New Pueblo Constructors, Inc. v. State

• Citation: 696 P.2d 203,144 Ariz. 113
• Decision Date: 07 March 1984
• Docket Number: No. 2,CA-CIV,2
• Parties: NEW PUEBLO CONSTRUCTORS, INC., Plaintiff/Appellee, v. STATE of Arizona, Defendant/Appellant. 4734.
• Court: Court of Appeals of Arizona

Page 203

696 P.2d 203

144 Ariz. 113

NEW PUEBLO CONSTRUCTORS, INC., Plaintiff/Appellee, v. STATE of Arizona, Defendant/Appellant.

No. 2 CA-CIV 4734.

Court of Appeals of Arizona,

Division 2.

March 7, 1984.

Lewis & Roca by John P. Frank, Joseph E. McGarry and Sarah H. Jenkins, Phoenix, for plaintiff/appellee

Robert K. Corbin, Atty. Gen. by James L. Hohnbaum, Joe Acosta, Jr. and Albert Morgan, Asst. Attys. Gen., Phoenix, for defendant/appellant.

OPINION

HOWARD, Judge.

This action arises out of two contracts between the State of Arizona through the Arizona Department of Transportation (ADOT) and New Pueblo Constructors, Inc. (NPC) for the construction of a portion of the interstate freeway in Santa Cruz County, Arizona. The state appeals from a jury verdict against it in the sum of $256,891.28.

The facts considered in the light most favorable to upholding the verdict are as follows. The parties entered into two contracts for the construction of a part of the interstate freeway, one for the section known as I-19-1(25) (Carmen project) on September 21, 1976, and one for the section known as I-19-1(29) (Tubac project) on February 4, 1977. The work in both segments consisted of grading, draining, furnishing and placing base and surfacing materials, and other work incidental to the construction of each segment. Incorporated as a part of the contracts was the Arizona Department of Transportation Standard Specifications for road and bridge construction, ediction of 1969 and 1977 supplement thereto. (Standard Specifications).

The base materials, called "select" materials, consist of rock of specified size which is placed on the grade and compacted to form the base course. The surface or paving course is made by mixing various sizes of rock and sand, called mineral aggregate, with asphalt, which is spread and rolled over the base course.

Both contracts, as well as custom and practice in the highway construction trade, recognized three sources for furnishing aggregate material: state-furnished sources, contractor-furnished sources, and commercial sources. In each instance the contractor is responsible for paying for the material. Both contracts, when bid, provided for state-furnished sources for obtaining select materials and mineral aggregate. If a contractor-furnished source is substituted for the state-furnished source, the parties enter into a change order or supplemental agreement which incorporates the contractor-furnished source and the other terms of the original agreement into the contract. Since the principal state-furnished source of select material for both projects was located in the center of the Santa Cruz River, NPC with the consent of ADOT substituted a source known as the Anamax pit. This substituted pit was located in an area less prone to flooding and provided a higher quality material. Substitution of a contractor-furnished source for mineral aggregate on the common project was also agreed to. In the same manner, the Agua Linda pit was substituted for select material on the Tubac project and was made a source of mineral aggregate for both projects.

On October 9 and 10, 1977, an extraordinary storm, part of Hurricane Heather, hit southern Arizona. The result was a 100-year storm, causing the biggest runoff and flood experienced in the area for the last 43 years and causing damage to the work and the area around of the project. Due to the heavy rains and floodwaters, the governor of the State of Arizona declared a state of emergency for Pinal, Pima and Santa Cruz counties.

As a result of the October 1977 storm, the aquifer was recharged and the groundwater level was raised. This condition was aggravated by heavy rains in January, February and March of 1978 which caused the groundwater level to rise and affected the groundwater table in the Agua Linda pit.

The weather events and action of the elements caused extensive damage and injury to the project area and the work previously performed by NPC. The soil in the project area became unstable; the subsurface became so soft that heavy construction equipment sank in mudholes fed by groundwater; select material previously placed on the roadway became over-saturated and had to be removed and replaced; cut slopes eroded into the borrow ditches; stockpiled select material in the Anamax pit and special backfill material eroded and washed away; the subgrade, the surface on which the road which was to be constructed, was eroded and softened; the natural ground was saturated and had to be stabilized, and the roadway refilled; the groundwater table in the Agua Linda pit ultimately rose from a level of 30 to 12 feet below the surface and a new section of the pit had to be developed for mineral aggregate and additional select materials had to be excavated, crushed and hauled.

