Bowes Construction, Inc. v. South Dakota Department of Transportation

#25653-a-GAS
2010 S.D. 99IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
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BOWES CONSTRUCTION, INC., Plaintiff and Appellant,
v.
SOUTH DAKOTA DEPARTMENT
OF TRANSPORTATION, Defendant and Appellee.
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APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
HUGHES COUNTY, SOUTH DAKOTA
* * * *
HONORABLE KATHLEEN F. TRANDAHL
Judge
* * * *
THOMAS R. OLSON
JOSHUA I. WELLE of
Olson and Welle, PC
West St. Paul, Minnesota
and
STEVEN C. BEARDSLEY of
Beardsley, Jensen and VonWald, LLC
Rapid City, South Dakota Attorneys for plaintiff
and appellant.
JEFFREY SVEEN
JULIA M. DVORAK of
Siegel, Barnett and Schutz, LLP
Aberdeen, South Dakota Attorneys for defendant
and appellee.
* * * *
CONSIDERED ON BRIEFS
ON NOVEMBER 15, 2010
OPINION FILED 12/22/10
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SEVERSON, Justice
[¶1.] Bowes Construction, Inc., a subcontractor hired to produce aggregate
materials for three asphalt paving projects, initiated this breach of contract action
against the South Dakota Department of Transportation. Under the subcontracts,
Bowes was contractually obligated to produce aggregate materials that would pass
the Department’s sodium-sulfate-soundness test, and the Department was
contractually obligated to accept Bowes’ aggregate materials in the absence of a
valid basis to reject them. The parties’ subcontracts incorporated South Dakota’s
standard test procedure for the sodium-sulfate-soundness test. Bowes contended
that its aggregate materials failed the Department’s sodium-sulfate-soundness test
because the Department did not follow the standard test procedure. Bowes alleged
that the Department therefore rejected its aggregate materials without a valid basis
and breached the subcontracts with Bowes. After a bench trial, the trial court
entered a judgment in the Department’s favor. We affirm.
BACKGROUND
[¶2.] Bowes is a heavy highway construction company located in Brookings,
South Dakota. Approximately one-third to one-half of its business is producing
aggregate materials. Producing aggregate materials involves procuring projects,
selecting a source or “pit,” setting up a portable “crusher” at the source, producing
the aggregate, and testing the aggregate for quality. In addition to producing the
aggregate, Bowes may be responsible for developing and producing the mix design. 1
1. A mix design is a recipe for asphalt or concrete. The composition of asphalt
or concrete varies depending on the quality of the aggregate.
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Bowes has produced aggregate materials for the Department for more than thirty
years.
The Sodium-Sulfate-Soundness Test
[¶3.] The sodium-sulfate-soundness test is used to determine whether
aggregate is suitable for use in asphalt paving projects. The use of aggregate that is
too soft will cause roads to prematurely crack, break, ravel, or fall apart. To
perform the test, one must first wash and dry the aggregate, separate the aggregate
into samples based on gradation, 2 and weigh each aggregate sample. A sodium-
sulfate solution is then prepared. When used, the solution must have a specific
gravity between 1.151 and 1.174, and the temperature must be between sixty-eight
and seventy-two degrees Fahrenheit. 3 The aggregate samples are covered in one-
half inch of the solution for sixteen to eighteen hours. During immersion, the
porous aggregate absorbs the solution. After the immersion period, the aggregate
samples are removed from the solution. The aggregate samples are placed in a
drying oven at 230 degrees Fahrenheit until they achieve constant weight.4 This
entire process is repeated five times. After the fifth cycle, the aggregate samples
2. Only the Department’s sodium-sulfate-soundness testing of the course
aggregate is at issue in this case. Course aggregate consists of rocks one
quarter-inch in diameter or larger.
3. Specific gravity, or relative density, is the ratio of the density of a substance
to the density of a standard reference substance. Specific gravity (physics),
Britannica Online Encyclopedia, www.britannica.com/EBchecked/topic/
558700/specific-gravity, (last visited December 16, 2010). In other words,
specific gravity is a measure of the strength of the solution.
4. Constant weight is achieved when the aggregate sample loses less than 0.1%
of its weight in four hours of drying.
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are washed and weighed. A percent loss is calculated for each aggregate sample.
South Dakota tolerates a fifteen-percent loss rounded to the nearest whole number.
By contrast, some states have sodium-sulfate-soundness-loss limits as low as five
percent. Because the absorbed solution crystallizes during the drying cycle and
expands during the subsequent soaking cycle, the sodium-sulfate-soundness test
measures the durability of the aggregate to freeze and thaw cycles.
