No. 12983
IN THE SUPREME COURT OF THE STATE OF M N A A
OTN
197 6
ZOOK BROTHERS CONSTRUCTION COMPANY,
P l a i n t i f f and A p p e l l a n t ,
-vs -
THE STATE OF MONTANA,
Defendant and Respondent.
Appeal from: D i s t r i c t Court o f t h e F i r s t J u d i c i a l D i s t r i c t ,
Honorable P e t e r Meloy, Judge p r e s i d i n g .
Counsel o f Record:
For Appellant :
Gough, Booth, Shanahan and Johnson, Helena, Montana
Ronald Waterman a r g u e d , Helena, Montana
P a t r i c k S u l l i v a n a r g u e d , Spokane, Washington
F o r Respondent :
Donald Douglas a p p e a r e d , Helena, Montana
Cannon and G a r r i t y , Helena, Montgna
Donald G a r r i t y a r g u e d , Helena, Montana
S u b m i t t e d : J u n e 3, 1976
Decided :
- 25 pr
7
fl\JG 2 k, **',-'?
Filed:
M r . J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion of t h e Court.
P l a i n t i f f a p p e a l s from a judgment of t h e d i s t r i c t c o u r t ,
Lewis and Clark County.
Zook B r o t h e r s Construction Company (Zook) and t h e Montana
Department of Highways ( S t a t e ) e n t e r e d i n t o a c o n t r a c t i n June
1967, whereby Zook agreed t o c o n s t r u c t a segment of highway
r e f e r r e d t o a s t h e "Montana C i t y P r o j e c t 1 ' , a 6.083 segment of
i n t e r s t a t e and secondary highway i n J e f f e r s o n County, s o u t h of
Helena, Montana. The c o n t r a c t allowed 300 days f o r completion
of t h e p r o j e c t and involved a $3,000,000 c o n t r a c t between t h e
parties.
The i n s t a n t c a s e i n v o l v e s Zook's c l a i m f o r damages a l l e g e d l y
caused by t h e S t a t e ' s f a i l u r e t o inform Zook t h e S t a t e lacked r i g h t -
of-way a c c e s s t o p o r t i o n s of t h e p r o j e c t , which i s claimed t o have
caused a d e l a y i n scheduled o p e r a t i o n s and e s c a l a t e d c o s t s of com-
pletion. Zook contends 1 ) i t i s e n t i t l e d t o damages f o r c o s t s
i n c u r r e d i n completion of t h e p r o j e c t , 2) f o r t h e c o s t of "standby"
on equipment it was unable t o u t i l i z e due t o unforeseen d e l a y s ,
and 3) f o r p r o f i t s a l l e g e d l y l o s t on t h i s p r o j e c t and subsequent
p r o j e c t s due t o t h e d e l a y s and t i e u p of a s s e t s .
The d e l a y s r e l i e d upon by Zook a s a b a s i s f o r i t s c l a i m were
occasioned ( a ) by Montana Power Company's problem i n o b t a i n i n g a
right-of-way f o r r e l o c a t i o n of a u t i l i t y l i n e , and ( b ) b y t h e
i n a b i l i t y of t h e S t a t e t o o b t a i n right-of-way a c r o s s v a r i o u s mining
claims through t h e p r o j e c t .
(a) The u t i l i t y d e l a y .
The S t a t e , a f t e r planning t h e g e n e r a l l o c a t i o n of t h e
highway t o be c o n s t r u c t e d , took s t e p s t o s e c u r e a right-of-way
and t o remove e x i s t i n g u t i l i t i e s from t h e a r e a . The Montana
Power Company was c o n t a c t e d regarding t h e r e l o c a t i o n of an
e l e c t r i c a l transmission l i n e . A r e l o c a t i o n c o n t r a c t w i t h Montana
Power was approved by t h e S t a t e on June 27, 1967 and contained
a p r o v i s i o n t h a t a l l u t i l i t y moves were expected t o be completed
by August 31, 1967. Relocation of t h e power l i n e was c r i t i c a l
t o Zook's schedule f o r c o n s t r u c t i o n , i n t h a t t h e l i n e had t o be
removed p r i o r t o c o n s t r u c t i o n of a f r o n t a g e road upon which Zook
had planned t o d i v e r t t r a f f i c t o complete t h e main highway c o n s t r u c -
tion. The power l i n e was n o t r e l o c a t e d u n t i l A p r i l 1968.
(b) The mining c l a i m d e l a y .
