Opinion ID: 4537716
Heading Depth: 1
Heading Rank: 1

Heading: CDI’s Breach-of-Contract Claim

Text: ¶ 12. The trial court’s factual findings will be upheld unless they are clearly erroneous. Sweet v. St. Pierre, 2018 VT 122, ¶ 10, 209 Vt. 1, 201 A.3d 978. However, the question of whether a contract is ambiguous is a legal one, subject to de novo review. John A. Russell Corp. v. Bohlig, 5 170 Vt. 12, 16, 739 A.2d 1212, 1216 (1999); see also In re Affidavit of Probable Cause, 2019 VT 43, ¶ 3, __ Vt. __, 215 A.3d 694 (describing de novo review as “nondeferential and plenary”). “If the court concludes the writing is unambiguous, it must declare the interpretation as a matter of law”; if it reaches the opposite conclusion, interpretation of the ambiguous contract becomes a question of fact. John A. Russell Corp., 170 Vt. at 16, 739 A.2d at 1216. ¶ 13. Here, the trial court drew no explicit legal conclusion as to whether the subcontract was ambiguous. For its part, CDI argues that the subcontract unambiguously permitted CDI to bill for drilling in obstructions without submitting a request for a change order to ECI. ECI counters that the subcontract is ambiguous as to whether drilling in obstructions constituted a “change in the work” triggering the change-order requirement, and that principles of interpretation applicable to ambiguous contracts support the trial court’s conclusion that the change-order requirement encompassed claims for drilling in obstructions. Although we part ways with the trial court’s analysis, we affirm its holding that CDI was required to submit a change-order request if it wished to bill ECI for drilling in obstructions.2 See Gilwee v. Town of Barre, 138 Vt. 109, 111, 412 A.2d 300, 301 (1980) (observing that we may affirm a decision where “the record . . . indicates any legal ground for justifying the result,” because “[a] trial court can achieve the right result for the wrong reason”). ¶ 14. The mere “fact that a dispute has arisen as to proper interpretation does not automatically render [contract] language ambiguous.” Isbrandtsen v. N. Branch Corp., 150 Vt. 2 We cannot agree with the dissent’s characterization of our analysis as an adoption of “the trial court’s faulty reasoning.” Post, ¶ 38. At its inception, our analysis fundamentally diverges from that employed by the trial court: While we find the contract language unambiguous, the trial court’s reliance on tools of construction suggests that it reached the opposite conclusion. See Kipp v. Estate of Chips, 169 Vt. 102, 107, 732 A.2d 127, 131 (1999) (holding that where contract language is unambiguous, “the court must accept the plain meaning of the language and not look to construction aids”). Moreover, while the trial court found that the ECI-town contract incorporation clause was “unclear,” and did not rely on it in reaching its legal conclusion, we hold that the incorporation clause is fundamental to our understanding of the contract’s plain language. 6 575, 581, 556 A.2d 81, 85 (1988). Rather, “[i]f a contract, though inartfully worded or clumsily arranged, fairly admits of but one interpretation, it may not be said to be ambiguous or fatally unclear.” Id. at 580-81, 556 A.2d at 85 (quotation omitted). To determine whether a contract “fairly admits of but one interpretation,” the “agreement must be viewed in its entirety, with an eye toward giving effect to all material parts in order to form a harmonious whole.” Id. at 580, 556 A.2d at 85; see also In re Grievance of Verderber, 173 Vt. 612, 615, 795 A.2d 1157, 1162 (2002) (mem.) (“[W]hen the language of the contract is clear on its face, we will assume that the intent of the parties is embedded in its terms. We must, however, give effect to every part of the instrument and form a harmonious whole from the parts.” (citation omitted)); John A. Russell Corp., 170 Vt. at 17, 739 A.2d at 1216-17 (“To determine the meaning of a specific provision of a contract, we consider the whole instrument and construe it in harmony if possible.”). In thus seeking to harmonize contractual provisions, we may “read terms into a contract” only where “they arise by necessary implication.” In re Stacy, 138 Vt. 68, 71, 411 A.2d 1359, 1361 (1980); see also Downtown Barre Dev. v. C & S Wholesale Grocers, Inc., 2004 VT 47, ¶ 9, 177 Vt. 70, 857 A.2d 263 (explaining that courts may insert terms into a contract by implication only where “the implication arises from the language employed or is indispensable to effectuate the intention of the parties” and that “[v]aguely implied conditions may not be inserted . . . particularly when those conditions are inconsistent with the express language of the agreement”). ¶ 15. Because we must view the subcontract in its entirety, with an eye to harmonizing each of its material parts, we begin by identifying those portions germane to this dispute. See Isbrandtsen, 150 Vt. at 580, 556 A.2d at 85; Verderber, 173 Vt. at 615, 795 A.2d at 1162. Two documents, ECI’s subcontractor agreement and CDI’s bid proposal, form the basic framework of the subcontract. Both reflect that the bid proposal “is included in and forms an integral part” of the subcontractor agreement, taking “precedence over any other terms and conditions of such Subcontract.” The subcontractor agreement, in turn, provides that “ECI’s Contract with [the town 7 of Hartford] is incorporated into this Agreement by reference and becomes part of this Agreement. The Subcontractor agrees to accept the specifications, schedule, and general conditions in ECI’s Contract with [the town of Hartford], except for exclusions in the Subcontractors proposal accepted by ECI.” ¶ 16. The trial court observed in dicta that the incorporation provision was “unclear,” noting that “ECI rests some of its legal arguments on terms in the contract with the town that it says apply to CDI, but the court is at a loss to understand how obligations ECI had to the town can become obligations of CDI to ECI merely by saying the spec[ifications], schedule[,] and conditions are incorporated in the subcontract.” However, this Court finds the import of the incorporation clause straightforward, in light of a fourth material provision of this subcontract—and, indeed, all contracts. ¶ 17. “An underlying principle implied in every contract is that each party promises not to do anything to undermine or destroy the other’s rights to receive the benefits of the agreement.” Carmichael v. Adirondack Bottled Gas Corp. of Vt., 161 Vt. 200, 208, 635 A.2d 1211, 1216 (1993). This “implied covenant of good faith and fair dealing exists to ensure that parties to a contract act with ‘faithfulness to an agreed common purpose and consistency with the justified expectations of the other party.’ ” Id. (quoting Restatement (Second) of Contracts § 205 cmt. a (1981)). Thus, “[e]ach party to a contract makes the implied promise that each will not do anything to undermine or destroy the other’s rights to receive the benefits of the agreement.” Southface Condo. Owner’s Ass’n v. Southface Condo. Ass’n, 169 Vt. 243, 246, 733 A.2d 55, 58 (1999) (quotation omitted). The court was correct in noting that ECI’s obligations to the town did not become CDI’s obligations to ECI by virtue of this provision. However, in incorporating by reference its contract with the town, ECI made explicit to CDI both the common purpose underlying the subcontract and the benefits ECI expected to receive through the subcontract. CDI therefore impliedly agreed to do nothing to undermine ECI’s thus-identified rights under the town 8 contract.3 See id. In short, the incorporation clause put CDI on notice that the CDI-ECI contract should be interpreted with fidelity to the management structure of the project as a whole. With this understanding of the relevant contractual provisions, we turn to the question of what is required of the parties under each section, and then consider whether those requirements may be read to create a harmonious whole. See Isbrandtsen, 150 Vt. at 580, 556 A.2d at 85. ¶ 18. CDI’s bid proposal provides a flat price of $266,600 for the work agreed to under the subcontract. This cost is itemized to include a single mobilization of drilling equipment, “1700 LF @ $128.00/LF,” and “Pile Load Test One (1) Each.” The proposal further notes that the price is based on a forty-hour work week and “drill holes for pile installation” of five-eighths inch diameter. At issue here, however, is the provision stating that “the price quoted shall be adjusted during the course of the work by payment of the following additional items.” These “additional items” include “payment of $920.00 per rig hour, excluding cost of bits (bit consumption will be calculated at cost plus 10%) for drilling in obstructions such as but not limited to steel, timbers, old foundations and boulders that requires more than 4 hours to complete drilling the hole.” The bid proposal does not dictate a mechanism through which such adjustments are to be made. However, the subcontract—through ECI’s subcontractor agreement—provides that [a] request for a Change Order may be submitted by the Subcontractor when changes in the work are encountered or expected. The request shall include documentation on the change, add or deduct costs, and possible changes to the schedule. No work shall proceed on a Change Order until approved in writing by ECI. CDI urges us to conclude that the “additional items” clause provides “that if CDI was drilling in obstructions, including boulders, and it took more than four hours to complete drilling the hole, then CDI was entitled to payment of $920 per rig hour,” and no notice to ECI was required. It 3 Indeed, the trial court ruled that CDI was not entitled to additional payment under the subcontract for delays caused by train traffic during work hours, see supra, note 1, because “[i]t was clear from the subcontract that the work had to be done around the train schedules, since the contract with the town was incorporated into the subcontract.” 