MIKE DENNISTON, INC., a/k/a MICHAEL DENNISTON, INC. v. COMMONWEALTH OF KENTUCKY, TRANSPORTATION CABINET, DEPARTMENT OF HIGHWAYS
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RENDERED: March 26, 2004; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-000294-MR
MIKE DENNISTON, INC., a/k/a
MICHAEL DENNISTON, INC.
APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE WILLIAM L. GRAHAM, JUDGE
ACTION NO. 99-CI-01465
v.
COMMONWEALTH OF KENTUCKY,
TRANSPORTATION CABINET,
DEPARTMENT OF HIGHWAYS
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, KNOPF, and McANULTY, Judges.
COMBS, JUDGE.
Mike Denniston, Inc. (“Denniston”) appeals from a
judgment entered by the Franklin Circuit Court adjudicating a
dispute that involved several service contracts awarded to
Denniston by the Commonwealth of Kentucky, Transportation
Cabinet, Department of Highways.
Dennison claims that the court
erred by concluding that it was not entitled to compensation
exceeding that which was provided under the terms of the
contracts.
We affirm.
Denniston is a mowing contractor.
His company mows
right-of-way areas for the Transportation Cabinet.
The annual
mowing contracts are awarded following a competitive bidding
process.
The Cabinet advertises for bids and prepares specific,
uniform bid packages pertaining to the mowing contracts to be
awarded in various counties.
After the bid packages are
circulated among interested contractors, they are submitted to
the Cabinet by the contractors on a per-acre pricing basis.
The
bids are reviewed and the contracts are awarded in the early
months of the contract year.
The Cabinet holds pre-season
mowing meetings to review the work to be completed during the
season.
These meetings occur soon after the contracts are
awarded each year.
After submitting numerous bid packages in 1996,
Denniston was awarded service contracts for right-of-way mowing
operations in several counties.
One contract provided for
right-of-way mowing in Pike County.
Johnson, and Martin Counties.
Another combined Floyd,
The right-of-way mowing in Pike
County was to be compensated at $41.75 per acre.
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The right-of-
way mowing in Floyd, Johnson, and Martin Counties was to be
compensated at $39.24 per acre.1
During a pre-season mowing meeting held by the Cabinet
in April 1996, a representative of Swartz Mowing, Inc., (“Swartz
Mowing”) questioned the Cabinet as to whether it was obligated
by the terms of the agreements to complete “slope mowing” in the
designated right-of-ways.
Swartz was a competitor of Denniston
and had been awarded contracts in Knott, Letcher, Johnson, and
Lawrence Counties.
Pursuant to the specific terms of the
agreements, the Cabinet advised the contractors that they were
expected to mow all the vegetation and steep slopes in the
designated right-of-way areas -- even if such mowing required
the use of specialized equipment.
Invoking the provisions of the Kentucky Model
Procurement Code, KRS2 Chapter 45A, Denniston filed a complaint
on December 22, 1999, against the Cabinet in Franklin Circuit
Court.
Denniston alleged that the Cabinet had erred in
concluding that the contracts provided for “slope mowing” within
the designated right-of-ways.
Denniston claimed that “slope
mowing” typically requires more time and the use of specialized
equipment not customarily used in regular right-of–way mowing
contracts.
According to industry practice, Denniston contended
1
Both contracts were renewed by the parties in 1997 and again in 1998.
contracts expired on December 31, 1998.
2
Kentucky Revised Statutes.
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The
that bids for right-of-way mowing contracts are customarily
interpreted to include the mowing of grass along the shoulders
of the road and grass backslopes whereas “slope mowing” is
understood to include the mowing of brush, trees, and steep
slope areas.
Denniston reported that slope mowing is typically
compensated at a much higher rate:
$150.00 - $200.00 per acre.
Denniston also contended that if it had “been on notice that
‘slope mowing’ was included in the two (2) right of way mowing
contracts, it would have substantially increased the amount of
its bid on both jobs.”
Complaint at 3.
As a result of the
unanticipated additional mowing, Denniston claimed that its
company was due additional compensation at a substantially
higher rate per acre than that which was provided for in the
written contracts.
