Court Opinion

ID: 1043987
Source: CourtListenerOpinion
Date Created: 2013-10-08 01:24:45.529989+00
Date Added: 2024-06-11T13:02:27.949776
License: Public Domain

IN THE SUPREME COURT OF TENNESSEE
                            AT KNOXVILLE
                               September 1, 2011 Session

              RAY BELL CONSTRUCTION COMPANY, INC.
                                v.
                       STATE OF TENNESSEE,
            TENNESSEE DEPARTMENT OF TRANSPORTATION

          Appeal by Permission from the Court of Appeals, Eastern Section
                          Tennessee Claims Commission
               No. T200712151     William O. Shults, Commissioner

               No. E2009-01803-SC-R11-CV - Filed December 12, 2011

A construction company entered into a contract with the State of Tennessee to restructure an
interstate interchange. The contract provides that the contract completion date “may be
extended in accordance with the Standard Specifications, however, no incentive payment will
be made if work is not completed in its entirety by December 15, 2006.” The Claims
Commission found that the contract contained a latent ambiguity requiring extrinsic evidence
to interpret the contract. The Claims Commission considered extrinsic evidence and
concluded that the construction company was entitled to the maximum incentive payment and
an extension of the contract completion date. A divided Court of Appeals affirmed the
judgment of the Claims Commission. We hold that the contract is unambiguous and does
not permit an extension of the incentive date. Accordingly, we reverse the Court of Appeals
and remand to the Claims Commission for modification of the final judgment.

                      Tenn. R. App. P. 11 Appeal by Permission;
                      Judgment of the Court of Appeals Reversed

J ANICE M. H OLDER, J., delivered the opinion of the Court, in which C ORNELIA A. C LARK,
C.J., and G ARY R. W ADE, W ILLIAM C. K OCH, J R., and S HARON G. L EE, JJ., joined.

Robert E. Cooper, Jr., Attorney General and Reporter; Joseph F. Whalen, Associate Solicitor
General; Melissa Ann Brodhag, Assistant Attorney General, for the appellant, State of
Tennessee, Tennessee Department of Transportation.
Craig N. Mangum, Matthew J. DeVries (at the Court of Appeals), Gregory Lee Cashion, and
Donald Capparella, Nashville, Tennessee, for the appellee, Ray Bell Construction Company,
Inc.

                                        OPINION

                             I. Facts and Procedural History

       Ray Bell Construction Company (“Ray Bell”) entered into a contract on May 28,
2003, with the Tennessee Department of Transportation (“TDOT”) to reconstruct the I-240
and I-40 interchange located in Memphis, Tennessee. Construction began on June 18, 2003,
and was to be completed on or before December 15, 2006. The contract between Ray Bell
and TDOT contained a provision that included both an incentive clause and a disincentive
clause. The incentive clause provided Ray Bell a bonus if the contract work was completed
on or before December 15, 2006. The disincentive clause provided a penalty for every day
contract work remained incomplete after December 15, 2006.

        The contract also provided for an extension of the completion date when work delays
were caused by events outside the contractor’s control. During construction, Ray Bell
encountered delays due to bridge closings by TDOT and other events beyond Ray Bell’s
control. Ray Bell sought to extend the completion date of the contract to accommodate these
delays.

      Ray Bell first requested a 289-day extension of the contract completion date. In
response to Ray Bell’s request, TDOT proposed Supplemental Agreement 24, which would
have extended the completion date and the disincentive date of the original contract by 137
calendar days to May 1, 2007. Ray Bell refused to execute the supplemental agreement,
however, because the agreement stated that the incentive date would remain December 15,
2006.

       Ray Bell notified the TDOT Engineer that it considered the contract work
substantially complete. The Engineer inspected the project site and determined that the
contract had been satisfactorily completed on December 17, 2006.

        Following the completion of the contract, Ray Bell requested a 362-day extension of
the completion date, the disincentive date, and the incentive date. TDOT again responded
that it would grant a 137-day extension as to both the completion and disincentive dates but
that the incentive date would remain December 15, 2006.

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       Ray Bell filed a complaint in the Tennessee Claims Commission alleging that TDOT
had breached the contract by refusing to grant an appropriate time extension of the
completion date, the disincentive date, and the incentive date. Ray Bell specifically sought
an extension of the contract incentive date and the maximum award of $2,500,000 based on
the language of the contract. TDOT maintained in its answer that the contract was
deliberately and clearly written to allow for an extension of both the completion date and the
disincentive date but that the contract did not permit an extension of the incentive date.

