Opinion
CAUSE NO. IP99-1723-C-T/G, CAUSE NO. IP99-1723-C-T/F
September 15, 2003
ENTRY ON MOTION FOR JUDGMENT ON THE PLEADINGS AND SECOND MOTION TO RECONSIDER
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
Goheen General Construction, Inc. ("Goheen"), filed its Motion for Judgment on the Pleadings seeking judgment in its favor on Counts II and VI of the Complaint of Murdock Sons Construction, Inc. ("Murdock"). Murdock then filed its Second Motion to Reconsider Entry of Summary Judgment as to Count I; or in the Alternative, to Grant Murdock Permission to Appeal the Entry as if it Were a Final Judgment. Oral argument was held on February 26, 2003. Having carefully considered the parties' respective positions and the applicable law, the court rules as follows.
I. Standards
Though Goheen ostensibly moves for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), the motion should be treated as a motion for summary judgment under Rule 56. The parties rely on matters outside the pleadings including the court's Entry on Summary Judgment Motions of January 14, 2002. The parties also inferentially rely on materials submitted in connection with the prior summary judgment motions upon which the entry relied, for example, the affidavits of W.H. Calvin Murdock and E.L. Goheen. Therefore, Goheen's motion is treated as a summary judgment motion rather than a motion for judgment on the pleadings.
Though a court generally should give notice when converting a Rule 12(c) motion to a Rule 56 motion, the reliance by both Goheen and Murdock on matters outside the pleadings demonstrates their constructive notice that the court might consider matters outside the pleadings. This notice, and the narrowness of the issue presented on Goheen's motion, renders formal notice of conversion unnecessary. Whether the motion is treated as a Rule 12(c) motion or Rule 56 motion, it may not be granted unless there is no genuine issue of material fact and Goheen is entitled to judgment as a matter of law. See, e.g., Fed.R.Civ.P. 56(c); Potthoff v. Morin, 245 F.3d 710, 715 (8th Cir. 2001). Moreover, there is no prejudice to Goheen or Murdock in converting Goheen's motion since the parties do not dispute the material facts, only the legal effect of those facts.
Because no final judgment has been entered, the court may reconsider prior rulings on Goheen's summary judgment motion. See Fed.R.Civ.P. 54(b); Fisher v. Nat'l R.R. Passenger Corp., 152 F.R.D. 145, 149 (S.D. Ind. 1993).
The information in this section is taken from the pleadings, Goheen's "Undisputed Facts from Pleadings and Orders" found in its memorandum supporting its motion for judgment on the pleadings, Murdock's "Undisputed Facts from the Pleadings" found in its memorandum in opposition to Goheen's motion, the undisputed facts as found in the court's Entry on Summary Judgment Motions of January 14, 2002, and the procedural history of this case.
On October 30, 1991, Goheen contracted with the State of Indiana, acting by and through its Department of Administration (the "State") to function as prime contractor on the construction of Level-VI housing for the Wabash Valley Correctional Institution (the "Project"). Goheen's contract with the State (the "Prime Contract") contained provisions regarding delays and claims for extensions of time. Section 8.3.1 of the Prime Contract provided in pertinent part:
If the Contractor is delayed at any time in the progress of the work . . . by labor disputes . . . or any causes beyond the Contractor's control,. . . or by any other cause which the Designer determines may justify the delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Designer may determine.
(Goheen Aff. ¶ 3 Ex. 1 at 13.) Section 8.3.2 provided that: "Any claim for extension of time shall be made in writing to the Designer not more than twenty days after the commencement of the delay; otherwise it shall be waived." ( Id.)
Goheen subcontracted the masonry work for the Project to Murdock by a three-page letter of acceptance, dated October 31, 1991 (the "Subcontract"). Under the Subcontract, Murdock agreed to furnish and install all masonry work required for the Project in exchange for the sum of $1,629,825.00. (Goheen Aff. ¶ 3 Ex. 2 at 1.) Goheen obtained a payment bond for the Project for which the Aetna Casualty and Surety Company ("Aetna") was the surety and Goheen the principal.
The parties agree that the Prime Contract applied to Murdock. A provision in the Prime Contract, section 5.3.1, which governs Subcontractual Relations, and states in pertinent part:
The Subcontract contains no provision regarding this, but based on the parties' agreement and lack of any language in the Subcontract to the contrary, the court accepted that the Prime Contract in its entirety applied to Murdock.
