C B Structures. Inc. v. Potomac Electric Power Company
MEMORANDUM OPINION Signed by Judge Paul W. Grimm on 8/13/2015. (cags, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
C B STRUCTURES, INC.,
Case No.: PWG-14-2327
POTOMAC ELECTRIC POWER CO.,
The parties entered into a purchase order (“Contract”) for Plaintiff C B Structures, Inc.
(“C B Structures”) to construct pole barns, which are “shed-like building[s] with no foundation
and siding made of corrugated steel or aluminum,” for Defendant Potomac Electric Power Co.
(“Pepco”) to use “to house its fleet of trucks” (the “Project”). Jt. Stmt. 1 & n.1, ECF No. 35.
The Contract included a “Premium” of $68,220.00, Ex. 1, Jt. Rec. 1, ECF No. 36, and a Proposal
Letter that C B Structures submitted to Pepco’s engineering consultant stated that “‘[f]or a
premium of $68,220.00,’” C B Structures would “‘substantially complete the buildings by 12-3112,’” Jt. Stmt. 2 (quoting Proposal Ltr.). When Pepco refused to pay the Premium because C B
Structures did not complete the Project by December 31, 2012, C B Structures filed suit for
breach of contract, and Pepco counter-claimed for breach of contract and recoupment. Compl.,
ECF No. 2; Am. Counter-Cl., ECF No. 13. The parties have filed cross-motions for summary
judgment on the narrow issue of the meaning of Premium as used in the Contract between the
parties. ECF Nos. 31, 32.1 Although the use of “Premium” in the Contract itself is ambiguous,
the undisputed extrinsic evidence clearly shows that Premium refers to an advance mobilization
cost and not an incentive conditioned on the completion of the Project by the end of 2012. On
that basis, I will grant C B Structures’ motion and deny Pepco’s motion.
The Contract provides:
This contract shall be governed by PHI [Pepco] Standard Terms and Conditions
for Service Contracts V.8 with Safety Attachment A Rev. 5 [“Standard Terms”].
Install New Pole Barns
This purchase order is for DoubleTree Structures [“DoubleTree,” a division of
C B Structures] to provide structural design, calculations, drawings, seals,
submittals, material and construction according to [the] attached proposal for
Forestville Service Center.
Jt. Rec. 1. It then includes an itemized list, with prices for each item, such as “Vehicle Canopy
Structure #1 $124,295.00” and “Conduit, Trenching, Trench repair $13,800.00”; one line item is
“Premium $68,220.00.” Id.
The parties do not identify the “attached proposal,” and it does not appear to be a part of
the Joint Record Extract. The record does include the Standard Terms, which provide:
Contract. The Contract shall consist of the Purchase Order, including any
documents attached to or identified on the PO, any contract amendments or
modifications, and any PHI-approved Contract Change Authorizations.
Plaintiff’s motion, styled as a Motion for Declaratory Judgment, shall be treated as a motion for
summary judgment, which a party may seek on “[a] part of [a] claim,” such as the narrow issue
that the parties identify. See Tauber v. Souza, No. PWG-11-3639, 2013 WL 2045095, at *5 (D.
Md. May 13, 2013) (noting that “a declaratory judgment . . . is a separate cause of action” and
that “[a] motion for summary judgment is not a vehicle for a request for a declaratory
judgment”). The parties fully briefed their cross-motions. ECF Nos. 33, 34. A hearing is not
necessary. See Loc. R. 105.6.
In the event of a conflict among terms contained in documents attached to, or
identified in, the PO, such conflict shall be resolved in the following descending
order of precedence:
PHI prepared pre-bid and bid clarification minutes
PHI accepted portions of Contractor’s Proposal
(iii) These Terms and Conditions
Attachments to these Terms and Conditions
Ex. 20, Jt. Rec. 59. None of these documents appearing in the record refers to the Premium or
otherwise illuminates its meaning.
The record does include what the parties refer to as a “Proposal Letter,” Ex. 2, Jt. Rec. 5.