During December of 1977, ADOT was made aware and had actual knowledge of the adverse and continuing effects of weather upon the project. In fact, at ADOT's request the Santa Cruz River Basin including the project site, was declared a major disaster area by the federal government on November 4, 1977.

In mid-March or early April 1978 Karl Ronstadt, NPC's president, and Kyrk Reid, NPC's vice-president, met with the state engineer, Oscar Lyons, and discussed the expenses which NPC was incurring and would be incurring in order to repair the damage to the work. Mr. Lyons suggested that NPC file a claim under subsection 107.17 of the Standards Specifications. This subsection provided, in part "Until final written acceptance of the project by the engineer, the contractor shall have the charge and care thereof and shall take every precaution against injury or damage to any part thereof by the action of the elements or from any other cause, whether arising from the execution or from the nonexecution of the work. The contractor shall rebuild, repair, restore and make good all injury or damages to any portion of the work occasioned by any of the above causes before final acceptance and shall bear the expense thereof except damage to the work due to unforseeable [sic] causes beyond the control of and without the fault or negligence of the contractor, including but not restricted to acts of God, of the public enemy or governmental authorities." (emphasis added)

By letter dated March 16, 1978, NPC advised ADOT:

"We have experienced more than normal stoppage of work on the above-referenced project due to weather during the last six months. There was heavy rain and flooding in October, 1977, and unseasonable rains during December, 1977 and January, February and March of 1978. Operations in our aggregate and select pits and special backfill areas have been hampered by a rising water table and continuous flooding of the Santa Cruz River.

The weather stoppage as recorded by ADOT's reports may not show the far-reaching effect of the abnormal weather trend we have just experienced. We may have other delays that can be directly or indirectly associated with these conditions which would impede the timely completion of this project.

Therefore, please consider this notification of potential delay as a result of the above-mentioned weather."

By letter of April 20, 1978, NPC again called to ADOT's attention the causes of the damage to the work on the project. ADOT was informed in that letter that data was being compiled and assessed to determine the cost of the damage to the work and the financial impact of the time delays associated with the damage.

Upon receipt of NPC's letters of March 16 and April 20, ADOT sent the following letter to NPC:

"YOUR LETTER OF APRIL 20, 1978, IS RECEIVED AND DUELY [sic] NOTED.

SINCE THE INFORMATION PRESENTED IN YOUR LETTER DOES NOT CONSTITUTE PROPER BASIS FOR CLAIM AS REQUIRED UNDER STANDARD SPECIFICATION SECTION 105.17, I WILL NOT FEEL OBLIGED TO MAINTAIN FORCE ACCOUNT BASIS ON ANY OPERATIONS DUE TO THIS LETTER.

WITHOUT DETAILED INFORMATION ON THE LOSSES YOU ARE CLAIMING, IT WILL SERVE NO PURPOSE AT THIS TIME TO DISCUSS THE SAME.

WHEN ADDITIONAL INFORMATION IS RECEIVED IT WILL BE CAREFULLY EXAMINED AND ANSWERED."

In response to this last letter, NPC, on May 4 sent a letter telling the engineer that it intended to press its claims and asking him to keep time on the fence work and the remaining roadway excavation. (Neither of these items was involved in the claims in this litigation.)

On June 27, 1978, although not all of the cost to repair, rebuild and make good the damage had yet been incurred, NPC submitted a summary and estimate of its claims and the cost to ADOT. NPC thereafter continued with performance and work on both projects, including the work to rebuild, repair, replace and make good on injured work. The Carmen project was completed and accepted by ADOT in early August 1978.

May 24, 1979, was the revised completion date for the Tubac segment. Sixteen days before the extended completion date, traffic was turned onto the main highway portion of the Tubac project. Six days before the deadline, all construction items under NPC's direct control were completed. There were no detours nor hindered traffic flow. ADOT had full access to and use of the roadway, and the Tubac segment was in a safe condition convenient for the use of the traveling public. Nevertheless, NPC was assessed $31,500 in liquidated damages by ADOT because of certain items which remained incomplete, mainly related to the frontage road. The damage was calculated as 75 days after May 24, 1979, at the rate of $420 per day. Although the Tubac contract provided for liquidated damages for time overruns, it also called for granting an extension of time if the work was delayed because of conditions beyond the control and without the fault of the contractor. The contract also provided that ADOT could waive liquidated damages for that portion assessed after the work was safe and convenient for public use.

The claim submitted by NPC to ADOT on June 27, 1978, estimated the cost to rebuild, repair...