Larry Morgan d/b/a Morgan Contracting v. Tellico Plains ( 2002 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
June 26, 2002 Session
LARRY MORGAN d/b/a MORGAN CONTRACTING, INC. v. TOWN OF
TELLICO PLAINS, TENNESSEE, ET AL.
Appeal from the Circuit Court for Monroe County
No. V99274P Lawrence H. Puckett, Judge
FILED OCTOBER 30, 2002
No. E2001-02733-COA-R3-CV
In this contract dispute, the Plaintiff, Morgan Contracting, Inc. (“Morgan”) sued the Town of Tellico
Plains, alleging that it was due $68,464.86 under the terms of the contract. Tellico Plains answered
with the defense that Morgan’s claim was time-barred under the sixty-day limitations period set forth
in the contract. After a non-jury trial, the Court ruled that Morgan had not filed suit within the
contractual limitations period and consequently dismissed Morgan’s cause of action. On appeal,
Morgan argues that the Trial Court erred in not finding that Tellico Plains waived its right to rely
upon the contractual limitations period provision. We affirm the judgment of the Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed; Cause
Remanded
HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which CHARLES D. SUSANO, JR.,
and D. MICHAEL SWINEY, JJ., joined.
John W. Cleveland, Sweetwater, for the Appellant, Morgan Contracting, Inc.
Wm. P. Biddle, III, Athens, for the Appellee, Town of Tellico Plains, Tennessee
OPINION
The contract at issue provided that Morgan was to install a system of water pipes for Tellico
Plains’ water system, replacing a system of pipes that was, in the words of Tellico Plains’ City
Engineer, “a patchwork quilt of small diameter lines of substandard grade materials, galvanized pipe,
old plastic pipe, old duct line and some cast iron pipes, most of which had been installed, some as
early as the early 1900's, at various times and by various people.” Morgan began work on the project
in October of 1998.
It soon became apparent that replacing the system of water pipes would be a rather
complicated matter, as it was discovered that there were no records or drawings showing the location
of the underground structures. Each of the parties took the position that the other was contractually
responsible for locating and marking the existing underground pipes. On October 13, 1998, Morgan
sent a letter to Joel Bruce Spaulding, Jr., the City Engineer, which states that “it is our position that
any additional costs incurred, due to unmarked waterlines, will need to be compensated.”
Responding to a short note sent by Mr. Spaulding which stated that the contract made it Morgan’s
responsibility to locate and mark the lines, Morgan sent a letter dated October 15, 1998 which states
as follows:
In short, we will not be held responsible for any water main, water
service, sewer main, or sewer service damage if the lines are not
marked. We will expect full compensation for the repair of such
lines. We will also expect full compensation for any downtime or
lost production due to the unmarked lines.
We feel a meeting about this conflict (A.S.A.P.) would be
advantageous to all parties. Please advise.
On October 16, 1998, Mr. Spaulding sent Morgan a letter which states as follows in relevant
part:
My formal decision under Section 9.11 of the General Conditions to
your October 13, 1998 and October 15, 1998 notices is that the
Contract Drawings clearly indicate that the Contractor is responsible
for locating the existing underground utilities.
The location of the existing utilities and other obstacles as well as any
incidental repairs to same are an essential work element of the
Contract.
* * *
As this is an essential element of the Contract, there is no basis for
additional compensation nor will the Town relieve you of your duties
and responsibilities under the Contract.
Morgan continued to work on the project, locating and marking the water lines as best it could, after
receipt of this letter.
On March 9, 1999, Mr. Spaulding sent a letter advising Morgan as follows:
The Town has requested that we delete the paving work from your
contract with the exception of the work performed to date. They have
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elected to perform the work with their own forces and requested that
I notify you of same.
The contract anticipated that Morgan would pave 10,000 square yards for Tellico Plains. At the time
Morgan received this letter, it had completed paving only 424.78 yards. Subsequently, Morgan filed
with the Town a claim for 10% overhead and 5% profit on the 9,575.22 square yards of paving work
which Tellico Plains deleted from the contract.
On March 15, 1999, Morgan’s attorney sent a letter to Mr. Spaulding and Tellico Plains’
attorney, which states as follows in relevant part:
I am advising my clients, Morgan Contracting, Inc., that they may
complete the job in the Town of Tellico Plains and keep a record of
all costs associated with the slow downs, stops, repairs, and down
time that are caused by the City of Tellico Plains’ inability to mark
the underground utilities in their city.