By an appropriate written agreement, the Contractor shall require each Subcontractor, to the extent of the Work to be performed by the Sub-Contractor, to be bound to the Contractor by the terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities which the Contractor, by these Documents, assumes toward the Owner and the Designer. Said agreement shall preserve and protect the rights of the Owner and the Designer under the Contract Documents with respect to the Work to be performed by the Subcontractor so that subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless specifically provided otherwise in the Contractor-Subcontractor Agreement, the benefit of all rights, remedies and redress against the Contractor that the Contractor, by these Documents, has against the Owner.
(Murdock Surreply Defs.' Summ. J. Reply Brs., Ex. AE.) The "Owner" is the State. (Goheen Aff. ¶ 3 Ex. 1 at 4.)
The exhibit was not accompanied by an affidavit or other testimony stating that the exhibit is a true and accurate copy of a page of the Prime Contract. No party disputed that the exhibit was anything other than that which Murdock claimed it to be. So, the court accepted it as a true and accurate copy of a page of the Prime Contract.
Under the terms of the Prime Contract and Subcontract, the Project was to be completed in the fall of 1992. Murdock began work in January 1992 and soon encountered extremely low masonry production levels. Early that month, Murdock advised Goheen of a production problem by the masons on the Project since the masons were not producing at the anticipated production rates. Murdock continued to inform Goheen on a regular basis from January through August and thereafter about the low level of production by the union masonry workers. Goheen communicated to Murdock its concern with how far Murdock was falling behind in the Project several times a month from January 1992 forward. Goheen, at the State's insistence, instructed Murdock to add more masonry workers and equipment to the Project.
Murdock first notified Goheen in writing of the problems with the low levels of production by the union masonry workers by letter dated August 5, 1992. (Goheen Aff. ¶ 3 Ex. 10.) Murdock's letter requested that Goheen extend the time for completion of the masonry work and make an adjustment in the Subcontract amount. This was the first such written request made by Murdock. Goheen forwarded Murdock's letter to the Designer, invoking sections 8.3.1 and 12.2.1 of the Prime Contract and formally requesting an adjustment in the contract amount and schedule period.
By letter to Goheen, dated November 18, 1992, Murdock again requested an increase in the contract price and an extension of time to complete the Project. (Goheen Aff. ¶ 3 Ex. 11.) Goheen submitted Murdock's request to the Designer, by letter dated December 4, 1992, thus requesting on behalf of Murdock an increase in the contract price and extension of time to complete the Project. ( Id.) The State denied the request, stating that "[t]o make a valid claim it must be a claim from Goheen . . . and it must state the amount of the claim in cost and time requested." ( Id., Ex. 12.)
Murdock submitted payment requests to Goheen in September, November and December 1992. Goheen, however, withheld payment from Murdock.
Goheen issued checks payable solely to Murdock totaling $1,013,482. The State issued checks totaling $221,463.71 payable jointly to Goheen and Murdock's suppliers and vendors whom Murdock did not pay. Goheen paid one of Murdock's suppliers $53,023.00 for materials purchased by Murdock. These payments total $1,287,968.71.
Murdock stopped work on the Project in December 1992 and left the job site without completing the work. Murdock claims that it stopped work because Goheen failed to pay it amounts allegedly due and owing in a timely manner.
On February 26, 1996, Murdock filed its state court complaint against Goheen, Aetna and the State. Count I alleged a constructive acceleration claim against Goheen. Count II alleged that Goheen breached the Subcontract by refusing to make progress payments to Murdock for work performed on the Project from August through December 1992. The count sought a judgment against Goheen only, including $334,178 in progress payments allegedly due Murdock. Count III alleged a breach of the State's duty of disclosure to Murdock and unjust enrichment to the State and Goheen. Count IV asserted a promissory estoppel claim against both Goheen and the State based on alleged promises by the State's representatives that Murdock would be paid for its costs and expenses incurred in accelerating its work on the Project by adding masonry workers. Count V sought rescission of the Subcontract based on mutual mistake of fact. Count VI alleged that Goheen and Aetna breached their obligations under the payment bond.
Goheen answered and filed a counterclaim against Murdock for breach of contract and filed a cross-claim against the State for, inter alia, indemnification, breach of contract, attorney's fees and costs.