Yet, the parties refer to it as extrinsic evidence, Pl.’s Mem. 9; Def.’s Opp’n & Cross-Mot. 19–20,
rather than an attachment to the Contract, suggesting that it is not the “attached proposal” or
another document that constituted part of the Contract, as Contract is defined in the Standard
Terms. See SG Homes Assocs., LP v. Marinucci, 718 F.3d 327, 335 (4th Cir. 2013) (stating that
a document referenced in a writing “‘is to be interpreted as part of the writing’”) (quoting Ray v.
William G. Eurice & Bros., Inc., 93 A.2d 272, 279 (Md. 1952)). Written by DoubleTree’s
general manager to Pepco’s engineering consultant, Birdsall Services Group (“Birdsall”), (who
in turn forwarded it to Pepco) with regard to the Project for Pepco, the Proposal Letter states:
Per our original proposal and preliminary schedule, C.B. Structures
intends to be substantially complete with the Forestville buildings in February and
100% complete by March 31, 2013, at the original price quoted. That is a
comfortable schedule that allows for typical weather delays and normal working
We have more than enough resources available to be able to complete the
project by December 31, 2012. However, in an effort to provide the most
competitive price possible we did not factor the necessary premium expenses for
early completion into our original price.
For a premium of $68,220.00, we will substantially complete the buildings
This premium will allow us to: authorize all the necessary overtime; bring
on temporary staff as needed; cover overtime premiums charged by subs and
suppliers; cover costs for temporary heat and/or special materials/mixes.
This completion time is barring any major weather delays or any approval
delays from owner/government agencies and excludes any placing of asphalt.
Jt. Rec. 5 (emphasis added).
THE PARTIES’ POSITONS
The parties have completed stage 1 discovery as identified in the Discovery Order that I
issued, ECF No. 11-1, and, although they dispute various material facts regarding which they
will seek additional discovery, at this juncture they ask the Court to resolve a single matter of
law: the meaning of Premium as used in the Contract. Jt. Stmt. 10. As C B Structures sees it, the
Contract language is unambiguous and “does not condition Pepco’s payment of the ‘Premium’ of
$68,220 on completion of C B Structures’ work prior to the end of 2012.” Pl.’s Mem. 6. Rather,
in C B Structures’ view, “the total contract amount to be paid CB Structures as stated in the
Purchase Order includes the amount of the $68,220 premium.” Id. at 7. In other words, it is C B
Structures’ position that the $68,220 Premium was an increase in the price that C B Structures
originally quoted to Pepco before Pepco asked that it accelerate the completion date by three
months, which would cause C B Structures to incur additional mobilization expenses that it
would not incur if it had longer to complete the construction. In a nutshell, the Premium was an
addition to the purchase price, not a bonus conditioned upon completion by a date certain.
Additionally, C B Structures contends that “[e]ven if the language of the Contract is determined
to be ambiguous, the undisputed extrinsic evidence in this case when interpreted according to the
rules of contract interpretation,” and construed against Pepco as the drafter, “proves that C B
Structures was not required to complete its work by December 31, 2012 as a condition precedent
to payment of the Premium.” Id. at 7–8. Not so, says Pepco. In its view, the term Premium as
used in the Contract is ambiguous, and “parol evidence clearly demonstrates that the Premium
was conditioned upon substantial completion of the project by December 31, 2012.” Def.’s
Opp’n & Cross-Mot. 10.
SUMMARY JUDGMENT STANDARD
Summary judgment is proper when the moving party demonstrates, through “particular
parts of materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . . , admissions, interrogatory answers, or
other materials,” that “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a), (c)(1)(A); see Baldwin v. City of
Greensboro, No. 12-1722, --- F.3d ---, 2013 WL 1866940, at *3 (4th Cir. May 6, 2013). When
considering cross-motions for summary judgment, the court must consider “each motion . . .
individually” and view “the facts relevant to each . . . in the light most favorable to the nonmovant.” Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003). Here, the parties agree that no
genuine dispute exists as to the material facts related to the meaning of Premium and that “the
issue could be resolved by the Court as a matter of law,” see Jt. Stmt. 10; the issue is which party
is entitled to judgment.
