Diamond Surface, Inc. v. State Cement Plant Com'n, s. 20112

• Decision Date: 19 August 1998
• Docket Number: Nos. 20112,20124,s. 20112
• Citation: 38 UCCRep.Serv.2d 391,1998 SD 97,583 N.W.2d 155
• Parties: 38 UCC Rep.Serv.2d 391, 1998 SD 97 DIAMOND SURFACE, INC., a corporation with its principal place of business at Maple Grove, Minnesota, Plaintiff and Appellant, v. The STATE CEMENT PLANT COMMISSION, a public corporation and agency operating the Cement Plant at Rapid City, South Dakota, Defendant and Appellee.
• Court: South Dakota Supreme Court

Page 155

583 N.W.2d 155

38 UCC Rep.Serv.2d 391, 1998 SD 97

DIAMOND SURFACE, INC., a corporation with its principal place of business at Maple Grove, Minnesota Plaintiff and Appellant, v. The STATE CEMENT PLANT COMMISSION, a public corporation and agency operating the Cement Plant at Rapid City South Dakota, Defendant and Appellee.

Nos. 20112, 20124.

Supreme Court of South Dakota.

Argued June 2, 1998.

Decided Aug. 19, 1998.

Ronald G. Schmidt of Schmidt, Schroyer, Moreno & Du Pris, Pierre, for plaintiff and appellant.

Mark J. Connot, James S. Nelson and Paul S. Swedlund of Gunderson, Palmer, Goodsell & Nelson, Rapid City, for defendant and appellee.

GILBERTSON, Justice.

¶1 Diamond Surface, Inc., a Minnesota corporation, brought suit against the South Dakota State Cement Plant Commission (SDCP), the South Dakota Department of Transportation (DOT), and Western Ash Company after completion of a highway paving project near Edgemont, South Dakota. DOT and Western Ash Company settled and were dismissed prior to trial. Diamond Surface alleged SDCP supplied defective cement which resulted in premature drying or stiffness of the concrete used in the paving project. After submission of Diamond Surface's case, the trial court granted SDCP's motion for directed verdict on the following counts: negligence; breach of implied warranty of fitness for a particular purpose; breach of the Uniform Commercial Code's (UCC) obligation of good faith and fair dealing; fraud and deceit; and violation of industry standards. Diamond Surface's remaining claim, breach of implied warranty of merchantability, was submitted to the jury. The jury returned a verdict for SDCP. Diamond Surface appeals the grant of directed verdict but not the jury verdict. We affirm.

FACTS AND PROCEDURE

¶2 Diamond Surface was the successful low bidder on a 1.3 mile long, 44 foot wide, eight inches deep, paving project on Highway 18 near Edgemont. Diamond Surface's owner, Terry Kraemer (Kraemer) had accepted a guaranteed price quotation from SDCP for the cement to be used on the project. ¹ Rather than submit its own concrete mix design, Diamond Surface selected a DOT tested and pre-approved mix design for the project. Diamond Surface also optioned to substitute fly ash for a portion of the cement. Fly ash has binding qualities similar to concrete but is cheaper. On the first day of the project it was observed that the concrete was setting up or drying too quickly and could not be worked with to produce an acceptable surface as it came out of the back side of the paver. This complication is known as "false setting" and Diamond Surface alleges this was the cause of a poor finish and difficulties encountered throughout the project.

¶3 Diamond Surface claimed the false setting was caused by defective cement received from SDCP and sought damages of $164,000 at trial for the additional time and labor expended to complete the project. SDCP denied its cement was the cause of the false setting and attributed the problems to several factors, including Diamond Surface's unique paving methods, substandard equipment, disorganization and inexperience among the paving crew, and delays in placing the concrete.

¶4 Diamond Surface's initial complaint alleged: negligence; breach of the implied warranties of merchantability and fitness for a particular purpose; breach of the UCC obligation of good faith and fair dealing; fraud and deceit upon which punitive damages should be awarded; and violations of industry standards. The punitive damage and negligence claims were dismissed by the trial court prior to trial but Diamond Surface was allowed to re-assert these claims by subsequent amendment.

¶5 A five-day trial was held in May 1997. At the close of Diamond Surface's case, the trial court directed a verdict in favor of SDCP on all grounds except the merchantability claim. The jury then decided that SDCP did not breach the implied warranty of merchantability. Diamond Surface does not appeal the jury verdict.

¶6 The Edgemont project was completed in 1993 over the course of eight days in two distinct phases. The eastbound lane was paved first on August 28, 30, 31, September 1, and 13 (Phase I). The westbound lane was paved from October 4th through the 6th (Phase II).