On March 24, 1997, Murdock and the State executed a Settlement Agreement ("Settlement Agreement" or "Agreement") in which Murdock agreed to settle all of its claims against the State, and pursuant to which the State, inter alia, paid Murdock $871,000. The Agreement stated that this action "was commenced by Murdock as a result of matters alleged to have arisen from services performed by Murdock, as subcontractor, under a contract with Goheen . . . in connection with work performed in the. . . . [Project.]" (Pet. Interpleader ¶ 2 Ex. A at 1.) The Agreement provided:
[T]he State Parties deny any liability to Murdock, Goheen or Aetna for any damages whatsoever, but, nevertheless, Murdock and the State Parties desire to avoid and put an end to the litigation between them arising out of Murdock's performance of any work in connection with the Project and to forever set at rest all such differences and disputes . . ., and to resolve and dismiss all of Murdock's claims against the State Parties in the Action, without in any way affecting the claims of Murdock against either Goheen or Aetna, and only in such a way that all of the rights and causes of action of Murdock against Goheen and Aetna for causing or contributing to its damages arising out of its performance of work on the Project shall not be affected or impaired[.]
( Id. at 2.) Murdock and the State agreed, inter alia, that:
1. The State Parties shall pay Murdock, and Murdock agrees to accept, the sum of $871,000.00, which shall be paid contemporaneously with the execution of this Agreement. . . .
. . .
4. Preserving all rights and causes of action against Goheen and Aetna . . . which Murdock . . . may be able to assert, Murdock hereby RELEASES and DISCHARGES the State Parties . . . from any and all presently existing claims, demands, obligations and rights of action of every nature whatsoever, whether known or unknown, which Murdock may now assert against the State Parties, and from any and all other present and future claims, demands, obligations and rights of action of every nature whatsoever against the State Parties based on any matter arising from, related to or connected with the Project or any work performed in connection with it . . . or arising in any manner whatsoever from any subject matter of the pending Action. . . .
6. Murdock agrees immediately to take such steps as are appropriate to dismiss, with prejudice, its claims and causes of action against the State Parties in the Action, but Murdock expressly retains the right to pursue all its claims against all other parties in such Action, including without limitation all claims and rights against Goheen and Aetna.
7. Murdock agrees to indemnify the State Parties for, and hold the State Parties harmless from, any liability . . . the State Parties may be found to have to Goheen on account of any liability Goheen may be found to have to Murdock on any or all of the claims asserted in Counts I, III, IV, V and VI (except to the extent that damages in Counts III and VI include damages sought in Count II) of Murdock's complaint. Murdock's indemnification and hold-harmless obligations do not extend to any liability the State Parties may be found to have to Goheen on account of any liability Goheen may be found to have to Murdock on Count II of Murdock's complaint. . . . The intent of the parties in this paragraph is to provide that in no event shall the State Parties be required to pay more than once in settlement or judgment for the same damages alleged to have been incurred directly by Murdock.
(Pet. Interpleader ¶ 2 Ex. A at 3-5.)
The State interpleaded funds (the Progress Payment Amount) which are now on deposit with the Clerk. A number of parties have made claims to those funds. The priority of claims remains to be determined in this action.
As noted in the court's entry dated January 14, 2002, Murdock agreed to dismiss Counts III, IV and V of its Complaint and its claim for consequential damages in Count I. In that entry the court concluded that summary judgment would be granted Goheen on the acceleration claim in Count I. Murdock's motion to reconsider the dismissal of Count I was denied by the court by entry dated July 9, 2002. Thus, Counts II and VI are the only counts of the Complaint now remaining.
III. Discussion
A. Murdock's Motion to Reconsider Summary Judgment on Count I
In its entry ruling on the motions for summary judgment, the court concluded that Goheen was entitled to judgment as a matter of law on Murdock's claim for acceleration in Count I of the Complaint because, based on the record, Murdock had not properly requested an extension of time from Goheen. Section 8.3.2 of Goheen's Prime Contract with the State, which Murdock and Goheen agree applied to Murdock, provided that: "Any claim for extension of time shall be made in writing to the Designer not more than twenty days after the commencement of the delay; otherwise it shall be waived." The evidence is uncontradicted that Murdock did not make a written request for an extension of time within that time period. Murdock's first claim for an extension of time in writing was made by letter dated August 5, 1992; but the delay began as early as January 1992. The court therefore determined that Murdock's written request for an extension of time was untimely and ruled that summary judgment should be granted Goheen.