The trial court dismissed this action based on
Denniston’s failure to exhaust available administrative
remedies.
However, on appeal, we vacated the dismissal and
remanded the matter for additional proceedings.
(See Mike
Denniston, Inc. v. Commonwealth of Kentucky, Transportation
Cabinet, Department of Highways, 2000-CA-1239-MR (rendered April
6, 2001)).
Upon remand and following a period of discovery, the
parties filed cross-motions for summary judgment.
On November
21, 2002, the Franklin Circuit Court granted the Cabinet’s
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motion and ordered that Denniston’s complaint be dismissed.
The
court agreed with the Cabinet that the contracts had
contemplated and included the disputed work.
It also found that
Denniston had failed to make a proper claim for additional
compensation before beginning the work or after payment was
tendered as required by the terms of the contract.
The trial
court made the following observations:
The right-of-way mowing contracts at issue
in this case were advertised for bid by
sending bid proposals to several interested
mowing contractors. The bid proposals set
forth the terms under which the work was to
be completed for each individual contract in
detail. The proposals included “Special
Notes” which further defined a contractor’s
duties and included drawings reflecting the
areas to be mowed.
[Denniston] had held mowing contracts with
the Transportation Cabinet since 1992.
Denniston requested and received bid
proposals for 1996 from the Transportation
Cabinet, one for the Pike County contract,
and one for the Various Counties contract.
These bid proposals allowed the parties to
renew the contracts for 1997 and 1998.
The language of the bid proposals was
revised for 1996 by including a more
detailed explanation of the mowing to be
done than in previous years. This language
included the backslope that was contained in
the ten foot (10’) mowing are of the rightof-way. The Special Notes also contained
drawing reflecting that the slopes within
the mowing areas were to be mowed.
Denniston certified that it had examined the
site of proposed work, project plans,
specifications, special provisions and notes
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as a part of its bid. As well, all the
mowing contractors attended a pre-mowing
meeting in April 1996 at which the
contractors were advised that the slopes
within the right-of-ways were included in
the required mowing.
In addition to the changes in the bid
proposal language, the acreage on the Pike
County contract was nearly double that which
Denniston had mowed under prior years’
contracts. This change in the new bid
proposals was to account for the additional
acres of the slopes. The Transportation
Cabinet failed to make the necessary
increase of acreage on the Various Counties
contract, and issued a change order in May
1996 to compensate Denniston for the
additional acres to be mowed under the
contract. Denniston was informed of the
change in acreage at the pre-mowing meeting
and signed the change order after it was
issued.
* * * * *
This Court holds that the terms of the
contract are not ambiguous and will
therefore be given their ordinary meaning.
(Citation omitted). A review of the bid
proposals and subject contracts reflects
that there are no ambiguities contained
therein. The Special Notes also reference
attached drawings to ensure a clear
understanding of the requirements of the
mowing contracts. As well, the contracts
make note of potential difficulties of
mowing slopes and indicate that the
contractor may have to utilize specialized
equipment on slope areas. [Denniston]
indicated that it had reviewed the proposals
and notes, and was therefore aware of the
requirements of the contract.
Denniston is charged with knowing the terms
of the contracts as agreed upon, which do
not include the limitations which [it]
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claims give it the right to additional
compensation. The change order that was
issued only corrected the amount of acres
[Denniston] was obligated to mow, not the
type of mowing required.
[Denniston] did not make a claim for
additional compensation before beginning the
work as required by the Standard
Specifications for Road and Bridge
Construction, nor did it submit a letter of
disagreement as required after the final
estimate of payment was sent to it.
[Denniston] signed the change order
regarding the additional acreage on the
Various Counties contract. By performing on
the contract, and acting in a manner which
this Court finds indicates acceptance of the
terms of the contracts, [Denniston] has
waived its right to challenge its
compensation on these contracts.
[Denniston] submitted bids according to the
specifications that [it] was given, and
these bids were accepted.
Order at 1-4.
This appeal followed.
On appeal, Denniston contends that the trial court
erred by failing to conclude that the Cabinet was collaterally
estopped from relitigating the issue of whether the contracts
required “slope mowing.”
