REDONDO CONSTRUCTION CORPORATION v. AUTORIDAD DE CARRETERAS DE PUERTO RICO et al

OCR transcription for search; preserved printed pages are authoritative

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

In re:
REDONDO CONSTRUCTION CORPORATION, : Case No. 02-02887 (ESL)

Debtor : Chapter 11

REDONDO CONSTRUCTION CORPORATION,

Plaintiff,
v. : Adv. No. 03-0192
: Adv. No. 03-0194
PUERTO RICO HIGHWAY AND Adv. No. 03-0195
TRANSPORTATION AUTHORITY, FILED & ENTERED
Defendant

DECISION AND ORDER

This matter is before the Court upon motions by the debtor,
Redondo Construction Corp. (“RCC”), to amend the Court’s Decision
and Order of August 31, 2009, in Adv. No. 03-0192, and motions by
the Puerto Rico Highway and Transportation Authority (“PRHA”) to
amend or alter the judgments of the Court entered on August 31,
2009, or for a new trial. For the reasons set forth below, RCC’s
motion will be granted, in part, and the motions of PRHA will be
denied.

BACKGROUND

RCC filed the captioned adversary proceedings claiming amounts
due for construction work performed in three projects: AC-005317

(“Desvio Sur de Patillas”), Adversary No. 03-0192; AC-20009 (“PR 2

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Mayagtez”), Adversary No. 03-0194; and AC-01657 (“Dorado-Toa
Alta”), Adversary No. 03-0195. After significant discovery by the
parties, a ten day trial was held before the Honorable Gerardo A.
Carlo. During the trial, RCC offered extensive documentary
evidence and numerous witnesses, as detailed in Judge Carlo’s
Decision and Order of August 31, 2009. Although PRHA had announced
various witnesses, it only offered two and since RCC had deposed
other witnesses renounced by PRHA, RCC offered into evidence
partial transcripts of three of these witnesses.

After the trial concluded, the parties filed post-trial
memoranda. Thereafter, on August 31, 2009, Judge Carlo issued ia
Decision and Order concluding that in Adv. 03-0192, PRHA was liable
to RCC in the amount of $713,338.03, plus prejudgment interest at
6.5% from February 27, 2007. In Adv. 03-194, Judge Carlo concluded
that PRHA was liable to RCC in the amount of $10,402,099.66, plus
prejudgment interest at 6.5% from June 30, 1996. And in Adv. 03-
0195, Judge Carlo found that RCC was entitled to $912,874.23, plus
prejudgment interest at 6.5% from October 26, 1995.

In RCC’s amended motion for amendment of the Decision and
Order in Adv. No. 03-0192 and Judgment Nunc Pro Tunc, RCC contends
that the Court erred in allowing interest only from February 27,
2007, rather than from February 27, 1995, when the project was
officially accepted. RCC states that the determination of the date

as to which the interest was allowed was a clerical error as to the

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year. RCC also indicates that in the body of the Decision and
Order, the Court awarded RCC $643,545.77, not the $713,338.03
claimed in the complaint, resulting from the Court’s deduction of
89 calendar days from the 471 claimed by RCC for delay.
Thereafter, in the actual order, the Court included the amount
claimed, $713,338.03, rather than the amount determined by the
Court, $643,545.77.

PRHA filed a reply to RCC’s motion for amendment of the
Decision and Order, contending that prejudgment interest is not
allowable and that if allowable, it is allowable at a lower rate.
PRHA agrees that there is a clerical mistake as to the amount, but
argues that the amount that RCC would be entitled to with the
deduction of the 89 days of office overhead and job overhead, would
be $564,188.61 or $541,474.24 (both numbers are stated). RCC filed
a sur-reply.

In PRHA’s motion to amend or alter judgment or for a new
trial, PRHA contends that the Court failed to discuss and apply the
legal requirements for each of RCC’s causes of action, that the
evidence presented at trial did not support the judgments, that the
contracts between the parties do not allow the remedies sought by
RCC and that prejudgment interest should not be allowed since it
was not contemplated as a remedy. RCC’s reply restates most of the
findings and conclusions in Judge Carlo’s Decision and Order of

August 31, 2009, and addresses prejudgment interest.