[¶4.] Several states utilize the sodium-sulfate-soundness test, but the
testing methods vary by state. The American Society for Testing and Materials
(ASTM) has published a standard test method for the sodium-sulfate-soundness test
known as ASTM C88. SD 220, a modified version of ASTM C88, is the standard
test method used by the Department. The most significant difference between
ASTM C88 and SD 220 is the containers used during the tests. ASTM C88 requires
the use of “baskets made of suitable wire mesh or sieves with suitable openings.”
SD 220, by contrast, requires the use of “pans.”5 The different containers result in
other variations between ASTM C88 and SD 220. According to SD 220, after the
soaking cycle, the sodium-sulfate solution is poured off the aggregate sample, and
the aggregate sample is placed in the drying oven. Because ASTM C88 requires the
use of sieves, it is not necessary to pour off the solution. The sieve containing the
aggregate sample is removed from the solution and allowed to drain before it is
placed in the drying oven.
5. Although the Department uses metal pans to conduct its sodium-sulfate-
soundness tests, several materials-testing laboratories in South Dakota use
glass bowls.
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[¶5.] The Department has performed the sodium-sulfate-soundness test for
decades. Howard Schill was primarily responsible for performing the sodium-
sulfate-soundness test for the Department from 1966 to 1999. He testified that
when the sodium-sulfate solution is poured off the aggregate sample after the
soaking cycle, sodium-sulfate crystals remain in the pan. These crystals liquefy
when the aggregate sample is placed in the drying oven. Because SD 220 requires
the use of pans rather than sieves, this additional liquid does not drain away from
the aggregate sample as it would under ASTM C88. Thus, when Schill began
working for the Department in 1966, he was taught to place the aggregate sample
in the drying oven, allow it to warm, remove it from the drying oven, and pour off
any remaining solution. Schill refers to this additional step as the “double pour” or
“redrain.”
[¶6.] Schill testified that he performed the sodium-sulfate-soundness test
with the double pour during his entire tenure with the Department. In 1996, Schill
helped the Department develop SD 220. At trial, Schill acknowledged that SD 220
does not require that the sodium-sulfate-soundness test be performed with the
double pour. Yet he testified that he intended SD 220’s requirement that “the
sodium-sulfate solution from the pan . . . be poured off” to include the double pour.
In 1999, in order to train his replacement to perform the sodium-sulfate-soundness
test, Schill prepared a procedure sheet, which was posted on the wall of the
Department’s materials-testing laboratory. Although the procedure sheet explained
the several steps necessary to conduct the sodium-sulfate-soundness test, the sheet
did not include the double pour.
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[¶7.] The Department no longer performs the sodium-sulfate-soundness test
with the double pour. For a short period of time after Schill left the Department in
1999, Everett Lawver performed the sodium-sulfate-soundness test. Lawver
testified that he performed the sodium-sulfate-soundness test without the double
pour. The Department subsequently hired Reed Sommers to perform the sodium-
sulfate-soundness test. Schill trained Sommers to perform the sodium-sulfate-
soundness test with the double pour. But Sommers passed away in 2001, and Brian
Hipple replaced him. There is no evidence whether Hipple performed the sodium-
sulfate-soundness test with the double pour. In December 2001, Perry Griffith, who
had no previous experience performing the sodium-sulfate-soundness test, replaced
Hipple. Hipple, not Schill, trained Griffith. Griffith, who was primarily responsible
for performing the sodium-sulfate-soundness test for the Department at all times
relevant to this lawsuit, has consistently performed the test without the double
pour since 2001.
The Highway 37 Project
[¶8.] The Department let bids on an asphalt paving project on Highway 37
in Bon Homme County, South Dakota, in May 2004. Brauer Construction from
Sioux City, Iowa, the successful general contractor on the project, selected Bowes to
produce the aggregate and mix design for the project. The parties’ subcontract
incorporated SD 220 and the South Dakota Quality Control/Quality Assurance
(QC/QA) program. South Dakota implemented the QC/QA program in the 1990s to
build better roads by providing contractors more control and responsibility in the
production of aggregate materials. Under the QC/QA program, a contractor must
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submit a mix design to the Department that will pass the sodium-sulfate-soundness
test as set forth in SD 220. Thus, under the parties’ subcontract, Bowes was
contractually obligated to produce aggregate materials that would pass the
Department’s sodium-sulfate-soundness test as set forth in SD 220, and the
Department was contractually obligated to accept Bowes’ aggregate materials in the
absence of a valid basis to reject them.
