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Total Industrial Plant Services v. Turner Industries Group

January 15, 2013

TOTAL INDUSTRIAL PLANT SERVICES, INC., AN OKLAHOMA CORPORATION, PLAINTIFF, APPELLANT, AND CROSS-APPELLEE,
v.
TURNER INDUSTRIES GROUP, LLC., A LOUISIANA LIMITED LIABILITY COMPANY; CHS, INC., A MINNESOTA CORPORATION; AND FIDELITY AND DEPOSIT COMPANY OF MARYLAND, A MARYLAND CORPORATION, DEFENDANTS AND APPELLEES, AND CROSS-APPELLANTS.



APPEAL FROM: District Court of the Thirteenth Judicial District, In and For the County of Yellowstone, Cause No. DV 09-1688 Honorable Gregory R. Todd, Presiding Judge

The opinion of the court was delivered by: Michael E Wheat

COUNSEL OF RECORD:

Submitted on Briefs: October 10, 2012

Decided: January 15, 2013

Filed:

Clerk

Justice Michael E Wheat delivered the Opinion of the Court.

¶1 Total Industrial Plant Services, Inc. ("TIPS"), appeals the District Court's entry of judgment in favor of defendants Turner Industries Group, LLC ("Turner"), and Fidelity and Deposit Company of Maryland ("Fidelity"), dismissing TIPS's claims for additional compensation under either quantum meruit or breach of contract, awarding fees and costs to Turner, and finding TIPS's construction lien time barred by operation of § 71-3-535, MCA. Turner cross-appeals, arguing the District Court erred both by granting TIPS partial summary judgment on the return of retainage and by dismissing Turner's bill of costs as being untimely filed.

ISSUES

¶2 We restate the issues on appeal as follows:

¶3 1. Did the District Court err by denying TIPS's claim for additional compensation under a theory of either quantum meruit or breach of contract?

¶4 2. Did the District Court err by failing to find that TIPS was the prevailing party and awarding costs and fees to Turner?

¶5 3. Did the District Court err by finding TIPS's construction lien was barred by the 90-day statute of limitations found in § 71-3-535, MCA?

¶6 4. Did the District Court err by granting partial summary judgment to TIPS and ordering Turner to return the retainage?

¶7 5. Did the District Court err by dismissing Turner's bill of costs for being untimely filed pursuant to § 25-10-501, MCA?

FACTUAL AND PROCEDURAL BACKGROUND

¶8 This appeal stems from a construction contract dispute between TIPS, an Oklahoma corporation, and Turner, a limited liability company formed in Louisiana. Fidelity and Deposit Company of Maryland ("Fidelity") is the surety for Turner's substitution bond filed in November of 2008 in lieu of TIPS's construction lien.

¶9 Turner entered into a written subcontract with TIPS to install insulation at a "coker" unit at a refinery in Laurel, Montana, on April 14, 2007. Turner also entered into two other subcontracts with TIPS for fireproofing and painting the coker, neither of which is at issue. Cenex Harvest States ("CHS") owns the refinery and hired Turner to act as the general contractor on the coker project. The initial subcontract between Turner and TIPS was to be paid as a fixed price totaling $2,336,967.00, with payment rendered by percentage of completion. The subcontract further provided that TIPS was responsible for the costs of all labor, services, and materials.

¶10 The original subcontract contemplated a start date in May of 2007 and a completion date of December 31, 2007. While TIPS began work fireproofing structural steel in May, Turner did not release TIPS to start insulating until October of 2007. It soon became apparent that TIPS would not meet the completion date. Both sides acknowledge that this was due to delays in the work of other subcontractors, a harsh winter, a change in insulation material, and an inability to obtain pipe and cable following Hurricane Katrina. Specifically, TIPS testified at trial that the cold weather reduced productivity because workers would periodically take breaks to warm in tents, and Turner also requested that TIPS not insulate welds on the piping to accommodate hydrostatic pressure testing that had run behind schedule. TIPS could thereafter only insulate straight-run piping in the first pass and had to leave the welded sections of pipe without insulation, returning to finish the job once the welds were tested. In response to the increasing delays, Turner repeatedly requested that TIPS increase the number of workers on the job.