In its first motion to reconsider, Murdock argued that a delay commences when the contractor recognizes that the cause for a delay is excusable under section 8.3.1 of the Prime Contract, rather than when the delay actually begins. The court rejected this argument as contrary to the clear and unambiguous terms of section 8.3.2.
Now, in its second motion to reconsider, Murdock contends that: it complied with the intent of section 8.3 for requesting an extension of time; Goheen had actual and constructive notice of the construction delays due to low masonry production rates and of Murdock's additional costs because of the delays, or Goheen waived the formal notice requirements; and Goheen was not prejudiced by Murdock's failure of strict compliance with the notice requirements. Murdock also argues that a reasonable jury could find that Murdock timely requested an extension of time. Goheen objects to Murdock's motion.
The court finds that Murdock's motion should be granted. The court's ruling that Goheen was entitled to judgment as a matter of law on Murdock's acceleration claim was based solely on the untimeliness of Murdock's written notice. The timeliness of the notice, however, had not been raised by Goheen. The court's grant of summary judgment on the basis of the untimeliness of Murdock's written notice, therefore, was sua sponte. Sua sponte rulings on dispositive motions, without prior notice to the parties or an opportunity to be heard on the issues underlying the ruling, "generally may be considered hazardous." Doe on Behalf of Doe v. St. Joseph's Hosp., 788 F.2d 411, 415 (7th Cir. 1986) (quotation omitted) (concluding no basis for dismissal in any event).
The general rule is that a court lacks the power to grant summary judgment sua sponte unless the party on the losing end of the court's ruling had proper notice and a fair opportunity to present evidence in opposition to the entry of summary judgment. See Simpson v. Merchants Recovery Bureau, Inc., 171 F.3d 546, 549-50 (7th Cir. 1999). The court concludes that it was error to grant summary judgment on an issue not raised or addressed by the parties.
The court did not advise the parties that it was considering the issue of whether Murdock's written notice was timely under section 8.3.2, and none of the briefs filed by Murdock, Goheen or Aetna addressed the issue. Thus, Murdock had no notice that the court intended to address the timeliness of its written notice to Goheen.
In addition, Murdock did not have a fair opportunity to present its evidence on the issue of the timeliness of its written notice. The parties did not fully develop the record regarding this issue, and Murdock was denied the opportunity to argue against summary judgment on the basis on which the court ruled against it. It seems that Murdock could produce evidence which would affect the court's summary judgment ruling on the acceleration claim. Murdock, for example, argues that Goheen had actual and constructive notice of the delay due to the masonry production, waived the formal notice requirements and was not prejudiced by Murdock's failure of strict compliance with those requirements. If the evidence establishes that Goheen was aware of the delay and waived the formal notice requirements, then the basis for the court's grant of summary judgment on the acceleration claim was erroneous. See State v. Omega Painting, Inc., 463 N.E.2d 287, 294 (Ind.Ct.App. 1984) ("Absent a showing of waiver, the parties must be deemed to be bound by the plain terms of the contract.").
The record establishes that beginning in January 1992, Goheen was aware that the masons were not producing at the anticipated production rates and expressed concern to Murdock about how far behind Murdock was falling in the Project. The parties, however, have not addressed whether any of Goheen's actions would be deemed a waiver of the formal notice requirements or whether Goheen was prejudiced by the lack of formal notice. Perhaps Goheen's failure to object to the timeliness of Murdock's August 5, 1992 written notice and submission of it to the Designer would constitute waiver of strict compliance with the notice requirements. See Dicon, Inc. v. Marben Corp., 618 F.2d 40, 44 (8th Cir. 1980); cf. Fraternal Order of Police Lodge No. 52 v. Civil City of Elkhart, Ind., 551 N.E.2d 469, 471-72 (Ind.Ct.App. 1990) (union waived strict performance of notice provision in collective bargaining agreement when it failed to insist upon timely notice and met to negotiate modifications to the agreement).
Because Murdock had no notice that the court was considering granting summary judgment on the basis of the untimeliness of its written notice to Goheen and did not have a fair opportunity to present its evidence and arguments against the entry of summary judgment on that basis, the court's grant of summary judgment on the acceleration claim was improvident. See Simpson, 171 F.3d at 549. Therefore, Murdock's second motion to reconsider is GRANTED.
Goheen, however, raised other arguments in support of its motion for summary judgment which have not yet been addressed by the court. These are discussed below.