[¶9.] Bowes chose the Beeson Pit in Bon Homme County to produce the
aggregate materials for the Highway 37 project. While investigating sources for the
project, Bowes spoke with another company that had done an asphalt project at the
Beeson Pit, but did not contact the Department to inquire about the quality of the
aggregate in that pit. Bowes also ran several preliminary laboratory tests on
aggregate taken from the Beeson Pit, but did not run a sodium-sulfate-soundness
test. Before the Highway 37 project, Bowes had not used the Beeson Pit to produce
aggregate materials.
[¶10.] In September 2004, Brauer obtained a sample of the mix design Bowes
was producing for the Highway 37 project and submitted it to the Department for
testing. The mix design failed the Department’s sodium-sulfate-soundness test. On
January 20, 2005, Bowes submitted a second sample of the mix design to the
Department. On February 1, 2005, the Department notified Bowes that it would
not test the mix design a second time. In a letter dated February 8, 2005, Bowes
argued that the first sample was not representative of the mix design it was
producing. The Department therefore agreed to perform a second sodium-sulfate-
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soundness test. The representative second sample of the mix design failed the
Department’s sodium-sulfate-soundness test with a 15.6 percent loss.
[¶11.] Because Bowes had never before failed a sodium-sulfate-soundness
test, it submitted representative samples of the mix design it was producing for the
Highway 37 project to independent materials-testing laboratories. In December
2004, before the Department agreed to test the mix design a second time, Bowes
sent a sample of the mix design to Maxim Technology. Although Maxim is aware
that SD 220 does not provide for it and that the Department performs the sodium-
sulfate-soundness test without it, Maxim performs the sodium-sulfate-soundness
test with the double pour. The mix design passed Maxim’s sodium-sulfate-
soundness test with a 13.4 percent loss. Bowes also sent a sample of the mix design
to GeoTek Engineering & Testing Services in February 2005. GeoTek ran the
sodium-sulfate-soundness test twice. Because the test results are rounded to the
nearest whole number, the mix design passed both tests with 14.7 percent and 15.3
percent losses. Ultimately, the Department allowed Bowes to proceed on the
Highway 37 project with a mix design containing five-percent Spencer quarry rock. 6
The Highway 50 Project
[¶12.] The Department let bids on an asphalt paving project on Highway 50
in Bon Homme County in January 2005. Like the Highway 37 project, the
Department awarded Brauer the general contract, and Brauer selected Bowes to
6. Spencer quarry rock is very durable to freeze and thaw cycles. It is often
added to mix designs to compensate for lower-quality aggregate with higher
sodium-sulfate-soundness losses.
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produce the aggregate and mix design for the project. Again, the parties’
subcontract incorporated SD 220 and the QC/QA program.
[¶13.] Bowes chose the Beeson Pit to produce the aggregate materials for the
Highway 50 project. Bowes planned to use the mix design it was already producing
for the Highway 37 project on the Highway 50 project. But after Bowes was
awarded the Highway 50 subcontract, it learned that the mix design it was
producing for the Highway 37 project failed the Department’s sodium-sulfate-
soundness test. 7 Highway 50, unlike Highway 37, is a medium-volume-traffic
roadway, thus requiring stricter testing standards. Therefore, if the mix design
Bowes was producing for the Highway 37 project had been submitted to the
Department for the Highway 50 project, it almost certainly would have failed.
Accordingly, Brauer submitted a mix design that contained five-percent Spencer
quarry rock to the Department. In May 2005, that mix design passed the
Department’s sodium-sulfate-soundness test. The Department allowed Bowes to
proceed on the Highway 50 project using the mix design containing five-percent
Spencer quarry rock. Bowes did not fail a sodium-sulfate-soundness test performed
on a mix design it was producing for the Highway 50 project.
The Highway 47 Project
[¶14.] The Department let bids on an asphalt paving project on Highway 47
in Lyman County in March 2005. The Department awarded Commercial Asphalt
7. Bowes did not learn that the representative sample of the mix design it was
producing for the Highway 37 project failed the Department’s sodium-sulfate-
soundness test until February 2005.
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the general contract, and Commercial Asphalt selected Bowes to produce the
aggregate materials for the project. Unlike the Highway 37 and 50 projects, Bowes
was responsible for not only producing the aggregate and mix design, but also
developing the mix design and submitting it to the Department for testing. Again,
the parties’ subcontract incorporated SD 220 and the QC/QA program.
