State Highway Com'n of Wyoming v. Brasel & Sims Const. Co., Inc.

• Decision Date: 12 September 1984
• Docket Number: Nos. 83-92,83-93,s. 83-92
• Citation: 688 P.2d 871
• Parties: STATE HIGHWAY COMMISSION OF WYOMING, Appellant (Defendant), v. BRASEL & SIMS CONSTRUCTION CO., INC., a Wyoming corporation, Appellee (Plaintiff). BRASEL & SIMS CONSTRUCTION CO., INC., Appellant (Plaintiff), v. STATE HIGHWAY COMMISSION OF WYOMING, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 871

688 P.2d 871

STATE HIGHWAY COMMISSION OF WYOMING, Appellant (Defendant), v. BRASEL & SIMS CONSTRUCTION CO., INC., a Wyoming corporation, Appellee (Plaintiff).

BRASEL & SIMS CONSTRUCTION CO., INC., Appellant (Plaintiff), v. STATE HIGHWAY COMMISSION OF WYOMING, Appellee (Defendant).

Nos. 83-92, 83-93.

Supreme Court of Wyoming.

Sept. 12, 1984.

Rehearing Denied Nov. 1, 1984.

A.G. McClintock, Atty. Gen., Glenn A. Williams, Senior Asst. Atty. Gen., Lawrence A. Bobbitt, III, Asst. Atty. Gen., A. Joseph Williams, Sp. Asst. Atty. Gen., Cheyenne, for State Highway Commission of Wyoming.

John T. Pappas and L.M. Chipley, Western Law Associates, P.C., Lander, for Brasel & Sims Construction Co., Inc.

Before ROONEY, C.J., and THOMAS, ROSE, BROWN and CARDINE, JJ.

ROSE, Justice.

Brasel & Sims Construction Company, Inc. (Brasel & Sims), an experienced builder of roads in this state, brought this action against the State Highway Commission of Wyoming to recover damages it sustained in performing a highway-construction contract. Brasel & Sims alleged that the contract, ostensibly a one-year project, required two years to complete and entailed unanticipated expenses as a result of the failure of the state highway department ¹ to supply an adequate source of water and to accurately represent the quality of the designated gravel pit. Following a trial to the court, a judgment was entered in favor of Brasel & Sims in the amount of $1,945,520.84.

On appeal, the commission concedes that the evidence is sufficient to support a finding of liability. The commission takes the position, however, that the dispute-resolution clause in the contract, which authorizes the department engineer and the commission to decide questions arising under the contract, should have been enforced by the trial court to preclude recovery by Brasel & Sims. The commission also challenges Brasel & Sims' method of proving damages at trial. Brasel & Sims cross-appeals the refusal of the trial court to award actual or prejudgment interest. We will affirm the judgment of the district court in all respects.

BACKGROUND

Brasel & Sims and the commission entered into a contract on October 19, 1978, for the construction of a portion of Wyoming Highway No. 387. Article VII of the contract specified the manner in which disputes were to be resolved:

"VII. Any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Engineer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. The decision of the Engineer shall be final and conclusive unless, within 30 days from the date of receipt of such conclusion, the Contractor mails or otherwise furnishes the Wyoming State Highway Commission written appeal. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of his appeal."

The contract also adopts by reference the Wyoming Highway Department Specifications for Road and Bridge Construction, 1974. Section 105.17 sets out a claims procedure:

"105.17 CLAIMS FOR ADJUSTMENTS AND DISPUTES.

"If in any case the Contractor deems that additional compensation is due him for work or material not clearly covered in the contract or not ordered as extra work as defined herein, or that contract time be extended, the Contractor shall notify the Engineer in writing within a reasonable time of his intention to make claim for such additional compensation or extended time. This notification should also specify the basis for the claim. The Engineer will acknowledge receipt of said intention and advise the Contractor that consideration will be given the claim when it is submitted in a formal manner with complete and thorough justification for every item.

"Within sixty (60) days from the date of the Contractor's formal claim, the Department will render to the Contractor a judgment in writing. This judgment shall be final and binding upon both parties to the contract unless the Contractor files within thirty (30) days of the date of said judgment a written notice of appeal "Under no circumstances will a claim be considered if submitted later than sixty (60) days after publication of first advertisement that work has been accepted as complete.

with the Secretary of the Highway Commission. Subsequent to the filing of the notice of appeal, the claim will be pursued according to the Contractor's Claim Procedure adopted by the Highway Commission.

"If the claim is found to be just, it will be paid on the basis of actual costs to which no percentage will be added. The justification for payment may be based upon an audit by the Department of the Contractor's project records and cost accounting system."