Maryland law2 regarding contract formation and interpretation is well-settled. “[T]he
cardinal rule of contract interpretation is to give effect to the parties’ intentions.” Dumbarton
Imp. Ass'n, Inc. v. Druid Ridge Cemetery Co., 73 A.3d 224, 232 (Md. 2013) (quoting Tomran,
Inc. v. Passano, 891 A.2d 336, 344 (Md. 2006)). Nonetheless,
The parties agree that Maryland law applies. See Pl.’s Mem. 6; Def.’s Opp’n & Cross-Mot. 11.
[c]ourts in Maryland apply the law of objective contract interpretation, which
provides that “[t]he written language embodying the terms of an agreement will
govern the rights and liabilities of the parties, irrespective of the intent of the
parties at the time they entered into the contract, unless the written language is not
susceptible of a clear and definite understanding.”
Id. (quoting Slice v. Carozza Properties, Inc., 215 Md. 357, 368, 137 A.2d 687, 693 (1958)).
Thus, a contract “is ‘measured by its terms unless a statute, regulation, or public policy is
violated thereby.’” Connorsv. Gov’t Employees Ins. Co., 88 A.3d 162, 166 (Md. Ct. Spec. App.
2014) (quoting Pac. Indem. Co. v. Interstate Fire & Cas. Co., 488 A.2d 486, 488 (Md. 1985)).
When construing an unambiguous contract, “courts focus on the four corners of the
agreement[,] and ascribe to the contract’s language its customary, ordinary, and accepted
Dynacorp Ltd. v. Aramtel Ltd., 56 A.3d 631, 670 (Md. Ct. Spec. App. 2012)
(citations and quotation marks omitted); see 100 Inv. Ltd. P’ship v. Columbia Town Ctr. Title
Co., 60 A.3d 1, 23 (Md. 2013). “As such, ‘[a] contract’s unambiguous language will not give
way to what the parties thought the contract meant or intended it to mean at the time of
Dumbarton, 73 A.3d at 232 (quoting Sy–Lene of Washington, Inc. v. Starwood
Urban Retail II, LLC, 829 A.2d 540, 546 (Md. 2003)). Additionally, the court must construe the
contract “‘in its entirety and, if reasonably possible, [give] effect . . . to each clause so that a
court will not find an interpretation which casts out or disregards a meaningful part of the
language of the writing unless no other course can be sensibly and reasonably followed.’”
Dumbarton, 73 A.3d at 232–33 (quoting Sagner v. Glenangus Farms, Inc., 198 A.2d 277, 283
In these circumstances, the contract’s construction is “an issue of law for
resolution by the trial judge.” Bd. of Educ. of Charles Cnty. v. Plymouth Rubber Co., 569 A.2d
1288, 1296 (Md. Ct. Spec. App. 1990); Pacific Indem. Co., 488 A.2d at 489.
The court also “may construe an ambiguous contract if there is no factual dispute in the
evidence,” Pacific Indem. Co., 488 A.2d at 489, as is the case here. See Chorley Enters. v.
Dickey’s Barbecue Restaurants, Inc., ---- F.3d ----, 2015 WL 4637967, at *6 (4th Cir. Aug. 5,
2015). Contract language is ambiguous “if, to a reasonably prudent person, the language used is
susceptible of more than one meaning and not when one of the parties disagrees as to the
meaning of the subject language.” Bd. of Educ. of Charles Cnty., 569 A.2d at 1296; see Sierra
Club v. Dominion Cove Point LNG, L.P., 86 A.3d 82, 89 (Md. Ct. Spec. App.2 014) (“[T]he
mere fact that the parties disagree as to the meaning does not necessarily render [a contract]
ambiguous.”). “An ambiguity does not exist simply because a strained or conjectural
construction can be given to a word.” Dumbarton, 73 A.3d at 233 (quoting Belleview Constr. Co.
v. Ruby Hall Cmty. Ass’n, 582 A.2d 493, 496 (Md. 1990)).
