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HEADNOTE: Blumenthal Kahn Electric Limited Partnership v. Bethlehem Steel Corporation Case No. 203, September Term, 1997 _________________________________________________________________ CONTRACTS -- DEFECTIVE PERFORMANCE OF CONSTRUCTION CONTRACT -- DAMAGES -- MITIGATION OF DAMAGES/DOCTRINE OF AVOIDABLE CONSEQUENCES -- WAIVER OR EXCUSE OF DEFECTIVE PERFORMANCE -- CONTRACT RIGHT TO INSPECT WORK.

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 203

SEPTEMBER TERM, 1997

BLUMENTHAL KAHN ELECTRIC LIMITED PARTNERSHIP v. BETHLEHEM STEEL CORPORATION

Murphy, C.J., Byrnes, Getty, James S., (Ret'd, specially assigned) JJ. Opinion by Byrnes, J.

Filed: April 6, 1998

This appeal is from a judgment entered against appellant Blumenthal-Kahn Electrical Limited Partnership, in the Circuit Court for Baltimore County, on a contract claim by Bethlehem Steel Corporation. Blumenthal initiated suit, alleging that Bethlehem

Steel had breached an electrical services contract between the companies by failing to pay Blumenthal the final balance for services Blumenthal performed. was Bethlehem in counterclaimed, by virtue of alleging its that

itself

breach

defective

performance and subsequent refusal to correct its work. The case was tried by the circuit court, sitting without a jury. in The court ruled against Blumenthal on its contract claim and of Bethlehem Steel on its counterclaim. It awarded

favor

Bethlehem Steel damages in the sum of $189,345.00.

On appeal,

Blumenthal presents the following questions for review, which we have rephrased slightly: I. Was the breached locating a twelve trial court's factual finding that Blumenthal-Kahn its contract with Bethlehem Steel by improperly electrical stubouts in sections one through four of section tunnel project clearly erroneous?

II.

Did the trial court err in interpreting the language of the contract between Blumenthal-Kahn and Bethlehem Steel so as not to require Bethlehem Steel to avoid additional losses caused by its failure to inspect or negligent inspection and, thus, mitigate its damages? Our review of the record reveals that the trial court's

factual findings were not clearly erroneous and that there was no error in its interpretation of the contract language. we affirm the judgments entered below. Accordingly,

FACTS
In 1991, Blumenthal and Bethlehem Steel entered into an electrical services contract in connection with the construction of an underwater tunnel. The Massachusetts State Highway Department had approved the Boston Central Artery Tunnel project to extend the Massachusetts Turnpike from south Boston to an area near Logan Airport, through the Boston Harbor. A large number of contractors formed a joint venture for the project. Morrison, Knudsen,

Interboten and White ("MKIW"), a "sponsoring partner" of the joint venture, contracted with Bethlehem Steel to fabricate twelve 300 foot tunnel sections at Bethlehem Steel's Sparrows Point plant. Bethlehem Steel was to build the steel tubes constituting the tunnel sections; install within the tubes a gridwork of reinforcing steel (known as "rebar"), electrical fittings, and mechanical fittings; stabilize the tubes with a small amount of concrete; and deliver them to Boston by barge. Once in Boston, the tubes would

be submerged in the Boston Harbor, joined end to end, and encased in concrete, which would be poured around their interiors and exteriors over form plates. Blumenthal subcontracted with Bethlehem Steel to install the electrical fittings, including junction boxes, conduit connections, and exit points, called "stubouts," from the junction boxes to the interior tunnel walls. The electrical fittings were to be

installed behind the rebar grid. Because the electrical fittings

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were to be embedded in concrete, the stubouts were needed, and allowed, for installation of lighting systems, traffic control systems, fire alarms, and other electrical workings inside the tunnel. the Each tunnel section was to have 54 stubouts. required, the and Massachusetts be located State at The terms of regulations heights

contract that

dictated,

stubouts

uniform

throughout the tunnel sections. Bethlehem Steel agreed to pay Blumenthal $1,411,490.72 for the electrical subcontract. work work it was to perform under the tunnel project

Blumenthal was to invoice Bethlehem Steel monthly for with a ten percent retention payable upon

performed,

completion and acceptance of all work. In determining the correct stubout locations, Blumenthal referred contract. situated to drawings that accompanied and were part of the

The drawings specified that the stubouts were to be two feet above the ceiling height of the tunnel.

Blumenthal could not determine the precise stubout locations, however, as the drawings did not specify the tunnel ceiling height. Blumenthal asked Bethlehem Steel for that specification, and

Bethlehem Steel in turn made inquiry of MKIW.

MKIW informed

Bethlehem Steel that the ceiling tunnel height was 9'8" above the horizontal axis. Bethlehem Steel then conveyed this specification to Blumenthal.

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Bethlehem Steel constructed the tunnel sections two at a time, in reverse order, beginning with section twelve.

Blumenthal completed the electrical work in tunnel sections five through twelve, and, following inspection by employees of Bethlehem Steel at Sparrows Point, those sections were shipped to Boston. After they were submerged in the Boston Harbor and encased in concrete, MKIW notified Bethlehem Steel that some of the stubouts were incorrectly located. Upon further investigation, MKIW

determined that the 9'8" ceiling dimension originally given to Bethlehem Steel, and conveyed to Blumenthal-Kahn, was inaccurate. The proper ceiling dimension actually was 11'8" above the

horizontal axis. By the time that this discovery was made, however, Blumenthal had commenced work on tunnel sections one through four. Bethlehem Steel paid Blumenthal-Kahn an additional sum to revise its work in those tunnel sections, so as to conform to the amended ceiling height. Upon completion of the electrical work for tunnel sections one through four, employees of Bethlehem Steel inspected each tunnel section. tubes two and Tubes one and four were inspected on May 28, 1993; three were inspected on July 30, 1993. The

inspections did not reveal any irregularities.

