KM Constr. Corp. v. Jackson Twp. Mun. Utils. Auth.

1

KM CONSTRUCTION CORP., Plaintiff, v. JACKSON TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, JOHN AND. JANE DOES, 1-10 AND ABC COMPANIES, 1-10, Defendant(s).

Civil Action No. OCN-L-3426-17

Superior Court of New Jersey, Appellate Division, Law Division

March 10, 2022

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

OPINION

CRAIG L. WELLERSON, P.J.

The plaintiff, KM Construction Corp. ("KM") is a New Jersey corporation that performs general contracting and construction throughout New Jersey. Defendant, Jackson Township Municipal Utilities Authority ("JTMUA") is a public entity created under the Municipal and County Utilities Law, N.J.S.A 40:14B-1 et seq. JTMUA solicited public bids in the spring of 2016 for a demolition and construction project involving a two million gallon water tower.

On May 12, 2016, JTMUA solicited bids for the public improvement project formally known as the Manhattan Street Complex Water Storage Improvements and Warehouse Building Project ("the project"). The proposed work called for the demolition of an abandoned water treatment plant, including a 1-million-gallon water ground storage tank and a 0.2-million-gallon elevated water storage tank. The proposed work also called for construction of new facilities including a 2-million-gallon water storage tank/standpipe and related site improvements.

KM obtained the project contract documents on or around May 20 2016, with July 14, 2016, established as the date on which the bids would be opened. JTMUA issued Addendum No. 1 on July 1, 2016, to respond to questions from bidders or otherwise clarify the wording and intent of the contract documents. KM received the Addendum on July 1, 2016, requiring the contractor (or its subcontractor) to submit design documents for the tank and the tank foundation. Addendum No. 1 dated July 1, 2016 indicates on page 4, "Tank foundation shall be designed by the tank manufacturer based on a ringwall foundation type as shown on Contract Drawing G-501. Concrete foundation /slab does not extend below the interior of the tank." Robert Laurie, the KM employee responsible for project's development, stated in his deposition that KM believed Addendum No. 1 prohibited the use of a "slab" or "mat" foundation. JTMUA's contract documents for the project (Contract Drawing G-501) specified a different, "ring wall" foundation.

KM was awarded the contract on August 25, 2016. O'Brien &amp Gere ("OBG") prepared the contract documents for the project, including specifications and drawings, although they did not design the proposed water tank. Before KM was awarded the contract, KM initially contacted Caldwell Tanks, Inc., Louisville, Kentucky, as a potential subcontractor to design the tank and its foundation. KM's bid for the project included Caldwell's pre-bid foundation design for the tank. On December 7, 2016, KM cancelled its Letter of Intent to Award to Caldwell. KM then started working with Fisher Tank Company ("Fisher"), a Chester, Pennsylvania company as a potential tank subcontractor to design the tank and foundation. KM never entered into a signed agreement with either tank manufacturing company. KM notified JTMUA that there was a problem with the contract documents and their accepted bid tank design on December 21, 2016. On February 10, 2017, KM submitted a Submittal 22 with the Fisher engineering foundation drawings. On March 16, 2017, KM and JTMUA met to discuss the project and the additional requirements JTMUA put in the comments of their submittal review. On March 17, 2017, JTMUA issued an email to KM to explain that JTMUA would review the new submittal, Submittal 22-R1, once KM had determined its direction on the project. JTMUA reached out to KM on April 20, 2017, May 2, 2017, asking if KM wanted JTMUA to review the foundation submittal. KM received a Notice of Default on June 7, 2017, including a contractual amount of time to cure the default. JTMUA returned Submittal 22-R1 on June 22, 2017. JTMUA made a claim on the performance bond with Selective Insurance ("Selective"), the surety on the project, based on KMs failure to perform. Selective's subsequent investigation resulted in Selective paying JTMUA eight hundred fifty-three thousand six hundred twelve dollars ($853, 612.00) and securing a replacement contractor for the project.