The S t a t e encountered problems i n o b t a i n i n g t h e right-of-way
through v a r i o u s mining claims w i t h i n t h e work a r e a . Zook was ad-
v i s e d t o begin c o n s t r u c t i o n on J u l y 17, 1967, although t h e S t a t e
was aware t h e r e were v a r i o u s problems o b t a i n i n g right-of-way
through t h e mining claims. A t a p r e c o n s t r u c t i o n conference h e l d be-
tween t h e S t a t e r e p r e s e n t a t i v e s and Zook personnel on J u l y 19, 1967,
Zook advised t h e S t a t e of i t s schedule f o r completion of t h e v a r i o u s
phases of t h e p r o j e c t . The S t a t e d i s c u s s e d such d i v e r s e problems
a s s a f e t y and t h e p r o t e c t i o n of w i l d l i f e h a b i t a t . The S t a t e d i d
n o t a d v i s e Zook personnel of t h e right-of-way d i f f i c u l t i e s i t was
encountering.
Upon r e c e i p t of t h e S t a t e ' s o r d e r t o proceed on J u l y 17,
1967, Zook began t o mobilize a l l of t h e n e c e s s a r y equipment f o r
completion of t h e p r o j e c t according t o t h e agreed schedule. However,
on J u l y 27, 1967, t h e S t a t e i s s u e d a suspension o r d e r t o Zook
which prevented Zook from proceeding w i t h c o n s t r u c t i o n i n t h e
a r e a of t h e mining claims during n e g o t i a t i o n f o r and t e s t i n g of
these claims. Zook's schedule c a l l e d f o r completion of "Frontage
Road No.4" by September 15, 1967, and d i v e r s i o n of t r a f f i c from
t h e e x i s t i n g route t o u t i l i z e sophisticated b l a s t i n g techniques,
which were i n t e n d e d t o reduce g r e a t q u a n t i t i e s of r o c k t o a s i z e
t h a t would a l l o w e x c a v a t i o n w i t h s e l f - l o a d i n g " s c r a p e r s " of l a r g e
rock c u t s . Zook a l s o planned t o use l a r g e q u a n t i t i e s of t h e
excavated r o c k and m a t e r i a l a s f i l l i n t h e a r e a involved i n t h e
mining c l a i m s t o p o r d e r . However, because of t h e S t a t e ' s f a i l u r e t o
o b t a i n t h e n e c e s s a r y right-of-way, Zook was f o r c e d t o abandon i t s
p l a n of t r a f f i c d i v e r s i o n and v a r i o u s f i l l and e x c a v a t i o n r e q u i r e -
ments were delayed s e v e r a l weeks.
R e s t r i c t i o n s on work i n t h e v i c i n i t y of t h e mining c l a i m s
were l i f t e d on September 2 2 , 1967; t h e power p o l e s were removed by
October 1 7 , 1967; Frontage Road No. 4 was t h e n a v a i l a b l e f o r
c o n s t r u c t i o n work.
On September 6 , 1967, Zook p e r s o n n e l informed t h e S t a t e by
l e t t e r t h a t t h e u t i l i t y p o l e problem and theI1mining c l a i m s d e l a y
has r e a l l y f o u l e d up o u r s c h e d u l e f o r completion of t h i s project
and f e e l we should be g i v e n f u l l c o n s i d e r a t i o n f o r t h e s e d e l a y s . "
On November 12, 1968, Zook submitted a c l a i m f o r damages
r e s u l t i n g from t h e d e l a y s which i t claimed caused t h e 116 day
over-run on t h e scheduled completion d a t e . T h i s c l a i m was r e j e c t e d
by t h e S t a t e . On March 24, 1972 Zook f i l e d a "complete Documentation"
[ ~ o o k ' sd e s c r i p t i o n ] of i t s c l a i m f o r an amount f a r i n e x c e s s of
i t s o r i g i n a l claim. Following t h e submission of t h i s c l a i m ,
t h e S t a t e undertook an a u d i t of t h e Zook r e c o r d s f o r t h e purpose
of e v a l u a t i o n of t h a t p o r t i o n of t h e c l a i m r e l a t i n g t o equipment
standby c o s t s . Zook's c l a i m was o r a l l y denied by t h e D i r e c t o r
of t h e S t a t e Highway Commission a f t e r s e v e r a l meetings between t h e
p a r t i e s t o discuss t h a t claim.
- 4 -
Zook brought s u i t i n t h e d i s t r i c t c o u r t t o r e c o v e r t h e
amount claimed, based on t h e s t a t e ' s a l l e g e d b r e a c h i n f a i l i n g t o
s e c u r e t h e right-of-way. After a lengthy t r i a l the d i s t r i c t court
determined:
"The S t a t e of Montana m a t e r i a l l y breached i t s c o n t r a c t
w i t h Zook and t h e damages which Zook s u f f e r e d t h e r e b y were
a d i r e c t and proximate r e s u l t of such breach."