       Both parties filed motions for summary judgment, which the Commissioner denied.
The Commissioner conducted a trial to determine whether Ray Bell was entitled to the
maximum incentive bonus “even though the contract was not completed by December 15,
2006, as seemingly strictly required by . . . the original contract.” The Claims Commission
found the contract contained “an egregious ambiguity” that required extrinsic evidence to
interpret the contract. The Claims Commission considered extrinsic evidence and found that
Ray Bell was entitled to the maximum incentive payment and to an extension of the
completion date, the disincentive date, and the incentive date. The Claims Commission
entered a judgment in favor of Ray Bell for $2,948,696.77.1 A divided Court of Appeals
affirmed the judgment of the Claims Commission.2 Ray Bell Const. Co. v. Tenn. Dep’t of
Transp., No. E2009-01803-COA-R3-CV, 2010 WL 4810670, at *15 (Tenn. Ct. App. Nov.
24, 2010). We granted TDOT permission to appeal.

                                               II. Analysis

       In interpreting a written contract, we review a written agreement de novo without
affording any presumption of correctness to the lower court’s conclusions of law. Allstate
Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn. 2006). This Court’s initial task is to
determine whether the language in the contract is ambiguous. Planters Gin Co. v. Fed.
Compress & Warehouse Co., 78 S.W.3d 885, 890 (Tenn. 2002). If the contract language is
unambiguous, then the parties’ intent is determined from the four corners of the contract.
See Whitehaven Cmty. Baptist Church v. Holloway, 973 S.W.2d 592, 596 (Tenn. 1998).

        1
          The judgment amount included: $2,500,000 for the incentive bonus, based on 250 days at $10,000
per day; $173,618.50 in prejudgment interest on the incentive bonus for the periods of April 7, 2007, through
January 30, 2009, and June 8, 2009, through July 31, 2009; $193,800 for the return of liquidated damages
and disincentive payments previously withheld by TDOT; $13,458.91 in prejudgment interest on the
liquidated damages and disincentive payments for the periods listed above; and $67,819.36 for unpaid
supplemental agreements and quantity adjustments.
        2
          Judge D. Michael Swiney filed a dissenting opinion. Ray Bell Const. Co. v. Tenn. Dep’t of
Transp., No. E2009-01803-COA-R3-CV, 2010 WL 4810670, at *44-*49 (Tenn. Ct. App. Nov. 24, 2010).

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       The Claims Commission found that the contract between Ray Bell and TDOT
contained a latent ambiguity when several contract provisions were read together. The
provisions at issue were Special Provision 108B (the “Completion Provision”), which
contains an incentive clause and a disincentive clause, and Standard Specification 108.06 (the
“Extension Provision”), which addresses the extension of the completion date of the contract.

       With respect to the incentive date, the Completion Provision provides:

       For each calendar day prior to December 15, 2006, that all work in the original
       contract has been completed and all lanes are opened to the free, safe and
       unrestricted passage of traffic, an incentive payment of ten thousand dollars
       ($10,000) per day shall be made to the contractor as an incentive. However,
       the maximum amount of incentive payments shall not exceed two million five
       hundred thousand dollars ($2,500,000).

The Completion Provision’s disincentive clause provides:

       For each day after December 15, 2006, that all work in the original contract is
       not completed, the sum of ten thousand dollars ($10,000) per day shall be
       deducted from monies due the Contractor as a disincentive. The amount of
       monies that may be deducted as a disincentive shall be unlimited except that
       the disincentive may be waived if the working time is extended in accordance
       with the Standard Specifications.

       . . . . The December 15, 2006, completion date may be extended in accordance
       with the Standard Specifications, however, no incentive payment will be made
       if work is not completed in its entirety by December 15, 2006.

(Emphasis added).

