Nordin Const. Co. v. City of Nome, s. 1290

Citation489 P.2d 455
Decision Date01 October 1971
Docket Number1299 and 1520,Nos. 1290,s. 1290
PartiesNORDIN CONSTRUCTION COMPANY, Inc., et al., Appellants, v. CITY OF NOME, Appellee (two cases). CITY OF NOME, Appellant, v. NORDIN CONSTRUCTION COMPANY, Inc., et al., Appellees.
CourtSupreme Court of Alaska (US)

C. R. Kennelly, Nome, and Millard F. Ingraham of Ingraham & Niewohner, Fairbanks, for City of Nome.

Richard Folta and Howard Staley of Merdes, Schaible, Staley & Delisio, Fairbanks, and Stuart G. Oles, and H. H. Halstead, of Degarmo, Leedy, Oles and Morrison, Seattle, Washington, for Nordin Construction Co., Inc., United States Fidelity & Guaranty Co., and Bronson, and others.

Before BONEY, C. J., and DIMOND, CONNOR and ERWIN, JJ.

OPINION

ERWIN, Justice.

This case revolves around the award and ultimate payment by the City of Nome (hereinafter, 'City') of a construction contract for a water and sewer system in Nome to Nordin Construction Co., Inc. & Associates of Fairbanks (hereinafter, 'Nordin'). The finding by a jury required Nordin to return the money paid by the City for failure of Nordin to substantially perform the contract.

The firm of Philleo Engineering & Architectural Services of Fairbanks (hereinafter, 'Philleo Engineering') prepared the plans and specifications for the system consisting of the following basic elements:

                A.  General provisions and mobilization
                    bond, move-in, etc.                   $   62,800.00
                B.  Utilidors and manholes                   748,733.00
                C.  10' direct burial water pipe              51,462.00
                D.  Raw water intake and pipeline             38,100.00
                E.  Water storage tank and pump
                    room                                     165,805.00
                F.  Sewage treatment plant, building
                    and lift station                         125,550.00
                G.  Miscellaneous work in sewage              24,250.00
                H.  Utiliducts                               137,185.60
                                                          -------------
                                                          $1,353,885.60
                                                          -------------
                

The project was bonded by United States Fidelity and Guaranty Company.

Construction took place during the years 1964 and 1965, with periodic payments made as the work progressed. When the 'Final Pay Estimate' was submitted for the period of September 30 to December 4, 1965, Nordin claimed that the work was substantially completed. The City's resident engineer, Mr. Gerald Freese, testified that he had approved the final estimates and Mr. Philleo of Philleo Engineering, which supervised the construction, testified that he had determined the work was acceptable, and that he had so notified the City.

On December 4, 1965, the City Council voted to pay Nordin the remainder of the contract price, reserving $20,000 for the correction of certain deficiencies.

In February of 1966, the City engaged the Seattle engineering firm of R. W. Beck & Associates to further inspect the sewer and water system. Mr. George Martin made the inspection, spending approximately three days going through the utilities system, compiling a punch list of the work which seemed to be deficient. On February 8, 1966, the City Manager wrote a letter to Nordin enclosing the punch list and indicating what corrections were necessary. Thereafter, the City issued Nordin a check in the amount of $20,000. Nordin returned this check 1 and the City issued another in the amount of $17,500, retaining $2,500 as the monies due under the contract to insure completion of the remaining corrections from the Martin punch list. Mr. Jeffress of Globe Plumbing & Heating, a Nordin subcontractor, asserted that the deficiencies were corrected with five minor exceptions. However, correction was denied at trial by the plumbing foreman on the job for Globe.

On April 23, 1966, Nordin submitted a claim to the City for additional compensation of $196,334.59, for extra work required by changed conditions. In response, the City filed the present action against Nordin, its surety, and several associates, for $3,786.542.16, alleging a failure of substantial performance by Nordin and resulting consequential damages. Nordin denied any breach and counterclaimed for the amount set forth in the claim for additional work.