“When a writing is ambiguous, extrinsic evidence is admissible to determine the
intentions of the parties to the document.” Point’s Reach, 2013 WL 4710568, at *17; see Sy–
Lene, 829 A.2d at 544 (stating that parol evidence showing the meaning of contract language “is
only admissible after the court finds the contract to be ambiguous”); see also Dumbarton, 73
A.3d at 234 (“‘Extrinsic evidence is only utilized when the intent of the parties and the purpose
of a restrictive covenant cannot be divined from the actual language of the covenant in question,
necessitating a reasonable interpretation of the language in light of the circumstances
surrounding its adoption.’”) (citation omitted). “[E]xtrinsic evidence admitted must help interpret
the ambiguous language and not be used to contradict other, unambiguous language.” Calomiris,
727 A.2d at 366.
“‘It is a basic principle of contract law that, in construing the language of a contract,
ambiguities are resolved against the draftsman of the instrument.’” John L. Mattingly Const. Co.
v. Hartford Underwriters Ins. Co., 999 A.2d 1066, 1078 (Md. 2010) (quoting Burroughs Corp. v.
Chesapeake Petroleum & Supply Co., 384 A.2d 734, 737 (Md. 1978)). The rationale for this rule
is that the drafter “‘had the better opportunity to understand and explain his meaning.’” Anderson
Adventures, LLC v. Sam & Murphy, Inc., 932 A.2d 1186, 1194 (Md. Ct. Spec. App. 2007)
(quoting L & H Enters., Inc. v. Allied Bldg. Prods. Corp., 596 A.2d 672, 676 (Md. Ct. Spec.
App. 1991) (quoting King v. Bankerd, 492 A.2d 608, 612 (Md. 1985))).
The parties dispute the meaning of Premium. Although I must “ascribe to the contract’s
language its customary, ordinary, and accepted meaning,” Dynacorp Ltd., 56 A.3d at 670,
“premium” has more than one meaning. The relevant definitions of “premium” include “[a]
reward given for a specific act or as an incentive; a prize” and “[a] sum additional to interest,
price, wages, or other fixed remuneration; any amount paid above the usual or nominal price; a
sum added to an ordinary price or charge.”
See Premium, Oxford English Dictionary,
http://www.oed.com.3 Consequently, focusing only on the word “premium” itself, in isolation
from the remainder of the Contract language, its “customary, ordinary, and accepted meaning”
supports both parties’ interpretations of the Contract language. See Dynacorp Ltd., 56 A.3d at
Indeed, the Contract itself—a simple purchase order that refers to a “Premium” of
“$68,220.00”—does nothing to relieve this ambiguity when considered in its entirety. Even
considering all documents referenced in the Standard Terms as part of the Contract, see Jt. Rec.
The online edition of the Oxford English Dictionary appears at the top of Justice Scalia and
Bryan Garner’s list of “the most useful and authoritative for the English language generally.”
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 419, 423
59, there is no explanation of the purpose of the Premium or the service or goods that the
Premium covered. A reasonably prudent person could conclude that the Premium was an
additional charge for providing expedited service just as readily as someone reasonably could
conclude that the Premium was an incentive for completing the Project by a date certain. Either
conclusion would be guesswork, as the Premium easily could have referred instead to an
additional cost for higher grade building supplies. Perhaps the “attached proposal” eliminated
the ambiguity, but the parties have not identified or attached it. Thus, the Contract as presented
to the Court is ambiguous. See Bd. of Educ. of Charles Cnty., 569 A.2d at 1296. Therefore, I
will consider extrinsic evidence to determine the parties’ intent. See Point’s Reach, 2013 WL
4710568, at *17.
The Proposal Letter states that C B Structures would complete the Project “by March 31,
2013, at the original price quoted,” which was “a comfortable schedule that allow[ed] for typical
weather delays and normal working hours,” but also that it could “complete the project by
December 31, 2012” by incurring “necessary premium expenses” that it “did not factor . . . into
[its] original price.” Jt. Rec. 5. It then states that, “[f]or a premium of $68,220.00, [C B
Structures would] substantially complete the buildings by 12-31-12.” Id. The Proposal Letter
explains that the Premium would “allow [C B Structures] to: authorize all the necessary
overtime; bring on temporary staff as needed; cover overtime premiums charged by subs and
suppliers; cover costs for temporary heat and/or special materials/mixes.” Id. It also cautions
that the promised “completion time [was] barring any major weather delays or any approval
delays,” id., suggesting that the Premium still applied if C B Structures did not complete the
Project by December 31, 2012.
