C & W ENTERPRISES v. City of Sioux Falls

Citation635 N.W.2d 752,2001 SD 132
Decision Date07 November 2001
Docket NumberNo. 21735.,21735.
CourtSupreme Court of South Dakota
PartiesC & W ENTERPRISES, INC., a South Dakota Corporation, Plaintiff and Appellee, v. CITY OF SIOUX FALLS, Defendant and Appellant.

Ronald A. Parsons, Jr., Chad Swenson of Johnson, Heidepriem, Miner, Marlow and Janklow, Sioux Falls, for plaintiff and appellee.

Lon J. Kouri, David A. Pfeifle of May, Johnson, Doyle & Becker, Sioux Falls, for defendant and appellant.

GILBERTSON, Chief Justice.

[¶ 1.] The City of Sioux Falls (City) and Sweetman Construction Company (Sweetman) entered into a general contract for the construction of an overpass and ramp at the intersection of 1229 and Louise Avenue in Sioux Falls. Sweetman subcontracted the sewer and watermain work to C & W Enterprises, Inc. (C & W), with the approval of City. Problems with the project specifications resulted in necessary repairs, the cost of which was born by C & W. C & W sued City for breach of contract and damages. At trial, the jury found for C & W in the amount of $270,000. City moved for judgment n.o.v. and, in the alternative, a new trial. The trial court denied the motion for a new trial, but granted partial judgment n.o.v. on the verdict amount over $180,000. We affirm.

FACTS AND PROCEDURE

[¶ 2.] On July 9, 1992, the State of South Dakota entered into a contract with Sweetman for work on a portion of the South Dakota Highway system located at the intersection of 1229 and Louise Avenue in Sioux Falls. This intersection lies in an area of Lincoln County called the Prairie View watershed and is known for its drainage problems. Sweetman subcontracted the construction of the sanitary sewer system and relocation of the watermain, a portion of the project controlled by City, to C & W on November 24, 1992. Both the original contract and the subcontract were subject to the agreement and approval of City.

[¶ 3.] The terms of the subcontract required that C & W complete the sewer and watermain project in accordance with the terms of the general contract, which was jointly prepared by City and the State. The contract included both general conditions, which are standard specifications incorporated into every City contract, and the more detailed specifications for this particular project. The contract specifications for the sewer and watermain projects were designed, drafted and enforced by the Office of the City Engineer. Additionally, a City inspector was assigned to be on site as the work was performed.1

[¶ 4.] C & W's project essentially required 10 inch PVC sewer pipe to be laid inside a 14 inch steel casing. The piping was also to be supported by Type A bedding material, "¼ to ¾ inch crushed rock or pea gravel," which is used to provide support while maintaining the proper grade and water flow. Under particularly wet or unstable ground conditions, however, Type B bedding material is required. Type B bedding material consists of oversized "¾ to 2 inch rock" and is considerably more expensive. For this reason, the contract provided "[i]f Type B oversized material is necessary to stabilize the trench base, such will be specified by the Engineer...." (underlined in original).

[¶ 5.] The first 300 feet of the project progressed normally, with C & W using the Type A bedding material, but with ground conditions continuing to worsen. The City inspector was on site inspecting the work for compliance and providing daily reports to the City engineer. When the crew reached what was approximately the 300-foot mark, they hit an abandoned pipeline, which flooded the trench. The crew's superintendent officially requested that City authorize Type B bedding material for the remainder of the excavation. The City inspector informed C & W of City's refusal to authorize the Type B bedding material and the project continued, albeit with some difficulty, until the crew reached the last 355 feet of the excavation.

[¶ 6.] The conditions in the last 355 feet were so wet that C & W's project superintendent contacted Warren Barse, the company owner, explained the problem and informed him of City's refusal to authorize and pay for Type B bedding material. Barse instructed the superintendent to go ahead and use the Type B bedding material if the job could not be completed without it. Therefore, the last 355 feet of the project contain the Type B bedding material. This material, however, was not approved until September 14, 1999. The entire project was completed by the end of September.

[¶ 7.] When problems with sagging and bending of the pipe were discovered in the first 300 feet, C & W repaired this damage at its own expense. A second inspection, however, revealed cracking and sagging in the bridge and ramp near the 400 to 500-foot mark, a point beyond the area where C & W had officially requested authorization for use of the Type B bedding material. The steel casing around the water pipe bent, causing the bridge above to crack. City demanded that C & W also correct this problem and rebury the pipe at its own expense. No problems were encountered in the final 355 feet in which Type B bedding material was used. C & W made the repairs and the project was completed.

