BAILEY, Judge.
The Town of Plainfield ("Plainfield") appeals two orders of the Hendricks Superior Court, one granting partial summary judgment to Paden Engineering Co., Inc. ("Paden"), and one granting partial summary judgment to Merchants Bonding Company and Everest Reinsurance Company (collectively, "the Sureties"), upon Plainfield's claims for damages for breach of contract and for payment upon a performance bond, respectively.
Plainfield presents for review the following consolidated and restated issues:
On July 19, 2002, Plainfield and Paden entered into a Standard Form of Agreement between Owner [Plainfield] and Contractor [Paden] ("the Contract")
Article 8 of the Contract provides that "[t]he Contract may be terminated by the Owner or the Contractor as provided in Article 14 of the General Conditions." (App.106.) As amended by Supplementary Conditions, Article 14.2.1 of the General Conditions, titled "Termination by Owner for Cause," provides:
(App.155-56.) Article 14.2.2 of the General Conditions provides that the Owner is obligated to consult with the Construction Manager and obtain certification by the Architect that sufficient cause exists to justify termination.
Section 3 of the Performance Bond provides that, where there is no Owner default, the Sureties' obligations arise after notice that declaration of contractor default was under consideration, a conference request, a lapse of twenty days, a declaration of default and formal termination, and the Owner's agreement to pay the Contract balance to the Sureties or a selected contractor. Also, the Performance Bond having incorporated the Contract terms, seven days written notice to the Sureties was required. Upon the Owner's exercise of termination procedures, the Sureties were to be afforded options: finance the principal (with Owner consent), takeover completion of the construction contract, tender damages payment to Owner, agree to completion by Owner, or deny liability.
Plainfield also contracted with Sebree & Associates, Inc. to act as Architect on the Project.
The working relationship between Plainfield and Paden was contentious, with each contending that the other caused delays. On October 9, 2003, Plainfield issued a Notice of Termination to Paden, stating that the letter constituted Paden's seven-day written notice of termination of the Contract. Written notice was not contemporaneously provided to the Sureties. However, on October 24, 2003, Plainfield issued a letter to the Sureties stating in relevant part:
(App.247) On October 12, 2004, subcontractor Hoosier Steel, Inc. filed a complaint against Paden and the Sureties.
On November 25, 2008, the Sureties filed a motion for partial summary judgment in their favor. On the same day, Paden and the Sureties jointly filed a separate motion for partial summary judgment. Plainfield filed a cross-motion for summary judgment as to all its claims. The trial court conducted a hearing at which argument of counsel was heard on all pending summary judgment motions.
On March 10, 2010, the trial court entered three orders on the summary judgment motions. The trial court granted the Sureties' motion for partial summary judgment, concluding that they had no obligation under the Performance Bond due to failure of conditions precedent, more specifically, notice and opportunity to mitigate damages. The trial court also granted Paden's motion for partial summary judgment, concluding that Plainfield had not complied with a condition precedent, specifically, obtaining an architect's certification of good cause for termination. Finally, the trial court denied Plainfield's motion for summary judgment. As to each of the partial summary judgment orders, the trial court directed the entry of a final judgment upon an express determination of no just reason for delay, pursuant to Indiana Trial Rule 54(B).
On April 9, 2010, Plainfield filed a motion to correct error. The motion was summarily denied. Plainfield appealed. On motion by Paden and the Sureties, this Court dismissed the portion of the appeal challenging the denial of Plainfield's motion for summary judgment because there was no entry of final judgment. The appeal of the partial summary judgment orders proceeded.
Plainfield is appealing the denial of a motion to correct error, which alleged that the trial court erred in granting Paden and the Sureties' motions for partial summary judgment. We review a trial court's ruling on a motion to correct error for an abuse of discretion. Newland Resources, LLC v. Branham Corp., 918 N.E.2d 763, 772 (Ind. Ct.App.2009).