Importantly, the Proposal Letter uses the word “premium” four times. The first explains
that when C B Structures bid the original job, it did so with the understanding that it would have
until March 31, 2013 to achieve final completion. This timeframe allowed it to offer “the most
competitive price possible,” since it did not have to factor in the “necessary premium expenses
for early completion.” Jt. Rec. 5 (emphasis added). Clearly, the word “premium” was qualified
by the word “expenses” and explained why C B Structures would have to increase the total cost
to achieve early completion: because doing so would cause it to incur additional expenses. C B
Structures further explained the Premium’s relationship to the expenses it would incur as
follows: “This premium will allow us to: authorize all the necessary overtime; bring on
temporary staff as needed; cover overtime premiums charged by subs and suppliers; cover costs
for temporary heat and/or special materials/mixes.” Id. (emphasis added). C B Structures’ use
of the phrase “overtime premiums” to describe payments it would have to make to its
subcontractors in order to meet an earlier completion date further clarifies that the word
“premium” was used to mean an incurred expense. Read in context, the repeated use of the word
“premium” in the Proposal Letter in connection with a description of additional expenses that
C B Structures would have to absorb in order to complete the Project three months earlier than
originally planned makes it clear to the reader that the “Premium” was an increase in the
proposed price of the Contract occasioned by the need to incur additional expenses to finish
early, and not a bonus or incentive payment, entitlement to which would be contingent upon
actually finishing the Project by December 31, 2012.
Moreover, this is exactly how Pepco’s engineering consultant (to whom the Proposal
Letter was sent) understood C B Structures’ proposed price increase to mean, as he forwarded it
to Pepco with an email that said, relevantly: “In regards to [C B Structures’] scheduling for
Forestville, they can complete the project by 12/31/12, at an accelerated schedule for an
additional $68,220.00, making their total $594,445 + $68,220 = $666,665.” Ex. 2, Jt. Rec. 3.
This email shows that he understood the extra sum to be an increase in the base cost of the
Contract occasioned by the earlier completion date and not a bonus or incentive payment that
would be unearned unless that completion date was met.
More significantly, it shows that
Pepco was informed prior to entering into the Contract that, as proposed by C B Structures, the
Premium did not function as an incentive. And, it establishes that, when Pepco failed to include
language in the Contract clearly stating its requirement that the Premium be an incentive, it “‘had
the better opportunity to understand and explain [its] meaning’” but chose not to do so. See
Anderson Adventures, LLC v. Sam & Murphy, Inc., 932 A.2d 1186, 1194 (Md. Ct. Spec. App.
2007) (citation omitted); see also John L. Mattingly Const. Co. v. Hartford Underwriters Ins.
Co., 999 A.2d 1066, 1078 (Md. 2010) (stating that court construes contractual language against
Considering the Contract in the context of this unambiguous language in the Proposal
Letter, I find that the Premium was a payment for costs that C B Structures would incur if it
accelerated its schedule, to enable it to complete the Project by December 31, 2012. Jt. Rec. 5.
It was not an incentive, only to be paid if C B Structures completed the Project by the end of
2012. Indeed, the Proposal Letter stated that, even with the Premium, C B Structures could not
guarantee completion by the end of 2012. See id. Thus, the Premium was part of the total
amount due under the Contract.
Construing the Contract in this fashion does not mean that Pepco is without a remedy if it
proves that C B Structures failed to complete the Project by the agreed-upon earlier date due to
its own fault, if the Contract afforded Pepco remedies for C B Structures’ breach. However the
Contract used the word Premium, it was paid to enable C B Structures to complete the Project by
December 31, 2012, which C B Structures did not do. Thus, C B Structures still may be liable
for damages for its failure to meet that deadline, if the evidence supports such a finding.
In sum, I find that the term “Premium” as used in the Contract means an advance
mobilization cost that was not contingent on completion of the Project by December 31, 2012
and that was part of the total amount due under the Contract. C B Structures’ motion for a
declaratory judgment, construed as a motion for summary judgment on the meaning of
“Premium,” ECF No. 31, IS GRANTED, and Pepco’s motion for summary judgment on the
same issue, ECF No. 32, IS DENIED.
A separate Order will issue.
Dated: August 13, 2015
Paul W. Grimm
United States District Judge
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