Primrose Ret. Cmtys., LLC v. Ghidorzi Constr. Co.

• Citation: 523 P.3d 1219
• Decision Date: 08 February 2023
• Docket Number: S-22-0162
• Parties: PRIMROSE RETIREMENT COMMUNITIES, LLC and Gillette Retirement, LLC, Appellants (Plaintiffs), v. GHIDORZI CONSTRUCTION COMPANY, LLC, Appellee (Defendant/Third-party Plaintiff).
• Court: United States State Supreme Court of Wyoming

523 P.3d 1219

PRIMROSE RETIREMENT COMMUNITIES, LLC and Gillette Retirement, LLC, Appellants (Plaintiffs),

v.GHIDORZI CONSTRUCTION COMPANY, LLC, Appellee (Defendant/Third-party Plaintiff).

S-22-0162

Supreme Court of Wyoming.

February 8, 2023

Representing Appellants: Amanda K. Roberts and J. Kyle Hendrickson, Lonabaugh and Riggs, LLP, Sheridan, Wyoming; Ryan W. McGrath and J. David Horning, Horning, Horning & McGrath, LLC, Gillette, Wyoming. Argument by Mr. Hendrickson.

Representing Appellee: Stephenson D. Emery, Williams, Porter, Day & Neville, P.C., Casper, Wyoming; Nicholas D. Harken and Eugene M. LaFlamme, McCoy Leavitt Laskey, LLC, Waukesha, Wisconsin. Argument by Mr. Harken.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

GRAY, Justice.

[¶1] In this construction contract dispute, Primrose Retirement Communities, LLC and its local affiliate Gillette Retirement, LLC (together Primrose)¹ appeal from the district court's grant of summary judgment in favor of Ghidorzi Construction Company, LLC (Ghidorzi) on claims of breach of contract and breach of the implied covenant of good faith and fair dealing. The district court determined that Primrose failed to submit evidence that Ghidorzi's alleged breach caused Primrose's damages and that the contract language obviated any need to impose an implied covenant. We reverse in part and affirm in part.

ISSUES

[¶2] The issues are:

1. Did the district court err in granting summary judgment on Primrose's breach of contract claim?

2. Did the district court err in granting summary judgment on Primrose's breach of the implied covenant of good faith and fair dealing?

FACTS

[¶3] In 2008, Primrose found a location for a new assisted living facility in Gillette, Wyoming. Primrose retained WAI Continuum as the project architect and Terracon Consultants, a geotechnical consulting firm, to assess the soils, prepare a soils report, and make structural recommendations for construction and to inform potential bidders. On August 5, 2008, Terracon issued its report—the Terracon Report—which identified expansive soils under the construction site and provided recommendations "to help mitigate the effects of soils shrinkage and expansion" on the proposed facility. Terracon's first recommendation was that "the proposed structure be supported on a drilled pier/caisson foundation system bearing on sandstone bedrock." The report contained an alternate recommendation that, "[i]f the owner is willing to assume additional risk associated with soil shrinkage and expansion, spread footings bearing on a minimum of 5 feet of new, non-expansive, low-permeability, engineered fill may be used to support the proposed structure." The report included specific design and construction recommendations for the foundation systems, pavements, and other earth-related phases of the project should the owner choose the alternate method. These recommendations were intended to result in construction that would allow a tolerance of one inch of differential movement. Primrose chose the alternate construction method.

[¶4] Primrose selected Ghidorzi as the general contractor for the project. The construction contract (Contract) was signed on September 11, 2009. The Contract specifically excludes the Terracon Report as part of the Contract but contains a drawing with an annotation that states the Terracon soils report specifications must be strictly adhered to. The project was completed in 2010. In 2011, Primrose noticed some movement of the slabs and walls in and near the water service room where the water main entered the building (Area A). Primrose notified Ghidorzi of the problem and a Ghidorzi representative was sent to inspect the situation. After its inspection, Ghidorzi wrote to Primrose stating it had tested the soils and there was an increase in water saturation in Area A. It also pointed out that the "construction of the building is per the construction documents." Ghidorzi suggested that "[m]ovement in the building is the nature of this site when building with spread footings."

