Jack Nelson Jones Professional Association
May 27 - June 2, 2019
JMD Construction Services, LLC V. General Construction Solutions, Inc., 2019 Ark. App. 268, Delivered May 15, 2019
This case comes on appeal from Washington County Circuit Court, Honorable Beth Storey Bryan, presiding, finding in favor of appellee General Construction Solutions, Inc. (GCS), on its breach-of-contract claim against appellant JMD Construction Services, LLC (JMD). The circuit court also dismissed JMD’s counterclaim with prejudice, awarded GCS the principal demanded, plus costs, and attorney’s fees. At issue was whether the written contract between the parties was ambiguous in the use of the term “sealer” to the degree that parol evidence was properly accepted by the court to discern the parties’ intent in entering into the contract. Alternatively, the court ruled that even if the contract was not ambiguous, it was subject to reformation by the court based on mutual mistake by the parties. The Court of Appeals affirmed the circuit court’s ruling which accepted parol evidence (evidence outside the four corners of the contract) to find the term “sealer” as used in the contract was used in this industry in this case as being the same as, or a form of, “curing” concrete and did not consider reformation of the contract.
In May 2016, JMD was hired as the general contractor to build a FedEx Ground facility in Lowell, Arkansas. In September 2016, JMD and GCS entered into a written agreement for GCS, as the subcontractor, to provide the labor for the concrete work to construct the building foundation and floor slab. The scope of work, attached as Exhibit “A” to the subcontract, required GCS to “Provide all Labor necessary to perform a turnkey building foundation and floor slab package as outlined in the Subcontract Documents.” Division 3 of the FedEx Ground standard specifications (“specifications”), which were made part of the subcontract, provided a detailed description of the requirements for all concrete work, including both initial and final curing, which were defined and distinct processes. The following were listed as “exclusions” from GCS’s scope of work: “Bonds, Materials Testing, Permanent Materials, Haul off of Spoils, Security Building, Sealer, Epoxy Crack Fill, Light Plants, Weather Protection, Modular Forms, Excavation & Grading Equipment & Operators.”
At the crux of this case was one small word: “sealer.” GCS contended the term “sealer” included “curing” in its usage in the industry and, therefore, it was not obligated under the parties’ contract to perform any work associated with curing concrete. JMD contended the term “sealer” did not include “curing”, making GCS obligated under the parties’ contract to perform labor associated with curing the concrete. Over the course of the contract, JM held back 10 percent retainage pursuant to the terms of the contract, which was to be paid thirty days following completion of the scope of the work, but JMD failed and refused to pay the retainage, claiming GCS did not perform the curing work required by the contract.
On Aug. 9, 2017, GCS filed suit against JMD for breach-of-contract. JMD filed an answer and counterclaim alleging that GCS owed JMD $73,486.20 for the cost JMD incurred for labor to perform the initial curing of the concrete slab. GCS subsequently filed a second amended complaint wherein it sought reformation of the contract and declaratory judgment in addition to the breach-of-contract claims asserted in its original and first amended complaints.
Following a bench trial, the circuit court found that the term “Sealer” as used in the parties’ contract was ambiguous, thereby opening the door to parol evidence about the contract negotiations, the correspondence after the contract was entered, and the parties’ conduct and course of dealing. After receiving parol evidence, the court concluded that the exclusion of “Sealer” from GCS’s scope of work was intended to exclude all labor to cure the concrete, including both initial and final curing, and dismissed JMD’s counterclaim. Judgment was entered in favor of GCS for the principal amount of $73,978.73, plus $175.63 in recoverable costs and attorney’s fees in the amount of $9,975, together with pre- and post-judgment interest. JMD timely appealed.
On appeal, JMD argued that the circuit court erred in finding that labor for initial curing was excluded from GCS’s contractual scope of work. JMD and GCS agreed that “Sealer” was intentionally excluded from the contract. JMD further admitted that “Sealer” is a part of the curing process. The circuit court found that Wes Taylor, owner of GCS, credibly testified that “sealer” and “curing” were the same thing. JMD argued that curing was included in the contract because it was not specifically excluded, but JMD admitted that “sealer” as part of the curing process was excluded. No independent expert witness testified at trial regarding the term “Sealer” and what exactly it meant.
In reaching its decision, the Court of Appeals found there was obviously much dispute as to the term “Sealer” and uncertainty as to its meaning, and that the circuit court was correct in finding the contract to be ambiguous and allowing parol evidence to be admitted. It observed that Taylor’s credible testimony that “curing” and “sealing” were synonymous terms in his business was proper evidence for the court to consider. Likewise, the Court held the circumstances of the contract were valid considerations, including that three prior bids reflected a line item for curing, which was struck through in bid three, and was not included at all in the fourth and final bid. The circuit court found, based on the testimony, that after the first concrete pour in December 2016, JMD performed the curing with its own labor. Eleven more concrete pours were performed between December 2016 and February 2017. The Court noted that, in that time, JMD never made any mention or notification by email, letter, or a phone call – “no statements whatsoever made by any agents for the defendant” – claiming that GCS was responsible for doing the curing work. Taylor testified that everyone understood JMD was performing the curing. Taylor even assisted JMD in picking out the burlap for the curing but was never asked to perform the curing work. Taylor also testified that “sealing” and “curing” are synonymous in his business. According to Taylor’s testimony, sealer is a form of curing – specifically, a curing compound. On the stand, Taylor admitted that “turnkey building foundation” includes curing but not if curing is excluded. Taylor further elaborated that because sealer was excluded in the contract and because, based on his experience, sealer and curing were coterminous, then all curing was excluded from GCS’s scope of work. The fourth bid, which was accepted, did not contain any line item charge for “curing.” The Court further noted that, after the first concrete pour, JMD – and not GCS – did the curing. Moreover, Ken Frey, JMD’s superintendent, wrote in an email to Taylor stating, “I guess you guys don’t have water cure or building temp shelter or covering subgrade so guess I will do it?”
On appeal, JMD urged that there was a distinction between the terms “sealer” and “curing.” The Court of Appeals held that was a disputed question of fact for the circuit court to decide. It noted that the evidence presented to the circuit court indicated that “sealer” and “curing” were interchangeable terms of art in the business and that the circuit court specifically found Taylor’s testimony credible. The circuit court, on the other hand, found Jacy Daugherty, owner of JMD, not credible because of the undisputed course of dealing between the parties and his own communications and emails. The Court observed that the circuit court found that JMD’s late-raised issue about “curing” was a ruse to avoid payment that was due and that he had strung along GCS by promising payments for months. JMD explained at oral argument that the issue was not raised during the performance of the contract because the project was running behind schedule and such an argument could have caused costly delays. The Court of Appeals noted that it did not act as a super factfinder and reweigh the circuit court’s findings on disputed questions of fact. Accordingly, it ruled that the circuit court’s findings were not clearly erroneous and showed a thorough and well-reasoned analysis in its decision to find the contract was ambiguous; properly considered permissible parol evidence; and found that GCS was not responsible for the curing in this case.
For those reasons, the Court affirmed the decision of the circuit court.