Ralph L. Wadsworth Construction Co. v. Regional Rail Partners.
2024 COA 78. No. 22CA2154. Breach of Contract—Public Works—Contractor’s Bonds and Lien on Funds—Verified Statement of Claim—Excessive Amounts Claimed.
August 1, 2024
The Regional Transportation District (RTD) contracted with Regional Rail Partners (Regional Rail) to design and build the North Metro Rail Line between Denver Union Station and Thornton. Regional Rail contracted with Ralph L. Wadsworth Construction Company LLC (Wadsworth) to perform work related to several segments of the rail line. Numerous disputes and delays plagued the project, and the parties disagreed about who was responsible. Wadsworth filed a verified statement of claim (and later an amended statement) with RTD pursuant to CRS § 38-26-107(1). Regional Rail then petitioned the district court under § 38-26-108 to substitute a corporate surety bond as security in place of the amended verified statement of claim and requested that the court release the amended verified statement of claim. The bond was issued by Travelers Casualty and Surety Company of America (Travelers) in the amount of $19,147,858.90, which was 150% of the amended verified statement of claim amount, plus estimated costs up to the date the bond was posted. The trial court granted Regional Rail’s petition to substitute the bond in place of the amended verified statement of claim and directed the clerk to execute a certificate of release.
Several months later, Wadsworth brought multiple claims against Regional Rail; Balfour Beatty Infrastructure, Inc.; Graham Contracting Ltd.; Travelers; Balfour Beatty, LLC; and Graham Business Trust (collectively, defendants). Defendants filed an affirmative defense that Wadsworth’s amended verified statement of claim was excessive, and Regional Rail brought counterclaims. The court entered a split verdict, entering judgment (1) in favor of Regional Rail and against Wadsworth for $514,666.64 and (2) in favor of Wadsworth and against Regional Rail for $5,718,135.
On appeal, Regional Rail contended that the trial court erred because Wadsworth’s verified statement of claim was excessive. The Colorado Public Works Act, CRS §§ 38-26-101 to -110, allows a subcontractor to file with the contracting public entity a verified statement of amounts due from and unpaid by the contractor (verified statement of claim). A public entity that receives a verified statement of claim must withhold from any payments to the contractor the amount claimed by the subcontractor until any disputes between the contractor and subcontractor are resolved. With the court’s approval, the contractor may elect to substitute a bond for the verified statement of claim, and the verified statement of claim is discharged once the court approves such a bond. Essentially, the verified statement of claim creates a lien on funds held by the public entity. However, a subcontractor forfeits all rights to the claimed amount if the subcontractor files a verified statement of claim for an amount greater than what is due if there is no reasonable possibility that the amount claimed is actually due, and with the knowledge that the claim is greater than the amount due. This penalty also applies to excessive claims against bonds substituted for a verified statement of claim. Here, while the trial court found that there was a reasonable possibility that the amount Wadsworth included in its amended verified statement of claim was due, it failed to explain its reasoning or support this finding with evidence. Accordingly, the court of appeals could not discern how the trial court determined that there was a reasonable possibility that the $12.7 million claimed in the amended verified statement of claim was due. Further, the evidence established that the amended verified statement of claim and the subsequent claim against the bond was for an amount greater than the amount due, that there was no reasonable possibility that the entire amount of the claim was due or was related to lienable amounts, and that Wadsworth knew the claim was excessive. Accordingly, Wadsworth forfeited its entire claim.
Regional Rail also argued that the trial court, without explanation, erroneously awarded it only half of its damages related to its direct costs associated with the replacement of Wadsworth’s defective concrete in a specified area, contending that this was contrary to the contract. However, the record supports the trial court’s finding that Regional Rail played a role in causing the concrete issues, and the trial court’s apportionment of damages was not contrary to the contract. Thus, the trial court did not err by not awarding Regional Rail the full amount of these costs.
Regional Rail further contended that the court incorrectly valued its counterclaims. Here, for each of the claims Regional Rail contended were insufficiently analyzed, conflicting testimony was provided on whether Wadsworth was responsible, which the trial court appropriately resolved.
Wadsworth raised several issues on cross-appeal, and all but one were resolved by the court’s conclusion that Wadsworth forfeited all its claims. The remaining contention is that the trial court erred as a matter of law by awarding Regional Rail liquidated damages because it delayed and disrupted Wadsworth’s work on all segments of the project. Here, the trial court found that Regional Rail had at least in part caused delays to all parts of the project for which it sought liquidated damages, so it erred by awarding Regional Rail liquidated damages.
The judgment was affirmed in part and reversed in part, and the case was remanded for the trial court to enter an amended judgment and to resolve both parties’ competing claims for attorney fees and costs.