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FRANKLIN PAVKOV CONST. CO. v. ULTRA ROOF
June 1, 1999
FRANKLIN PAVKOV CONSTRUCTION COMPANY, PLAINTIFF,
ULTRA ROOF, INC., DEFENDANT, AND INTERNATIONAL FIDELITY INSURANCE COMPANY, ADDITIONAL DEFENDANT ON THE COUNTERCLAIM.
The opinion of the court was delivered by: Hurd, United States Magistrate Judge.
MEMORANDUM-DECISION AND ORDER
Plaintiff, Franklin Pavkov Construction Company ("Pavkov" or
"plaintiff") alleges that defendant Ultra Roof, Inc. ("Ultra
Roof") breached a subcontract entered into between the two
companies. Pavkov claims that Ultra Roof, which subcontracted
with Pavkov to retrofit a roof at an Army facility in Rotterdam,
New York ("Rotterdam project"),*fn1 did not timely commence work
on the project, unreasonably delayed performance, and abandoned
the project without justification. Ultra Roof contends that its
duty to perform was discharged due to Pavkov's failure to make
payments according to the terms of the subcontract and
counterclaimed for breach of the subcontract. Defendant
International Fidelity Insurance Company ("IFIC") is Pavkov's
bonding company,*fn2 and was made an additional defendant on
Ultra Roof's counterclaim.*fn3
A five day bench trial was conducted from February 3, 1999
through February 9, 1999 in Utica, New York. Testifying on behalf
of the plaintiff was its Vice President, Mark Pavkov. Also
testifying in support of plaintiff were Vince Pavkov, project
manager for the Rotterdam project, and John Miller, the Federal
government inspector for the project. Finally, plaintiff called
Martin Keller, owner of Kelco Roofing & Sheet Metal, Inc., Peter
Corsi, and Ed Kolbako, president of Ed's Electrical Service,
Inc., to testify concerning the issues of costs of completion and
work remaining on the project after Ultra Roof left the site.
Testifying on behalf of the defendant were Alan Beck ("Beck"),
owner of Ultra Roof, and Jackie Lane, project superintendent.
Post trial proposed Findings of Fact and Conclusions of Law were
filed by all parties on April 15, 1999.
Pavkov is a corporation organized and existing under the laws
of the State of Ohio, which engages in roof contracting. In
September of 1993, Pavkov entered into a contract with the United
States Government, Department of the Army, for the construction
of a retrofit roof at the Army Facility in Rotterdam, New York.
The contract was for the sum of $723,549.00. The contract,
designated as contract number DAKF36-93-C-0094, called for
performance to begin within ten (10) days and completion within
three hundred sixty (360) days after receiving the notice to
proceed. The contract provided that failure to complete the work
within the time specified in the contract, or any extension,
would result in the contractor having to pay liquidated damages
in the sum of $177.91 per day for each day past the completion
date. The contract also provided that, in the event that the
contractor withheld any monies from a subcontractor, the
contractor must provide written notice to the subcontractor,
identifying the amount being withheld, the reason for the
withholding, and the mandatory remedial action. In addition, a
copy of such written notice must be given to the contracting
officer. Specifications for the Rotterdam project and the
applicable rates of wage were attached to the contract. Pavkov
was to bill the Government monthly and be reimbursed monthly
based upon the percentage of work completed, which Pavkov and the
government inspector were to agree upon. Pursuant to the contract
and the terms of the Miller Act, Pavkov obtained a performance
bond and payment bond from IFIC. The payment bond was in the
penal sum of $361,774.50.
Although Pavkov originally intended to perform the contract
itself, it later decided to subcontract the work. In or about
December of 1993, Mark Pavkov directed his brother, Vince Pavkov,
to solicit bids. Vince Pavkov contacted Alan Beck, owner of Ultra
Roof, who had previously quoted a price to complete the project.
On December 14, 1993, Beck faxed a one-page letter to Vince
Pavkov's attention proposing to complete the Rotterdam project
for the sum of $575,543.00. The letter, which was received the
same day by Pavkov, contained four Roman numeral headings
outlining the terms of the proposal. The fourth section, labeled
"Terms and Conditions", contained five subsections, which read as
A) Ultra Roof Inc. will be paid 3% for Mobilization
of the total amount of our Contract, due upon receipt
B) Ultra Roof Inc. will furnish Certified Payroll
Reports Weekely (sic) & will be paid weekely (sic) on
the following Friday.
