Construction Law - Dennis J. Webb, Jr., Henry L. Balkcom Iv, and Dana R. Grantham

• Publication year: 2004

Construction Lawby Dennis J. Webb, Jr.^* Henry L. Balkcom IV^** and Dana R. Grantham^***

This Article surveys construction law decisions handed down by Georgia appellate courts between June 1, 2003, and May 31, 2004. The cases discussed primarily fall within five categories: (1) contract; (2) tort; (3) mechanics' and materialmen's liens; (4) arbitration; and (5) legislation. The Article also includes a miscellaneous section covering noteworthy cases that do not fit neatly into the sections enumerated above.

I. Contracts

The Georgia Court of Appeals decided several cases concerning claims for breach of contract during the survey period.

A. Contractor's Claim for Contract Balance; Substantiating Documentation

In Department of Transportation v. Hardin-Sunbelt,¹ the court of appeals affirmed the trial court's denial of defendant Department of Transportation's ("DOT") motion for directed verdict.² Hardin-Sunbelt ("Hardin") sued the DOT to recover the contract balance on a $23 million Sugarloaf Parkway project in Gwinnett County.³

The contract anticipated that a lake adjacent to the project that was owned by Boeing Corporation could be used as a sediment basin during construction. Hardin was required to restore the lake to its original state by removing the silt that became deposited in the lake during construction.⁴ The contract also required Hardin to construct a "rock check dam to collect most sediment before it entered the lake."⁵ The lake restoration item was included as "lump sum" in the contract between the parties.⁶

Throughout the project, Hardin, through its subcontractor, constructed the rock check dam and periodically removed large quantities of silt from the lake. In September 1999 Boeing released the DOT, Hardin, and its subcontractor from any liability with respect to the lake restoration. Hardin subsequently sought payment of the lump sum stated in the contract for the lake restoration item. In March 2000 the DOT refused to make payment, stating that the lake restoration had not been performed and directing Hardin to perform no further work on the lake because Boeing had accepted it "as is." The DOT essentially based its decision to withhold payment on the fact that Hardin and its subcontractor had not substantiated with contemporaneous documentation the fact that the lake restoration work had actually been performed. However, Hardin's subcontractor did present a job diary entry showing that silt had been hauled out of the lake, and other employees of the subcontractor stated that they were present when the silt was hauled from the lake.⁷

The court of appeals held that the contract's provisions clearly and unambiguously entitled Hardin to the contract balance for the lake restoration portion of the work.⁸ The DOT argued that the contract's "claims for adjustments and disputes" section required Hardin to provide substantiating backup documentation supporting that the lake restoration work was in fact completed.⁹ The court of appeals disagreed with the DOT's argument because that portion of the contract applied only to claims by the contractor for "additional compensation" and not to claims for work that was already part of the contract between the parties.¹⁰

In addition the DOT argued that the lake restoration work had been eliminated from the contract in accordance with a provision that allowed the DOT to eliminate, upon a written order, certain items from the scope of the contractor's work. The DOT based this argument on the March 6, 2000 letter which directed Hardin to perform no further work on the lake. However, all of Hardin's lake restoration work had been completed before March 6, 2000. Furthermore, the contract provision relied upon by the DOT also provided that Hardin would be reimbursed for actual work performed and all costs incurred, including mobilization of materials prior to any notification to eliminate items from the con-tract.¹¹

Lastly, the DOT argued that the award of attorney fees against it was improper because there was no evidence to support it under the Official Code of Georgia Annotated ("O.C.G.A.") section 13-6-11.¹² Affirming the award of attorney fees, the court of appeals held that the DOT's refusal to pay for the lake restoration work during the course of the execution of the contract provided the jury with a basis for finding that the DOT was stubbornly litigious and caused Hardin unnecessary trouble and expense.¹³

B. Request for Equitable Adjustment for Disruption Damages

In Atlantic Coast Mechanical v. R. W. Allen Beers Construction,¹⁴ R. W. Allen Beers Construction ("Beers") entered into a subcontract agreement with Atlantic Coast Mechanical ("ACM") for the mechanical and plumbing work on the Children's Medical Center in Augusta, Georgia. ACM submitted a request for equitable adjustment to Beers based on additional costs incurred by ACM as a result of Beers's disruptions to ACM's work. ACM subsequently filed suit based upon the damages set forth in its request for equitable adjustment, among other things. The trial court granted Beers's motion for summary judgment, and ACM appealed.¹⁵

