Sundt Corp. v. State By and Through South Dakota Dept. of Transp., No. 19750

• Court: Supreme Court of South Dakota
• Writing for the Court: GILBERTSON; SABERS
• Citation: 1997 SD 91,566 N.W.2d 476
• Docket Number: No. 19750
• Decision Date: 16 July 1997
• Parties: SUNDT CORP., with its principal place of business at Tucson, Arizona, Plaintiff and Appellant, v. The STATE of South Dakota By and Through the SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION, a state agency located in Pierre, South Dakota, Defendant and Appellee.

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566 N.W.2d 476 1997 SD 91 SUNDT CORP., with its principal place of business at Tucson,
Arizona, Plaintiff and Appellant,
v.
The STATE of South Dakota By and Through the SOUTH DAKOTA
DEPARTMENT OF TRANSPORTATION, a state agency
located in Pierre, South Dakota,
Defendant and Appellee. No. 19750. Supreme Court of South Dakota. Argued April 29, 1997.
July 16, 1997.

Ronald G. Schmidt of Schmidt, Schroyer, Moreno and Dupris, Pierre, for plaintiff and appellant.

Barton R. Banks of Banks, Johnson, Colbath and Kerr, Rapid City, for defendant and appellee.

GILBERTSON, Justice.

¶1 Sundt Corporation, a paving construction company, appeals from the trial court's directed verdict and dismissal of its negligence claim against the South Dakota Department of Transportation (SDDOT) and the trial court's refusal of its proposed jury instructions. We affirm.

FACTS AND PROCEDURE

¶2 On July 5, 1991, SDDOT awarded Sundt a paving contract for a portion of U.S. Highway 12 in Corson County between Walker and McLaughlin. The contract required Sundt to provide a gravel cushion for 20 miles of roadway, and to surface the roadway with eight-inch, nonreinforced concrete pavement. Another contractor was hired to grade the roadway prior to Sundt's phase of the project. Sundt's contract required that during its portion of the construction, the highway would remain open, and the shoulders of the roadway would carry public traffic and trucks hired by Sundt to haul project materials.

¶3 The grading contractor completed its contract in the fall of 1991. The grading contractor was given a change order in fall 1991 which required it to apply oil to the roadway to keep the dust down. The change order specifically provided that no oil was to be applied on the road shoulders. Sundt's contract required construction to begin in the spring of 1992.

¶4 In early spring of 1992, when Sundt's employees inspected the site prior to commencement of construction, they noticed that the winter runoff from the oiled road and snow bladed off the highway had seeped into the shoulders, making them soft and unstable. Sundt requested that public traffic be detoured off the highway and that its construction trucks be permitted to drive on the roadway, which would avoid the unstable shoulders and cut construction time by a claimed ten weeks. SDDOT refused to permit the rerouting of traffic, but on May 15, 1992, the SDDOT engineer signed an Extra Work Authorization No. 001 which read, in part:

Extra work is hereby agreed to and authorized for repair of unstable shoulders, as encountered, from 15 feet right or left of centerline to the inslope. Shoulders were left unsealed over the winter from the previous grading project, which allowed moisture to penetrate through the existing gravel cushion and into the top foot of subgrade.

Sundt's subcontractor, which was hired to place the gravel cushion, was paid for making repairs to the shoulders.

¶5 A dispute arose over Sundt's claim that SDDOT should reimburse it for additional time and expense in completing the contract, which Sundt argued was due to the problems with the shoulders. Sundt's position was that the condition of the road shoulders impeded the efficiency of its operation by slowing optimal truck speeds, bunching

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trucks, ¹ and increasing its costs of truck repairs and maintenance. Sundt requested an additional 14 days to complete its contract and avoid liquidated damages based on lost production due to unstable shoulders. SDDOT claimed the project was slowed not by the shoulders, but because Sundt had overestimated the speed a loaded truck could travel on the shoulders, had problems with its cement plant, and had overestimated the amount of concrete its trucks legally could carry (load limits). The extension of time was denied, and SDDOT assessed liquidated damages against Sundt in the amount of $5,100.