[¶5] The problems continued to escalate into 2012 when Primrose contacted the City of Gillette. The City pressure-tested the water main for a leak but did not find one. The soil movement continued to cause cracks and separation in the floors and walls of the building. Primrose observed heavy ground saturation in the vicinity of the water service room and evidence of standing and subsurface water. In September 2013, Primrose again contacted the City and the City conducted another pressure test. This time it identified a leak where the service line connected to the water main just outside the water service room. At roughly the same time, Primrose excavated the affected area and discovered water was "gushing [and] boiling up into the holes." An inspection of the service line installed by a Ghidorzi subcontractor revealed the leak was at the "T" connection between the service line and the City water line. The connection was missing "all thread" necessary to hold the pipes together. The connection was repaired but the differential movement continued.

[¶6] On April 7, 2016, Primrose filed a complaint against Ghidorzi alleging negligence, breach of contract, and breach of the implied covenant of good faith and fair dealing. Primrose also alleged negligence claims against the City of Gillette. Primrose later amended its complaint to add claims against WAI, the architect, who, in turn, brought a third-party complaint against Ghidorzi's engineering subcontractor. Eventually, all claims against the entities named in the action—except Ghidorzi—were dismissed by stipulation. Ghidorzi moved for summary judgment on all of Primrose's claims on May 15, 2020.

[¶7] After a hearing, the district court granted summary judgment in favor of Ghidorzi.² Relevant to this appeal, the district court concluded the Terracon Report was excluded from the Contract documents, Primrose failed to establish evidence demonstrating that Ghidorzi's alleged breach caused Primrose damages, and the duty of good faith and fair dealing was inapplicable because the duties of the parties were fully incorporated through the terms of the Contract.

STANDARD OF REVIEW

[¶8] Our standard of review on summary judgment is well established:

A grant of summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." W.R.C.P. 56(a).

This Court reviews a district court's order granting summary judgment de novo and may affirm on any basis in the record.

[W]e review a summary judgment in the same light as the district court, using the same materials and following the same standards. We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record. A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties.

The movant bears the initial burden of establishing a prima facie case for summary judgment using admissible evidence. If the movant establishes a prima facie case for summary judgment, the burden shifts to the opposing party to present admissible evidence demonstrating a genuine dispute of material fact for trial.

Peterson v. Meritain Health, Inc. , 2022 WY 54, ¶¶ 14–16, 508 P.3d 696, 704 (Wyo. 2022) (internal citations and quotation marks omitted); see also W.R.C.P. 56(c) (requiring evidence supporting and opposing summary judgment to be admissible).

[¶9] The parties agree that the claims arising from the Contract are reviewed under South Dakota law. "Contract interpretation is a question of law reviewed de novo." Prunty Constr., Inc. v. City of Canistota , 2004 S.D. 78, ¶ 10, 682 N.W.2d 749, 753 (citing Fenske Media Corp. v. Banta Corp. , 2004 S.D. 23, ¶ 8, 676 N.W.2d 390, 393 ). The intent of the parties is ascertained from the contract's language and, to the extent possible, "we must give meaning to all the provisions of a contract." Id. (quoting Fenske , ¶ 8, 676 N.W.2d at 393 ).

DISCUSSION

I. Did the district court err in granting summary judgment on Primrose's breach of contract claim?

[¶10] Primrose contends the district court erred in granting summary judgment on the breach of contract claim because it failed to recognize a material issue of fact as to whether Ghidorzi breached the Contract by failing to follow the specifications from the Terracon Report³ incorporated into the Contract documents. Primrose also argues the district court misapplied South Dakota law and material issues of fact remain as to causation.

A. Terms of Contract

[¶11] It is undisputed that the Terracon Report recommended specific structural requirements and made clear these were necessary if Primrose chose the spread footing foundation option in moving forward with the project. It is also undisputed that Ghidorzi did not follow these recommendations during construction. Ghidorzi claims the specifications in the Terracon Report were directly and unambiguously excluded from the Contract requirements by the Project Manual, Division 2, Section 02010, 1.2, which states, "[the Terracon] report is not a part of the Contract Documents." Primrose disagrees, arguing the Terracon specifications for the spread footings were incorporated into the Contract through a drawing submitted by Ghidorzi's structural engineer on February 13, 2009, prior to the execution of the Contract. The drawing had an annotation that read, "All footings shall bear on new engineered fill as per soils report by Terracon project # A5085035. The soils report must be strictly adhered to." Ghidorzi concedes that the drawing was part of the Contract, but claims the note on a structural drawing did not modify Section 1.2 of the Project Manual. Ghidorzi admits under the terms of the Contract it was required to review...