Summary judgment is appropriate only if the pleadings and designated materials considered by the trial court show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Yates v. Johnson County Bd. of Comm'rs, 888 N.E.2d 842, 846 (Ind.Ct.App.2008). We must construe all evidence in favor of the party opposing summary judgment, and all doubts as to the existence of a material issue must be resolved against the moving party. Id. at 847. We carefully review a grant of summary judgment in order to ensure that a party was not improperly denied his or her day in court. Reeder v. Harper, 788 N.E.2d 1236, 1240 (Ind.2003). The fact that the parties made cross motions for summary judgment does not alter this standard of review. Decker v. Zengler, 883 N.E.2d 839, 842 (Ind.Ct.App. 2008), trans. denied.
Our Indiana Supreme Court has expressed its commitment to advancing the public policy in favor of enforcing contracts. See Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind.1995). It is in the best interest of the public not to unnecessarily restrict persons' freedom to contract. Id. Accordingly, as a general rule, the law will allow persons of full age and competent understanding the utmost liberty in contracts. Barrington Mgm't Co. v. Paul E. Draper Family Ltd. Partnership, 695 N.E.2d 135, 140 (Ind.Ct.App.1998). Contracts entered into freely and voluntarily will be enforced by the courts. Id.
Our standard of review is de novo. Id. If a contract is ambiguous or uncertain and its meaning must be determined by extrinsic evidence, its construction is a matter for the fact finder. Id. On the other hand, if an ambiguity arises because of the language used in the contract rather than extrinsic facts, its construction is purely a question of law. Id. Reading the contract as a whole, we attempt to determine the intent of the parties at the time the contract was made. Id. We construe the language so as not to render any words, phrases, or terms ineffective or meaningless. Id. Finally, we accept an interpretation of the contract which harmonizes its provisions as opposed to one which causes the provisions to be conflicting. Id.
Plainfield argues that it was entitled to proceed with a breach of contract action against Paden, while Paden contends that it established that Plainfield failed to satisfy at least one condition precedent. A condition precedent is a condition that must be performed before the agreement of the parties becomes binding, or a condition that must be fulfilled before the duty to perform a specific obligation arises. Cricket Ridge, LLC v. Wright, 880 N.E.2d 1271, 1278 (Ind.Ct.App.2008), trans. denied. Where the condition precedent never occurred, a party cannot enforce a conditional contract obligation. See id.
The arguments of the parties implicate Article 14.2.2 of the General Conditions of the Contract, which provides:
(App.156.) Plainfield acknowledges a contractual obligation to provide Paden with seven days written notice and an architect's certification, but nonetheless asserts
(App.135.) The designated materials identify Sebree & Associates, Inc. as the architect of the Project. The materials also include an example of an architect's certification — that executed as a prerequisite to contractor payment — indicating that the certification is to be of standard form and signed. Moreover, the Contract requires that the certification be explicit: sufficient cause exists for the Owner to terminate the Contract for cause. Paden and the Sureties designated evidence that there had been no architect certification of good cause for termination as required by the Contract. (App.303.)
Plainfield contends that it need not have responded by designation of materials in order to withstand the grant of partial summary judgment, because it properly had no burden to negate Paden's defense.
(App.973.)
We consider this e-mail communication in the light most favorable to Plainfield in order to discern whether a genuine issue of material fact precludes partial summary judgment. Yates, 888 N.E.2d at 847. The sender alludes to termination, but does not purport to be rendering an architect's certification of good cause for termination. He does not claim to be an architect, nor does he claim that he was rendering an architect's certification on behalf of Sebree, the designated architect for the Project. In his affidavit, Craney merely avers that he had "expressed [his] agreement with terminating Paden from the Project." (App.971.) In short, he never claimed to have rendered an architect's certification as required by the Contract. Accordingly, the designated material does not reveal a genuine issue of material fact in this regard. The absence of the architect's certificate not in dispute, we turn to Plainfield's argument that the omission is not fatal to its pursuit of a common law claim against Paden.
