Prunty Const., Inc. v. City of Canistota
| Decision Date | 09 June 2004 |
| Docket Number | No. 23077, No. 23078. |
| Citation | 2004 SD 78,682 N.W.2d 749 |
| Parties | PRUNTY CONSTRUCTION, INC., a South Dakota Corporation with its principal place of business in Brookings, South Dakota, Plaintiff and Appellant, v. CITY OF CANISTOTA, McCook County, South Dakota, Defendant and Appellee. |
| Court | South Dakota Supreme Court |
Ronald G. Schmidt of Schmidt, Schroyer & Moreno, Rapid City, SD, for plaintiff and appellant.
Timothy W. Bjorkman of Bjorkman & Fink Bridgewater, SD, for defendant and appellee.
[¶ 1.] The City of Canistota contracted with Prunty Construction, Inc. for a water and sewer project. The City claims that the contract was paid in full. Prunty claims it is owed an additional sum of $59,428 for work performed under the contract. The trial court granted summary judgment in favor of the City. Prunty and the City appeal.
[¶ 2.] The City hired Sayre Associates, Inc. (Sayre) to design and prepare construction and bidding documents for the construction of two projects: (1) a water main and (2) a sanitary sewer and surfacing improvement. Sayre assigned Monty Miller (Engineer), a professional engineer, to represent the City on this project. Prunty submitted its bid and was awarded the contract. The City paid Prunty partial payments in the amount of $925,587.77 which was the amount Prunty submitted on the original bid form. After the project was completed, the City refused to pay a final change order in the amount of $54,930 plus an additional $4,498 for items inadvertently omitted from the final change order.1 Prunty filed suit against the City alleging breach of contract. Both Prunty and the City moved for summary judgment. The trial court granted summary judgment to the City. Prunty moved for reconsideration. The City requested sanctions against Prunty pursuant to SDCL 15-6-56(g) in its Resistance to Plaintiff's Motion for Reconsideration. The trial court denied Prunty's motion. It also denied the City's request to impose sanctions against Prunty. Both Prunty and the City appeal. The Association of General Contractors of South Dakota (AGC) appears as amicus curiae.2
[¶ 3.] Prunty raises the following issue on appeal:
Whether the trial court erred in granting summary judgment to the City.
[¶ 4.] The City raises the following issue on appeal:
Whether the trial court abused its discretion by not imposing sanctions against Prunty.
[¶ 5.] Summary judgment grant or denial requires this Court to determine whether genuine issues of material fact exist and whether legal issues were correctly decided. First Dakota Nat. Bank v. Performance Eng'g and Mfg., Inc., 2004 SD 26, ¶ 4, 676 N.W.2d 395, 398. We view the evidence most favorably to the nonmoving party, resolving reasonable doubt against the moving party. Id. The grant or denial of sanctions is reviewed for abuse of discretion.
[¶ 6.] The parties disagree as to the terms of the contract. The City claims that the contract is a "lump sum" contract. Prunty claims that the contract is a "unit bid" contract. They also disagree about the final change order and whether the contract requires prior approval of the changes. Both parties argue that the terms of the contract are not ambiguous. In analyzing this case, we will first set forth the trial court's ruling and the positions of Prunty and the City.
[¶ 7.] The trial court, while discussing differences between unit bid contracts and lump sum contracts, did not expressly decide this question. Rather, the trial court determined that "the contract between Prunty and Canistota required notice of unanticipated conditions and a halt to the work until the change order was approved." Because the trial court concluded that Prunty did not comply with these requirements, it held that the City was "not bound to pay for these additional expenses."
[¶ 8.] The City argues that the contract is a lump sum contract, and that Prunty was required to submit change orders for additional units and have prior authorization in order to be paid for any additional work beyond the contract amount. "Under a lump-sum agreement, the contractor agrees to complete the work for a set price, regardless of the actual costs incurred in completing the construction." United States v. Johnson, 937 F.2d 392, n. 2 (8thCir.1991). The City relies on the contract provision that specified a total sum of $925,587.77. The provision states:
The CONTRACTOR agrees to perform all of the WORK described in the CONTRACT DOCUMENTS and comply with the terms therein for the sum of $925,587.77 or as shown in the BID schedule.
The City claims that Prunty is only entitled to the lump sum amount specified in the contract. The only way Prunty would be entitled to amounts in excess of the contract amount is if Prunty had submitted and the City had approved a change order prior to the work being done. The City further argues that municipalities cannot be held liable for sums greater than the approved original bid because subsequent increases were not approved at a duly-authorized meeting as required by SDCL 9-1-5, 5-18-11 & 5-18-19.