Goheen first argues that the acceleration, if any, was ordered by the State. Goheen, however, has not disputed that the State as well as Goheen repeatedly instructed Murdock to add more masonry workers and equipment to the Project. (See Goheen's Br. Supp. Mot. Summ. J., at 4; see also E.L. Goheen Aff. ¶ 14 (stating that Goheen communicated to Murdock its concern about how far behind Murdock was falling in the Project); Murdock Aff. ¶ 22 (stating that upon Goheen's request Murdock added additional management and equipment), ¶ 25 (stating that Goheen demanded Murdock add additional manpower to the Project).) Goheen suggests that constructive acceleration is applicable only to the owner, but it cites no legal authority to support this claim. Cases have held a general contractor liable to a subcontractor on an acceleration claim. See, e.g., Mobil Chem. Co. v. BlountBros. Corp., 809 F.2d 1175, 1178-79 (5th Cir. 1987) (holding general contractor and project owner equally liable for damages on subcontractor's acceleration claim).
Goheen argues that Murdock was not entitled to an extension of excusable delay from Goheen. According to Goheen, under the Prime Contract only the Designer and the State could grant an extension of time. Goheen cites no legal authority to support this argument. Murdock, as subcontractor, was not a party to the Prime Contract and had no direct contractual relation with the State. Murdock was in privity only with Goheen, the general contractor. Therefore, Murdock could not have properly request an extension of time from the State.
In arguing that Murdock was not entitled to an extension of time from Goheen, Goheen ignores the provision of the Prime Contract governing subcontractual relations. That provision, section 5.3.1, affords the subcontractor, "unless specifically provided otherwise in the Contractor-Subcontractor Agreement, the benefit of all rights, remedies and redress against the Contractor that the Contractor, by these Documents, has against the Owner." (Murdock's Surreply Defs.' Summ. J. Reply Brs., Ex. AE.) The Subcontract between Goheen and Murdock does not "specifically provide otherwise"; therefore, by operation of section 5.3.1, Murdock has the benefit of all rights, remedies and redress against Goheen that Goheen, by the contract documents, has against the State.
One right that Goheen has against the State under the Prime Contract is the right to make a claim for an extension of time for any delay in the progress of its work if the delay is because of "any cause beyond the Contractor's control[.]" If it is determined that the cause justifies the delay, then the Goheen has the remedy of an extension of the contract time. Goheen also has the right under section 12.2 of the Prime Contract to make a claim for an increase in the contract sum as well as for an extension in the contract time against the State.
Goheen argues that under section 5.3.1 the rights of the Owner and Designer are preserved, including the rights with respect to extending the contract time by issuing change orders such that only the Owner and Designer can grant an extension of time. Goheen ignores the language in the same section quoted above which gives the Subcontractor the same benefit of all rights, remedies and redress against the Contractor that the Contractor has against the Owner. Goheen could have granted Murdock an extension of time even if Goheen was not afforded an extension in the contract time by the Designer and the State. Goheen then might be subject to liquidated damages under the Prime Contract. However, if Goheen, in turn, properly requested an extension of the contract time from the State and its request was denied, but the facts showed that the extension was justified, it seems that Goheen would have a claim against the State.
Therefore, the court concludes that Murdock could properly request an extension of time from Goheen; and, if the request was made under section 8.3.1, and it was determined that the cause of the delay was beyond Murdock's control and the cause justified the delay, then Murdock would be entitled to an extension of time from Goheen.
Goheen next argues that Murdock's delays were not excusable. Murdock, however, has offered evidence to raise a genuine issue as to whether the cause of its delay was excusable. Calvin Murdock states in his affidavit that the masons were not producing at the anticipated production rates, their production was extremely low, and Murdock's addition of management and equipment to the project had no impact on the production rates. (Murdock Aff. ¶¶ 18, 22-23.) In addition, the Designer's management meeting notes, dated September 4, 1992 and October 30, 1992, reflect statements by Ray Schultz of the Indiana Department of Public Works that attempts to increase the masons' productivity resulted in lower productivity, the local union was in control, and the productivity of the masons was exceptionally low. ( Id. ¶ 28 Ex. D.)
The court is unsure why the parties have focused on section 8.3 of the Prime Contract to the exclusion of section 12.2, which covers claims for additional cost or time and does not seem to require that the event giving rise to the claim be "excusable." Perhaps section 12.2, which does not seem to carry a similar limitation, would also apply to Murdock's claim for an extension of time.