In the alternative, Denniston argues
that the trial court erred by failing to apply the doctrine of
equitable estoppel; by failing to apply the doctrine of quantum
meruit; or by failing to determine that the contracts simply did
not require “slope mowing.”
Having carefully considered these
arguments, we cannot conclude that the trial court erred by
awarding summary judgment to the Cabinet.
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When a trial court grants a motion for summary
judgment, the standard for review on appeal is whether the trial
court correctly determined that there were no genuine issues as
to any material fact and that the moving party was entitled to
judgment as a matter of law.
(CR) 56.03.
Kentucky Rules of Civil Procedure
With no factual matters in dispute, summary
judgment concerns only legal questions; therefore, we do not
defer to the trial court’s decision and our review of
is de novo.
the issue
Lewis v. B & R Corp., Ky. App., 56 S.W.3d 432
(2001).
Denniston contends that the trial court erred by
failing to find that the Cabinet was bound by the conclusions
reached in an earlier administrative proceeding involving his
competitor and that the Cabinet was not at liberty to contest
his demand for greater compensation based on the substantially
different work –- “slope mowing” -- that he was required to
undertake.
Denniston argues that the doctrine of collateral
estoppel determined the proper resolution of this matter.
We
disagree.
The following elements must be present for the
offensive use of collateral estoppel:
(1) a final decision on
the merits; (2) identity of issues; (3) issues actually
litigated and determined; (4) a necessary issue; (5) a litigant
who had lost in a previous proceeding; and (6) a full and fair
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opportunity to litigate.
Ky., 1988).
May v. Oldfield, 698 F.Supp. 124(E.D.
The general rule is that a judgment in a previous
action operates as an estoppel only as to matters which were
necessarily involved and determined in that former action.
It
is not conclusive as to matters which were immaterial or nonessential to the determination of the action or which were not
necessary to uphold the judgment.
Sedley v. City of West
Buechel, Ky., 461 S.W.2d 556 (1970).
As the basis for its estoppel argument, Denniston
relies on the administrative resolution of a substantially
similar disagreement between Swartz Mowing and the Cabinet.
Swartz Mowing argued at an earlier administrative hearing before
the Cabinet that the disputed contracts did not require the
mowing of brush, trees, woody vegetation, and slopes with the
use of specialized equipment and that it was, therefore,
entitled to additional compensation at a higher rate for the
specialized mowing that the Cabinet required in the right-of-way
areas.
After considering the matter, the hearing officer agreed
and concluded that Swartz Mowing had indeed proven that it was
entitled to the additional compensation that it sought.
Denniston argues that the Cabinet is bound in this proceeding by
the hearing officer’s previous findings of fact and conclusions
of law.
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We are asked to assume that under appropriate
circumstances an administrative decision may be given collateral
estoppel effect in a later civil action.
Nevertheless, the
traditional requirements for the application of collateral
estoppel must still be satisfied.
580 (1994).
See 46 Am.Jur.2d Judgments §
In this case, those requirements have not been met.
Some of issues necessarily involved and determined in
the Swartz Mowing matter are not identical to issues that are
material to this proceeding.
As the Cabinet notes, Swartz
Mowing claimed in the administrative proceeding that it was not
aware that the disputed “slope mowing” was required since the
amount of acreage described in the 1996 mowing contracts was
incorrectly stated as being identical to the acreage for the
1995 contract.
When the Transportation Cabinet submitted a
change order to reflect the increased acreage, Swartz protested.
The hearing officer observed as follows:
Swartz testified if the correct acreage had
been included in the bid proposals when the
two projects were first advertised, he would
have called the Transportation Cabinet to
inquire what was included in the increased
acreage. If he had had any questions, he
would have looked at the acreage and then
submitted a higher bid. As it turned out,
[Swartz] claims he could not anticipate the
type of work required because of the
incorrect acreage stated in the bid
proposals.
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Denniston, however, was on notice from the outset that
the specific requirements of the contracts had changed and that
the acreage, too, had increased dramatically.