C) All material supplied by Ultra Roof Inc. to be
paid Net 30 days, Ultra Roof Inc. takes exception to
our payment being contingent upon the General
Contractor receipt of Payment from owner.
D) Ultra Roof Inc. will not agree to liquidated
damages until (sic) a mutually agreed upon schedule
E) Ultra Roof Inc. will perform roofing in a neat &
workmanship type manor (sic), we are not responsible
for subsequent cleaning.
(Ex. D-2.) Subdivision "E" was not followed by any further
language other than Beck's closing and signature line.
Vince Pavkov reviewed the proposal and discussed it with Mark
Pavkov, at which time certain changes were made. Vince Pavkov
handwrote "Addendum A" at the top of the proposal. In addition,
since Mark Pavkov found the payment term in subdivision "B"
unacceptable, an additional payment term was added at the bottom
of the proposal, which read as follows:
(Ex. P-41.) There is no evidence that this change was ever faxed
to Beck. Additionally, Vince Pavkov's testimony at his deposition
and at trial are contradictory regarding whether he had ever
discussed the changes made to the proposal with Beck. (Tr. at
130, Vince Pavkov Dep. at 34, 41.)
Vince Pavkov faxed a one-page letter to Beck on December 14,
1993 requesting a meeting with Beck on December 16, 1993 at Ultra
Roof's office in Jasper, Indiana to discuss the Rotterdam
project, sign the subcontract, discuss the start date,
submittals, and payment schedule, and some other matters. No
mention was made in this letter of any changes made to Beck's
December 14, 1993 proposal.
Prior to traveling to meet with Beck, Vince Pavkov prepared
several documents which would comprise the subcontract. The first
page was a preprinted subcontract agreement indicating that the
subcontract applied to the Rotterdam project, the price, and a
start date of April 15, 1994 and completion date of August 31,
1994. In addition, the first page referenced terms contained in
"Addendum A". The second page was a version of Beck's proposal
typed up at Pavkov's offices titled "Addendum A" and containing
the changes made by Pavkov except subdivision "F". The third page
contained subdivision "F" and signature lines for Beck and Vince
Pavkov. The fourth page consisted of a statement and
acknowledgment. This page acknowledges that certain clauses
contained in the government contract with Pavkov, which include
the Contract Work Hours and Safety Standards Act ("CWHSSA"),
40 U.S.C. § 327-333 (1986), and the Davis-Bacon Act,
40 U.S.C. § 276a-276a-5 (1986), also apply to the subcontractor. None of the
pages were numbered.
Vince Pavkov and Beck met on December 16, 1993 at which time,
Vince Pavkov presented two copies of the subcontract documents.
The copy which Vince Pavkov brought back with him to Ohio
contained Beck's signature on the first page (the preprinted
form) and the last page (the statement and acknowledgment).
Neither Beck's signature nor his initials appear on either page
of "Addendum A". Vince Pavkov's signature does not appear on any
page of the subcontract which he retained. The copy of the
subcontract which Beck retained contained the signatures of both
Vince Pavkov and Beck on the preprinted page and the statement
and acknowledgment. Beck's copy only contains page one of
"Addendum A". It does not contain the second page of the
addendum, which bore subdivision "F".
Beck testified that he was never shown page two of "Addendum
A", he never discussed it with anyone from Pavkov, and he would
not have agreed to subdivision "F". (Tr. at 882.) Mark Pavkov
testified that he intended to have Beck sign "Addendum A". (Id.
at 625-26.) Mark Pavkov also claimed that he would never enter
into a subcontract where payment was made on any basis other than
percentage completion. However, on January 20, 1994, only one
month after the subcontract for the Rotterdam project was signed,
Pavkov entered into a subcontract agreement with Ultra Roof for a
roofing project at Fort Gordon, Georgia. The agreement contains
an "Addendum A" with the same payroll term as Ultra Roof's
proposal for the Rotterdam project contained. The Fort Gordon
subcontract did not contain any terms similar to subdivision "F"
and both Beck and Vince Pavkov signed the addendum page on that
There is simply no evidence that Beck ever saw, discussed, or
agreed to be bound by subdivision "F". Therefore, subdivision "F"
is not a part of the subcontract agreement between Pavkov and
Ultra Roof for the Rotterdam project.
