Gettysburg Sc. Dist. 53-1 v. Helms & Assoc.

• Decision Date: 30 April 2008
• Docket Number: No. 24543.,24543.
• Citation: 751 N.W.2d 266,2008 SD 35
• Parties: GETTYSBURG SCHOOL DISTRICT 53-1, Plaintiff and Appellee, v. HELMS AND ASSOCIATES, a division of Schumucker, Paul, Nohr and Associates, Inc., Defendants, and Bituminous Paving, Inc., Defendant and Appellant.
• Court: South Dakota Supreme Court

751 N.W.2d 266

2008 SD 35

GETTYSBURG SCHOOL DISTRICT 53-1, Plaintiff and Appellee, v. HELMS AND ASSOCIATES, a division of Schumucker, Paul, Nohr and Associates, Inc., Defendants, and Bituminous Paving, Inc., Defendant and Appellant.

No. 24543.

Supreme Court of South Dakota.

Argued February 13, 2008.

Decided April 30, 2008.

Kenneth E. Barker, Michael Trump of Barker Wilson Law Firm, LLP, Belle Fourche, SD, for plaintiff and appellee.

Ronald G. Schmidt of Schmidt, Schroyer, Moreno, Lee & Bachand, PC, Rapid City, SD, for defendant and appellant.

MEIERHENRY, Justice.

[¶ 1.] Bituminous Paving, Inc. (Bituminous) appeals from a jury verdict in favor of the Gettysburg School District (District) for faulty construction of an outdoor track. We affirm.

[¶ 2.] The District entered into a contract with Bituminous for the construction of an outdoor track and with Helms and Associates (Helms) for engineering services of designing and inspecting the construction of the track. Bituminous' contract with the District required Bituminous to remove the old track, prepare the base of the new track, and lay the asphalt running surface. Bituminous appeared to have completed the project by the required deadline of September 2002; however, unknown to the District, Bituminous had failed to adequately compact the soil sub base and gravel layer that was designed to support the asphalt top. Defects developed within a few weeks of the track's completion. The District's athletic director and track coach reported noticeable construction problems and safety concerns with the track including uneven lanes and depressions in the surface. A school board member additionally observed cracking asphalt and "pop-outs." By October 22, 2002, Helms wrote Bituminous with concern about the cracking of the asphalt and with a directive that the cracking be examined in the spring.

[¶ 3.] The following spring, Helms provided Bituminous a punch list of needed repairs to the track. The needed repairs included fixing depressions in the asphalt, uneven surface cracking, and areas that held water. Bituminous finished its repair work in August of 2003; however, the repair work did not fix the problems and arguably made them worse. Thereafter, Bituminous' project manager offered to re-repair the defective areas. Helms followed up with a letter to the District on April 1, 2004, proposing how Bituminous should address the known surface deficiencies in the track. At its April board meeting, in response to Helms' proposal, the District discussed its frustration with the year-and-a-half delay in completion of the track repairs. Later, representatives of Helms, the District, and Bituminous met and inspected the track. The District conditionally accepted Helms' proposal for the completion of the re-repair work on the track surface, including arrangements for payment. Helms memorialized the agreement on May 25, 2004. Thereafter, Helms directed Bituminous to complete five specific work items between May 27 and August 15, 2004.

[¶ 4.] In the meantime, the District met with Sam Fisher, a certified track builder and owner of Fisher tracks, to inspect the track's defects on June 7, 2004. On June 10, 2004, Fisher faxed two reports to the District that raised concerns about whether the needed re-repair work set forth in Helms' letter to Bituminous would address the track's underlying structural defects. According to Fisher, trying to fix or patch the track's structural faults would be nearly impossible.

[¶ 5.] Reacting to Fisher's concerns, the District's Superintendent contacted and instructed Bituminous not to return to the track and not to perform its proposed "re-repair" work. On August 8, 2005, the District officially rescinded the "re-repairs" agreement with Bituminous and voted to bring an action against both Helms and Bituminous because of the defective repairs and underlying structural defects.

[¶ 6.] The District retained two experts, Fisher and Chunhua Han, PhD PE (a paving expert). After a closer inspection, Fisher and Han determined that the track's defects were both structural and material. Structurally, the ground base material and subsequent top layers of asphalt were unevenly laid and compacted. Also, in several locations, the track sloped opposite of the designed slope direction, allowing water to pool improperly and accumulate. The asphalt also failed to meet material specifications. It contained shale-like material that caused "pop-outs" or holes along the surface that allowed water to pool up to three-quarters of an inch in depth. The overall condition of the track caused the Board to be concerned about the students' safety.