Further, Goheen's letter to the Designer, dated August 13, 1992, requested an adjustment in the contract schedule and price under paragraphs 8.3.1 and 12.2.1 of the Prime Contact. Along with its own letter, Goheen submitted a copy of Murdock's August 5, 1992 letter to Goheen which requested an adjustment to the contract. Goheen's letter expressly states: "We are in agreement with Murdock's premise in this letter." (E.L. Goheen Aff. ¶ 19 Ex. 11.) The premise of Murdock's letter was that the production of the union bricklayers was unforeseen and unreasonably low. As well, in a letter to the Designer, dated December 4, 1992, Goheen again requested an increase in the contract price and extension of time based on Murdock's request to Goheen for the same.
Moreover, in a letter to the Designer, dated February 28, 1993, Goheen indicated that it was making a claim for an extension of time and increase in contract price under the contract documents. The letter stated: "The delay in project completion is a result of causes beyond the control of Goheen, including but not limited to an unanticipated change in the production rates of masonry workers." (Murdock Aff., Ex. T at 1; see also id. at 5.) And, again, in a letter to the Designer, dated March 26, 1993, Goheen sought an extension of time and increased price. This letter said that additional costs were incurred by Goheen and Murdock "as a result of causes beyond [their] control. . . including . . . an unanticipated change in the production rate of masonry workers." ( Id., Ex. U, ¶¶ H I.)
Thus, the record contains evidence which raises a genuine issue of material fact as to whether Murdock's delays were excusable. Murdock maintains that the delays were due to the unanticipated and unreasonably low production rates of the masons, that the union was in control of the production, and that adjustments by Murdock did not improve production. Murdock has offered evidence which shows that others also believed the delays were due to the masons' low production levels and the union's control. Indeed, Goheen took the position that the causes of the delay were beyond Murdock's control. Thus, Goheen has not shown that it is entitled to summary judgment because Murdock's delays were not excusable.
Murdock also offers the report of its expert witness, Carl P. Meglan, to support its claim. Goheen has challenged, in a very general fashion, the admissibility of this report. If the report turns out to be admissible it may be additional evidence that Murdock's delays were excusable. But even if the report is inadmissible, Murdock has offered sufficient evidence to raise a genuine issue of fact.
Therefore, the court concludes that other bases advanced by Goheen for why it should be granted summary judgment on the acceleration claim are unavailing. Accordingly, on reconsideration, the court VACATES that portion of its Entry on Summary Judgment Motions of January 14, 2002, which granted Goheen summary judgment on the acceleration claim and DENIES Goheen's motion for summary judgment on this claim.
B. Goheen's Motion for Judgment on Counts II and VI
Goheen moves for judgment in its favor on Murdock's claims for breach of contract and breach of obligation under the payment bond (Counts II and VI). Murdock objects to Goheen's motion as untimely because it was filed after the deadline for filing motions for summary judgment established by the Case Management Plan ("CMP"). The objection is OVERRULED. The CMP does not contain a deadline for filing motions for judgment on the pleadings. Moreover, Murdock does not dispute the facts as asserted by Goheen, but only disputes the legal effect of the facts. A trial on the purely legal issue presented by Goheen's motion would be unnecessary and inefficient.
Goheen claims that Murdock has received more than the full amount to be paid under the Subcontract and, therefore, judgment should be entered in Goheen's favor. Murdock responds that it has not been paid the full amount due under the Subcontract. According to Murdock, the $871,000 paid to it by the State was in settlement of its claims against the State for additional work and expenses incurred on the Project which were beyond the scope of the Subcontract. Murdock has the better view.
Goheen argues that a reasonable conclusion is that the State's $871,000 payment to Murdock was for unpaid contract amounts with respect to the Subcontract. For support, Goheen looks to language in the Recitals of the Settlement Agreement which provides that this action "was commenced by Murdock as a result of matters alleged to have arisen from services performed by Murdock, as subcontractor, under a contract with Goheen General Construction, Inc. ("Goheen") in connection with work performed in . . . the "Project"[.]" (Pet. Interpleader, Ex. A at 1.) Although this action may have its genesis in the Subcontract between Murdock and Goheen, it does not follow that any cause of action Murdock may have had against the State directly arose from the Subcontract or an alleged breach thereof.