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DISCUSSION

With respect to RCC’s motion for amendment of the Decision and
Order in Adv. 03-0192, RCC properly acknowledges that Judge Carlo
awarded RCC $643,545.77, not the $713,338.03 claimed in the
complaint, resulting from the Court’s deduction of 89 calendar days
from the 471 claimed by RCC for delay. Thereafter, in the actual
order, the Court included the amount claimed, $713,338.03, rather
than the amount determined by the Court, $643,545.77. This Court
agrees that this is a clerical mistake, which may be corrected
pursuant to Fed. R. Civ. P. 60, made applicable by Fed. R. Bankr.
P, 9024,

This Court is at a loss as to PRHA’s argument that the amount
should be some other quantity entirely, since these were the exact
calculations made by PRHA in its post-trial brief, which Judge
Carlo accepted. See dkt. #144 at p. 28. PRHA argued that under a
best case scenario, RCC would be entitled to extended and main
office overhead costs for 382 calendar days, not-for the 471
claimed, reducing its compensation from $335,771.79, for office
overhead, and $359,864.49 for job overhead, for a total of
$695,635.68, minus a credit for $81,218.53, to $632,187.87, minus
the credit. The Court notes that the actual claim for office
overhead was $335,770.89, which was a $.90 difference.
Nonetheless, Judge Carlo allowed the $632,187.87, less the credit

of $81,218.53, plus $34,072.27 for the under-run of the piles and

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joints, for a total of $585,041.61, plus 10% profit of $58,504.16,
for a total of $643,545.77, which the judgment will be amended to
reflect.

This Court can not conclude that the award of interest to RCC
using the date of February 27, 2007 was a clerical mistake. RCC
suggested many different dates for the calculation of interest. In
the body of the complaint, RCC sought interest beginning on May 27,
1994. In the prayer, RCC sought interest from December 1, 1994.
The substantial completion date was March 18, 1994 and the claim
was submitted on February 21, 1995. In the post-trial memorandum,
RCC twice requested interest beginning on February 27, 2007. See
dkt. #145 at pp. 27-28. RCC’s gave various dates for the
commencement of prejudgment interest and the Court used the dates
stated in the post-trial brief, notwithstanding that the date used
is more than a decade later than project completion.

PRHA seeks to alter or amend the Decision and Order pursuant
to Federal Rule of Bankruptcy Procedure 9023, which makes Federal
Rule of Civil Procedure 59 applicable. This Rule states that
“[Ta]ny motion to alter or amend a judgment must be filed no later
than 10 days after entry of the judgment.” Fed. R. Civ. P. 59(e).

In seeking reconsideration under Federal Rule of Civil Procedure

59(e), “the moving party must ‘either clearly establish a manifest
error of law or must present newly discovered evidence.’” Marie v.
Allied Home Mortgage Corp., 402 F.3d 1, 7 n. 2 (1st Cir.

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2005) (quoting Pomerleau v. W. Springfield Pub. Sch., 362 F.3d 143,

146 n. 2 (1st Cir. 2004)). In Marie, the First Circuit also cited
a leading treatise, noting four grounds for granting a motion for
reconsideration under Federal Rule of Civil Procedure 59(e). These
are “manifest errors of law or fact, newly discovered or previously
unavailable evidence, manifest injustice, and an intervening change

in controlling law.” Marie v. Allied Home Mortgage Corp., 402 F.3d

at 7 n. 2 (citing 11 C. Wright et al., Federal Practice & Procedure
§ 2810.1 (2d ed.1995)). Motions under Fed. R. Civ. P. 59 are not
to be used by a losing party who failed to raise available
arguments or who simply disagrees with a court’s decision. In re
Kellogg, 197 F.3d 1116 (llth Cir. 1999).

Reconsideration of a judgment under Rule 59 is an
extraordinary remedy that is used sparingly and only when the need
for justice outweighs the interests advanced by a final judgment.
It is directed at allowing a court to correct it own errors. White

v. New Hampshire Dept. Of Employment Security, 455 U.S. 445, 450

(1982). Moreover, it is well settled that Rule 59(e) does not
exist to give parties a second chance to prevail on the merits
generally. Rule 59(e) is not to be used to reassert arguments,
theories and evidence previously rejected by a court. Nor may it
be used to raise arguments, theories or defenses that they could
have raised prior to judgment but did not. The rule is “aimed at

reconsideration, not initial consideration.” Harley-Davidson Motor

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Co., Inc. v. Bank of New England, 897 F.2d 611, 616 (list Cir.