It is in my best legal opinion that Morgan Contracting, Inc. is entitled
to compensation for the loss of time and down-time as a result of the
City of Tellico Plains’ inability to mark utilities. . .Therefore, I have
advised my clients to serve upon the Town of Tellico Plains a bill for
all additional costs which currently is running over Forty Thousand
($40,000) Dollars and additional costs are being accrued daily.
Tellico Plains’ attorney responded to this letter by sending the following letter, dated March
17, 1999, which forms the basis for Morgan’s waiver argument:
This will acknowledge receipt of your letter of March 15, 1999. We
do not agree with the legal observations and conclusions made
therein. Morgan can make whatever claim Morgan desires in regard
to additional compensation and that will be addressed in accordance
with the contract documents by the Town of Tellico Plains at such
time as the contract by Morgan is completed based upon the
obligations of the parties under the contract.
The Town of Tellico Plains is not accepting any liability for cost
incurred by Morgan Contracting, Inc. resulting from the contractor’s
damage to existing water lines, but recognize the right that Morgan
has to claim additional compensation.
On May 10, 1999, Mr. Spaulding sent a letter to Morgan which states in relevant part as
follows:
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The following represents my formal decision as ENGINEER as
provided in the General Conditions Article 9.11 in response to the
“Summary of Charges”, i.e., your requests for additional
compensation under the above referenced contract as presented in our
April 28, 1999 meeting.
* * *
As regards your claims totaling $39,901.93 for marking unmarked
water lines and repairing unmarked water lines, my decision remains
the same as my previous decision to the contrary stated in detail in my
October 16, 1998 letter. Based on the same reasons outlined in my
October 16, 1998 letter, I can not approve your request for additional
reimbursement for marking and/or repairing unmarked water lines.
As regards your claim for 5% overhead and 10% profit1 for the
deletion of 9,575.22 square yards of pavement repair at $10.00 per
S.Y. (which I calculate as a claim of $14,362.83), I can find no basis
in the CONTRACT DOCUMENTS to support this claim.
Morgan filed the instant action on October 5, 1999, alleging that it was due the lost overhead
and profits from the deleted paving work, and also reimbursement for the expenses it incurred due
to the inability to locate and mark the water lines. Tellico Plains responded, alleging, inter alia, that
the contract did not support Morgan’s claims and that Morgan had failed to comply with the
following provision of the contract:
Decisions on Disputes:
9.11. ENGINEER will be the initial interpreter of the requirements
of the Contract Documents and judge of the acceptability of the work
thereunder. Claims, disputes and other matters relating to the
acceptability of the Work or the interpretation of the requirements of
the Contract Documents pertaining to the performance and furnishing
of the Work and Claims under Articles 11 and 12 in respect of
changes in the Contract Price or Contract Times will be referred
initially to ENGINEER in writing with a request for a formal decision
in accordance with this paragraph. . .ENGINEER’s written decision
on such claim, dispute or other matter will be final and binding upon
OWNER and CONTRACTOR unless:. . .a written notice of intention
to appeal from ENGINEER’s written decision is delivered by
OWNER or CONTRACTOR to the other and to ENGINEER within
thirty days after the date of such decision and a formal proceeding is
1
Morgan’s claim actually was for 10% overhead and 5% profit, as previously noted.
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instituted by the appealing party in a forum of competent jurisdiction
to exercise such rights and remedies as the appealing party may have
with respect to such claim, dispute or other matter in accordance with
applicable Laws and Regulations within sixty days of the date of such
decision, unless otherwise agreed in writing by OWNER and
CONTRACTOR.
Tellico Plains asserted that Morgan did not send it a written notice of intention to appeal Mr.
Spaulding’s decision within thirty days, nor did Morgan file suit within the sixty days required by
the above-cited Article 9.11 of the contract. Morgan argued at trial that Tellico Plains’ letter of
March 17, 1999, which states that “Morgan can make whatever claim Morgan desires in regard to
additional compensation and that will be addressed in accordance with the contract documents by
the Town of Tellico Plains at such time as the contract by Morgan is completed based upon the
obligations of the parties under the contract,” constituted a waiver by Tellico Plains of Article 9.11
of the contract.
The Trial Court held that Tellico Plains’ March 17, 1999 letter was not “a complete waiver.”
The Court stated that “I do think it was a waiver of the original. . .October 16 [1998] letter and
decision. Because it extended the time for claims to be made to the time of completion.” The Court
made additional findings as follows:
The way the Court understands the proof, the work had been
completed when on May the 10th, 1999, the final decision of the
engineer was made about the additional compensation claims. At that
point it was incumbent under the contract for Morgan to file a notice
of disagreement within thirty days and file suit within sixty days.
The Court consequently dismissed Morgan’s action as time-barred under the sixty-day contractual
limitations period.
