of the sand drain installation, a significant amount of "spoils material" accumulated on the site. ⁸ Because the spoils material did not meet contract specifications for ground cover, the MDC required Sutton either to mix it with other material to bring it within contract specifications or to move the material offsite and replace it with soil that complied with the contract. Sutton asked instead to move the material to the preload area, another portion of the construction site. The MDC declined. Sutton then chose to remove the spoils material and replace it with "gravel borrow," for a total cost of $153,094.

B. Changed condition. Sutton first argues that it is entitled to an equitable adjustment under the changed conditions provision of the contract. The Superior Court judge adopted the master's rulings that: (1) there was a "changed condition" within the meaning of G.L. c. 30, § 39N; and (2) Sutton satisfied the procedural requirements for an equitable adjustment claim under the "changed conditions" provision of the contract. ⁹ The MDC argues, first, that there was no changed condition. In the alternative it argues that, even if there was a changed condition, Sutton's claims are barred because they fall under the purview of the "extra work" provision of the contract (Article XVIII) and Sutton failed to follow the detailed procedural prerequisites for such a claim. ¹⁰ It was on this latter ground that the Appeals Court reversed the decision of the Superior Court and ruled in the MDC's favor. 38 Mass.App.Ct. at 769, 652 N.E.2d 627.

We begin with the general rule that "contractor's invocation of remedies available under either the contract or applicable statutes such as G.L. c. 30, § 39N, must be addressed by the public agency in good faith. Glynn v. Gloucester, 9 Mass.App.Ct. [454, 460-461, 401 N.E.2d 886 (1980) (Glynn I ) ]." Glynn v. Gloucester, 21 Mass.App.Ct. 390, 397, 487 N.E.2d 230 (1986) (Glynn II ). Here, Sutton followed the procedures set out in § 39N (and incorporated in the contract as part of Article XIX); once Sutton discovered what it believed to be a changed condition, it ceased operations and notified the MDC by letter seeking an equitable adjustment. The MDC does not dispute that Sutton fulfilled the procedural prerequisites of § 39N.

The master found that, in the course of the sand drain installation, Sutton had experienced a "Type II" changed condition, because "the site conditions [were] substantially in conformance with the contract documents, but the installation system specified did not perform as anticipated." ¹¹ The Appeals Court ruled that the master's conclusion was "incorrect as matter of law" because it relied on the failure of the installation system rather than the soil conditions, Sutton Corp. v. Metropolitan Dist. Comm'n, supra at 767 n. 2, 652 N.E.2d 627, but went on to conclude that "Sutton experienced a changed condition under § 39N, since the [master's] subsidiary findings support the conclusion that the actual soil conditions differed radically from those described in the contract plans." Id.

We agree that Sutton experienced a changed condition within the meaning of the statute, but for slightly different reasons than either the master or the Appeals Court. The Appeals Court correctly criticizes the master's report for improperly focusing on the performance of the equipment, not the actual physical conditions, as required by the statute. G.L. c. 30, § 39N. But the Appeals Court improperly focuses on the description of the conditions set out in the contract plans. Id. Where the actual subsurface conditions differ substantially from those conditions "ordinarily encountered and generally recognized as inherent in work of the character provided for in the plans and contract documents," G.L. c. 30, § 39N, there is a changed condition under the meaning of the statute, whether or not the conditions differ from the contract specifications. Thus, contrary to the MDC's assertions, the Federal "Type II" changed condition is explicitly part of Massachusetts law, as demonstrated by both the text of the statute and regulations promulgated pursuant to the statute. ¹²

The master's subsidiary findings support the conclusion that subsurface conditions at the construction site differed substantially from those "ordinarily encountered and generally recognized as inherent" in the installation of sand drains by the methods specified in the contract. G.L. c. 30, § 39N. The difference in the conditions caused "a change in the construction methods required for the performance of the work which result[ed] in an increase ... in the cost of the work," see id., a conclusion also supported by the master's findings. ¹³

The Appeals Court concluded that Sutton forfeited its claim for an equitable adjustment by failing to follow the procedures for an extra work claim under Article XVIII of the contract. We disagree. Section 39N mandates that its provisions be included in public works construction contracts. It provides a specific procedure and remedy for the contractor encountering differing subsurface or latent physical conditions. Article XVIII, on the other hand, applies to "extra work," rather than work required by the contract. The unexpected soil condition encountered by Sutton required it to modify its construction methods and incur significant additional expense in order to complete the contractually required work. Such modifications and additional expense do not constitute "extra work" within the meaning of Article XVIII. Cf. Lawrence-Lynch Corp. v. Department of Envtl. Management, 392 Mass. 681, 682-683, 467 N.E.2d 838 (1984). ¹⁴

The cases cited by the MDC are not to the contrary. It is true that contractors seeking to recover payment in excess of the contract price must follow the procedures set out in the contract. See Lawrence-Lynch Corp. v. Department of Envtl. Management, supra at 684-685, 686, 467 N.E.2d 838; State Line Contractors, Inc. v. Commonwealth, 356 Mass. 306, 317-319, 249 N.E.2d 619 (1969); Marinucci Bros. & Co. v. Commonwealth, 354 Mass. 141, 144-145, 235...