1990). See also, Bogosian v. Woloohojian Realty Corp., 323 F.3d

55, 72 (1st Cir. 2003) (Rule 59(e) motion not appropriate to present
new issues or evidence or raise arguments which could, and should

have been made before judgment issued); Nat’1l Metal Finishing Co.

v. Barclays American/Commercial, Inc., 899 F.2d 119, 123 (lst Cir.

1999) (Rule 59(e) does not allow losing party to rehash old
arguments, previously considered and rejected).

In the present case, for the most part, PRHA disagrees with
Judge Carlo’s decision and proposes to raise arguments and defenses
not raised at trial and thus waived. PRHA argues that the Court
erred in awarding prejudgment interest since it was not
contemplated in the contracts, nor is it allowable by law. PRHA
also contends that there was no legal support for allowing
inefficiency and extended overhead for differing site conditions or
disruption delays.

With respect to prejudgment interest, PRHA argues that
interest can only be allowed on liquidated claims or claims for
which the costs are readily ascertainable by mathematical
computation or with reference to established standards of value
that have been codified. The amount of the claim must be capable
of being computed with reasonable certainty from cost records of
the contractor and PRHA alleges that the amounts claimed by RCC are

not mathematically nor reasonably precise. PRHA also discusses the

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Laws of Puerto Rico, which allow for prejudgment interest due to
temerity or contumacious behavior and the legal interest rate
established by the Puerto Rico Office of the Commissioner of
Financial Institutions, which varied between 5% and 6% during the
years in question.

Suffice it to say, that these are new arguments being raised
for the first time in a motion to alter or amend judgment.
Nonetheless, Judge Carlo determined that RCC established its claims
against PRHA to an amount certain and the allowance of interest is
based on contractual provisions. RCC indicated that it used a 6.5%
rate because the three projects have federal funds under the
Federal Acquisition Regulations, specifically Section 33.02 of the
Contract Disputes Act of 1978, as amended, 41 U.S.C. §§ 601-613.
The Blue Book, Exhibit 53, at § 107.05, states that when the United
States Government participates in the cost of the work covered by
the contract, the work shall be under the supervision of the PRHA,
but subject to the inspection of the appropriate federal agency and
in accordance with applicable federal statutes, rules and
regulations. (Tr. Of 2/27/07, pp. 1451-1457). Thus, RCC used the
federal rate, which was not disputed by PRHA until now.

This Court agrees that the contracts partially constitute the
law between the parties. And Judge Carlo found that the change
orders did not compensate RCC for the increase in overhead as a

result of the delays. PRHA argues that RCC did not give the proper

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notifications required under the contracts to seek delay damages.
Judge Carlo concluded, however, that RCC brought all problems to
the attention of PRHA as the construction went along. PRHA was
informed through their resident engineers, who were present and
involved in the projects and aware of the problems. The change
orders and extra work order, related to differing site conditions,
are evidence of PRHA’s knowledge of the conditions. These orders
were all prepared, authorized and issued by PRHA. As argued by
RCC, this Court accepts that RCC was not in a position to quantify
the claims for extended overhead or inefficiency at the time of
issuance of the individual change orders or extra work orders.
Judge Carlo accepted RCC’s testimony that the policy of PRHA’s
executive director was to deal with the claims for extended
overhead at the conclusion of the contracts and that PRHA’s
officers represented that this would be dealt with at another time,
at another level, and RCC relied on these representations and
continued working. PRHA does not make reference to any evidence
presented by it to counter RCC’s proven facts. It appears that
this defense as to notification was not raised until after trial.

PRHA addressed each of the three contracts separately. In
each, Judge Carlo found that due to problems encountered by RCC,
RCC was given extra time to complete the same, but was not
compensated financially for the costs incurred due to inefficiency

and extended overhead, resulting from differing site conditions and

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disruption. PRHA provided the information on all of the projects
and Judge Carlo found that RCC proved that the physical conditions
at the project sites differed from the conditions ordinarily
encountered and generally recognized as inherent in the work;
object of the contracts. RCC also proved to Judge Carlo’s
satisfaction that the conditions differed materially from that
implied from the language of the contract documents and that the
conditions existed prior to contract formation, were unknown and
unusual.

