W. Sur. Co. v. Dep't of Transp.

• Decision Date: 28 March 2014
• Docket Number: No. A13A2157.,A13A2157.
• Citation: 757 S.E.2d 272,326 Ga.App. 671
• Court: Georgia Court of Appeals
• Parties: WESTERN SURETY COMPANY et al. v. DEPARTMENT OF TRANSPORTATION.

326 Ga.App. 671

757 S.E.2d 272

WESTERN SURETY COMPANY et al.

v.DEPARTMENT OF TRANSPORTATION.

No. A13A2157.

Court of Appeals of Georgia.

March 28, 2014.

Thompson, Slagle & Hannan, Dewitte Thompson Jr., Johns Creek, Jefferson B. Slagle, for Appellants.

Hall Booth Smith, Denise Weiner Spitalnick, Atlanta, for Appellee.

PHIPPS, Chief Judge.

In this construction contract dispute, Western Surety Company and Continental Casualty Company (the “Sureties”) appeal from the trial court's grant of partial summary judgment to defendant State of Georgia Department of Transportation (the “DOT”) on the Sureties' claims for breach of contract and violation of the Georgia Prompt Pay Act (the “PPA”).¹ The Sureties contend that the trial court erred in entering partial summary judgment because there remain genuine issues of material fact. For the reasons set forth below, we disagree and affirm.

Summary judgment is warranted when the moving party shows that there is “no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.” ² A defendant may meet this burden by demonstrating that “the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of the plaintiff's case.” ³ And when the moving party discharges this burden, “the nonmoving party cannot rest on its pleadings, but must point to specific evidence giving rise to a triable issue.” ⁴ We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant.⁵

So viewed, the record shows that the DOT and Bruce Albea Contracting, Inc. (“BAC”) entered into a construction contract (the “Contract”) for work on roadway U.S. 27 (the “Project”). The Sureties issued performance and payment bonds to the DOT, as obligee. The completion date for the Project was originally March 31, 2007, but was extended to January 18, 2008.

After BAC entered into the Contract, it experienced an increase in material costs for the Project. As a consequence of the increase in material prices, particularly for asphalt and other petroleum-related products, BAC suffered financial difficulties. In December 2006, BAC notified the Sureties of the problem.

Rather than allow the Project to “grind to a halt,” the Sureties provided funds to BAC between April and July 2007. In exchange for their help with the Project, BAC provided the Sureties with a letter from BAC to the DOT, dated April 18, 2007, stating that BAC could not perform the work and was voluntarily abandoning the Contract. The letter was received by the DOT in late June 2007, and the DOT placed BAC in default and directed the Sureties to take over the work on the Project.

On September 11, 2007, the Sureties sent two claim letters to the DOT. After a meeting, the DOT asked for additional information. The Sureties chose not to respond to the DOT's request and subsequently sued the DOT, setting forth three counts of breach of contract ⁶ and one count of violation of the PPA. The DOT moved for partial summary judgment on the Sureties' claims for: (i) compensation for price inflation incurred after March 31, 2007 (the “Original Completion Date”) (“Count II”); (ii) compensation for price inflation incurred before the Original Completion Date (“Count III”); and (iii) violation of the PPA.⁷ The trial court granted the DOT's motion for partial summary judgment. On appeal, the Sureties contend that the trial court erred in granting summary judgment on Count II and Count III because they did not waive their claims against the DOT by failing to strictly comply with the Contract's notice and claim provisions.⁸ The Sureties also contend that the trial court erred by finding that they are barred from recovering attorney fees under the PPA.

1. The Sureties acknowledge that neither BAC nor the Sureties strictly followed the claim notice requirements set forth under the Contract, particularly Specification 105.13. Specification 105.13.B.9 provides:

NOTICE OF POTENTIAL CLAIM: In any case in which the Contractor believes that it will be entitled to additional compensation, the Contractor shall notify the Engineer in writing of its intent to claim such additional compensation. Such notice shall be given in order that the Department can assess the situation, make an initial determination as to who is responsible, and institute appropriate changes or procedures to resolve the matter. a. Claims for Delay—The Department shall have no liability for any delay which occurred more than one week prior to the filing of such written notice. Failure of the Contractor to give such written notice in a timely fashion will be grounds for denial of the claim.

b. All Other Claims Except Acceleration and Delay—If the Contractor does not file such written notice before beginning the work out of which such claim arises, then the Contractor hereby agrees that it shall have waived any additional compensation for that work and the Contractor shall have no claim thereto.⁹

In submitting a claim, the Contractor is also required to provide certain information, as set forth in Specification 105.13.C, and to certify the claim, as required by Specification 105.13.D.