But for the Subcontract, Murdock would not have performed any work on the Project and presumably would have had no cause of action against Goheen, Aetna or the State.
Murdock's Complaint alleges not only a breach of the Subcontract against Goheen but also alleges several other claims against Goheen and the State, including acceleration and promissory estoppel. The acceleration claim expressly alleges that Murdock's provision of labor, material and services in accord with the acceleration were "outside the scope, intent and price of the Subcontract." (Compl. ¶ 45.) The promissory estoppel claim was based on the State's alleged promises that Murdock would be paid for its costs and expenses incurred due to the acceleration. Although the acceleration and promissory estoppel claims may be tangential to the breach of contract claim, the language quoted from the Recitals does not support the conclusion that the former claims arise directly from the Subcontract. Nor does the language support a reasonable conclusion that the State's $871,000 payment to Murdock was for unpaid contract amounts on the Subcontract.
Goheen argues that a contract is strictly construed against the party who drafted it. Indiana decisions do not apply this rule where the party seeking a favorable interpretation of a contract was not a party to the contract. See, e.g. Ind. Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 291 N.E.2d 897, 899 (Ind. 1973); Am. Family Ins. Co. v. Globe Am. Cas. Co., 774 N.E.2d 932, 936 (Ind.Ct.App. 2002), trans denied. Neither case cited by Goheen, INB Banking Co. v. Opportunity Options, Inc., 598 N.E.2d 580, 584 (Ind.Ct.App. 1992) or Boswell Grain Elevator, Inc. v. Kentland Elevator Supply, Inc., 593 N.E.2d 1224, 1228 (Ind.Ct.App. 1992), holds to the contrary. Thus, Goheen's argument that the Settlement Agreement should be strictly construed against Murdock and Baker Daniels is not persuasive.
Even more importantly, Goheen has advanced no reason why the State would make a payment to Murdock on the Subcontract. Pursuant to the Settlement Agreement, Murdock released and discharged the State only from any and all claims, rights of action, etc. "which Murdock may now assert against the State Parties" and from any and all future claims, rights of action, etc. "against the State Parties." Murdock was not in privity of contract with the State with respect to the Subcontract. Thus, if there is a legal basis for a breach of contract claim against the State premised on a breach of the Subcontract, it is not readily apparent. Goheen has offered no doctrine, rule or judicial decision to establish that Murdock could have brought such a claim against the State, and, the court is unaware of any. Furthermore, it seems that Murdock could not assert a breach of contract claim against the State based on an alleged breach of the Subcontract because Murdock had no privity of contract with the State. Cf. Baudier Marine Elecs. Sales Serv., Inc. v. United States, 6 Cl. Ct. 246, 249 (1984) ("It is also clear that the plaintiffs have no proper claim for breach of contract against the United States, because, as subcontractors, they have no privity of contract with the government"), aff'd 765 F.2d 163 (Fed. Cir. 1985).
Though not dispositive of the question whether Murdock could have alleged a breach of contract claim against the State based on the Subcontract, the fact that Murdock did not make such a claim bears some consideration. One reasonably would expect that Murdock, represented by competent legal counsel, would have asserted such a claim if it could have done so consistent with the existing law. Murdock's Complaint does not allege a breach of contract claim against the State based on the Subcontract. Instead, it alleges that Murdock expended $3,991,385 to meet the original project schedule. The Subcontract price was $1,629,825. Murdock also alleges that it was required to perform extra or additional work and incurred extra or additional costs not contemplated by the parties to the Subcontract. Thus, it seems that Murdock makes a claim for damages above and beyond damages under the Subcontract.
The Recitals of the Settlement Agreement support the conclusion that Murdock did not assert against or settle with the State a breach of contract claim based on the Subcontract:
WHEREAS, substantial completion of the Project was extended significantly beyond the scheduled completion date, and, as part of its claims in the Act, Murdock has contended, inter alia, that the extended construction period was due to factors beyond Murdock's control, and that Murdock was required to accelerate its work on the project, thereby incurring additional costs and losses, and that the circumstances surrounding the extended construction period and resulting acceleration entitle Murdock to payment by the State Parties for the fair, reasonable value of the services and materials supplied by Murdock on the Project as a result of such extended construction period and acceleration[.]
(Pet. Interpleader, ¶ 2, Ex. A at 1-2) (second emphasis added). This language supports the conclusion that the claims Murdock asserted against and settled with the State arose from matters surrounding the extended construction period and resulting acceleration, not from a breach of the Subcontract.