[¶15.] Bowes chose the Lafferty Pit in Lyman County to produce the
aggregate materials for the Highway 47 project. The central part of South Dakota
has lower-quality aggregate with higher sodium-sulfate-soundness losses, and
Bowes had never before used the Lafferty Pit to produce aggregate materials.
Bowes was therefore concerned about the quality of the aggregate in the Lafferty
Pit and contacted the Department for information. The Department provided
information showing passing sodium-sulfate-soundness-test results for aggregate
samples taken from the Lafferty Pit, but Bowes ultimately took its aggregate from a
different part of the pit. Further, Bowes ran several preliminary laboratory tests on
aggregate taken from the Lafferty Pit, but did not run a sodium-sulfate-soundness
test. Bowes did not contact other contractors about the quality of the aggregate in
the Lafferty Pit.
[¶16.] Bowes contracted with Maxim to develop the mix design for the
Highway 47 project. After developing the mix design, Maxim performed a sodium-
sulfate-soundness test on it in July 2005. The mix design passed Maxim’s sodium-
sulfate-soundness test with a 14.9 percent loss. On July 15, 2005, Maxim submitted
the mix design it developed to the Department. Maxim did not, however, send
tensile strength ratio (TSR) data, which is required to properly complete and test a
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mix design. Nonetheless, the Department began its sodium-sulfate-soundness test
on the mix design on July 18, 2005. When the Department contacted Maxim to
inquire about the missing TSR data on July 19, 2005, the Department learned that
Maxim had already run a sodium-sulfate-soundness test on the mix design. On
July 21, 2005, Maxim sent the Department the TSR data and the results of its
sodium-sulfate-soundness test. Although Maxim’s mix design had passed the
sodium-sulfate-soundness test it conducted, Maxim submitted a second mix design
containing five-percent Spencer quarry rock to the Department that day.
[¶17.] On July 22, 2005, the Department began a sodium-sulfate-soundness
test on Maxim’s second mix design. The Department completed its sodium-sulfate-
soundness test on the first mix design on July 28, 2005. That test showed a failing
twenty-one-percent loss. Given the significant sodium-sulfate-soundness loss,
Commercial Asphalt knew that a drastic change to the mix design was necessary.
Before the Department completed the sodium-sulfate-soundness test on the second
mix design, Commercial Asphalt asked the Department to perform a sodium-
sulfate-soundness test on a mix design containing seventeen-percent Spencer
quarry rock. The Department completed its sodium-sulfate-soundness test on the
second mix design on August 2, 2005. With a twenty-percent loss, the second mix
design also failed the Department’s sodium-sulfate-soundness test. Only the mix
design containing seventeen-percent Spencer quarry rock passed the Department’s
sodium-sulfate-soundness test. The Department allowed Bowes to proceed on the
Highway 47 project using the third mix design.
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Procedural History
[¶18.] Bowes initiated this breach of contract against the Department in May
2006. 8 Bowes alleged that its aggregate materials failed the Department’s sodium-
sulfate-soundness test because the Department did not follow SD 220. Bowes
contended that the Department incorrectly performed its sodium-sulfate-soundness
test in three respects: (1) the double pour was not done; (2) the temperature of the
sodium-sulfate solution was too warm; 9 and, (3) the specific gravity of the solution
was too high. See supra ¶ 3. Bowes alleged that the Department therefore rejected
its aggregate materials without a valid basis and breached the subcontracts with
Bowes. After a bench trial, the trial court entered extensive findings of fact and
conclusions of law. The trial court concluded that the Department followed SD 220
and did not breach the subcontracts with Bowes. The trial court thus entered a
judgment in the Department’s favor. Bowes appeals.
ANALYSIS AND DECISION
[¶19.] Whether the trial court erred by concluding that the
Department did not breach the subcontracts with Bowes.
8. Bowes, an approved subcontractor for the asphalt paving projects at issue,
may directly sue the Department for breach of contract under SDCL 31-2-34.
See Fisher Sand & Gravel Co. v. S.D. Dep’t of Transp., 1997 S.D. 8, ¶¶ 9-10,
558 N.W.2d 864, 867; Sweetman Constr. Co. v. S.D. Dep’t of Transp., 293
N.W.2d 457, 461 (S.D. 1980).
9. Although the Department presented evidence that the temperature of its
materials-testing laboratory was within the allowable limits, it presented no
evidence that it monitored the temperature of the sodium-sulfate solution.
Nonetheless, testimony at trial established that if the solution exceeds
seventy-two degrees Fahrenheit, the results of the sodium-sulfate-soundness
test will favor the contractor.