Further, under Specification 105.13.B.6.b, recoverable damages under the Contract include “[d]ocumented additional costs for materials.” The parties also agreed under Specification 105.13.B.5, however, that “[c]ompliance with the provisions of this Subsection will be an essential condition precedent to any recovery of damages by the Contractor.”

Parties to construction contracts are free to enter into claim notice requirements, and such provisions are “legal and binding on the parties in the absence of special circumstances,” which may include waiver or estoppel. ¹⁰ Thus, we start with the premise that the Contract is enforceable and that the Sureties cannot recover on their claims for damages under Count II and Count III, absent special considerations. The Sureties argue that those considerations are present here, and that a jury could conclude that (i) the DOT waived strict compliance with Specification 105.13, (ii) BAC and the Sureties reasonably and substantially complied with the notice and claim procedures, (iii) the DOT had actual notice of BAC's and the Sureties' claims, and (iv) the DOT was not prejudiced by the lack of strict compliance. It follows, they contend, that it was error for the trial court to grant partial summary judgment to the DOT on Count II and Count III. We disagree.

(a) The Sureties contend that the DOT waived strict compliance with the notice and claim procedures under the Contract by actively encouraging disputes to be handled informally and by punishing those who followed the strict claims procedures, by granting extensions of the contract time, and by negotiating with the Sureties. In that respect, we have “recognized that a party to a contract may waive contractual provisions for his benefit.” ¹¹ And in the context of claim notice requirements, “[c]ourts will readily seize upon any fact or circumstance growing out of the conduct of the parties, tending to show a waiver of strict compliance, and will seek to avoid the forfeiture and to leave the actual merits of the case open to investigation.” ¹² However, “mere silence when there is no duty to speak, cannot constitute a waiver or estoppel.” ¹³

To show that the DOT had encouraged disputes to be pursued outside the parameters of the Contract, the Sureties point to evidence that before 2006 or 2007 the DOT had a general practice of discouraging contractors from filing notice of claims but then retrospectively considering requests for additional compensation.¹⁴ We are unpersuaded that what the DOT did at other times, with other parties, under different contracts, is relevant here. Although the Sureties suggested to the trial court that the course of dealing was so universal as to become part of the Contract by implication, the applicable agreement is set forth in the express provisions of the Contract. ¹⁵

The Sureties also point to evidence that BAC's principal, based on his experience with the DOT on other projects, was reluctant to file any claim against the DOT. BAC's principal deposed that on another project, upon “issue [ ] [of] the word claim, [the DOT] immediately used my liquidated damages as leverage.” The DOT's engineer on the Project also testified that as to another project he worked on with BAC's principal, it was “not an out-of-question conversation” that he told BAC “we're not going to give you time if you are asking for both time and money.” According to BAC's principal, in this case BAC and its supplier wanted to “work out an escalation agreement” with the DOT, but wanted to “get the time extension first.”

While there is evidence that BAC was “afraid to ruffle the feathers” of the DOT by filing a claim, and that the DOT might react negatively if such a claim was made, the evidence tends to explain why the procedures for filing a claim under the Contract were intentionally not followed by BAC, not that the DOT waived any of the Contract provisions regarding the filing of claims. ¹⁶ Rather, “[t]here is no evidence that DOT ... did any affirmative act which would lead [BAC] to believe that it was not necessary for it to give timely notice of a claim.” ¹⁷

The Sureties also point to the DOT's alleged practice of “waiting until the end of projects to consider time extensions,” showing that in this instance the DOT considered and granted BAC's requests for time extensions in 2007, notwithstanding that the delays occurred in 2004, 2005, and 2006. Therefore, the Sureties argue, because the requests for extensions were sent more than one week after the delays and were not in strict compliance with the notice requirements, there was evidence of waiver. The DOT shows, however, that extensions of contract time were not granted under the...