¶6 Sundt also experienced difficulty achieving the specified entrained air ² and slump ³ of the concrete contained in the contract. Sundt claimed the slump problems were due to the quality of the cement from the State Cement Plant, and requested to use another cement supplier. SDDOT claimed the problems were due to too much water in the mix and the distance trucks had to carry the cement from the plant where it was mixed to the site where it was poured. Sundt used additional equipment and changed the formula for its mix of concrete in an attempt to correct the problems. SDDOT deducted penalties of $44,562.74 against Sundt for failure to meet specified standards of entrained air and slump on sections of the poured concrete.

¶7 Sundt sued SDDOT under the provisions of SDCL 31-2-34 through -39, the statutes which govern suit on state highway construction contracts. Sundt claimed damages for extra paving costs due to unstable highway shoulders, for return of the penalties and liquidated damages assessed, and for costs of trimming the gravel cushion. It based its claim for damages on theories of negligence, breach of reasonable construction standards, breach of contractual obligations, breach of the implied obligation of good faith and fair dealing, and equitable principles (unjust enrichment). At trial, after both sides rested, the trial court directed a verdict for SDDOT on the negligence count and rejected Sundt's proposed jury instructions. The jury returned a verdict for Sundt in the amount of $51,839 for the excessive trimming costs; that verdict is not the subject of this appeal.

¶8 On appeal, Sundt raises the following issues:

1. Whether the trial court erred in granting SDDOT's motion for directed verdict on Sundt's negligence claims.

2. Whether the trial court erred in refusing Sundt's proposed jury instructions on negligence.

3. Whether the trial court erred in granting SDDOT's motion to dismiss Sundt's negligence claims on statute of limitations grounds.

4. Whether the trial court erred in refusing Sundt's proposed jury instructions on breach of implied warranty.

5. Whether the trial court erred in refusing Sundt's proposed jury instruction on differing site conditions.

¶9 We believe our recent holding in Fisher Sand & Gravel Co. v. SDDOT, 1997 SD 8, 558 N.W.2d 864, ⁴ is dispositive of the negligence issues in this appeal. In that case, we held there can be no cause of action sounding in negligence unless there is a legal duty which arises independent of the duties under the contract. Id., 1997 SD 8 at p 16, 558 N.W.2d at 868. Whether a duty exists is a question of law, which we review de novo. Id., 1997 SD 8 at p 12, 558 N.W.2d at 867 (citing Tipton v. Town of Tabor, 538 N.W.2d 783, 785 (S.D.1995); Bland v. Davison County, 507 N.W.2d 80, 81 (S.D.1993)).

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¶10 In the case at bar, we find no legal duty which existed outside the contract. If there was a duty to maintain the shoulders to support the heavy construction activities of Sundt, it arose solely under the contract; as in Fisher, "[o]utside the contract, there was no relationship between [the parties]." Id, at p 13, 558 N.W.2d at 867. Moreover, Sundt appears to recognize its remedies for the unstable shoulders were in contract: by offering to modify the contract to reroute traffic off Highway 12 entirely; by attempting to instruct the jury on an agency rule that states SDDOT can modify the contract if the site conditions (i.e., the shoulders) materially differ from the anticipated conditions; and by basing its claim for negligence on shoulder conditions differing from those "represented in the plans." ⁵ When Sundt complained, SDDOT attempted to remedy the shoulder problem under the provisions of the contract--by paying Sundt's subcontractor under a change order to fix the shoulders. ⁶

¶11 There is no question that Sundt knew of the shoulder problems before it began performance of the contract. In fact, Sundt argued at trial that its preconstruction proposal to entirely detour traffic off the highway should go to the jury as proof that it tried to mitigate the damages caused by the shoulder problems. It elected to seek the benefit of the bargain by...