Moreover, the Settlement Agreement between Murdock and the State reveals the parties' understanding that the State's $871,000 payment was not in payment for an alleged breach of the Subcontract. The Agreement expressly recognizes the intention of Murdock and the State that the claims of Murdock against Goheen and Aetna, which included an alleged breach of the Subcontract, not be affected or impaired by the settlement. The Agreement provides in relevant part that:
Murdock and the State Parties desire . . . to resolve and dismiss all of Murdock's claims against the State Parties in the Action, without in any way affecting the claims of Murdock against either Goheen or Aetna, and only in such a way that all of the rights and causes of action of Murdock against Goheen and Aetna for causing or contributing to its damages arising out of its performance of work on the Project shall not be affected or impaired[.]
(Pet. Interpleader ¶ 2 Ex. A at 2) (emphasis added). The Agreement reiterates this understanding by stating that:
Murdock agrees immediately to take such steps as are appropriate to dismiss, with prejudice, its claims and causes of action against the State Parties in the Action, but Murdock expressly retains the right to pursue all its claims against all other parties in such Action, including without limitation all claims and rights against Goheen and Aetna.
( Id. ¶ 2 Ex. A at 5, ¶ 6) (emphasis added).
In addition, the Settlement Agreement expressly excepts the breach of contract claim based on the Subcontract asserted in Count II from the indemnification and hold-harmless provision:
Murdock agrees to indemnify the State Parties for, and hold the State Parties harmless from, any liability . . . the State Parties may be found to have to Goheen on account of any liability Goheen may be found to have to Murdock on any or all of the claims asserted in Counts I, III, IV, V and VI ( except to the extent that damages in Counts III and VI include damages sought in Count II) of Murdock's complaint. Murdock's indemnification and hold-harmless obligations do not extend to any liability the State Parties may be found to have to Goheen on account of any liability Goheen may be found to have to Murdock on Count II of Murdock's complaint. . . .
(Pet. Interpleader, ¶ 2, Ex. A at 5, ¶ 7) (emphases added). This paragraph expressly states that "[t]he intent of the parties in this paragraph is to provide that in no event shall the State Parties be required to pay more than once in settlement or judgment for the same damages alleged to have been incurred directly by Murdock." ( Id.) (emphasis added). This supports the conclusion that the damages Murdock sought in Count II for breach of the Subcontract are not the same as the damages sought in any other count of the Complaint and for which the State paid Murdock $871,000 pursuant to the Settlement Agreement.
Goheen offers no legal authority to establish that Murdock did or could have alleged a breach of contract claim against the State arising out of an alleged breach of the Subcontract, and it seems that Murdock could have had no such claim against the State. Accordingly, Goheen's motion for summary judgment is DENIED.
In reaching this conclusion the court has not relied on any parol evidence. However, it is noted that evidentiary materials and other filings in the record before the court further support the conclusion that all parties concerned, namely, Murdock, the State, and Goheen, understood that the State's $871,000 payment was for Murdock's delay claim only. ( See Goheen's Mot. Stay Settlement, Ex. C, Letter from G. Slaughter, Deputy Attorney General, to G. Grodner, Goheen's counsel, of March 6, 1997 at 1 (referring to Murdock's documentation of $2 million in out-of-pocket expenses beyond those provided by contract and an expert report that settlement of Murdock's delay claims for $871,000 would be appropriate); id., Ex. D, E.L. Goheen's Aff., ¶ 3 (stating the affiant was advised by Murdock and the State that they intended to enter into a settlement the terms of which included payment of $871,000 by the State to Murdock for Murdock's delay claims)); Goheen's Mot. Stay Settlement ¶ 8 (stating that Goheen was advised by representatives of Murdock and the State that they intended to enter into a settlement including the payment of $871,000 by the State to Murdock for Murdock's delay claim); Goheen's Mem. Supp. Mot. Stay Settlement at 3 (same)).
IV. Conclusion
For the foregoing reasons: (1) Murdock's motion for reconsideration is GRANTED, the part of the Entry on Summary Judgment Motions of January 14, 2002, granting Goheen summary judgment on the acceleration claim is VACATED and Goheen's motion for summary judgment is DENIED as to the accleration claim; and (2) Goheen's motion for judgment on the pleadings is treated as a motion for summary judgment and is DENIED.
ALL OF WHICH IS ENTERED.