¶7 On the day Diamond Surface began, problems with the project were observed by DOT, which ordered the crew to stop paving after just 150 feet of road surface was laid. Several reasons were cited, including lack of an oscillating transverse screed, inadequate concrete depth, using too much water, and producing a rough finish. The paver was out of alignment. Furthermore, rather than using a standard belt placer or spreader, a piece of equipment that travels in front of the paver at the same pace and uniformly delivers concrete to the front of the paver, Diamond Surface used the front end bucket of a Bobcat to place the concrete in front of the paver. The crew then tore out and disposed of the rejected concrete.

¶8 Dan Johnston (Johnston), a DOT engineer, testified that in nearly twenty years of experience he had never seen or even heard of placing concrete in front of a paver with a Bobcat. Johnston testified that picking up small loads of concrete with the Bobcat exposed it to air and caused it to dry out more quickly and the repeated handling could cause the concrete to begin to set up before it could be finished. Furthermore, since the concrete was delivered in dump trucks, rather than concrete trucks, it could not be remixed.

¶9 Dan Vockrodt (Vockrodt), a DOT engineer, performed tests on the concrete the first day of paving and did not observe any false setting complications. He noticed that the crew was having problems finishing the concrete and attributed them to the crew's problems with "a little bit of everything." These problems included the paver being out of alignment and having to be picked up and straightened out, concrete thickness less than that required, using the Bobcat to place the concrete, and allowing concrete to sit in dump trucks during delays.

¶10 Diamond Surface had difficulties with equipment on the project. The paver being used was unacceptable according to DOT standards and rejected because it did not have an oscillating screed, a basic attachment that vibrates the concrete as it runs through the paver, eliminates pockets of air, and produces a smooth finish. Vockrodt was present on most paving days and noted in his diary that on October 4, 1993, the operation began "running smoothly" after Diamond Surface began using the proper equipment and used "straight cement" with no fly ash. ²

¶11 SDCP claimed that another factor that contributed to the premature drying of the concrete was Diamond Surface's failure to adhere to DOT standards which require that the subgrade be watered prior to placing the concrete. Vockrodt testified this was one of the reasons he shut the operation down on the first day. The purpose of adding water is to prevent the dry subgrade from absorbing the water contained in the cement and causing it to stiffen prematurely. Randy Bohne (Bohne), the batch plant operator, noted that the crew "finally" started to water down the subgrade on October 4, 1993, when Phase II began.

¶12 SDCP also attributed any alleged false setting behaviors to numerous delays in placing the concrete. DOT specifications require that concrete be placed in front of the paver no later than 45 minutes after leaving the batch plant. While the batch plant used in this project was less than one mile away from the project site, several witnesses observed that, on occasion, Diamond Surface failed to get the concrete placed within the 45-minute requirement. Vockrodt observed that due to frequent paver problems, dump trucks filled with concrete were forced to wait.

¶13 While SDCP claimed the concrete ceased to exhibit false setting behaviors after the new equipment and Kraemer arrived on the site during Phase II, Diamond Surface claimed the concrete continued to false set throughout the remainder of the project. Kraemer initially complained to SDCP after the August 28, 1993 complications. Paul Minor (Minor) and Court Patterson (Patterson), SDCP employees, believed the cement was not false setting. Minor suggested that the fly ash could be causing the problem. Diamond Surface chose to continue to use the fly ash through the remainder of Phase I. The trial court heard testimony from both Diamond Surface and SDCP experts who agreed that the fly ash contained materials that may react with or accelerated concrete causing it to dry out.

¶14 The trial court also received evidence of several concrete tests conducted before, during, and after the project was completed. SDCP cement is manufactured to conform to specifications set forth by the American Society of Testing Materials (ASTM). According to Patterson, cement meets industry standards if it passes the ASTM C-150. Within ASTM C-150 are approximately twenty subtests. At least two of these subtests, ASTM C-451 and C-359, are elective and can detect false setting behavior. Diamond Surface argues that the ASTM C-359 test should have been conducted to detect false setting. SDCP claimed the ASTM C-451 was the proper test to detect false setting and that ASTM C-359 was not a test but merely a research tool because it does not contain any pass/fail criteria and is not commonly used in the industry.

¶15 SDCP supported its claims by offering expert testimony from William Hime (Hime) concerning technicalities of cement and concrete usage and testing. Hime had participated in an extensive survey of testing procedures conducted in cement plants in the United States, Canada, and Mexico. The survey concluded that every plant used the ASTM C-150 test, 34% used the optional ASTM C-451, and none used the ASTM C-359 test that Diamond Surface alleges should have been used. Patterson admitted not using the C-359 test when Minor initially requested he investigate...