COA affirms judgment for roofing company against subcontractor, reverses to determine accurate prejudgment interest

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The Court of Appeals of Indiana has affirmed summary judgment, damages and attorney fees for a roofing company after its relationship with a subcontractor turned sour. However, the court reversed to determine the appropriate award of prejudgment interest.

In April 2015, Five Star Roofing Systems Inc. signed a subcontractor agreement with Pendleton Enterprises Inc. for roofing work as part of a construction project for Flint Hill Resources.

The total subcontract price – $176,000 – included an upfront initial payment of $88,000, with the remaining balance to be paid once the project was completed.

By August 2015, Pendleton informed Five Star that the subcontractor had twice shown up to work with the incorrect insulation material, had not complied with safety rules and regulations regarding permits and documentation of training, which in turn led “to FHR requiring more stipulations.” It outlined expectations for future work on the roof, but just a few days later, Pendleton told Five Star that it was in breach of their agreement and that it would be terminated as the subcontractor.

Pendleton also asserted that Five Star had 48 hours within receipt of the notification to acknowledge via certified letter to Pendleton and follow all of the document’s guidelines. If not, Pendleton would sue.

A suit eventually came after Kevin Baird, on behalf of Five Star, sent Pendleton a letter alleging costs of $88,766 and loss of the “final payment not received due to not being allowed to complete the job” and stating “[w]e will accept the deposit as final payment for the costs incurred.”

Pendleton sued its former subcontractor, saying it had a right to terminate the contract and was “entitled to reimbursement from Five Star for all of the [breaches] pursuant to the express terms of the Subcontract.”

The Porter Superior Court granted Pendleton’s motion for summary judgment in June 2021, finding it was entitled to $121,992 in damages plus prejudgment interest of $56,902.72 and reasonable attorney fees. The final judgment totaled at $245,284.50, with $66,233.78 in fees and expenses, plus $156 in costs.

The COA affirmed Pendleton’s summary judgment award, concluding that the trial court did not err.

“The record reveals that Five Star did not designate evidence to contest many of Pendleton Enterprises’ claims,” Judge Elaine Brown wrote, “including that it ordered the wrong insulation on two occasions, it did not provide lead time when requested for the third order of insulation, its workers cut into the roof when Pendleton left to check an insulation delivery, it did not have enough workers on August 11, 2015, its workers cleaned up with kerosene and failed to use protective gloves, its workers failed to attend a safety meeting, it did not ultimately hire a fall protection-competent person at a reasonable rate pursuant to Pendleton Enterprises’ request, it failed to comply with safety requirements prior to August 14, 2015, and it did not respond to or comply with the allegations in the August 24th email.

“Under these circumstances, we conclude as a matter of law that Five Star’s breaches were material and permitted Pendleton Enterprises to terminate the Subcontractor Agreement,” Brown concluded.

However, the COA paused on the issue of prejudgment interest. Appellate judges reversed the prejudgment interest award with respect to the date it began to accrue.

“The record reveals that, after Pendleton Enterprises terminated Five Star, it sought ‘[t]hree estimates again’ and ‘references from local areas that had track records’ before selecting (Sterling Commercial Roofing, Inc.’s) proposal and signing a contract for $210,085 on October 19, 2015,” Brown wrote. “Sterling completed the roofing project by February 9, 2016, at which time it submitted an invoice for $209,992. Once Sterling completed the roofing project to FHR and Pendleton Enterprises’ satisfaction, submitted its invoice on February 9, 2016, and the cost expended to complete the roofing project could be determined, Pendleton Enterprises’ damages were due according to the Subcontractor Agreement.”

The COA therefore remanded with instructions for the court to determine the appropriate amount of interest from Feb. 9, 2016, in Five Star Roofing Systems, Inc. D/B/A Five Star Commercial Roofing Systems Inc. v. Armored Guard Window & Door Group, Inc. D/B/A Pendleton Enterprises, Inc., 21A-PL-1964.

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