This action concerns KM Construction's claim that JTMUA terminated and enforced an out-of-sequence and untimely claim against Selective. These plaintiffs commenced an action in the Law Division alleging that JTMUA breached the contract with KM and has jeopardized KM's bonding for future jobs. The defendants counterclaim alleges that, pursuant to Article 4.24 of the General Conditions of the contract, KM is responsible for $5, 000.00 per day in liquidated damages.

In 2017, Plaintiffs instituted this action against Defendant JTMUA. In their Complaint the Plaintiffs allege that JTMUA breached its contract by improperly terminating its contract with KM. Plaintiffs also allege that JTMUA breached an implied covenant of good faith and fair dealing and have been unjustly enriched by KMs bonding company. Plaintiffs assert they have suffered financial harm as a result of Defendant's alleged breach.

JTMUA has now filed a motion for summary judgment claiming that Plaintiff cannot establish the elements of a breach of contract claim. Plaintiff has filed a cross motion for partial summary judgment asserting that Defendant's liquidated damages claim is unenforceable.

This matter comes before the court upon the motion of Defendant/Counterclaimant Jackson Township Municipal Authority seeking an Order granting summary judgment, dismissing Plaintiff's Complaint with prejudice, and awarding JTMUA over $1.1 million in liquidated damages. In addition to Orders denying Defendant's motion, Plaintiff KM Construction seeks an Order granting partial summary judgment dismissing JTMUA's claim for "liquidated damages." For the reasons set forth herein, the court DENIES the Defendants' Motions.

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). This standard requires the Court to consider the evidence presented "in the light most favorable to the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). The Court must determine whether a rational factfinder could possibly resolve the alleged dispute in favor of the non-moving party. Ibid. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202, 212 (1986)). Because the grant of summary judgment serves as a final disposition of the issues contemplated by the order, courts generally "seek to afford 'every litigant who has a bona fide cause of action or defense the opportunity for full exposure of his case.'" Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 193 (1988).

New Jersey law has established the four elements of a breach of contract claim, placing the burden on the plaintiff to prove: (1) that the parties entered into a contract containing particular terms; (2) that the plaintiff did what the contract required the plaintiff to do; (3) that the defendant did not do what the contract required the defendant to do; (4) that the defendant's breach of the contract caused a loss to the plaintiff. Globe Motor Company v. Igladev, 225. N.J. 469, 482 (2016). Each element must be proven by a preponderance of the evidence. Id. at 482; Liberty Mutual Insurance Co. v. Land, 186 N.J. 163, 169 (2006).

The parties have both acknowledged the existence of a contract as an undisputed fact in this matter. JTMUA asserts that KM breached the contract by: (a) failing to engage a tank manufacturer to design the foundation for the tank; (b) failing to immediately notify JTMUA of potential discrepancies in the contract documents; (c) failing to notify JTMUA of a potential change order within twenty (20) calendar days; (d) failing to diligently prosecute the work; and (e) "walking off" the job without completing it. JTMUA also claims that KM cannot show that JTMUA did not do what it was required to under the contract. KM maintains that the delays in the project were caused by: (a) the internal inconsistency and ambiguity of the contract documents; (b) the JTMUA's refusal to accept subcontractor and tank manufacturer Fisher's recommendation for a mat foundation; and (c) the JTMUA's refusal to answer key questions or review the revised foundation submittal made by KM.

Claims such as those that KM failed to immediately notify JTMUA of potential discrepancies in the contract documents and failed to notify JTMUA of a potential change order within twenty (20) calendar days are simple to prove. The concepts of "immediate" and clear timelines do not require a finder of fact to decipher. However, the assertions that KM failed to engage a tank manufacturer to design the foundation for the tank, failed to diligently prosecute the work, and "walked off" the job without completing it, are still unproven from the moving papers.

The matter will not be concluded until the remaining issues in dispute between the parties have been resolved. The first issue presented is whether KM breached the contract by failing to diligently prosecute the work in question or whether KM's conduct was reasonable and consistent with the contract under the circumstances. The dispute between the parties centers around the type of foundation to be designed by the tank manufacturer. Addendum No. 1 indicates on page four the following Question and Answer:

Q. Please verify

...