With respect to Dorado-Toa Alta, PRHA contends that the Court
erred in making an equitable adjustment and granting overhead due
to delay caused by differing site conditions. PRHA stresses that
there was no evidence that the conditions existed prior to
execution of the contract and offers that the conditions could have
changed after the contract was executed. However, the work
commenced on the project on October 4, 1993, shortly after the
notice to proceed was issued on September 23, 1993. The differing
site condition, and the water problem became apparent in July of
1994. This Court finds it disingenuous for PRHA to now argue that
the condition could have arisen or come about in the short period
of time after contract formation. As PRHA states, Judge Carlo
relied on the testimony of RCC’s field personnel; testimony which
the Court found credible. Moreover, Judge Carlo already considered

and rejected this argument in the Decision and Order of August 31,

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2009. And as discussed above, a motion for reconsideration is not
the proper vehicle for rehashing arguments that were already
considered and rejected.

PRHA also argues that there was no showing of the causal link
between the differing site condition event and how RCC’s
productivity deteriorated and there was no proper computation of
the productivity losses. However, the record shows that RCC
presented evidence and calculations as to lost productivity, which
PRHA apparently failed to rebut at trial. PRHA now, by way of
argument, is seeking to refute RCC’s calculations. This argument
is late.

With respect to the Desvio Sur de Patillas project, PRHA
alleges that the Court should not have allowed the entire claim.
It indicates that the Court erred in allowing RCC’s claim for
$713,338.03 for the time period from March 18, 1994 to July 1994,
since the project was substantially completed on March 18, 1994.
PRHA notes that this is a time difference of eighty-nine days,
which it indicates the Court failed to deduct. This is the
project, which this Court discussed above. The Decision and
Judgment will be amended to reflect that the Court awarded
$643,545.77.

PRHA also argues that the delay should have been apportioned
and that the claimed delay could not have been assigned entirely to

either party. But, this Court’s review of the record has not

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revealed any evidence presented by PRHA to support the apportioning
of the claim. Nor has this Court found evidence of RCC’s
concurrent delay or inadequate performance.

With respect to Mayaguez, RCC made claims for inefficiency,
equitable adjustment for extra work orders due to inefficiency,
extra work, extended overhead, subcontractor’s claims, profit,
interest and telephone. PRHA alleges that there were no findings
regarding the adequacy of RCC’s assertion of the claims on behalf
of subcontractors and that 940 days must be eliminated from the
award. PRHA also argues that there is no privity of contract
between subcontractors and owner and thus, the prime contractor
(RCC) must pass through the subcontractors claims to the owner
(PRHA), which is exactly what RCC did. But, PRHA also argues that
their was no liquidation agreement with the subcontractors
presented into evidence, nor evidence of RCC’s liability.

Judge Carlo concluded that RCC adequately documented the
claims of the subcontractors and that there was no question as to
RCC’s liability to Lord and Remodelco. The record shows that Lord
participated in weekly meetings and that PRHA was well aware of
RCC’s intention to present a formal claim on behalf of the
subcontractors upon the conclusion of Lord’s electrical work.

PRHA contends that the Court did not adequately differentiate
between delay and disruption damages, confusing the two. But,

Judge Carlo concluded that RCC’s damages were related to both delay

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and disruption. Judge Carlo found that actual disruption occurred,
which exceeded a normal range reasonably foreseeable at the time
that the contract was executed.

PRHA states that the measure for abnormal disruption is the
difference between actual productivity and expected productivity,
caused solely by events within the control of the other party. RCC
was required to establish a reasonable estimate of damages, but the
estimate must be validated. PRHA argues that there was no evidence
of causation to prove the impact claim. Judge Carlo heard the
evidence and accepted the testimony of the owner and employees of
the company, which he concluded established a reasonable estimate
of damages.

In sum, PRHA has failed to show manifest errors of law or
fact, newly discovered or previously unavailable evidence, manifest
injustice, or an intervening change in controlling law. PRHA is
largely reasserting arguments and theories previously rejected by
Judge Carlo and attempting, at this belated date, to raise new
issues and defenses that it could have raised prior to judgment but

did not.

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ORDER

WHEREFORE IT IS ORDERED that in Adv. 03-0192, the Puerto Rico
Highway and Transportation Authority is liable to Redondo
Construction Corporation in the amount of $643,545.77, with
prejudgment interest at 6.5% from February 27, 2007.

IT IS FURTHER ORDERED that the motions by the Puerto Rico
Highway and Transportation Authority to alter or amend the
judgments of the Court entered on August 31, 2009, or for a new
trial shall be, and they hereby are, DENIED.

SO ORDERED. ,
he dele.

San Juan, Puerto Rico, this /{ day of

BY THE COURT:

Aaruls

ENRIQUE S. LAMOUTTE
Wef U.S. Bankruptcy Judge

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