2019 COA 44
Colo. Ct. App.2019Background
- Whiting-Turner (general contractor) subcontracted shotcrete/anchoring work to Klempco for $1,785,783; Klempco defaulted, stopped work, and failed to pay sub‑subcontractors.
- Klempco furnished AIA A312 form performance and payment bonds issued by Guarantee Company of North America USA (GCNA); the Subcontract was incorporated into the bonds.
- The performance bond (section 3) imposed three conditions precedent on Whiting‑Turner to trigger the surety: notice (3.1), declaration/termination (3.2), and payment of the “Balance of the Contract Price” to the surety or a replacement contractor (3.3); Balance was defined as the total payable after proper adjustments and reduced by valid payments already made.
- After Klempco demobilized, Whiting‑Turner terminated the Subcontract, paid certain sub‑subcontractors to avoid liens, agreed with Klempco (and GCNA attended) to deduct shotcrete work ($553,707) from Klempco’s price, and sent GCNA a June 24, 2014 calculation showing a negative Balance and that Whiting‑Turner had tendered the Balance (net result: Whiting‑Turner claimed it had paid what was required under §3.3).
- Whiting‑Turner sued Klempco and brought third‑party claims against GCNA for breach of the performance and payment bonds; the bench trial found Klempco breached, that Whiting‑Turner satisfied §3.3, and that GCNA breached the bonds. Damages and attorney fees were awarded jointly and severally against Klempco and GCNA.
Issues
| Issue | Whiting‑Turner (Plaintiff) Argument | GCNA (Defendant) Argument | Held |
|---|---|---|---|
| Legal standard for satisfying a bond condition precedent (strict v. substantial) | Trial applied correct standard; Whiting‑Turner complied with §3.3 | Conditions precedent must be strictly satisfied by the contractor | Court declined to reach a new rule; record did not show trial court applied a wrong standard and affirmed outcome |
| Waiver by GCNA of objections to §3.3 compliance | Whiting‑Turner argued GCNA waived objections by not responding to requests for guidance | GCNA said it did not waive its right to contest §3.3 compliance | Trial court’s waiver finding was alternative; appellate court did not decide waiver because merits independently supported judgment |
| Calculation of “Balance of the Contract Price” (deductions/payments) | Whiting‑Turner reduced Balance by post‑termination payments to Klempco’s sub‑subcontractors, the agreed shotcrete reduction, and an adjusted back charge; it tendered the Balance to GCNA | GCNA argued those reductions were improper (Balance fixed at termination; reductions and back charge invalid) | Trial court findings supported; reductions were authorized by the Subcontract/agreement and GCNA tacitly consented; §3.3 satisfied |
| Claim of duplicative damages ("triple dipping") | Whiting‑Turner sought recovery only under the performance bond after offsetting amounts Whiting‑Turner would have owed Klempco | GCNA said Whiting‑Turner reduced the Balance and also recovered same amounts under bonds | No duplicative recovery; court limited recovery to avoid double recovery and subtracted what Whiting‑Turner would have paid Klempco |
| Award and allocation of attorney fees | Whiting‑Turner sought full fees under contract/bond; fees arise from same operative facts so not segregable | GCNA argued fees not recoverable unless §3.3 satisfied and fees attributable to claims against GCNA should be segregated | Fees award sustained: court found §3.3 satisfied and that claims involved common core of facts so segregation was not required |
Key Cases Cited
- Zingone v. Zingone, 314 P.2d 304 (Colo. 1957) (appellate review limits: cannot rely on alleged trial‑court findings not in record)
- Brighton School Dist. 27J v. Transamerica Premier Ins. Co., 923 P.2d 328 (Colo. App. 1996) (substantial compliance governs notice provisions in bonds)
- U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34 (2d Cir. 2004) (obligee’s actual agreement to pay the Balance, not surety’s valuation, controls §3.3 inquiry)
- Rocky Mountain Festivals, Inc. v. Parsons Corp., 242 P.3d 1067 (Colo. 2010) (attorney fees may cover entire litigation when claims share a common core of facts)
- Powder Horn Constructors, Inc. v. City of Florence, 754 P.2d 356 (Colo. 1988) (contract language governs parties’ intent on obligations such as fee shifting)