[¶ 9.] Prunty argues that its contract with the City is a unit bid contract and as such, requires the City to pay for the actual units supplied.
A unit-bid contract is one wherein the contractor submits a price per unit for each of the various categories involved. This type of contract is used where the final quantities of work cannot be determined with accuracy until final completion.
Johnson, Drake & Piper, Inc. v. United States, 483 F.2d 682, 684 (8thCir.1973). Prunty admits that change orders had to be submitted but asserts that a "final change order" is contemplated by the contract. Prunty also argues that not all changes required halting the work until a change order was approved. Prunty argues that only certain changes required prior approval. Specifically, changes that required prior approval were of two types: (1) changes due to subsurface or latent physical conditions at the site differing materially from those indicated in the contract, and (2) changes due to unknown physical conditions at the site, of an unusual nature and differing materially from those ordinarily encountered and generally recognized as inherent in this type of work. Prunty claims that the final change order did not include changes requiring prior approval. Whether the site conditions differed materially or were of an unusual nature would be questions of fact for which summary judgment would be inappropriate. Sundt Corp. v. South Dakota Dept. of Transp., 1997 SD 91, ¶¶ 22-24, 566 N.W.2d 476, 481-82.
[¶ 10.] Contract interpretation is a question of law reviewed de novo. Fenske Media Corp. v. Banta Corp., 2004 SD 23, ¶ 8, 676 N.W.2d 390, 393. To ascertain the intent of the parties, we rely on the contract's language. Id. (citation omitted). Further, to the extent possible, "we must give meaning to all the provisions of a contract." Id. (citation omitted).
[¶ 11.] As part of the contract, the parties signed an agreement which specified that "the CONTRACTOR agree[d] to perform all of the WORK described in the CONTRACT DOCUMENTS and comply with the terms therein ..." The contract by definition included the following: (1) the advertisement for bids, (2) information for the bidders, (3) the Bid consisting of 10 pages listing 146 items, (4) a Bid Bond, (5) Agreement, (6) a 28-page Rural Utilities Service (RUS) Bulletin3 describing 32 General Conditions, (7) Supplemental General Conditions, (8) Payment Bond, (9) Performance Bond, (10) Notice to Proceed, (11) Change Order (12) 66 pages of Drawings by Sayre Associates, Inc., (13) Specifications prepared or issued by Sayre Associates, Inc., and (14) Addenda Nos. 1 & 2. (Compare to what is included in SDDOT construction contract documents noted in Sundt, 1997 SD 91, nn. 5 & 6, 566 N.W.2d at 479.) A large portion of the contract consists of RUS form documents. Since RUS partially funded the projects, it imposed certain requirements on the City including the use of its forms.
"Unit Bid" Contract
[¶ 12.] To determine if the contract is a "unit bid" contract or a "lump sum" contract, we look to the contract language itself. The clearest indication that the contract is a "unit bid" contract is from the advertisement for the bid and the bid itself. The City's Advertisement for Bids used unit prices for the major items necessary for the projects to be bid. The Advertisement states:
Approximate quantities of major construction items include the following Water Main 4,230 L. Ft. Concrete Meter Vault 1 Each Sanitary Sewer Pipe 5,050 L. Ft 48" Diameter Manhole 18 Each Ordinary Rpadway Shaping 21,045 Sq. Yd. Aggregate Base Course 11,264 Ton PCC Pavement Replacement (8") 1,398 Sq. Yd. Asphalt Concrete Composite 4,436 Ton
(emphasis added). The Bid Form divides the major items listed in the Advertisement into two projects, Schedules A and B. Each Schedule lists the items for that project, totaling 146 bid items for the two projects. For each of the items there is an "estimated quantity" column, "unit" column (measurement), a "unit price" column, and a "total price" column. For example, the following items appear on the form as follows:
Est. Unit Total Item Description Quant. Unit Price Price 38. Asphalt Concrete Composite 3411.0 TON ____ ____ 66. Temporary Silt Fence 60 L.FT. ____ ____
Sayre, on behalf of the City, filled in the "Estimated Quantity" and "Unit" columns with the anticipated number of units needed to complete the project. Bidders were required to fill in the "Unit Price" and "Total Price" columns. The "Total Price" was derived by multiplying Sayre's estimated "Unit" quantity by the bidder's "Unit Price" amount. Each Schedule was then subtotaled and added together to derive the "Total Gross Sum Bid for Project." Item 85...
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