There are other
factors necessarily involved and determined in the Swartz Mowing
matter that materially differ from the issues involved in this
litigation, including: (1) Swartz Mowing’s representation that
it had previous experience with Cabinet contracts that required
slope mowing in more specific terms; (2) Swartz Mowing’s refusal
to agree to the Cabinet’s proposed change order reflecting a
change from the acreage originally listed to the correct acreage
along with the inclusion of slopes in the area to be mowed; and
(3) Swartz Mowing’s decision to dispute the extra work
immediately and to submit a claim for additional compensation to
the Cabinet in accord with the Standard Specifications for Road
and Bridge Construction.
Since the Swartz Mowing proceeding
included findings and conclusions on issues materially different
from those considered in this litigation, the trial court did
not err by refusing to apply the doctrine of collateral estoppel
against the Cabinet.
Next, Denniston claims that it is entitled to recover
damages against the Cabinet in the amount of the additional
compensation it seeks under the doctrines of either equitable
estoppel or quantum meruit.
We disagree.
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The doctrine of equitable estoppel incorporates the
following elements:
(1) conduct which amounts to false
representation or concealment of material
facts or at least which is calculated to
convey the impression the circumstances are
in a particular state that is inconsistent
with the party’s subsequent position; (2)
the intention or expectation that such
conduct shall influence the other party to
act; and (3) knowledge, constructive or
actual, of the true facts. The party
claiming the estoppel must show: (1) lack
of knowledge and of the means of knowledge
of the true facts; (2) a good faith reliance
on the words or conduct of the party to be
estopped; and (3) a detrimental change in
position or status by the party claiming
estoppel due to such reliance.
See City of Shelbyville v. Commonwealth, Ky.App., 706 S.W.2d
426, 429 (1986), citing Electric and Water Plant Board of the
City of Frankfort v. Suburban Acres Development, Inc., Ky., 513
S.W.2d 489, 491 (1974).
Because of an overriding public policy
in favor of protection of public resources, the doctrine is
applied to governmental agencies only in exceptional
circumstances.
J. Branham Erecting v. Kentucky Unemployment
Insur. Comm’n., Ky. App., 880 S.W.2d 896 (1994).
The exceptional circumstances deemed sufficient to
invoke the doctrine against the government were set forth in
Laughead v. Commonwealth, Dep’t. of Transp., Ky., 657 S.W.2d 228
(1983).
Laughead involved an intentional course of conduct by
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the governmental agency that “’lulled’ the opposing party into
inaction,” followed by its decision later “to take an
inconsistent position to the other party’s detriment.”
Branham Erecting 880 S.W.2d at 898.
J.
“[E]quity will not allow a
party to benefit from its own intentional, inconsistent
conduct.”
Id.
We cannot conclude that the trial court erred in
finding no intentionally offensive or inconsistent conduct on
the part of the Cabinet in this case.
The Cabinet re-worked its
mowing contracts to take into account the intermittent need for
more extensive right-of-way mowing.
In so doing, it
specifically expressed its position that contractors were
required by the terms of the contracts to mow vegetation and
areas that involved hard-to-access slopes even if the use of
specialized equipment was necessary to complete the work.
The
circumstances involved in this case do not support recourse to
the use of the doctrine of equitable estoppel against the
Cabinet.
Denniston also seeks to recover based on the doctrine
of quantum meruit.
Quantum meruit provides an avenue of
recovery on a contract or quasi-contract by implying the
existence of contract where the parties either had no express
contract or had abandoned or rescinded it.
We believe that
Denniston is barred from invoking quantum meruit because of the
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explicit nature of the contracts at issue.
See 66 Am.Jur.2d
Restitution and Implied Contracts § 81 (2001).
[W]here an express contract is made defining
the circumstances under which an obligation
may arise with reference to a certain
subject matter such contract excludes the
possibility of an implied contract
concerning the same matter.
Sparks Milling Co. v. Powell, Ky., 283 Ky. 669, 143 S.W.2d 75,
76 (1940)).
The language of the contracts in this case provided
that the contractor was required to mow vegetation on the
“backslope in all situations . . . where the cut slope areas
exist within the ten foot (10’) area designated for mowing.”
