Court Opinion

ID: 6338079
Source: CourtListenerOpinion
Date Created: 2022-05-05 16:07:33.929297+00
Date Added: 2024-06-11T09:25:09.547930
License: Public Domain

138 Nev., Advance Opinion   51
                              IN THE SUPREME COURT OF THE STATE OF NEVADA

                       APCO CONSTRUCTION, INC., A                           No. 80177
                       NEVADA CORPORATION; AND
                       SAFECO INSURANCE COMPANY OF
                       AMERICA,
                       Appellants,                                          FIVE)
                       vs.
                       HELIX ELECTRIC OF NEVADA, LLC,                        MAY 0 5 2022
                       A NEVADA LIMITED LIABILITY
                       COMPANY,
                       Respondent.

                                  Appeal from a district court judgment after a bench trial in a
                       contract action. Eighth Judicial District Court, Clark County; Elizabeth
                       Gonzalez, Judge.
                                  Affirmed.

                       Fennemore Craig, P.C., and Christopher H. Byrd, Las Vegas; Fennemore
                       Craig, P.C., and John Randall Jefferies, Phoenix, Arizona,
                       for Appellants.

                       Peel Brimley LLP and Cary B. Domina and Ronald J. Cox, Henderson,
                       for Respondent.

                       BEFORE THE SUPREME COURT, SILVER, CADISH, and PICKERING,
                       JJ.

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                                                                                 1,1 N31k
                                                    OPINION
                   By the Court, SILVER, J.:
                                The covenant of good faith and fair dealing "prohibits arbitrary
                   or unfair acts by one party that work to the disadvantage of the other."
                   State, Dep't of Transp. v. Eighth Judicial Dist. Court, 133 Nev. 549, 555,
                   402 P.3d 677, 683 (2017) (internal quotation marks omitted). In this appeal,
                   we consider whether the district court properly applied the covenant of good
                   faith and fair dealing when it awarded delay damages to a subcontractor.
                   We also, for the first time, interpret NRS 338.490 and determine whether
                   the subcontractor waived its right to receive delay damages by signing a
                   waiver and release to receive its retention. We conclude that the district
                   court properly determined the covenant of good faith and fair dealing
                   applies here, the contractor breached the covenant, and the subcontractor
                   did not waive its delay claims under NRS 338.490.
                                    FACTS AND PROCEDURAL HISTORY
                               The City of North Las Vegas (CNLV) contracted with appellant
                   APCO Construction, Inc.,' for a construction project. Subcontractor and
                   respondent, Helix Electric, Inc., contracted with APCO for the project's
                   electrical work. The project was originally scheduled to be completed on
                   January 9, 2013, but the project was not substantially completed until
                   October 25, 2013.
                              After the original project completion date passed, Helix notified
                   APCO that it reserved the right to receive payment for the additional costs
                   incurred due to the delay. In response, APCO indicated that Helix must
                   timely pursue reimbursement for those costs and provide all related

                        'We refer to appellants APCO and Safeco Insurance Company of
                   America collectively as APCO.
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documentation to APCO, so that APCO could then submit Helix's claim to
CNLV. Helix thereafter sent APCO a list of delay costs totaling $72,960.
Helix later submitted a revised claim for $102,000 based on the calculation
of $640 per day for 32 weeks. APCO created a change order request for
Helix's $102,000 delay claim and submitted it to CNLV. APCO also told
Helix it was in the process of preparing a time impact analysis, which would
"open the door for Helif to present its case.
            CNLV rejected the change order request because CNLV did not
have a contract with Helix. APCO informed Helix it needed backup
documentation to reverse CNLV's rejection but did not tell Helix that CNLV
rejected the claim on the basis that CNLV did not have a contract with
Helix. In fact, at trial, the CNLV construction manager testified that
providing backup information would not have changed CNLV's decision
"because [the information] still would be coming from a contractor that does
not have a contract with the city." Moreover, CNLV expected APCO to
include its subcontractors claims in its own claim for general conditions,
rather than submit the subcontractors' claims separately. On October 2,
2013, APCO settled its own $1,090,066 delay claim with CNLV for
$560,724. As part of the settlement, APCO agreed to forgo any claim,
present or future, that may occur on the project. The record shows APCO
did not notify Helix that it had settled with CNLV or that CNLV had paid
APCO's delay claim.
            On October 18, 2013, Helix also billed APCO for its retention
payment of $105,677 and included a conditional waiver and release upon
final payment that indicated a disputed-claim amount of "zero." On
November 5, 2013, APCO submitted a revised change order to CNLV
seeking a total of $111,847 for Helix's delay claim, which CNLV again

