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Dept of Transportation v. Eastwind, Inc. (5/14/93), 851 P 2d 1348
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NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors to
the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order that corrections
may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, acting by and )
through its Department of )
Transportation and Public )
Facilities, )
) )
Appellants, ) File No. S-4546/4547
Cross-Appellees, )
)
v. ) 3AN 88 12420 CI
)
EASTWIND, INC., ) O P I N I O N
)
Appellee, ) [No. 3953 - May 14, 1993]
Cross-Appellant. )
________________________________)
Appeals from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Dana Fabe, Judge.
Appearances: Virgina A. Rusch, Assistant
Attorney General, Anchorage, Charles E. Cole,
Attorney General, Juneau, for Appellant/Cross-
Appellee. Donna C. Willard, Law Offices of
Donna C. Willard, Anchorage, for Appellee/
Cross-Appellant.
Before: Rabinowitz, Chief Justice, Burke,
Matthews, Compton and Moore, Justices.
BURKE, Justice.
This breach of contract action arises out of a dispute
between the State of Alaska and Eastwind, Inc., over Eastwind's
performance of a highway construction contract. The state
appeals the trial court's denial of its motion for summary
judgment, and the court's findings of fact and judgment in favor
of Eastwind, Inc. On appeal, the state argues that the trial
court erred in concluding that the state breached its contract by
unnecessarily directing Eastwind to use "blend sand" in its
asphalt paving mix. The state also argues that the trial court
incorrectly decided that Eastwind's claim should not be barred
because of Eastwind's failure to request a written change order,
and to give timely notice of its claim. Further, the state
contends that the trial court's finding regarding the cost of
aggregate is in error.
We affirm the decision of the trial court except for
the amount awarded per ton of aggregate. The parties agree that
such award should be based on a price of $5.19 per ton, instead
of $7.50 per ton.
I. FACTS & PROCEEDINGS
In December 1986, Eastwind contracted with the state of
Alaska, Department of Transportation and Public Facilities to
widen the Glenn Highway. The contract called for Eastwind to
perform construction work, and to supply the asphalt paving mix
required for the job. A special provision was intentionally
added to the contract to improve pavement performance, by
establishing higher than normal performance standards. The
"Marshall Test,"used to determine whether or not the aggregate
gradation proposal met these stringent criteria, has been deemed
to be the industry standard.
Eastwind submitted a representative sample of its pro
posed aggregate gradation mix to the state material lab in June
1987, as required by its contract. The state evaluated
Eastwind's proposal before performing the Marshall test. The
state acknowledged that Eastwind's proposed aggregate was within
specification but suggested to Eastwind that the use of blend
sand would be "more in spec." Eastwind responded that it did not
want to use blend sand.
The state then tested Eastwind's proposed aggregate.
The test results indicated that the proposed aggregate failed to
meet the required specifications. No re-test was done. The
state informed Eastwind that the proposed aggregate failed the
Marshall test. Eastwind was also told that by adding blend sand,
the aggregate could meet the specifications. The trial court
found that the discussion at this meeting constituted a direction
from the state to add blend sand in order to get the state's
approval.
Eastwind testified that, while it did not want to use
blend sand, it agreed to use blend sand to get state approval of
the aggregate. Eastwind did not get a written change order from
the state. The state then approved Eastwind's mixture with blend
sand. That same day, Eastwind learned from its own testing that
the originally proposed aggregate could meet the test criteria.
Samples later tested by two other labs and the state's lab passed
the test.
In August, when Eastwind had the results of the test,
it immediately filed written notice of a claim with the state.
The state acknowledged receipt of the claim notice by letter.
The state continued performing sample tests in September. These
tests consistently confirmed that Eastwind's originally proposed
aggregate did meet contract specifications.
In October, Eastwind requested an equitable adjustment
in the contract, in the amount of $728,000. In an administrative
decision, the state denied Eastwind's request, claiming that "(1)
the state did not change the work by rejecting Eastwind's
proposed aggregate gradation; (2) the state's rejection was
proper because the Marshall criteria had not been met; and (3)
Eastwind's evidence that commercial Alaskan laboratories had
shown that no blend sand was necessary was irrelevant because the
engineer determines the Job Mix Design and not the laboratory of
Eastwind's choice."
Again in 1988, the state performed tests on samples
that matched the gradation of Eastwind's originally proposed
aggregate. All laboratories that tested the proposed aggregate
after June, 1987 found that Eastwind's proposal passed the
Marshall criteria.