Bethlehem Steel

transported the sections from Sparrows Point to Boston, by barge. In February, 1994, after those sections had been submerged in the Boston Harbor and encased in concrete, MKIW informed Bethlehem

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Steel that the stubouts in those sections were not located properly either. In particular, the stubouts were not uniformly located;

rather, they appeared at different heights and different locations in the interior walls of the tunnels. MKIW and the Massachusetts State Highway Department demanded that Bethlehem Steel correct the stubout locations. Bethlehem

Steel notified Blumenthal of the problem and demanded that it take action to correct the defect. Blumenthal refused to do so, and

notified Bethlehem Steel that it was disclaiming liability for the improperly placed stubouts. Thereafter, Bethlehem Steel informed

Blumenthal that it was reserving its right to take action against it, and proceeded to correct the stubout locations in sections one through four itself, at a cost of $277,147.00. Blumenthal issued a final invoice to Bethlehem Steel for the contract retainage amount of $144,149.07. refused to pay, asserting that After Bethlehem Steel had breached the

Blumenthal

contract, Blumenthal filed suit against Bethlehem Steel, in the Circuit Court for Baltimore County, seeking the retainage sum as damages. Bethlehem Steel counterclaimed for the costs it had

incurred in relocating the electrical stubouts.1

In Bethlehem Steel's counterclaim, it sought damages from Blumenthal for costs incurred in relocating the stubouts in all of the tunnel sections. The lower court found that, in tunnel sections five through twelve, Blumenthal mislocated the stubouts because it had been given the inaccurate ceiling dimension. On that basis, the court ruled against Bethlehem Steel on the claims (continued...) -5-

1

At trial, the parties each called two witnesses and placed numerous documents into evidence. At the close of the evidence,

the court found that Blumenthal's performance under the contract had been defective. It awarded Bethlehem Steel $189,345.00 in damages for the costs of repairs necessitated by Blumenthal's defective electrical work. The court credited the $144,149.07 retainage against the damage award, and entered judgment in the amount of $45,196.00 in favor of Bethlehem Steel and against Blumenthal. Blumenthal noted a timely appeal. facts will be supplied as necessary to our

Additional discussion.

DISCUSSION
I. Standard of Review On review of a case tried without a jury, we will not disturb the factual findings of the trial court unless they are clearly erroneous. Md. Rule 8-131(c); Urban Site v. Levering, 340 Md. 223, We

229-30 (1995); Spector v. State, 289 Md. 407, 433 (1981).

review the case on both the law and the evidence, giving due regard to the opportunity of the lower court to judge the credibility of the witnesses. Md. Rule 8-131(c). "On our review we are obligated

(...continued) pertaining to tunnel sections five through twelve. This appeal relates only to the ruling in favor of Bethlehem Steel on the claims pertaining to tunnel sections one through four. -6-

1

to

consider

the

evidence

produced

at

trial

in

a

light

most

favorable to the prevailing party; and if substantial evidence is presented to support the trial court's determination, it is not clearly erroneous and hence will not be disturbed on appeal." Bert. Cropper, Inc. v. Wisterco, 284 Md. 601, 620 (1979). Geo.

II. In ruling against Blumenthal and in favor of Bethlehem Steel, the circuit court made the following factual finding: I find based on [the] evidence that the credible evidence and the reasonable inference to be drawn therefrom, that the . . . stubouts . . . were improperly, incorrectly installed and that it was a defect that occurred within one year. And pursuant to paragraph five of the contract was a responsibility of Blumenthal Kahn [sic]. Blumenthal contends that this factual finding was clearly erroneous because there was no direct evidence demonstrating that the stubout locations did not conform to the contract requirements when the tunnel sections were inspected in Baltimore, before they were shipped to Boston. Specifically, Blumenthal argues that the court rested its finding upon three pieces of documentary evidence that were not sufficient to sustain it and were irrelevant: two reports of inspections of the tunnel sections, conducted after they had been submerged in the Boston Harbor and encased in concrete, revealing that the stubout locations deviated from the contract specifications, and an August 11, 1993 letter by Frederick L. Graefe of Blumenthal, in which he conceded that thirty-one of the -7-

sixty

stubouts

in

tunnel

sections

six

through

twelve

were

"imprecisely" located.

Blumenthal asserts that, in the absence of

direct evidence that the stubouts were incorrectly located when the tunnels left Baltimore, the only rational conclusion that the court could have reached was that Blumenthal had located the stubouts correctly, but that the stubouts later shifted position, either during transit to Boston or when the concrete was poured. Blumenthal's argument fails to take into account several important aspects of the fact-finding process. First, a fact-

finder considers evidence together with and in light of the other evidence presented, not in a vacuum. See Proctor Elec. Co. v.

Zink, 217 Md. 22, 33 (1958)("It is the [fact-finder's] duty to take into consideration all the evidence, whether circumstantial or otherwise, tending to disprove any statement of fact made by a witness, . . . and thus determine the weight or credibility to be given to such statement."); Locklear v. State, 94 Md. App. 39, 45 (1992)("The fact finder may accept or reject any evidence presented to it."); 32A C.J.S. Evidence

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