9 further argues that because the bid proposal contemplated the possibility that CDI would encounter subsurface obstructions necessitating more than four hours to complete drilling each hole, and set a price which would apply in this circumstance, drilling in an obstruction was not a “change in the work” triggering ECI’s change-order clause.4 ¶ 19. We cannot agree. We are obligated to harmonize the two provisions at issue if they may be harmonized, see Isbrandtsen, 150 Vt. at 580, 556 A.2d at 85, and the manner in which they fit together is abundantly clear: the change-order clause in the subcontractor agreement was the mechanism by which the cost adjustment contemplated in the bid proposal was to be carried out. See John A. Russell Corp., 170 Vt. at 18, 739 A.2d at 1217 (finding contract unambiguous after rejecting construction of paragraph which would conflict with other paragraph and stating “[v]iewing the contract as a whole and construing the provisions in harmony, this is the only reasonable construction”); cf. Madowitz v. The Woods at Killington Owners’ Ass’n, 2010 VT 37, ¶ 17, 188 Vt. 197, 6 A.3d 1117 (finding contract ambiguous where “[t]here is simply no harmonious way to read . . . conflicting provisions”). The only mechanism to “add . . . costs”— such as additional costs associated with “additional items” as identified in the bid proposal—was the change-order provision. ¶ 20. The change-order request clause was implicated because CDI’s attempts to free the casing were a “change[] in the work.” CDI’s bid proposal delineated a scope of work which included only those items reflected in the flat fee of $266,600. CDI budgeted four hours of drilling per hole at the contract price, classifying all further drilling necessary to complete the hole as an 4 In support of this contention, CDI points to the trial testimony of ECI’s project manager, who stated that drilling in obstructions did not represent a change in the scope of CDI’s work. However, the trial court made no finding based on this testimony, in fact concluding that “[d]rilling in obstructions that were not expected based upon the test borings were ‘changes in the work.’ ” “[I]t is for the trial court, not this Court, to weigh the evidence and assess the credibility of witnesses.” Estate of George v. Vt. League of Cities & Towns, 2010 VT 1, ¶ 36, 187 Vt. 229, 993 A.2d 367. Therefore, the project manager’s statement has no bearing on our analysis. 10 “additional item.” The clear import of the word “additional” is that such obstruction drilling was not a part of the “work” contemplated in the contract, as measured by the contract price. See Additional Work, Black’s Law Dictionary (11th ed. 2019) (“Work that results from a change or alteration in plans concerning the work required, usu[ally] under a construction contract; added work necessary to meet the performance goals under a contract.”). Moreover, the work done to free the casing—which included drilling a smaller “side hole” and bringing a jack to the site—was substantively different work than the work done to install the pile. The subcontract was clear about the size and number of holes CDI was expected to drill, which did not include the side hole. The fact that a jack was not already on site suggests that it was not otherwise necessary to the work. Therefore, the trial court was correct in concluding that all obstruction drilling which took place after four hours of drilling a given micropile was a “change in the work.” ¶ 21. Our conclusion that the subcontract admits of but one interpretation—that the change-order clause was the mechanism by which the additional-items clause was to be effectuated—is buttressed by the two additional contract provisions we identify as material to this dispute. Pursuant to the terms of ECI’s contract with the town—as incorporated by reference into the subcontract—in order for ECI to pass costs for differing subsurface conditions on to the town, ECI was required to give notice to the town in writing before further disturbing the conditions or continuing to work. Specifically, if ECI encountered subsurface or latent physical conditions . . . at the site differing materially from those specified in the Contract or if unknown physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the Contract, are encountered at the site, the party discovering such conditions shall promptly notify the other party in writing of the specific differing conditions before they are disturbed and before the affected work is performed. Receipt of such notification would trigger an investigation by the engineer “to determine if the conditions materially differ and will cause an increase or decrease in the cost or time required for 11 the performance of any work under the Contract[;]” but no adjustments were allowed through this provision “for any effects caused on unchanged work.” If the written notice is not provided as required, “[n]o Contract adjustment that results in a benefit to the Contractor will be allowed.” Similarly, [i]n order to bring a claim for additional compensation not clearly covered by the Contract for conditions substantially different than represented by the Contract and not ordered by the Engineer as Extra Work as defined herein, the Contractor must provide written notice . . . to the Engineer before conducting any work or purchasing any materials subject to the claim. Failure to file such notice of intent was waiver of ECI’s “right to bring the Claim under the Contract” with the town. ¶ 22. Significantly, because CDI did not advise ECI that the drill was stuck as a result of what it believed to be an obstruction, ECI was deprived of the opportunity to seek to either mitigate those costs5 or to pass them on to the town through the latent-conditions provision of the town contract. See Carmichael, 161 Vt. at 209, 635 A.2d at 1217 (recognizing that “bad faith inheres in . . . ‘willful failure to mitigate damages.’ ” (quoting Restatement (Second) of Contracts § 205 cmt. e)). In doing so, CDI parted ways with ECI’s justified expectations—expectations which were made particularly clear to CDI by virtue of incorporation of the town contract—undermined its contractual rights, and prevented it from obtaining the full benefit of its bargain.6 See 5 Indeed, drilling a replacement pile was an option. This would have cost approximately $110,400 less than the amount CDI billed for its nineteen-day effort to finish NC-8. 6 Contrary to the dissent’s characterization, we do not hold that CDI’s failure to file a change-order request before drilling in obstructions “plac[ed] ECI in breach of its contract with the town.” Post, ¶ 39. Rather, we hold that this failure prevented ECI from obtaining the full benefit of its bargain with CDI, because ECI’s ability to seek to pass costs for drilling in obstructions to the town was contingent on CDI providing ECI with notice of these obstructions before the affected work was performed. Moreover, we find the dissent’s suggestion that the obstruction in NC-8 did not satisfy the ECI-town contract’s definition of a differing subsurface condition because “encountering a subterranean physical obstruction such as a boulder during a drilling project is not unusual” without merit. First, that definition could have been separately satisfied by a material difference from those conditions “specified in the Contract,” and second, 12 Restatement (Second) of Contracts § 205 cmt. d (recognizing as one type of bad faith “evasion of the spirit of the bargain” and noting that “bad faith may . . . consist of inaction”). ¶ 23. “Generally, an implied duty of good faith and fair dealing is not understood to interpose new obligations about which the contract is silent, even if inclusion of the obligation is thought to be logical and wise.” Downtown Barre Dev., 2004 VT 47, ¶ 18 (quotation omitted). Here, however, the subcontract is not silent: the change-order requirement is not a “new obligation.” The purpose of the subcontract between ECI and CDI was to delineate how CDI would complete one component of a much larger, dynamic project involving multiple variables and decision-makers, as well as an active train schedule. CDI urges an interpretation of the subcontract which would turn this project-management scheme on its head, allowing a subcontractor—rather than the decision-makers designated in the subcontract and the contract— to unilaterally control the cost and schedule of the project. Under CDI’s view, it could incur costs more than ten times the cost of drilling a new hole and roughly 50% above the contract price without any request for a change order. ¶ 24. CDI suggests that the additional-items provision would be superfluous if the items listed therein were nonetheless subject to the change-order requirement. But this argument ignores the reality that the additional-items provision had an important independent effect: it set the price for such additional work, should it be ordered, obviating the need for further discussion or bargaining on this point while the time-sensitive project was underway. However, it did not vest in CDI the power to determine how to proceed, or give it the unfettered right to expend any amount necessary to free its drill with no notice to ECI of its intent to bill for these efforts. whether a given circumstance is “unusual” is not measured by our understanding of what the process of drilling generally entails. And in any event, the more important consideration is that because CDI did not request a change order, ECI never had the opportunity to argue that the either prong of the differing-conditions provision of its contract with the town applied. 13 II. Motions to Reopen the Evidence and for a New Trial ¶ 25. CDI argues that the trial court erred in denying its motions to reopen the evidence and for a new trial. Both rulings are subject to review for abuse of discretion. See In re Bjerke Zoning Permit Denial, 2014 VT 13, ¶ 16, 195 Vt. 586, 93 A.3d 82 (“The trial court has broad discretion to permit further evidence to be offered after the close of evidence in a trial but prior to entry of final judgment.”); Brueckner v. Norwich Univ., 169 Vt. 118, 132-33, 730 A.2d 1086, 1097 (1999) (“A decision concerning a motion for new trial pursuant to V.R.C.P. 59(a) lies within the sound discretion of the trial court and will be reversed only where there has been an abuse of discretion.”). ¶ 26. We find no abuse of discretion here. The trial court was correct in concluding that the proffered testimony regarding conversations on the job site could have no bearing on the outcome of the case. Under the subcontract, any request for a change order “shall include documentation on the change, add or deduct costs, and possible changes to the schedule.” Further, no work could proceed on the change order “until approved in writing by ECI.” The evidence proffered by CDI had no bearing on the relevant question, which was not whether ECI had notice that CDI considered the work to be drilling in obstructions, but whether CDI submitted a formal request for a change order including the necessary information. Because this was sufficient ground to deny both motions, we do not reach the merits of the trial court’s conclusion that CDI’s efforts to locate the foreman did not constitute due diligence.