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Millgard Corp. v. Liberty Mutual Insurance Co.

August 21, 2007

THE MILLGARD CORP. PLAINTIFF, E.E. CRUZ/NAB/FRONTIER-KEMPER, A JOINT VENTURE, E.E. CRUZ & CO., NAB CONSTRUCTION CORP., FRONTIER KEMPER CONSTRUCTION, INC. AND AETNA CASUALTY : & SURETY CO., DEFENDANTS,
v.
LIBERTY MUTUAL INSURANCE CO., COUNTERCLAIM DEFENDANT.



The opinion of the court was delivered by: Sand, J.

OPINION

Following the completion of liability issues in this complex and protracted suit for breach of a construction contract (See Millgard I - Millgard VI ) this Court held a damage hearing (Nov. 20-28, 2006) and in May 2007 the parties submitted their proposed findings of fact and conclusions of law. We assume familiarity with all of this Court's prior opinions and findings and address herein the disputed damage issues*fn1 .

Mobilization (Millgard's Claim $525,000)

Although the Subcontract on which suit was based was not executed until December 10, 1997, it explicitly states that it is an agreement made "this 21st Day of August 1997." The delay in execution was occasioned by issues relating to bonding unrelated to the issues presently before the Court.

Millgard seeks recovery for the expenses it incurred for mobilization and takes the position that pursuant to Schedule A the Subcontract price of $12,337,000 specifically states that the total contract price of $12,337,000 had two distinct components: Excavation Support System (ESS $11,337,00 --; mobilizaton $1,000,000).

The Joint Venture takes the position that the contract was a single indivisible contract for $12,337,000 relying on precedents which hold that absent specific agreements to the contrary construction contracts are indivisible. Joint Venture also asserts that Millgard is not entitled to reimbursement for work performed prior to the contract date and that the parole evidence rule bars evidence as to any conversations or understandings reached prior to the execution of the contract.

We find that it was the clear understanding of the parties, as reflected in the language of the subcontract itself that $1,000,000 was to be paid to Millgard for mobilization. We also find that it is no defense that some mobilization costs were incurred before the subcontract was executed.

The Joint Venture was extremely anxious to move the project forward as expeditiously as possible and as this Court has previously found "Toward the end of July 1997, the JV directed TMC [i.e. "Millgard] to prepare to start construction ... To this end TMC acquired and prepared equipment and brought cranes and attachments to the site.

Millgard Corporation v. E.E. Cruz, et al. 2004 WL 148854 SDNY July 2, 2004.

Had Millgard completed performance of the entire contract it would of course have been entitled to a full recovery of mobilization costs. It would be extremely inequitable to deny it recovery of these costs because they were performed at the Joint Venture's urging prior to the formal execution of the contract. The Joint Venture was fully aware that Millgard was, at its request, beginning to mobilize and took no steps to discourage this from happening. Inconsistently with its post-litigation position, the Joint Venture included in its requisitions to the City work performed by Millgard prior to the formal execution of the contract.

The evidence also supports Millgard's claim that the mobilization costs at issue were attributable to the ESS and therefore within the subcontract and not for the GZA test program, the scope of which had not yet been finalized and was not included in the Subcontract.

The Joint Venture filed requisitions for work completed to the City including payments which it sought for transmission to Millgard. (For example, the Joint Venture received $80,000 attributable to Millgard but withheld payment because of the dispute as to the total sum due Millgard).

We find that Millgard has sustained its burden of proof that it was entitled to receive $1,000,000 for its mobilization work which it had completed and has been paid $475,000. It is therefore owed $525,000 for its completed work in mobilizing for this project.

Direct Costs (Claim for $561,428)

Millgard claims that it incurred direct costs for work performed pursuant to the Subcontract prior to its termination in the amount of $561,428. Millgard sought to prove this claim by detailed introduction of documents and the testimony of Christine Moretta, who was Millgard's chief financial officer at the relevant dates. Joint Venture asserts that Millgard was overpaid for the work it completed and is entitled to no further payment. Joint Venture also asserts that Millgard should be held to the figure attributed to work performed pursuant to the subcontract as set forth in Court Exhibit I at the liability trial on December 15, 2003.

At that time Millgard had stipulated to withdrawing its claim for its work on the test program and in Ex. I it set forth figures for the GZA test program, contract work and mobilization. Thereafter, on Feb. 7, 2005 seeking to be relieved of this stipulation Millgard represented that it had conducted further discovery with respect to the facts set out in Ex. I; that Millgard did not have in its possession documents related to Ex. ...


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