Pursuant to these provisions, Brasel & Sims filed its claim to recover the costs it had incurred as a result of alleged breaches by the highway department. The claim was ultimately denied by the commission, and this denial was affirmed by the district court, upon Brasel & Sims' petition for review. Brasel & Sims appealed that decision to this court. Brasel & Sims Construction Co., Inc. v. State Highway Commission of Wyoming, Wyo., 655 P.2d 265 (1982). We dismissed the appeal, holding that the district court, and therefore this court, lacked jurisdiction to entertain a petition for review since the highway commission had no authority to decide the contract dispute in the first place. We noted in that case that Brasel & Sims had filed a separate action in district court seeking recovery of the same damages that it had claimed by way of the administrative procedure. We said:

"Appellant's [Brasel & Sims'] relief may be found in its action on the contract filed in the District Court, Laramie County, First Judicial District." 655 P.2d at 268.

At trial in the present case, Brasel & Sims used the "total cost" method to calculate and prove damages. By subtracting the estimated cost of doing the work under conditions as represented from the actual cost of doing the work in the nine areas affected by the breach, ² Brasel & Sims arrived at a damages claim of $2,010,552.

The trial court, in its Findings of Fact, approved the costs claimed by Brasel & Sims in five of the nine areas, ³ which costs amounted to $1,887,362. These costs were found by the court to be reasonable:

"THE DEFENDANT BREACHED THE OCTOBER, 1978 CONTRACT AND THE WARRANTIES, AND AS A NATURAL RESULT, THE PLAINTIFF HAS PERFORMED WORK AND SUPPLIED MATERIALS NOT CLEARLY COVERED IN THE ORIGINAL CONTRACT, THE ACTUAL AND REASONABLE COST OF THE EXTRA WORK AND MATERIAL BEING $1,887,362.00, SAID AMOUNT BEING THE DIFFERENCE BETWEEN THE REASONABLE COST OF DOING THE WORK UNDER THE CONDITIONS REPRESENTED AND THE REASONABLE COST OF DOING THE WORK UNDER ACTUAL CONDITIONS."

The court determined, however, that an "equitable and appropriate" award would be $1,691,757.25, the difference between Brasel & Sims' total cost for the entire construction project and the amount of money paid to Brasel & Sims by the highway department for the entire project. The court allowed a profit of 15% of the

additional cost for a total award to Brasel & Sims of $1,945,520.84.

ISSUES ON APPEAL

The commission presents the following issues for our consideration on appeal:

"THE DISTRICT COURT ERRED IN REFUSING TO ENFORCE THE DISPUTES CLAUSE OF THE CONTRACT,"

and

"THE PLAINTIFF FAILED TO PROVE ITS DAMAGES."

Brasel & Sims raises a single issue:

"Did the court err in not awarding either actual interest or statutory pre-judgment interest?"

I

In analyzing the effect of the dispute-resolution provisions in the construction contract, it is helpful to review our earlier decision involving these parties in which we dismissed the appeal. Brasel & Sims Construction Co., Inc. v. State Highway Commission of Wyoming, supra. The crux of that opinion is that administrative agencies, absent statutory authority, may not adjudicate contract disputes. We said that agencies are free to establish claims-resolution procedures for the negotiation of additional compensation or the adjustment of disputes. Such procedures, however, cannot constitute formal administrative proceedings under the Wyoming Administrative Procedure Act, §§ 16-3-101 through 16-3-115, W.S.1977, unless an express statute authorizes the agency to adjudicate its contract disputes. ⁴ No such enabling legislation exists with respect to the state highway commission:

" * * * We can find no statutory authority for the appellee [State Highway Commission of Wyoming] to conduct a hearing and make findings, conclusions of law, and a decision in a dispute between itself and one of its contractors, which is reviewable by the district court on a petition for review." Brasel & Sims Construction Co., Inc. v. State Highway Commission of Wyoming, supra, 655 P.2d at 268.

Thus, as an aggrieved party, Brasel & Sims' remedy was a suit on the contract in a court of law, where it could obtain a trial de novo, notwithstanding the adjudicatory process established by the commission for resolving contractual disputes.

Our holding in Brasel & Sims Construction Co., Inc. v. State Highway Commission of Wyoming, supra, does not prevent parties from agreeing to submit disputes to one of the parties to the contract and further agreeing to be bound by that party's decision. Such provisions are fairly common in construction contracts and are enforceable in court. United States v. Moorman, 338 U.S. 457, 70 S.Ct. 288, 94 L.Ed. 256 (1950). These provisions are valid because the court, not the agency, performs the judicial function of interpreting the terms of the contract and their legal effect in accordance with the familiar requirements of good faith and absence of collusion, fraud or mistake. United States v. Moorman, supra; 3A Corbin on Contracts, § 652, pp. 121-131. We recognized the validity of self-imposed prerequisites to the initiation...