Standard architectural contracts have long provided for termination and takeover by the owner under some circumstances; however, "forfeitures are not favored" and a condition precedent "must be strictly complied with in order to justify the drastic action contemplated." White v. Mitchell, 30 Ind.App. 342, 65 N.E. 1061, 1062 (1903). "Where the parties to a building contract have made the certificate of the architect a condition precedent to the assertion of a right thereunder, the party claiming such right must show the performance of the condition, a reason for noncompliance therewith, or a waiver thereof." Id. at 1062-63. See also Hoyt v. Pomeroy, 87 Conn. 41, 86 A. 755 (1913) (the architect certification must be "exact" and "conform to the conditions in the contract relied upon").
Under a contract giving the architect the power to determine questions arising over the construction of the building, such as diligent performance of the work and whether the owner is justified in terminating the contract and taking possession of the materials for the purpose of completing the building, the architect must expressly certify that the owner is warranted in taking over the contract and the materials. Oden Const. Co. v. Helton, 218 Miss. 41, 65 So.2d 442, 445 (1953). In Oden, letters from an architect expressing displeasure with the work did not constitute compliance with the express certification requirement. See id. An owner who fails to give contractually-required notice, upon receipt of a proper architect's certificate, may not rightfully rescind the contract and take charge of the work. American-Hawaiian Eng'g & Const. Co. v. Butler, 165 Cal. 497, 133 P. 280, 286 (1913).
In White, this Court considered the following provision, Article 5 in a standard contract recommended for general use by the American Institute of Architects and the National Association of Builders:
65 N.E. at 1062 (emphasis added.) The White Court determined that the contract made the certificate of the architect a condition precedent to the right of the owner to terminate the employment, and also noted "the universal strictness with which this provision of the contract has been uniformly construed[.]" Id. at 1063. See also Korbly v. Loomis, 172 Ind. 352, 88 N.E. 698 (1909) (reiterating "[w]hen the parties to a building contract have made the certificate of an architect or engineer a condition precedent to the assertion of a right thereunder, such provisions are valid, and the party claiming such right must show by proper allegations the performance of the conditions, a valid reason for noncompliance therewith, or a waiver thereof."), overruled in part on other grounds by Moore-Mansfield Const. Co. v. Indianapolis, N.C. & T. Ry. Co., 179 Ind. 356, 101 N.E. 296 (1913).
Plainfield contends that the holding of White is inapposite, because the contract language therein included no reference to retention of common law rights. Specifically, Plainfield points to the following provision of the Contract at issue here:
(App.156.) (emphasis added.) Plainfield contends that the phrase "without prejudice to any other rights or remedies" ensures that Plainfield did not give up any common law right to address a breach of contract by Paden. Also, Article 13.4.1 provides that duties and obligations, and rights and remedies under the Contract shall be in addition to those imposed or available by law.
Plainfield relies upon Ingrassia Constr. Co. v. Vernon Township Bd. of Educ., 345 N.J.Super. 130, 784 A.2d 73 (2001). The construction contract at issue in Ingrassia provided, like the instant Contract:
Id. at 77 (emphasis added.) The construction contract was terminated by the Board after certification by an architect licensed in Canada but not in the United States. See id. The Ingrassia Court observed, "The problem then is to determine the consequences that flow from a termination based on a defective architect's certificate." The Court concluded,
Id. at 77-81.
Paden and the Sureties respond that Ingrassia is not well-reasoned and has not been followed by other jurisdictions. We find Ingrassia to be something of an anomaly, a case in which one party substantially performed its obligation to procure an architect's certification, but the certification fell short because of the origin of licensure, and the trial court essentially applied equitable principles. We do not find it instructive in our review of the contract before us.
We believe the more well-reasoned view to be that a party to such a contract retains his common law rights to the extent that the exercise of those rights is not in conflict with the duties specified in his contract. Here, in order to harmonize
Upon non-performance of a contract term by Paden, Plainfield could still pursue a breach of contract action, as its common law rights were not extinguished by the Contract. However, Plainfield's exercise of its right was constrained by compliance with certain conditions precedent — notice and architect's certification. The architect's certification not having been rendered, a condition precedent failed, and Paden is entitled to partial summary judgment upon Plainfield's claim for breach of contract.
Section 3 of the Performance Bond contains certain conditions precedent to Plainfield's recovery from the Sureties, providing:
(App.236.) (emphasis added.)