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                   rejected. On November 13, 2013, Helix submitted another claim to APCO
                   in the amount of $26,304, accounting for the extended overhead costs for
                   the months of September and October. APCO submitted Ilethes claim to
                   CNLV, which CNLV rejected on grounds that CNLV did not have a contract
                   with Helix and, moreover, CNLV had already settled with APCO.
                               In October 2014, APCO sent a copy of a check in the amount of
                   Helbes retention and an updated unconditional waiver for Helix to sign
                   upon final payment. The waiver—which Helix did not sign—included the
                   retention amount, and Helix added the delay amount to the payment line
                   next to the retention amount. Helix did not list the delay claim as a
                   disputed claim on the waiver, but Helix's president emailed APCO's
                   contract manager expressing concern about Helix's delay claim. Helix's
                   senior vice president also wrote to APCO, explaining that Helix reserved its
                   rights to its delay claim. Helix's president also emailed a promissory note
                   to APCO's contract manager laying out a payment plan for Hethes delay
                   costs. Ultimately, Helix claimed APCO owed $134,724.68 for Helix's delay
                   costs.
                              APCO did not pay Helix's delay costs, and Helix filed the
                   underlying complaint. The district court ruled in favor of Helix after a
                   three-day bench trial, finding that APCO breached the covenant of good
                   faith and fair dealing by not including Helix's delay damages claim as part
                   of APCO's own claim to CNLV and thereafter settling its own claim with
                   CNLV without notifying Helix. Notably, the district court found that CNLV
                   rejected Helix's claims because APCO did not include Helix's claim under
                   its own claim and that APCO waived and released Helix's claim by settling
                   with CNLV. The court further found that under NRS 338.490, the waiver
                   Helix signed applied to retention only and not to Helix's claim for delay

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                   damages. The district court awarded Helix $43,992.39 in delay damages
                   and $1,960.85 in interest along with attorney fees. APCO appeals.
                                                  DISCUSSION
                               The primary issue before us on appeal is whether the district
                   court erroneously found Helix was entitled to damages. In addressing this
                   question, we consider, first, whether Helix properly received delay damages
                   pursuant to the covenant of good faith and fair dealing and the subcontract
                   and, second, whether the conditional release and waiver Helix signed
                   precludes it from receiving delay damages from APCO.
                               We give deference to the district court's factual findings and will
                   uphold them so long as they are not clearly erroneous and are supported by
                   substantial evidence. Weddell v. H20, Inc., 128 Nev. 94, 101, 271 P.3d 743,
                   748 (2012). "Substantial evidence is evidence that a reasonable mind might
                   accept as adequate to support a conclusion." Id. (quoting Whitemaine v.
                   Aniskovich, 124 Nev. 302, 308, 183 P.3d 137, 141 (2008)). We review issues
                   of statutory and contractual interpretation de novo. Id.
                   The covenant of good faith and fair dealing allows for Helix to receive delay
                   damages
                               APCO argues that the district court erred by applying the
                   covenant of good faith and fair dealing here because APCO and Helix's
                   subcontract limits Helix's remedy to an extension of time and the court
                   found that this provision was enforceable. APCO further argues that by
                   applying the covenant of good faith and fair dealing, the district court
                   effectively modified or superseded the subcontract's provisions and
                   frustrated the parties reasonable expectations under the contract for
                   monetary damages. APCO contends that substantial evidence does not