¶11 The subcontract did address how the parties were to deal with delays, changes to the scope of work, jobsite conditions, and the costs of "manning up." The recitals provided that "SUBCONTRACTOR shall furnish and pay for all labor, services and/or materials and perform all the work necessary or incidentally required for the completion of" the project. Section 7.2 directed that TIPS was to supply "a sufficient number of properly qualified workers" to perform the work "efficiently and promptly." Section 11.2 stated that TIPS was to "take all measures necessary to eliminate . . . delays," including hiring extra personnel, "at no cost" to Turner or CHS. Section 10 allowed Turner to make alterations to the scope of work and required TIPS to submit written change orders to cover any additional costs or time extensions that resulted. Moreover, Section 3 required TIPS to assume responsibility for unanticipated costs stemming from the location of the project and general and local conditions.

¶12 Despite these provisions, TIPS claimed that Turner's requested changes resulted in inefficiencies and extra costs not covered by the original fixed price subcontract and not paid for after the switch to time and materials. As noted, Section 10 specifically addressed how the parties were to handle Turner's requested changes to the project, and required TIPS to submit written change orders describing the nature and cost of the extra work. TIPS did submit a number of change orders following some of Turner's requests, and uncontested testimony at trial established that Turner paid every change order that TIPS submitted.

Indeed, the parties had agreed that TIPS would have to submit a change order to cover the additional costs stemming from leaving welds without insulation. Whether TIPS submitted written change orders to cover the requested changes and increased costs was contested, however, and TIPS has instead argued that Turner made oral promises of compensation that obviated the need for written change orders.

¶13 Turner and TIPS also agreed to several increases in the compensation paid to TIPS, eventually revising the subcontract five times to increase TIPS's pay. On January 4, 2008, Turner and TIPS agreed to a revised fixed price payment of $4,224,278.96, an increase of $1,887,311.96 over the original subcontract. This increase consisted of $38,300.00 for extra insulation, $1,460,756.00 for work approved over the original bid amount, $36,078.76 in additional equipment, and $352,177.20 for mineral wool.

¶14 TIPS and Turner subsequently began discussing changing from fixed price payment to "time and materials" invoicing in January of 2008. TIPS sought the change to realize direct compensation for the additional manpower and work it claims Turner was requesting. CHS and Turner agreed to the change on February 6, 2008, retroactive to February 4, 2008, believing that it would incentivize TIPS to increase manpower and allow Turner to exact more control over the project. Turner also believed the change would eliminate issues concerning unknown extra costs, remove the need for future payment negotiations, and potentially preclude a claim by TIPS over compensation.

¶15 TIPS began to submit invoices based on time and materials costs on February 4, 2008. At that time, Turner calculated that TIPS had completed 47% of the insulation project under the fixed price subcontract. TIPS contested this calculation and payment, and also argued that it has not been compensated for losses it suffered from inefficiencies that resulted from Turner's requests.

¶16 Thereafter, on March 10, 2008, a second revision increased payment to TIPS to $7,000,000.00. This increase included payment of $94,685.00 for hydraulic power manifolds, $148,500.00 in filtration system materials, $347,051.90 in extra work, and $2,185,484.14 in estimated future time and materials work. This revision also incorporated a $4.00 per hour increase in the labor rate agreed to on February 13, 2008, bringing the hourly rate to $43.45. This was apparently done at TIPS's request to enable them to attract more qualified insulators.

¶17 A third revision increased TIPS's payment to $10,000,000 on April 17, 2008. This increase was based on an invoice TIPS submitted for additional work. A fourth revision on June 6, 2008, increased TIPS's pay to $13,000,000.00, and was similarly based on a TIPS invoice for work under time and materials. A final, fifth, revision on July 25, 2008, increased TIPS's payment to $13,250,000.00. It is uncontested that TIPS was paid the final revised amount, and all time and materials claims from February 4, 2008, onward have been paid.

ΒΆ18 TIPS began to claim additional compensation was owed in the spring of 2008 despite these modifications. In particular, Turner refused to pay TIPS's invoice 1895-1, which claimed a payment of $700,095.00 for "inefficiencies," and Turner thereafter left the work site on June 25, 2008. TIPS remained at CHS through July, and while the end date of TIPS's work under contract was in dispute, the parties do not dispute that TIPS completed its work under the subcontract. TIPS thereafter filed a construction lien against the CHS ...


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