Green Const. Co. v. Kansas Power & Light Co.

• Decision Date: 21 July 1993
• Docket Number: 91-3151,Nos. 91-3150,s. 91-3150
• Citation: 1 F.3d 1005
• Parties: GREEN CONSTRUCTION COMPANY, an Iowa corporation, Plaintiff-Appellant and Cross-Appellee, v. The KANSAS POWER & LIGHT COMPANY, Defendant-Counterclaimant-Appellee and Cross-Appellant, v. SEABOARD SURETY COMPANY and Green Holdings, Inc., Counterclaim-Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1005

1 F.3d 1005

26 Fed.R.Serv.3d 1459

GREEN CONSTRUCTION COMPANY, an Iowa corporation, Plaintiff-Appellant and Cross-Appellee, v. The KANSAS POWER & LIGHT COMPANY, Defendant-Counterclaimant-Appellee and Cross-Appellant, v. SEABOARD SURETY COMPANY and Green Holdings, Inc.,

Counterclaim-Defendants-Appellees.

Nos. 91-3150, 91-3151.

United States Court of Appeals Tenth Circuit.

July 21, 1993.

John P. Ahlers, Barokas & Martin, Seattle, WA (Kevin E. Glynn, Niewald, Waldeck & Brown, Kansas City, MO and Gilbert G. Lundstrom, Woods & Aitken, Lincoln, NE, with him on the brief) for plaintiff-appellant.

Jeffrey S. Southard, Kansas Power & Light Co., Topeka, KS (J. Nick Badgerow, Spencer, Fane, Britt & Browne, Overland Park, KS, with him on the brief) for defendant-appellee.

Before KELLY and SETH, Circuit Judges, and KANE, District Judge. ^d

PAUL KELLY, Jr., Circuit Judge.

This appeal arises out of a contract dispute over the construction of a dam by Plaintiff-appellant Green Construction for Defendant-appellee Kansas Power and Light (KPL). Green Construction appeals the district court's order limiting its recovery to contract damages and disallowing additional expenses and prejudgment interest. KPL cross-appeals the district court's orders denying KPL's motions for realignment of the parties, bifurcation of the trial, post-trial juror interviews and judgment notwithstanding the verdict or a new trial. KPL also appeals the admission of evidence of insurance and the testimony of multiple expert witnesses. Our jurisdiction arises under 28 U.S.C. Sec. 1291 and we affirm.

Background

The best laid plans ...

In 1984, KPL solicited bids for the construction of an earthen dam to create a reservoir at a power plant in Kansas. The dam was to be built out of the clay soil found at the project site. KPL provided bidders with a Geotechnical Data Report on the subsurface conditions at the site, but instructed the bidders to make their own investigation as there would be no future adjustment in price for unforeseen conditions. Green was the lowest bidder, but did not conduct an investigation.

The contract required Green to construct the dam with a soil moisture content that would yield the greatest strength. The soil moisture range was to be +3% to -2% from "optimum." The soil in the borrow area (located behind the dam site) contained more moisture than indicated in the Geotechnical Report, however. Green began construction in the spring of 1985 and finished in June 1986. Within a few weeks, the dam developed cracks which Green attempted, unsuccessfully, to fix. KPL refused to accept the dam and eventually replaced the dam at its own cost. KPL withheld $420,000, or 5% of the contract price, which would have been due to Green upon acceptance.

Green initiated litigation to collect the 5% retainage as well as extra costs incurred during construction, based on theories of implied warranty, constructive change and misrepresentation. Green argued that the dam failed due to KPL's design. KPL counterclaimed alleging defective construction and breach of contract. The district court granted summary judgment for KPL on Green's claims for additional compensation, with the exception of the compensation based on misrepresentation, which it ruled would be available only as a set-off against any damages awarded to KPL. A jury trial resulted in a verdict for Green on its retainage claim and denying recovery to KPL. Both sides appeal, raising numerous issues.

Discussion

I. Green's Claim for Additional Compensation

Green Construction appeals the district court's partial summary judgment on its claim for expenses in excess of the contract price. The district court eliminated Green's theories of implied warranty and constructive change, and limited any recovery based on misrepresentation to a set-off against damages that might be awarded to KPL.