(Pike County Contract at 2).
Contractors understood and agreed
that in order to mow some areas, they might be required to use
specialized equipment, including slope mowers, side-mounted
articulated mowers, and even the use of hand-held trimming
equipment in some instances.
Cabinet’s expectations.
abandoned.
annually.
Denniston was aware of the
The contracts were never rescinded or
On the contrary, they were renewed by Denniston
Pursuant to the criteria governing the applicability
of quantum meruit, Denniston has not demonstrated that the
Cabinet was unjustly enriched by the mowing operations that it
required.
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Denniston next argues that the trial court erred by
interpreting the contract to require the company to mow all of
the vegetation and steep slopes in the right-of-way areas.
In
light of the clear provisions of the contracts, we disagree.
Additionally, Denniston failed to make a claim for
extra compensation prior to beginning work on the contracts –- a
specific requirement contained in the contract regarding either
extra or extraordinary work.
Denniston also failed to submit a
letter of disagreement or protest after receiving the Cabinet’s
final estimate of payment –- another contractual requirement.
Incorporated by reference into the disputed contracts
are the 1994 Standard Specifications for Road and Bridge
Construction, which contain a provision concerning claims for
adjustments and other disputes.
Section 105.16 provides as
follows:
When, in any case, the Contractor deems that
additional compensation is due him for work
or material not clearly covered in the
contract . . . the Contractor shall notify
the Engineer in writing of his intention to
make claim for such additional compensation
before he begins the work on which he bases
the claim. When such notification is not
given . . . then the contractor hereby
agrees to waive any claim for such
additional compensation. . . . (Emphases
added.)
Denniston was required by this provision to notify the Cabinet
that it would seek additional compensation for the work that it
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claimed was not clearly covered by the terms of the contracts.
However, Denniston did not make any claim concerning additional
compensation prior to beginning work.
Consequently, under the
unambiguous terminology of the Standard Specifications, the
contractor waived any claim to additional compensation.
These
omissions, viewed in conjunction with its election to perform
the contracts as directed by the Cabinet, indicated Denniston’s
acceptance of the Cabinet’s interpretation of the terms of the
contracts.
At the end of the mowing season, Denniston was again
given an opportunity to protest.
After the work was completed,
the Cabinet sent a “Final Estimate” of compensation for the
project in accordance with Section 109.06 of the Standard
Specifications.
That section provides as follows:
Within a reasonable time after final
inspection and acceptance of the work by the
Engineer, the Engineer will compile a final
estimate for the contract. . . .The final
estimate will then be submitted to the
Contractor for his review. Within 60
calendar days after the final estimate has
been submitted to the Contractor, the
Contractor shall submit to the engineer his
written approval of the final estimate or a
written statement of disagreement with the
final estimate. Upon the contractor’s
approval of the final estimate, or when he
makes no acceptable statement of
disagreement within the 60 calendar days
provided herein, the final estimate will be
processed for payment.
* * * *
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Upon the Commissioner’s approval, and after
the total amount of all previous payments,
liquidated damages, and other claims, if
any, are deducted, the amount of money due
the Contractor will be certified for payment
to the agencies of the Commonwealth as
required by law. The acceptance by the
Contractor of payment for the final
quantities shall operate as and shall be a
release to the Commonwealth and the
Commissioner. (Emphases added.)
Each final estimate notified Denniston that it had sixty (60)
days either to agree to the estimate or to submit a letter of
disagreement.
The final estimate provided that the contract
would be processed for payment if no reply were forthcoming.
It is undisputed that no response was received from
Denniston on either contract and that both contracts were paid
in accordance with the Cabinet’s final estimates.
accepted the payments.
Denniston
The contracts provide expressly that
acceptance of payment under these circumstances operates as a
release of claims against the Commonwealth.
Thus, the trial
court did not err by concluding that Dennison had formally
waived its right to seek additional compensation under the
contracts.
The judgment of the Franklin Circuit Court is
affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Patrick M. Hedrick
Ashland, Kentucky
Robert C. Moore
Squire N. Williams III
Frankfort, Kentucky
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