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support the district court's finding that it breached the covenant of good
faith and fair dealing.2 We disagree with APCO on all points.
            We interpret contracts by "discern [ing] the intent of the
contracting parties" and employing "Kkaditional rules of contract
interpretation." Am. First Fed. Credit Union v. Soro, 131 Nev. 737, 739, 359
P.3d 105, 106 (2015) (quoting Davis v. Beling, 128 Nev. 301, 321, 278 P.3d
501, 515 (2012)). If "the language of the contract is clear and unambiguous,"
we will enforce the contract as written. Id. (internal quotation marks
omitted).
            "[A]n implied covenant of good faith and fair dealing exists in
all contracts." A.C. Shaw Constr., Inc. v. Washoe County, 105 Nev. 913, 914,
784 P.2d 9, 10 (1989). A plaintiff can recover damages for breach of the
covenant of good faith and fair dealing "[e]ven if a defendant does not breach
the express terms of a contract." State, Dep't of Transp. v. Eighth Judicial
Dist. Court, 133 Nev. 549, 555, 402 P.3d 677, 683 (2017). The covenant of
good faith and fair dealing "prohibits arbitrary or unfair acts by one party
that work to the disadvantage of the other." Id. (quoting Nelson v. Heer,
123 Nev. 217, 226, 163 P.3d 420, 427 (2007)). "When one party performs a
contract in a manner that is unfaithful to the purpose of the contract and
the justified expectations of the other party are thus denied, damages may
be awarded against the party who does not act in good faith." Hilton Hotels
Corp. v. Butch Lewis Prods., Inc., 107 Nev. 226, 234, 808 P.2d 919, 923

      2APCO   also argues that Helix failed to prove the delay increased its
costs and damaged Helix and that Helix is not entitled to attorney fees.
After carefully reviewing the record, we conclude substantial evidence
supports the district court's finding that Helix suffered damages from the
delay. And we are not persuaded by APCO's arguments against the
attorney fees award.

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(1991). Reasonable expectations are "determined by the various factors and
special circumstances that shape these expectations." Id. at 234, 808 P.2d
at 924.
            As an initial matter, we conclude substantial evidence supports
the district court's finding that APCO breached the covenant of good faith
and fair dealing. When APCO settled with CNLV, APCO acted contrary to
the spirit and purpose of its subcontract with Helix by keeping its claim
separate from Helix's claim and failing to preserve Helix's claim where
CNLV would only accept claims from APCO and not from Helix.3 APCO
entered into a settlement agreement with CNLV without Hethes knowledge
and waived all claims arising from the project delay, including Helix's delay
costs. Moreover, APCO misrepresented to Helix the reasons for CNLVs
rejection of Helix's claim, telling Helix the rejection was due to a lack of
backup information when CNLV rejected the claim because it did not have
a contract with Helix. APCO also resubmitted Helix's delay claim after
Helix provided APCO with more backup information despite already
knowing CNLV rejected Helix's claim for a different reason. Accordingly,
the district court did not err in finding APCO breached the covenant of good
faith and fair dealing.
            We next address whether the APCO-Helix subcontract
prohibited the district court from finding APCO breached the covenant and
is liable for Helix's delay damages. Courts "should not rewrite contract

      3APCO's   reliance on Nelson v. Heer is misplaced because that case
dealt with a seller's duty to disclose certain conditions on the property and
that duty was limited by statute. 123 Nev. 217, 227, 163 P.3d 420, 427
(2007). Here, APCO does not point to any statute that would similarly limit
its duty as the contractor to take steps for its subcontractors to receive
payment.