[¶ 7.] The District settled its claims against Helms prior to trial. At trial, the jury determined that Bituminous breached its agreement with the District, negligently constructed the track, breached express or implied warranties and breached its duty of good faith to the District. The jury found that the District had been damaged in a total amount of $215,500, allocating 70% liability to Bituminous. The jury also awarded prejudgment interest on $182,000 of the District's damages, beginning July 1, 2004. In post trial motions, the trial court granted the District's motions for apportionment of prejudgment interest, statutory costs, disbursements and attorneys' fees against Bituminous. The judgment against Bituminous totaled $278,450 (including costs and prejudgment interest). Bituminous appeals raising several issues.

1. Bituminous claims that the District's breach of contract claim is barred, estopped and/or waived because the District failed to satisfy conditions precedent in the contract.

[¶ 8.] Bituminous contends that the District should be barred from bringing a claim because (a) the District failed to plead that the conditions precedent were satisfied, (b) the District failed to provide Bituminous proper notice of defects, and (c) the District failed to seek a decision from the engineer or wait for "substantial completion" of the project before seeking court action. Bituminous also argues that the District's failure to meet these conditions precedent constituted waiver and estoppel.

a. Failure to plead that conditions precedent were satisfied

[¶ 9.] Bituminous claims that the District should not be permitted to sue on the contract because, as required by SDCL 15-6-9(c), it failed to plead that all conditions precedent were satisfied. Bituminous, however, did not raise this issue to the trial court, and we will not consider it for the first time on appeal. Hall v. State ex rel. South Dakota Dep't of Transp., 2006 SD 24, ¶ 12, 712 N.W.2d 22, 26 (stating "[w]e have repeatedly stated that we will not address for the first time on appeal issues not raised below") (citations omitted).

b. Failure to give proper notice of defects

[¶ 10.] Bituminous claims that the District did not provide Bituminous with contractually required seven (7) days written notice¹ of defects in the track prior to bringing a lawsuit for its defective work. The record shows that Bituminous did receive written notice from Helms of the known defects as early as October 22, 2002. In response to the notice, Bituminous attempted to fix the defects, but was unsuccessful. Helms then provided yet another written re-repair list. However, when the District sought another opinion from Fisher, it discovered that Helms' list of repairs was inadequate and only addressed surface problems and that the track would need to be rebuilt. Bituminous claims that it technically should have been provided written notice of all the defects that the District learned from Fisher before the District brought a lawsuit. Bituminous' notice argument is without merit. Under the terms of the agreement, Bituminous was sufficiently provided notice of the known defects and had the opportunity to correct them. Although additional defects later became apparent to the District, they were not obligated to amend the previous notices of defects. Indeed, the totality of defects did not become fully known to the District until the discovery phase of litigation.

[¶ 11.] Moreover, although Bituminous veils this issue under notice grounds, the heart of its argument is that Bituminous was not allowed the opportunity to complete the project.² Bituminous presented this exact defense to the jury. Indeed, Bituminous proffered and the court instructed on this exact issue as follows:

You are instructed that Plaintiff Gettysburg School District 53-1 is not entitled to be compensated for work that remained unfinished if you find that Bituminous Paving, Inc. was willing to perform such work but was ordered off the job and not allowed to complete such work.

Obviously, based on this instruction, the jury considered whether Bituminous was provided the opportunity to complete the project as contracted. The quoted instruction plainly directed the jury to offset damages that resulted from the District excluding Bituminous from the project, regardless of whether the exclusion was proper or improper. Furthermore, it is possible that the jury reduced Bituminous' liability because of this instruction. We presume that juries understand and abide by instructions. First Nat'l Bank of Minneapolis v. Kehn Ranch, Inc., 394 N.W.2d 709, 720 (S.D.1986).

c. Failure to seek engineer's decision or wait for "substantial completion"

[¶ 12.] Bituminous next claims that the District did not satisfy the condition precedent of seeking a decision from Helms prior to filing this suit, citing contract provision 9.09. Provision 9.09 made the engineer "the initial interpreter" of the contract requirements and "judge" of the work's acceptability. The provision required Helms to decide a dispute before either party could seek a remedy under the law. On at least two occasions, the District provided notice to Helms of deficiencies in the work. Helms, in turn, conveyed to Bituminous a decision/plan on what must be done to remedy the...