We review summary judgment de novo and apply the same legal standard used by the district court under Fed.R.Civ.P. 56(c). Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We view the evidence and draw any inferences in a light most favorable to the party opposing summary judgment, but that party must identify sufficient evidence which would require submission of the case to a jury. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-52, 106 S.Ct. 2505, 2510-12, 91 L.Ed.2d 202 (1986); Hall v. Bellmon, 935 F.2d 1106, 1111 (10th Cir.1991). Kansas law governs in this diversity action, and in the absence of state cases on point we will look to other state courts as well as federal decisions. Armijo v. Ex Cam, Inc., 843 F.2d 406, 407 (10th Cir.1988). We review de novo the district court's application of Kansas law. Salve Regina College v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

A. Implied Warranty

Green contends that the information provided to bidders regarding subsurface conditions created an implied warranty of these conditions. The district court found no implied warranty as a matter of law because the construction contract expressly instructed bidders to conduct their own investigation of the site, placed the risk of excessively moist soil on the contractor, and stated that the "[l]ogs of test borings may not be indicative of all subsurface conditions that may be encountered." ¹

Green argues that: (1) the project owner impliedly warrants the accuracy and suitability of its plans and specifications; (2) additional compensation was waived only as to local conditions, as addressed in Section A.7 of the contract, and not as to subsurface conditions, addressed in Section A.8; (3) boilerplate disclaimers do not abrogate an implied warranty; and (4) KPL cannot disclaim the accuracy of the tests where the data constitutes a positive misrepresentation.

Generally, absent fraud, the party who agrees to complete construction for a fixed cost must absorb any losses resulting from unforeseen conditions. Reece Const. Co. v. State Highway Com'n, 6 Kan.App.2d 188, 627 P.2d 361, 364 (1981). When a contract contains a site inspection clause, it places a duty on the contractor to exercise professional skill in inspecting the site and estimating the cost of work. Pinkerton and Laws Co. v. Roadway Express, Inc., 650 F.Supp. 1138, 1146 (N.D.Ga.1986). Thus, Green is not entitled to additional compensation merely because the project was more expensive due to unexpected soil moisture. See United States v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918). Green may still recover, though, if KPL impliedly warranted the plans and specifications, and then breached that warranty. Id. at 136, 39 S.Ct. at 61; Trustees of Indiana Univ. v. Aetna Cas. & Sur. Co., 920 F.2d 429, 436 (7th Cir.1990). An implied warranty will only be found where the owner made unequivocal affirmative statements which were false or misleading. Christie v. United States, 237 U.S. 234, 35 S.Ct. 565, 59 L.Ed. 933 (1915). Such a warranty is not avoided by standard clauses disclaiming responsibility for the accuracy of data. Hollerbach v. United States, 233 U.S. 165, 34 S.Ct. 553, 58 L.Ed. 898 (1914).

However, where a contractor has a duty to make an independent inspection, reliance on the owner's specifications may very well be unreasonable. Brant Constr. Co. v. Metropolitan Water Reclam. Dist., 967 F.2d 244, 248 (7th Cir.1992). An owner does not create an implied warranty by providing some soil information but instructing the contractor that the information may not be complete and that an independent site and soil investigation is required. See McDevitt & Street Co. v. Marriott Corp., 713 F.Supp. 906, 914 (E.D.Va.1989), aff'd in relevant part, 911 F.2d 723 (4th Cir.1990); Pinkerton, 650 F.Supp. at 1146; Anderson v. Golden, 569 F.Supp. 122, 142-43 (S.D.Ga.1982). This contract, like those in McDevitt, Pinkerton and Anderson, squarely placed the risk of uncertainty as to site and soil conditions on the contractor. There was no implied warranty.

B. Constructive Change

Green's next theory is that the extra work caused by the wet soil amounted to a material change in the scope of the project, entitling Green to additional compensation. Again, we disagree.

When Green encountered wet soil in the designated borrow area, Green opted to obtain soil from another location rather than process (dry out) the soil from the borrow area. KPL consented to the change. Green relies on the "changes" clause, section D.27 of the contract, and on KPL's assent to the change, in support of this theory of recovery. Section D.27 provides in part:

The COMPANY, without invalidating the Contract, may order any extra work or make any changes by altering, adding to or reducing the work, provided the Contract price be adjusted as provided herein and evidenced by written agreement....

Aplt.App. at 58. The district court found that section D.27 applies only to changes in the scope of work caused by amendments to the project design, and not to difficulties in performance due to unforeseen conditions.

Generally, a contractor may recover for additional work necessitated by a material change in specifications. 13 Am.Jur.2d Building and Construction Contracts Sec. 19 (1964 & Supp.1993). However, there can be no recovery for extra work if the work is covered by the terms of the contract. Id. "The extra work doctrine" allows additional compensation only "for work that was not within the scope of the contract, such that the parties could not have established a contract price of their own." Brant Constr., 967 F.2d at 248. Here, Green is not entitled to additional compensation merely because the work it had contracted for was made more expensive by wet soil. See Pinkerton, 650 F.Supp. at 1146 (citing Spearin, 248 U.S. 132, 39 S.Ct. 59). The...