Eastwind filed an appeal from the administrative
decision in the superior court. The court granted a trial,
denied the state's motion for summary judgment, and eventually
awarded Eastwind an equitable adjustment of $251,300.25.
II. DISCUSSION
A. THE TRIAL COURT CORRECTLY FOUND THAT THE
STATE WAS WRONG IN REJECTING EASTWIND'S PROPOSED
AGGREGATE.
The trial court awarded damages to Eastwind and based
its finding on the conclusion that the state breached its
contract by incorrectly rejecting Eastwind's proposed aggregate
and directing Eastwind to use blend sand. The state contends
that this finding is erroneous and should be set aside. The
state reasons that the contract provided for the state's engineer
to determine the design of the asphalt paving mix. Therefore,
the trial court failed to respect the state engineer's judgment.1
In the alternative, the state argues that even if the
trial court does not have to accept the engineer's determination,
the evidence does not show that the state's testing was
erroneous. This argument is also unpersuasive. The state,
Eastwind's laboratory, and two outside labs continued testing the
proposed aggregate until April 1988. Except for the state's
first testing, all other samples of the originally proposed
aggregate passed the Marshall criteria. While the state
presented evidence contrary to these findings, this court will
not weigh the evidence. Martens v. Metzgar, 591 P.2d 541 (Alaska
1979). This court is satisfied that the facts on the record
support the trial court's finding that the state's testing was
wrong. Thus, we affirm the trial court's finding that the state
breached its contract by rejecting the proposed aggregate.2
B. THE TRIAL COURT CORRECTLY DECIDED THAT EASTWIND'S
CLAIM WAS NOT BARRED BECAUSE OF EASTWIND'S FAILURE TO
OBTAIN A WRITTEN WORK ORDER OR TO GIVE PROMPT NOTICE OF
INTENT TO CLAIM.3
The state further argues that Eastwind's claim should
have been dismissed for failure to comply with the written order
and notice of claims provisions of the contract. We have already
decided a case involving this issue.
With regard to the requirement of formal
notice, we note that the purpose of the
notice provision was to insure that the city
knew of the delay and did not continue to
rely on their expectations that the housing
would be completed. . . . The city did know
of the construction delay without formal
notice, and there is no evidence that it was
in any way prejudiced by the failure to
receive formal notice. We agree with the
trial court that this combination of actual
notice and lack of prejudice to the city
excused Section 707's requirement of written
notice.
City of Valdez v. Valdez Development Co., 523 P.2d 177, 182-83
(Alaska 1974).
In the case at bar, the state also knew of the change
and was not prejudiced by the lack of written notice. The state
argues that Eastwind should have said: "we are not going to add
blend sand unless you order us in writing to do so." Had it done
so, the state would have immediately clarified its position by
saying that it was not insisting on the use of blend sand, just
that the aggregate material meet applicable specifications. This
argument is contradicted by what actually happened. When the
written notice of claim was made, on August 19, the state did not
go to Eastwind and say "We did not order you to use blend sand
and you can use anything you want on the remainder of the job so
long as specifications are met.", even though more than half of
the project remained to be done.
The trial court found that it was not until August 19,
1987 that Eastwind had a reasonable basis for asserting that the
state's directive to use blend sand was a contract change. This
occurred when the additional testing, that the state had agreed
to, was completed and showed that the material proposed by
Eastwind would meet specifications. At that point, Eastwind did
give written notice. Also, by participating in the additional
testing, the state was found to have acquiesced in waiving any
earlier notice that might have been required. Thus, the state's
arguments that Eastwind's claims should be dismissed for failure
comply with the written order and notice requirements are without
merit.
C. THE TRIAL COURT ERRED IN DETERMINING THE COST
OF THE AGGREGATE.
The next question on appeal is whether the trial court
correctly determined extra costs for the addition of blend sand
use. Because this is a question of fact, the trial court's
decision stands unless this court is convinced that the trial
court's findings of fact are clearly erroneous. Native Alaskan
Reclamation & Pest Control v. United Bank Alaska, 685 P.2d 1211,
1215 (Alaska 1984).
The state claims that the extra costs allotted for
crushing were erroneous.4 The state argues that the cost of
aggregate is $5.19 per ton and not $7.50 per ton.
