Domson, Inc. v. Kadrmas Lee & Jackson, Inc.

• Decision Date: 19 September 2018
• Docket Number: 28401
• Citation: 918 N.W.2d 396
• Court: South Dakota Supreme Court
• Parties: DOMSON, INC., Plaintiff and Appellant, v. KADRMAS LEE & JACKSON, INC. and Dakota Engineering, LLC, Defendants and Appellees.

918 N.W.2d 396

DOMSON, INC., Plaintiff and Appellant,

v.KADRMAS LEE & JACKSON, INC. and Dakota Engineering, LLC, Defendants and Appellees.

28401

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS ON MAY 21, 2018

OPINION FILED September 19, 2018

Rehearing Denied October 26, 2018

RONALD G. SCHMIDT of Gunderson, Palmer, Nelson & Ashmore, LLP, Rapid City, South Dakota, Attorneys for appellant.

MICHAEL L. LUCE, DANA VAN BEEK PALMER of Lynn, Jackson, Shultz & Lebrun, P.C., Sioux Falls, South Dakota, Attorneys for defendants and appellees.

SEVERSON, Retired Justice

[¶1.] Domson, Inc. brought suit against Dakota Engineering and Kadrmas, Lee and Jackson (KLJ) for professional negligence.¹ Dakota Engineering and KLJ moved for summary judgment. During the hearing, Dakota Engineering/KLJ asserted that a clause in the contract between Domson and the Oglala Sioux Tribe insulated them from liability for negligence to Domson. The circuit court agreed and separately granted Dakota Engineering and KLJ summary judgment. Domson appeals. We requested supplemental briefing from the parties on the enforceability of exculpatory clauses insulating a third party from claims of negligent design and negligent administration and interpretation of a contract. We affirm.

Background

[¶2.] The Oglala Sioux Tribe hired Dakota Engineering/KLJ to design a road reconstruction project on the Pine Ridge Indian Reservation. On March 21, 2012, the Tribe advertised the project for bids. Prospective bidders could inspect the contract documents, including the drawings and project manual. It is unclear whether Dakota Engineering or KLJ prepared the bid documents, including the project manual, the proposal to bidders, plans, specifications, estimates, and amendments for the project. However, the record reveals that the manual and documents relevant to the request for bids were signed and sealed in March 2012 by Tonya Tordsen of KLJ.

[¶3.] It is undisputed that Domson obtained the bid documents and submitted a bid on the project. The public bid opening revealed Domson as the apparent low bidder. KLJ informed Domson that Domson had been awarded the bid. On July 5, 2012, Domson and the Tribe executed a contract for the project. The contract between Domson and the Tribe designated Dakota Engineering/KLJ as the "Engineer" and the Tribe’s representative. The contract provided that "Engineer assumes all duties and responsibilities, and has the rights and authority assigned to Engineer in the Contract Documents in connection with the completion of the Work in accordance with the Contract Documents." KLJ had the duty to administer the contract for the Tribe, including the processing of applications for payment by Domson. Change orders and payments needed approval from the Tribe.

[¶4.] It is undisputed that Domson did not substantially complete the project in the time required under the contract. KLJ, as the Tribe’s representative, assessed Domson $103,950 in liquidated damages. In January 2015, Domson brought suit against Dakota Engineering and KLJ, alleging professional negligence. Domson asserted that "Dakota Engineering/KLJ owed a duty to Domson to reasonably draft, interpret, and apply the project’s contract documents." Domson alleged that "Dakota Engineering/KLJ were negligent in their design, interpretation, and application of the plans and specifications[.]" According to Domson, Dakota Engineering/KLJ’s negligence in designing and administering the contract caused Domson approximately $1,138,027.28 in damages.

[¶5.] Dakota Engineering and KLJ filed a joint answer. Dakota Engineering denied that it was a proper defendant because Dakota Engineering’s "only involvement was initial design work[.]" Dakota Engineering/ KLJ asserted that Domson’s alleged damages arose out of its contract with the Tribe. Dakota Engineering and KLJ filed a joint motion for summary judgment. They again indicated that Dakota Engineering was only involved in the design work and did not administer the contract. Dakota Engineering/KLJ also highlighted Paragraph 9.09 of the standard general conditions contract document. That paragraph provides:

Neither Engineer’s authority or responsibility under this Article 9 or under any other provision of the Contract Documents nor any decision made by Engineer in good faith either to exercise or not exercise such authority or responsibility or the undertaking, exercise, or performance of any authority or responsibility by Engineer shall create, impose, or give rise to any duty in contract, tort, or otherwise owed by Engineer to Contractor, or any Subcontractor, any Supplier, any other individual or entity, or to any surety for or employee or agent of any of them.