[¶ 8.] When City refused to pay for the repairs, C & W sued City for breach of contract and sought to recover approximately $180,000 in damages related to repair of the 400 to 500-foot section of the project.2 C & W also sought damages in the amount of the last installment owing on the contract, which City refused to pay. City filed a Third Party Complaint against Sweetman, but Sweetman was dismissed by stipulation on January 31, 1999. At trial, which was held from September 12 through 14, 2000, the jury found in favor of C & W for damages in the amount of $270,000 and prejudgment interest in the amount of $180,000.

[¶ 9.] On September 25, City filed a motion for judgment notwithstanding the verdict and, in the alternative, a motion for a new trial. At a hearing on October 11, 2000, the trial judge denied the motion for a new trial, but did grant partial judgment n.o.v. to reduce the verdict to $180,000, determining the error was due to jury miscalculation and not to passion, prejudice or mistake of law. City appeals, raising the following issues:

1. Whether the trial court erred in holding C & W, as a subcontractor specifically approved by City, is in privity of contract with City such that it may sue City for a breach of contract.
2. Whether the trial court erred in denying City's motion for a directed verdict and in partially denying city's motion for judgment notwithstanding the verdict.
3. Whether the trial court erred in denying City's motion for a new trial.
STANDARD OF REVIEW

[¶ 10.] City challenges the trial court's denial of its motion for a directed verdict. Our standard of review on motions for directed verdict is well settled:

A motion for a directed verdict under SDCL 15-6-50(a) questions the legal sufficiency of the evidence to sustain a verdict against the moving party. Upon such a motion, the trial court must determine whether there is any substantial evidence to sustain the action. The evidence must be accepted which is most favorable to the nonmoving party and the trial court must indulge all legitimate inferences therefrom in his favor. If sufficient evidence exists so that reasonable minds could differ, a directed verdict is not appropriate. The trial court's decisions and rulings on such motions are presumed correct and this Court will not seek reasons to reverse.

Veeder v. Kennedy, 1999 SD 23, ¶ 25, 589 N.W.2d 610, 617 (quoting Border States Paving, Inc., v. S.D. Dep't of Transp., 1998 SD 21, ¶ 10, 574 N.W.2d 898, 901) (citations omitted).

[¶ 11.] City also challenges the trial court's partial denial of its motion for judgment notwithstanding the verdict. A motion for judgment n.o.v. "is based on and relates back to a directed verdict motion made at the close of all the evidence." State v. Perovich, 2001 SD 96, ¶ 11, 632 N.W.2d 12, 15 (citing SDCL 15-6-50(b)). The grounds for the directed verdict motion are merely brought before the trial court for a second review. Perovich, 2001 SD 96, ¶ 11, 632 N.W.2d at 15. "Thus, we apply the abuse of discretion standard when reviewing the trial court's ruling." Id. (citing Treib v. Kern, 513 N.W.2d 908, 914 (S.D.1994)). After reviewing the evidence in a light most favorable to the verdict, we determine whether there is sufficient evidence to support it. Perovich, 2001 SD 96, ¶ 11, 632 N.W.2d at 15.

[¶ 12.] City also moved for a new trial on the basis that the jury's verdict was excessive. "Whether a new trial should be granted is left to the sound judicial discretion of the trial court, and this Court will not disturb the trial court's decision absent a clear showing of abuse of discretion." Id. (citing Tunender v. Minnaert, 1997 SD 62, ¶ 9, 563 N.W.2d 849, 851 (citation omitted)). Moreover, the determination of an award amount "is peculiarly a question for the jury." Maryott v. First Nat'l Bank of Eden, 2001 SD 43, ¶ 26, 624 N.W.2d 96, 105 (citing Berry v. Risdall, 1998 SD 18, ¶ 9, 576 N.W.2d 1, 4). Therefore, "[i]f the jury's verdict can be explained with reference to the evidence rather than by juror passion, prejudice or mistake of law, the verdict should be affirmed." Id.

ANALYSIS AND DECISION

[¶ 13.] 1. Whether the trial court erred in holding C & W, as a subcontractor specifically approved by City, is in privity of contract with City such that it may sue City for a breach of contract.

[¶ 14.] This Court has previously held that a subcontractor may proceed in a breach of contract action against the first party where the parties are in privity with one another. See Fisher Sand & Gravel Co. v. State, Dept. of Transp., 1997 SD 8, ¶ 9-10, 558 N.W.2d 864, 867

; Sweetman Const. Co., Inc. v. State, 293 N.W.2d 457, 461 (S.D.1980). Privity of contract occurs when: (1) the subcontractor is specifically...

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