Eastwind concedes that the price of the aggregate per
ton is $5.19 and not $7.50. Therefore, we hold that the crushing
costs are reduced in the amount of $23,885.40, from $77,550.00 to
$53,664.60. This results in a reduction of the total damage
award from $251,300.25 to $227,414.85.
III. CONCLUSION
We affirm the trial court's decision, except for one
change. The trial court correctly found that the state was wrong
in rejecting Eastwind's proposed aggregate. The trial court's
finding of a resulting breach of contract was not clearly
erroneous. Additionally, the trial court correctly decided that
Eastwind's claim was not barred for failure to request a written
order or give prompt notice of a claim.
The trial court incorrectly calculated the extra costs
for the use of blend sand. As the parties concede, the trial
court erred in the figure used in the calculation. Thus, the
correct amount is a deduction of $23,885.40 from the trial
court's judgment.
We AFFIRM the trial court's decision in favor of
Eastwind, Inc. However, we instruct the trial court to reduce
the amount of its damage award from $251,300.25 to $227,414.85,
to reflect the corrected cost of aggregate at $5.19 per ton.
_______________________________
1. The state cites no authority to support its argument.
As the state explains, the engineer's determination should be
accepted by the trial court unless the engineer's use of his
authority was unreasonable or arbitrary.
The initial rejection of Eastwind's proposal came
before the Marshall test was actually performed. Once the state
tested the proposal, the result was unusual. Even though the
result was unusual, the state did not re-test the aggregate.
Given the facts, the trial court properly concluded that the
state incorrectly rejected Eastwind's initially proposed
aggregate.
2. Thus, we affirm the trial court's denial of the state's
summary judgment motion since it correctly found that the state
breached its contract.
3. Whether Eastwind's claim is barred due to its failure
to request a written order or give written notice is an issue of
law. The standard of review for conclusions of law allows this
court to substitute its judgment for the superior court's,
adopting the rule that is most persuasive in light of precedent,
reason, and policy. Guin v. Ha, 591 P.2d 1281, 1284, n.6 (Alaska
1979); Peters v. Juneau-Douglas Girl Scout Council, 519 P.2d 826,
834 (Alaska 1974). The superior court concluded that the state,
by its words and actions, directed Eastwind to use blend sand.
The superior court did not strictly enforce the written order
requirement and concluded that Eastwind was entitled to an
equitable adjustment for the added costs.
4. Additionally, the state appeals the trial court's
rulings regarding the excess costs of purchasing, hauling,
screening and loading of the blend sand.
At trial, the court heard expert testimony that, under
the circumstances, it was reasonable for Eastwind to purchase and
haul from the King Street location, even if the purchase cost was
.50 more per ton. Eastwind had less than 24 hours notice from
the time they learned of the need for blend sand to the time they
had to purchase the sand. Eastwind controlled the King Street
location and the sand there was immediately available. King
Street apparently had the highest quality blend sand and was
superior to that of the Lake Otis Pit. The expert testified that
had Eastwind waited even a day to get bids and search for a
better quality blend sand, the cost of the delay may be "a heck
of a lot more than a few cents difference in purchase price."
Given the facts presented to the trial court, we affirm the
finding below. There exists no clear error by the trial court
with which we can decide otherwise.
The evidence supports the trial court's ruling for
extra screening costs. The state's expert testified that
Eastwind's use of their crushing operation may have been the
prudent thing to do. The trial court committed no clear error in
accepting this testimony from the state's expert.
Eastwind argues that the cost of loading was increased
because with the addition of blend sand, there were three piles
to load instead of two. Loading from three piles took longer
than two. The increased loading time cost Eastwind an extra
$7,853. This evidence was submitted as expert testimony,
reviewed by the trial court, and found to be conclusive.
Without a clear showing of error, this court must affirm the
trial court's finding in this instance.
On cross-appeal, Eastwind claims that the trial court
incorrectly determined the amount of increased production costs.
This argument was not raised below and thus, this court cannot
review it now. In re L.A.M., 727 P.2d 1057 (Alaska 1986).
Eastwind also claims error in the trial court's ruling
that Eastwind is not entitled to an enhanced rate of prejudgment
interest. Further, Eastwind argues that the trial court erred in
applying the statutes on prejudgment interest with regard to the
effective start date. In that Eastwind did not include either
argument in its Statement of Points on Cross-Appeal, this court
will not address these questions. Alaska R. App. P. 210(e);
Moran v. Holman, 501 P.2d 769 (Alaska 1972).
We are unpersuaded that any of these contentions have
merit.
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