The court of appeals reversed, disagreeing with Beers's arguments that the contract precluded ACM's recovery of the costs identified in the request for equitable adjustment.¹⁶ Specifically, Beers argued that (1) ACM waived its claims by failing to object to Beers's April 29, 1998 letter within forty-eight hours; (2) ACM's claim was barred by article 3(b) of the subcontract because ACM was to take into account "'all hindrances and delays incident to its [w]ork'" upon entering into the subcontract; (3) ACM had waived claims that it held by executing certain change orders; and (4) ACM's claim was barred by the "no damages for delay" provision in the agreement between Beers and the project owner.¹⁷

The court of appeals disagreed with Beers's first argument because the subcontract provision relied upon by Beers only required an objection within forty-eight hours regarding "any dispute concerning a question of fact arising under this [a]greement."¹⁸ The April 29, 1998 letter from Beers to ACM disputed whether ACM was legally entitled to assert its claim, and the letter did not address "a question of fact."¹⁹ Therefore, under the plain language of the subcontract, ACM did not waive its claim by failing to respond to Beers's letter.²⁰

The court of appeals also disagreed with Beers's argument that article 3(b) precluded additional compensation for disruptions.²¹ The court concluded that the language of article 3(b) only applied to hindrances and delays that ACM could have foreseen upon entering into the subcontract.²² ACM submitted evidence that the disruptions caused by Beers far exceeded what would normally be expected at the time the contract was executed.²³ In addition the court determined that article 3(b) and other cited provisions of the contract that Beers relied on were silent with respect to ACM's entitlement to additional compensation for unanticipated labor costs from disruptions or hindrances.²⁴

Furthermore, the court of appeals disagreed that ACM had waived its claim for disruption by signing certain change orders.²⁵ Specifically, the change order signed by ACM stated that the amount of the change order included full compensation for delays encountered by ACM through the date of the change order.²⁶ The court of appeals determined that ACM's claim was based upon "disruption of its work, resulting in loss of efficiency and increased labor costs" and not from delays.²⁷ Relying upon U.S. Industries v. Blake Construction Co.,²⁸ the court of appeals determined that the language in the change orders only addressed delays and not disruption.²⁹ Therefore, ACM's request for equitable adjustment was not barred by the change orders and Beers was not entitled to summary judgment.³⁰

Finally, Beers argued that the "no damages for delay" provision in the contract between Beers and the project owner precluded ACM's request for equitable adjustment.³¹ The court of appeals disagreed that the "no damages for delay" provision in the owner contract precluded recovery because it was inconsistent with a provision of the subcontract.³² The contract between Beers and the owner contained a broad "no damages for delay" provision that only allowed damages for delays and hindrances caused solely by the owner's fraud or bad faith.³³ The subcontract provided that "[ACM] shall be entitled to compensation for such interruptions, interferences, inefficiencies, suspensions, or delays, not attributable to [ACM's] fault or neglect, to the extent, but only to the extent, [Beers] actually recovers compensation for same from the owner," which is arguably broader than the owner provision.³⁴ The subcontract also contained a provision, which stated that in the event of an inconsistency between the provisions of the subcontract and the owner contract, the subcontract would control.³⁵ The court of appeals held that summary judgment was improper because the provision of the subcontract, under certain circumstances, allowed ACM to recover compensation for claims like these in its request for equitable adjust-ment.³⁶

C. Measure of Damages Where Repair is not Feasible

In City of Atlanta v. Conner,³⁷ the court of appeals vacated the trial court's damages award in favor of the homeowner, Mrs. Conner ("Conner"), because the evidence presented at trial did not support the $100,000 award.³⁸ Conner entered into a rehabilitation contract with the City of Atlanta ("City") to bring her house up to code and make certain badly needed repairs. Under the contract the City was responsible for selecting and hiring the builder. The City hired the builder based on his low bid of $38,396.50. However, the builder later defaulted on the contract, leaving the roof exposed and subjecting the interior of the house to water damage. Between 1998 and 2000, Conner made repeated attempts to get the City to finish the repair work. The City...