There were several motions for summary judgment and for change of venue which were denied. On September 5, 1969, a pre-trial conference was held which resulted

in a stipulation that trial be held in Anchorage, and in an order that the parties file amended pleadings

The amended complaint was filed on September 15, 1969, and alleged that the work did not substantially comply with the terms of the contract. The complaint further stated that as a result of the substantial nonperformance, Nordin was entitled to no compensation for the work performed, and should repay the $1,391,542.16 which had been paid. 2

In answer to the amended complaint, Nordin specifically denied the allegations of substantial breach, and counterclaimed for the sum of $198,854.59 for extra work required by changed conditions. The only affirmative defense alleged by Nordin was acceptance by the City.

In its final pleading the City denied the allegations of the counterclaim, and replied to the affirmative defense by stating that no acceptance had occurred, or, in the alternative, that acceptance if found: (1) did not go to faulty materials because of the terms of the contract, (2) could not vitiate latent defects, or (3) would be nullified as induced by fraud, actual or constructive, of Nordin or the architect/engineer, Philleo Engineering.

The case was submitted to the jury which found that Nordin failed to substantially perform and that the total amount paid under the contract should be returned to the City. The jury further found that Nordin should be awarded its counterclaim for extra work performed. Judgment was entered on this verdict. Both parties have appealed. An appeal by Nordin from a denial of a Civil Rule 60(b) relief from judgment motion has also been consolidated.

I

The central issue in this case, both at trial and on appeal, has been whether Nordin substantially performed the contract. Before considering whether a jury question was presented on that issue by the evidence below, however, it is necessary to examine the City's theory of recovery.

The City did not proceed on a theory of damages for defective performance. 3 Rather, the City sought restitution of money paid, based on an alleged failure of substantial performance by Nordin. In so doing, the City relied upon the principle, well settled in American construction contract law, that '* * * 'substantial performance' is the condition-the fact that must exist before payment is due.' 4 The distinction between theories of recovery was simply stated in Little Thompson Water Ass'n v. Strawn, 466 P.2d 915, 917 (Colo.1970), as follows:

The rules appear to be that if the promisor proves complete and full performance,

he is entitled to recover the complete and full consideration bargained for; if the proof establishes something less than full and complete performance, that is, substantial performance only, he is entitled to recover the contract price less those necessary expenditures required to complete the performance bargained for; and if the performance falls short of being substantial, then the promisor is entitled to no recovery

In order to recover, therefore, it was incumbent upon the City to prove a failure by Nordin to substantially comply with the terms of the construction contract.

As with many general legal principles, it is impossible to lay down precise rules of mathematical application to govern the issue of what amounts to a failure of substantial performance. Professor Corbinsummarizes the problem as follows: 5

It is not easy to lay down rules for determining what amounts to 'substantial performance,' sufficient to justify a judgment for the contract price (subject to a counterclaim for injury, if asserted) in any particular case. It is always a question of fact, a matter of degree, a question that must be determined relatively to all the other complex factors that exist in every instance. The variation in these factors is such that generalization is difficult and the use of cases as precedents is dangerous. (footnote omitted)

Such factors as the extent of performance and the wilfullness of the breach have obvious relevance.

Nordin has argued throughout this case that there is no evidence upon which a failure of substantial performance could be maintained, and specifically states as follows:

Thus, we have testimony only of the need to rebuild only 12% of 20% of the utilidor system, or 2.4% of the utilidor system. This amounts to less than 1 1/2% of the entire sewer and water system that was built by Nordin. Yet, this is the record on which the jury has found against the defendants for $1,391,542.16, whereas 2.4% of the value of the entire utilidor system ($748,733.00) would equal only $17,969.59.

Nordin argues that there was no testimony concerning the ten-inch direct burial waterpipe, the raw water intake and pipeline, the sewage treatment plant building, lift station and utiliducts, and only de minimis testimony as to the water storage tanks and pumprooms.

Previously this court has held that a jury issue is presented unless the court can say that reasonable minds cannot differ on the issue to be presented. 6 In order to uphold the view of Nordin, we must be able to say that there was no evidence upon which a failure of substantial performance could be inferred by reasonable jurors when the evidence is viewed in the light most favorable to the City. We, therefore, must review the evidence presented at the trial to apply the rule in this case.

A. UTILIDOR AND UTILIDUCTS

A basic element in the construction of the utilidor to contain the sewer and water pipe was the use of proper materials for bedding and backfill. Six inches of select class 1 gravel was required to...

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