(Emphasis added.)

[¶6.] Domson did not submit "a separate, short, and concise statement of the material facts as to which" it contended a genuine issue existed as required by SDCL 15-6-56(c)(2). Instead, it submitted a brief in opposition to the motion for summary judgment. But the brief did not "respond to each numbered paragraph in the moving party’s statement with a separately numbered response and appropriate citations to the record." See id. Rather, Domson’s brief grouped arguments together with general responses. Domson’s brief also did not cite to the record. Nevertheless, in the brief, Domson referred the circuit court to Mid-Western Electric, Inc. v. DeWild Grant Reckert & Associates, Co. , as authority for recognizing that Dakota Engineering/KLJ owed a duty to Domson to reasonably draft, interpret, and apply the project’s contract documents. 500 N.W.2d 250 (S.D. 1993). Domson asserted generally that issues of material fact existed on the question of breach of that duty.

[¶7.] The circuit court issued a memorandum decision. The court granted summary judgment on all claims against Dakota Engineering. It concluded that Dakota Engineering was not an appropriate party in the lawsuit. The court also granted summary judgment on all claims against KLJ. Although Domson did not comply with SDCL 15-6-56(c)(2), the court gave Domson "the benefit of the doubt with what [it had] submitted" in response to the motion for summary judgment. After considering Domson’s submissions, the court concluded that Domson offered mere general allegations and denials. The court also interpreted Paragraph 9.09 to insulate KLJ from liability to Domson for negligence, absent a claim by Domson that KLJ acted in bad faith.

[¶8.] In response to the court’s decision, Domson filed a motion and brief in support requesting the circuit court reconsider its decision granting summary judgment. It asserted that Paragraph 9.09 was unlawful under SDCL 53-9-3. Domson then filed a supplemental brief in support of its motion for reconsideration. It restated its position that because KLJ owed it a duty, a jury must determine whether KLJ breached that duty. The court denied Domson’s motion to reconsider.

[¶9.] Domson appeals and asserts the following issues, which we restate as follows:

1. Whether summary judgment was improper because defendants failed to plead Paragraph 9.09 as an affirmative defense.

2. Whether the circuit court erred when it granted summary judgment based on Paragraph 9.09 of the standard general conditions contract document.

3. Whether the circuit court erred when it granted summary judgment despite that defendants admitted they owed a duty to Domson.

Standard of Review

[¶10.] Under our well-settled standard of review on appeal from a grant of summary judgment:

We must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Brandt v. Cty. of Pennington , 2013 S.D. 22, ¶ 7, 827 N.W.2d 871, 874 (quoting Jacobson v. Leisinger , 2008 S.D. 19, ¶ 24, 746 N.W.2d 739 ).

Analysis

[¶11.] Domson contends that Dakota Engineering and KLJ could not rely on Paragraph 9.09 in the standard general conditions contract document to insulate themselves from liability because they failed to plead Paragraph 9.09 either in avoidance or as an affirmative defense. Dakota Engineering and KLJ respond that they asserted Paragraph 9.09 as a defense in their answer by pleading the affirmative defenses of estoppel and waiver. They also claim that Domson failed to raise waiver before the circuit court. We agree that Domson waived the issue. Because Domson failed to assert this argument to the circuit court, we will not address it for the first time on appeal. See Rush v. U.S. Bancorp Equip. Finance, Inc. , 2007 S.D. 119, ¶ 8 n.1, 742 N.W.2d 266, 269 n.1.

[¶12.] We combine Domson’s next two issues because both relate to whether Dakota Engineering and KLJ owed Domson a duty under the circumstances. The circuit court recognized that under South Dakota law, an engineer can owe a duty to a contractor despite the lack of contractual privity between the parties. See Mid-Western Elec. , 500 N.W.2d at 253-54. But, here, the contract between the Tribe and Domson, via Paragraph 9.09, insulated Dakota Engineering/KLJ from liability for their good-faith acts and failures to act by the authority given to them under the contract and contract documents. Therefore, although a duty may exist under Mid-Western Electric , we must examine the effect of Paragraph 9.09.

[¶13.] Domson argues that "the exculpatory clause should be construed as an indemnity provision that violates statute[,]" citing SDCL 56-3-16, -17. But Domson did not assert this argument to the circuit court, and further,...