       The Extension Provision, which governs possible extension of the contract completion
date, provides in pertinent part:

       If the Contractor finds it impossible for reasons beyond his control to complete
       the Work within the contract time as specified or as extended in accordance
       with the provisions of this Subsection, he may, at any time prior to the
       expiration of the contract time specified or as extended, make a written request
       to the Engineer for an extension of time setting forth therein the reasons which
       he believes will justify the granting of his request. The Contractor’s plea that
       insufficient time was specified is not a valid reason for extension of time. If

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       the Engineer finds that the Work was delayed because of conditions beyond
       the control and without the fault of the contractor, he may extend the time for
       completion by a properly executed Supplemental Agreement in such amount
       as the conditions justify. The extended time for completion shall then be in
       full force and effect the same as though it were the original time for
       completion.

       The contract also contains an “Order of Precedence” clause that states “[i]n case of
discrepancy . . . , Special Provisions will govern over both [Contract] Plans and [Standard]
Specifications.”

        We find the above provisions to be unambiguous. The contract’s Order of Precedence
clause dictates which provision must prevail when several provisions are at issue. Applying
the Order of Precedence clause, the Completion Provision containing the incentive and
disincentive clauses is a Special Provision and governs over the Extension Provision, which
is a Standard Specification. Recognizing that the Completion Provision is controlling, we
must next consider the plain language of the contract provisions.

       The extension of the incentive date is governed by the language of the Completion
Provision. The first paragraph of the Completion Provision, the incentive clause, allows an
incentive bonus for every day prior to December 15, 2006, that “all work in the original
contract has been completed and all lanes are opened to the free, safe and unrestricted
passage of traffic.” The second paragraph of the Completion Provision, the disincentive
clause, imposes a penalty for every day that the contract work remains incomplete after
December 15, 2006. The second paragraph also states, however, that TDOT may waive the
disincentive “if the working time is extended in accordance with the Standard Specifications”
for reasons beyond the contractor’s control. There is no corresponding provision in the
incentive clause permitting TDOT to extend the incentive date due to reasons beyond the
contractor’s control. TDOT’s offer to extend only the completion and disincentive dates by
137 days therefore was consistent with the language of the Completion Provision.

       The third paragraph of the Completion Provision serves to emphasize the distinction
between the incentive bonus and the disincentive penalty. It states that although the
“completion date may be extended in accordance with the Standard Specifications . . . , no
incentive payment will be made if work is not completed in its entirety by December 15,
2006.” This provision is unambiguous. Even if the completion date is extended due to
circumstances beyond the contractor’s control, no incentive payments are due if the contract
was completed after December 15, 2006. When the contract language is unambiguous it is
the duty of the courts to interpret the contract according to its plain terms. Maggart v.

                                             -5-
Almany Realtors, Inc., 259 S.W.3d 700, 704 (Tenn. 2008). TDOT’s refusal to extend the
incentive date beyond December 15, 2006, was therefore consistent with the contract.

       As construed above, the Completion Provision does not serve to render the Extension
Provision meaningless or superfluous when the two are read together. Maggart, 259 S.W.3d
at 704 (stating that courts should interpret a contract such that no portion is rendered
meaningless). The Extension Provision allows for the extension of both the contract
completion date and the disincentive date if the Engineer finds that the circumstances warrant
an extension due to events beyond the control of the contractor. The Completion Provision,
however, does not permit the award of an incentive payment unless all work is completed on
or before December 15, 2006. This language is not reasonably subject to another
interpretation. See Maggart, 259 S.W.3d at 704.

        Finding that the contract is unambiguous, we must determine the date of completion
of the contract. The Claims Commission implicitly held that the contract was not completed
by December 15, 2006. The evidence does not preponderate against the Claims
Commission’s determination. Ray Bell therefore is not entitled to an incentive bonus.
TDOT has not appealed the Claims Commission’s finding that the contract completion date
should be extended by at least 250 days. Ray Bell therefore is not subject to any disincentive
penalty. We reverse the Claims Commission’s award of an incentive bonus in the amount
of $2,500,000 and the related $173,618.50 in prejudgment interest. We remand this case to
the Claims Commission to enter judgment in favor of Ray Bell for liquidated damages and
disincentive payments previously withheld by TDOT, prejudgment interest on those amounts,
unpaid supplemental agreements and quantity adjustments, and for other proceedings
consistent with this opinion.

                                      III. Conclusion

      We reverse the Court of Appeals and remand this case to the Claims Commission for
modification of the final judgment. Costs of this appeal are taxed to the appellee, Ray Bell
Construction Co., for which execution may issue, if necessary.

                                                   _________________________________
                                                   JANICE M. HOLDER, JUSTICE

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