Admittedly, Plainfield did not provide written notice to the Sureties prior to termination of Paden's services or permit the Sureties to elect which of their five contractual options would be exercised in an effort to mitigate their damages.
A contract of surety creates a tripartite contractual relationship between the party secured, the principal obligor, and the party secondarily liable. Meyer v. Bldg. & Realty Serv. Co., 209 Ind. 125, 133, 196 N.E. 250, 253 (1935). A surety is one who undertakes to do that which the principal is bound to do in the event the principal fails to comply with an obligation. Id. While insurance contracts are in many respects similar to surety contracts, there is a "wide difference between the two kinds of contracts." Id. "Insurance has been defined as a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event; whereas a contract of suretyship is one to answer for the debt, default, or miscarriage of another[.]" Id. 209 Ind. at 134, 196 N.E. at 253-54. A surety's liability must be measured by the strict terms of his contract. In re Kemper Ins. Companies, 819 N.E.2d 485, 490 (Ind.Ct.App.2004), trans. denied.
Here, Plainfield and the Sureties entered into a contractual relationship whereby the Sureties' obligations would be triggered only upon the performance of specified conditions precedent. Also, the Sureties were contractually entitled to elect one of five options for mitigation of their damages. However, Plainfield admittedly did not comply with formal termination requirements relative to the Sureties or afford the Sureties to elect a course of action. As to the Sureties, Plainfield essentially concedes that conditions precedent failed but claims that the Sureties should be compelled to show actual prejudice arising from Plainfield's omissions.
In its discussion of actual prejudice, Plainfield has directed our attention to Tri-Etch, Inc. v. Cincinnati Ins. Co., 909 N.E.2d 997 (Ind.2009), reh'g denied:
Id. at 1004-5. The Tri-Etch Court held that, while a finding of prejudice is required to void coverage, late notice was presumptively prejudicial to an insurer. Id. at 1005. As such, Tri-Etch is not helpful to Plainfield's position. In essence, even if the Sureties are to be regarded as insurers asserting a late notice defense, Tri-Etch would dictate that the lack of timely notice was presumptively prejudicial. The Sureties designated evidence of lack of written notice and architect certification. In light of Plainfield's failure to come forward with a designation of evidence to rebut the presumed prejudice, the Sureties need not show actual prejudice to prevail upon their partial summary judgment motion. See also Sheehan Constr. Co. v. Continental Cas. Co., 938 N.E.2d 685, 689 (Ind.2010) (observing that, one prejudice is presumed, the burden is on the insured to establish some evidence that prejudice did not occur in the particular situation), reh'g denied.
The parties herein entered into a contract assigning duties, rights, remedies and obligations. In the event of alleged failure by the contractor, Paden, to adequately perform, the owner, Plainfield, was permitted (upon satisfaction of specified prerequisites) to seek to hold the Sureties liable. Even so, the Sureties — as opposed to Plainfield — were accorded the right to elect among specified options. We may not rewrite clear and unambiguous language of a contract to alter the obligations of the parties. Von Hor, 867 N.E.2d at 278. As such, we will not extend the coverage of the performance bond beyond that for which the parties have contracted. Nor will we re-allocate the opportunity for mitigation of damages bargained for by the Sureties and agreed to by Plainfield.
In short, Plainfield is bound by the terms of the contract into which it entered and the Sureties are liable for no more than the contract provisions would dictate. Kemper, 819 N.E.2d at 490. Plainfield did not satisfy conditions precedent to recovery from the Sureties. The Sureties are entitled to partial summary judgment upon Plainfield's claim for payment under the performance bond.
Paden has demonstrated the absence of a genuine issue of material fact and its entitlement to partial summary judgment as a matter of law upon Plainfield's contractual claim for damages against Paden. The Sureties have demonstrated the absence of a genuine issue of material fact and their entitlement to partial summary judgment as a matter of law upon Plainfield's contractual claim for payment under a performance bond. Accordingly, the trial court properly granted partial summary judgment to Paden and to the Sureties.
Affirmed.
NAJAM, J., and DARDEN, J., concur.