B. Problems in Performance
Pursuant to the subcontract, Ultra Roof was to perform the
entire project which
constituted Pavkov's contract with the government. This included
preparation and submission of drawings to the government for
approval. On or about December 17, 1993, Beck sent plans and
specifications to Atlantic Framing Design, Inc. ("Atlantic
Framing") for design of the roof system to be used at the
Rotterdam site. On January 7, 1994, the drawings from Atlantic
Framing were sent to Pavkov along with other materials to be
submitted to the government for review and approval. Over one
month later, on February 8, 1994, Pavkov forwarded these
materials to the government. Ultra Roof could not commence work
on the project because it could not order materials and finalize
the drawings until it received the government's response. On
February 28, 1994, the government notified Pavkov that the
drawings were approved in part and rejected in part. Pavkov did
not notify Ultra Roof of this until March 21, 1994. On May 25,
1994, Ultra Roof sent Pavkov a second set of drawings and
submittals which were forwarded to the government the next day.
On May 26, 1994, Atlantic Framing advised Ultra Roof and Pavkov
that the drawings were complete except for two areas that
required clarification by the government. A meeting was held at
the Rotterdam site in early June. Alan Beck, Vince Pavkov, the
government engineer, and an engineer from Atlantic Framing were
The government sent Pavkov a Notice to Cure on June 10, 1994 as
a result of its rejection of the second set of drawings. The
drawings were finally approved in late June 1994. In the
meantime, Ultra Roof received a proposal from Schenectady Steel
Company, Inc. ("SSCI") on June 17, 1994 to furnish and erect
structural steel material for the sum of $81,950.00.
Subsequently, this amount was increased by $625.95, bringing the
total of the estimate up to $82,575.95. Ultra Roof billed Pavkov
$51,520.00 on June 24, 1994, for material stored offsite at SSCI.
However, Ultra Roof had not yet been billed by SSCI.*fn4
SSCI mobilized to the job site on June 30, 1994. SSCI requested
a joint check agreement between it, Ultra Roof, and Pavkov as a
condition of performance. On July 7, 1994, Vince Pavkov sent a
letter to SSCI agreeing to issue joint checks payable to Ultra
Roof and SSCI and promising that payment would be made no later
than forty (40) days from the date of delivery.
On July 1, 1994, differing site conditions were found. Ultra
Roof notified Pavkov that day, recommended a resolution, and
suggested that Pavkov notify the government requesting advice as
to how to proceed. Pavkov repeatedly sent letters to the
government with no response. During the months of July and
August, only six percent (6%) of the work was completed on the
Rotterdam project. Ultra Roof had not mobilized to the site yet,
but it billed Pavkov a three percent (3%) mobilization fee, which
totaled $17,266.29. The contracting officer finally responded to
Pavkov's request for advice on August 2, 1994. With Ultra Roof's
completion deadline approaching fast, Pavkov requested an
extension, citing the government's delays in responding to
Pavkov's request for advice with respect to the differing site
conditions. The government acknowledged that the differing site
conditions required a contract modification, however, it was
unwilling to extend the completion date. In September of 1994,
Pavkov again requested
a contract extension as well as a winter shutdown. Only six
percent (6%) of the work remained complete at this time. On
December 12, 1994, the government granted Pavkov a winter
shutdown and extended the contract completion date to July 31,
1995. Pavkov claims that the delays incurred during 1994 were
Ultra Roof's fault. However, Vince Pavkov attributed the delays
in 1994 to the government's lack of response concerning the
differing site conditions. (Ex. P-67.) Additionally, ascertaining
the responsible party is of no consequence because the government
granted Pavkov the extension it requested.
By November 1994, Pavkov had made five payment applications to
the government. Attached to the payment applications, Pavkov
included a contract progress report and a contractor's affidavit.
The affidavit states that subcontractors had been paid from
previous payments received and that timely payment would be made
from the current application's proceeds. Pavkov also indicated
that no amounts were being withheld from subcontractors. Pavkov
had so far received a total of $441,364.89 from the government
and had paid Ultra Roof $296,373.74. In addition, many of
Pavkov's payments were well over two weeks late. Furthermore,
Pavkov did not pay in accordance with either subdivision "B" or
subdivision "F" (assuming, arguendo, that subdivision "F" was
part of the subcontract).
During an inspection in December 1994, government inspector
John Miller had determined that, miraculously, sixty-one percent
(61%) of the project was complete even though no workers had been
on the site since November, when the estimate was that six
percent (6%) was complete.*fn5 Roof leaks were noted due to
improper sealing, however, these leaks are ...