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provisions that are otherwise unambiguous . . . [ ]or . . attempt to increase
the legal obligations of the parties where the parties intentionally limited
such obligations." Senteney v. Fire Ins. Exch., 101 Nev. 654, 656-57, 707
P.2d 1149, 1150-51 (1985) (deciding a person in a motor vehicle accident
could not recover from the motorcycle owner's homeowner insurance
company where the homeowner's policy expressly excluded coverage for
motor vehicle incidents).
            The language in the APCO-Helix subcontract, read as a whole,
supports the district court's decision. We acknowledge, as APCO points out,
that under section 6.5 of the subcontract, Hethes exclusive remedy for most
delays was an extension of time. Nevertheless, section 6.3 provides an
exception wherein Helix may obtain extra compensation from APCO for
delays if "specifically agreed to in writing by [APCO] and [CNLV] and paid
for by [CNLV]." Here, Helix notified APCO that it reserved the right to
receive payment for the additional costs incurred due to the delay, and in
response, APCO agreed to submit Helix's claim to CNLV. But APCO did
not properly submit Helix's claim to CNLV and thereby prevented Helix
from receiving extra compensation under section 6.3. Further, section 6.1
of the addendum requires APCO to make available to Helix "all
information . . . that affects [Hethes] ability to meet its obligations under
the subcontract . . . [including] information relating to . . delays [ancl]
modifications to [APCO's] agreement with [CNLV] . . . ." Yet the record
demonstrates that APCO misled Helix into believing CNLVs denial was
based on the lack of detail in Helix's claims. Therefore, APCO performed
the subcontract in a manner that was unfaithful to its purpose, and the
district court did not err by applying the covenant of good faith and fair
dealing.

                                     8
The conditional release and waiver Helix signed does not preclude it from
receiving delay damages from APCO
            APCO argues the district court misapplied NRS 338.490 and
erred by not enforcing the release and waiver Helix signed to receive its
retention payment.4 We disagree.
            If the meaning of a statute is clear on its face, then this court
does not look beyond the statutes language. Zohar v. Zbiegien, 130 Nev.
733, 737, 334 P.3d 402, 405 (2014). NRS 338.490 provides,
            Any release or waiver required to be provided by a
            contractor, subcontractor or supplier to receive a
            progress payment or retainage payment must be:
                  1. Conditional for the purpose of receiving
            payment and shall be deemed to become
            unconditional upon the receipt of the money due to
            the contractor, subcontractor or supplier; and
                  2. Limited to claims related to the invoiced
            amount of the labor, materials, equipment or
            supplies that are the subject of the progress bill or
            retainage bill.
(Emphases added.)
            APCO does not dispute that this statute applies; instead, it
argues the release, which covered the "final payment to the undersigned for
all work" on the project, confirmed that no outstanding claims remained
and, therefore, Helix was barred from pursuing its later claims. The plain
language of NRS 338.490, however, limits any waiver or release to the
claimed costs that are the subject of the progress or retainage bill, and we

      4We  are not persuaded by APCO's argument that Helix waived its
delay claim where the record shows Helix submitted change order requests
to APCO twice for its delay costs, provided more backup information for
those costs upon APCO's request, and sent emails and letters to APCO
confirming its intent to reserve the right to seek delay damages.

                                     9
                 must enforce the statute as written. See In re George J., 128 Nev. 345, 349,
                 279 P.3d 187, 190 (2012). Here, the subject of the release is the retention
                 payment for the work completed prior to the delay costs, and the release is
                 therefore limited to that payment. Moreover, Helix has never received its
                 delay costs, so it follows that APCO never withheld a retention amount from
                 those costs and Helix could therefore pursue a claim for those delay costs
                 that were not contemplated by the waiver. Accordingly, we conclude that
                 under NRS 338.490, the waiver Helix signed does not preclude it from
                 receiving delay damages from APO:J.5
                                               CONCLUSION
                              We affirm the district court's decision. The covenant of good
                 faith and fair dealing applies, and APCO breached the covenant of good
                 faith and fair dealing by misrepresenting the reasons for CNLV's rejection
                 of Helix's delay costs and by settling with CNLV, which effectively waived
                 Helix's claims. And Helix did not waive its delay claims by signing a
                 conditional waiver because NRS 338.490 limits that waiver to claims
                 concerning the subject of the retainage bill.

                                                                                ,   J.
                                                      Silver
                 We concur:

                                                 J.
                 Cadish

                       5We have carefully considered the remaining arguments and conclude
                 they are without merit.
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