On appeal, Morgan raises the issue, which we restate, of whether the Trial Court erred in
failing to hold that Tellico Plains had waived its right to rely on the contractual limitations period
contained in Article 9.11.
This is a non-jury case and, accordingly, our review is de novo upon the record of the
proceedings below. A trial court's conclusions of law carry no presumption of correctness.
Campbell v. Florida Steel Corp., 919 S.W.2d 26 (Tenn.1996). There is, however, a presumption of
correctness as to a trial court’s findings of fact and that presumption must be honored absent
evidence which preponderates to the contrary. Tenn.R.App.P. 13(d) and Union Carbide Corp. v.
Huddleston, 854 S.W.2d 87 (Tenn.1993).
We initially note that “it is a well established general rule that in the absence of a prohibitory
statute, a contract provision is valid which limits the time for bringing suit, if a reasonable period
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of time is provided, and that the general statutes of limitations are not prohibitory of such contractual
provisions as between private individuals or corporations.” State v. Evans, 334 S.W.2d 337
(Tenn.Ct.App. 1959).
We agree with the Trial Court that the March 17, 1999 letter from Tellico Plains’ attorney
was not an express waiver. As we have recently noted in Collins v. Summers Hardware and Supply
Co., an unreported opinion of this Court filed in Knoxville on March 27, 2002,
A waiver is an intentional relinquishment of a known right and is a
doctrine of very broad and general application. It concedes a right,
but assumes a voluntary relinquishment of it. Our courts have held
that there must be clear, unequivocal and decisive acts of the party of
an act which shows determination not to have the benefit intended in
order to constitute a waiver.
(Quoting Gitter v. Tennessee Farmers Mut. Ins. Co., 450 S.W.2d 780, 784 (Tenn.Ct.App.1969)).
As the Trial Court noted, the letter twice affirms the obligations of the contract, stating that “Morgan
can make whatever claim Morgan desires. . .and that will be addressed in accordance with the
contract documents by the Town of Tellico Plains at such time as the contract is completed based
upon the obligations of the parties under the contract.” (Emphasis added). We are not of the opinion
that the language of the March 17, 1999 letter could reasonably be construed as a clear, unequivocal
and decisive relinquishment of Tellico Plains’ right to rely on the contractual limitations provision.
Although the Trial Court spoke in terms of “waiver,” its holding in effect was that Tellico
Plains was equitably estopped from asserting the contractual limitation period until, in the words of
the letter, “such time as the contract is completed.” Our Supreme Court has recently discussed the
concept of equitable estoppel, “which tolls the running of the statute of limitations where the
defendant has ‘misled the plaintiff into failing to file [his] action within the statutory period of
limitations.’” Fahrner v. SW Manufacturing, Inc., 48 S.W.3d 141 (Tenn. 2001)(bracketed material
in original). Although the Fahrner court dealt with a statutory limitations period, we believe the
equitable principles discussed in that case are equally applicable in a situation where the parties have
contractually agreed upon a limitations period.
The Fahrner court held as follows:
Having held that the discovery rule and equitable estoppel are
different, we must now decide how long the statute of limitations is
tolled when a plaintiff successfully invokes the latter. The answer is
clear: the tolling period equals the amount of time the defendant
misled the plaintiff.
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Fahrner, 48 S.W.3d at 146. In the present case, we agree with the Trial Court’s finding that
although the March 17, 1999 letter was not an express waiver, it could fairly be construed as
misleading Morgan into believing that Tellico Plains would not assert the limitations defense until
“such time as the contract was completed.”
The Trial Court found that the contract was completed on May 10, 1999, the date on which
Mr. Spaulding mailed the final adjusting change order, and his formal decision denying additional
compensation under the contract, to Morgan. The evidence does not preponderate against this
finding. It is undisputed that Morgan did not deliver to Tellico Plains or Mr. Spaulding a written
notice of intention to appeal Mr. Spaulding’s May 10 formal decision, as required by Article 9.11
of the contract. Morgan filed suit on October 5, 1999, well beyond the sixty days allowed by the
contract. We do note that Mr. Spaulding’s May 10 letter is clearly designated as “my formal
decision as ENGINEER” and that it makes specific reference to Article 9.11 of the contract. Based
on our review of the record and applicable law, we agree with the Trial Court’s conclusion that
Morgan’s claim is time-barred under the limitations period provision of its contract with Tellico
Plains.
For the foregoing reasons the judgment of the Trial Court is affirmed and the cause remanded
for collection of costs below. Costs of appeal are adjudged against Morgan Contracting, Inc. and
its surety.
_________________________________________
HOUSTON M. GODDARD, PRESIDING JUDGE
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