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[¶20.] Bowes argues that the trial court erred by concluding that the
Department did not breach the subcontracts with Bowes. Although Bowes argued
at trial that the Department incorrectly performed the sodium-sulfate-soundness
test in three respects, the primary issue in this appeal is the double pour. Bowes
concedes that SD 220, which is incorporated into the parties’ subcontracts, does not
require that the sodium-sulfate-soundness test be performed with the double pour.
But Bowes claims that SD 220 is ambiguous and should be supplemented or
explained by oral testimony of the South Dakota materials-testing industry’s usage
of trade to perform the sodium-sulfate-soundness test with the double pour. Bowes
therefore alleges that the Department breached the subcontracts by rejecting its
aggregate materials on the basis of a sodium-sulfate-soundness test performed
without the double pour. The Department, on the other hand, contends that SD 220
is not ambiguous.
[¶21.] The trial court found that Bowes failed to establish it suffered damages
caused by the breach it alleges. The elements of a breach of contract are (1) an
enforceable promise; (2) a breach of the promise; and, (3) resulting damages.
Guthmiller v. Deloitte & Touche, L.L.P., 2005 S.D. 77, ¶ 14, 699 N.W.2d 493, 498
(citing McKie v. Huntley, 2000 S.D. 160, ¶ 17, 620 N.W.2d 599, 603; Krzycki v.
Genoa Nat’l Bank, 242 Neb. 819, 496 N.W.2d 916, 923 (1993)). If the trial court
properly found that Bowes failed to establish it suffered damages caused by the
breach it alleges, we need not decide whether SD 220 is ambiguous thus allowing
oral testimony to explain or supplement its written terms. We therefore address
the causation of damages issue first.
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[¶22.] Bowes presented testimony at trial on its hypothesis that its
aggregate materials failed the Department’s sodium-sulfate-soundness test because
the Department performed the test without the double pour. Bowes argued that
excess sodium-sulfate solution remains in the pan during the drying cycle if the
double pour is not performed. And although the water in the solution evaporates
during the drying cycle, sodium-sulfate crystals remain in the pan. These
remaining crystals raise the specific gravity of the solution in the next soaking
cycle. The solution is thus stronger in the subsequent soaking cycle. The stronger
solution causes more crystallization on the aggregate and more sodium-sulfate-
soundness loss. Accordingly, Bowes maintains that if the double pour is not
performed, the results of the sodium-sulfate-soundness test will be artificially high.
Bowes asserts that the fact that its mix designs passed the sodium-sulfate-
soundness tests performed with the double pour by independent materials-testing
laboratories supports its hypothesis.
[¶23.] The Department, by contrast, presented evidence at trial that
performing the sodium-sulfate-soundness test without the double pour does not
materially affect the test results. Upon having its sodium-sulfate-soundness test
results questioned, the Department ran several sodium-sulfate-soundness tests on
the mix design Bowes produced for the Highway 47 project. The Department first
ran a series of tests to determine if the specific gravity of the sodium-sulfate
solution increased after each soaking cycle. The tests showed that the specific
gravity was within tolerance. The Department also ran two tests with sieves, three
tests with the double pour, and one test without the double pour. The results of all
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six tests were within close parameters. In fact, the sodium-sulfate-soundness test
run without the double pour had the lowest loss percentage. Finally, the
Department sent samples of the mix design Bowes produced for the Highway 47
project to materials-testing laboratories in Wisconsin and Wyoming. The sodium-
sulfate-soundness tests performed by those laboratories had higher sodium-sulfate-
soundness losses than the Department’s tests.
[¶24.] The trial court carefully considered and weighed all the evidence and
testimony presented on the causation of damages issue. Ultimately, the trial court
found that Bowes failed to establish that its aggregate materials failed the
Department’s sodium-sulfate-soundness test because the Department performed the
test without the double pour. The trial court was in the best position to weigh the
conflicting evidence, and we will not disturb the trial court’s factual findings unless
they are clearly erroneous. See Geraets v. Halter, 1999 S.D. 11, ¶¶ 12, 18, 588
N.W.2d 231, 233-34 (citations omitted). The record contains sufficient evidence to
support the trial court’s findings and conclusion that Bowes failed to establish it
suffered damages caused by the breach it alleges. We therefore need not further
address whether the Department breached the subcontracts with Bowes or
breached a duty of good faith and fair dealing. With no proof of causation of
damages, Bowes cannot prevail under any of the theories of recovery it has
presented.
[¶25.] Affirmed.
[¶26.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER and
MEIERHENRY, Justices, concur.
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