Zook was awarded a t o t a l of $140,917 i n damages, c o n s i s t i n g of
$125,000 f o r maintenance of equipment i n standby s t a t u s , and
$15,917 a s a d d i t i o n a l expense f o r t r a f f i c c o n t r o l c o s t s i n c u r r e d
due t o i t s i n a b i l i t y t o complete Frontage Road No. 4 .
Zook a p p e a l s c l a i m i n g i t i s e n t i t l e d t o damages fa.r i n
e x c e s s of t h o s e g r a n t e d by t h e d i s t r i c t c o u r t . The S t a t e c r o s s -
a p p e a l s on t h e b a s i s Zook's c l a i m i s b a r r e d by t h e s p e c i a l s t a t u t e
of l i m i t a t i o n s p r e s c r i b e d by s e c t i o n 83-602, R.C.M. 1947, and
by t h e terms of t h e c o n t r a c t and t h e judgment of t h e d i s t r i c t c o u r t
t h a t a b r e a c h had o c c u r r e d i s n o t supported by t h e evidence. Hearing
was had on March 5 , 1976 b e f o r e t h i s C o u r t , and on March 2 5 , 1976,
t h e Court o r d e r e d a d d i t i o n a l b r i e f s and argument l i m i t e d t o :
1. Causal connection between b r e a c h and damages.
2. Equipment standby c o s t s .
3. Traffic control costs.
4. Administrative c o s t s .
Arguments h e a r d on June 3 , 1976 were r e s t r i c t e d t o a d i s c u s s i o n
of t h e f o u r items enumerated.
The S t a t e contends t h e c l a i m o f Zook i s b a r r e d by t h e
p r o v i s i o n s of s e c t i o n 83-602, R.C.M. 1947, which p r o v i d e s i n p e r -
tinent part:
"Whenever any c o n t r a c t i n g agency of t h e s t a t e of
Montana provides a procedure f o r t h e s e t t l e m e n t
of any q u e s t i o n o r d i s p u t e a r i s i n g between t h e con-
t r a c t o r and s a i d agency, t h e c o n t r a c t o r , b e f o r e
proceeding t o b r i n g an a c t i o n i n c o u r t under
p r o v i s i o n of t h i s a c t , must r e s o r t t o such
procedure w i t h i n t h e time s p e c i f i e d i n h i s
c o n t r a c t o r , i f no time i s s p e c i f i e d , w i t h i n
n i n e t y (90) days a f t e r t h e q u e s t i o n o r d i s p u t e
has a r i s e n ** *.I'
The c o n t r a c t between t h e p a r t i e s c o n t a i n s a p r o v i s i o n r e q u i r i n g :
" I n c a s e any claim o r d i s p u t e a r i s e s between t h e
p a r t i e s h e r e t o , r e s p e c t i n g any m a t t e r p e r t a i n i n g
t o t h i s agreement *** said claim o r dispute s h a l l
be r e f e r r e d t o t h e Commission by t h e c o n t r a c t o r i n
w r i t i n g , and a r e q u e s t f o r a h e a r i n g w i t h i n a p e r i o d
of s i x t y (60) days a f t e r t h e claim o r d i s p u t e h a s
arisen ** *.If
The S t a t e argues Zook's cause of a c t i o n , i f any, a r o s e a s
of t h e J u l y 27, 1967 o r d e r from t h e D i r e c t o r t o s t o p work i n t h e
a r e a of t h e mining c l a i m s . The S t a t e urges t h e c o n t r a c t l i m i t s t h e
time f o r f i l i n g of a c l a i m t o w i t h i n t h e 60 day p e r i o d following
t h e d a t e of t h e d e l a y . It claims t h e September 6 , 1967 l e t t e r
from Zook's g e n e r a l manager f a i l s t o s t a t e a c l a i m i n t h a t i t does
not contain demand f o r a d d i t i o n a l compensation, n o r does
e x p r e s s an i n t e n t i o n t o submit such a c l a i m a t any 1 a . t e r d a t e .
I t a l s o n o t e s t h e l e t t e r does n o t d i r e c t i t s e l f t o t h e Commission.
These a l l e g e d f a c t s a r e urged a s grounds f o r f i n d i n g t h a t Zook
time
f a i l e d t o p r e s e n t a c l a i m w i t h i n the/provided, i . e . 60 days.
This Court i s i n agreement w i t h t h e d i s t r i c t c o u r t ' s conclu-
sion t h a t these contentions a r e t o t a l l y without merit. The claim
i s n e i t h e r b a r r e d on s t a t u t o r y nor c o n t r a c t u a l grounds. The l e t t e r
from Zook was addressed t o a M r . Richard B . Dundas, D i s t r i c t En-
g i n e e r , S t a t e Highway Commission, and was s e n t approximately 40
days a f t e r t h e work stoppage o r d e r was promulgated. Zook's l e t t e r
c l e a r l y expressed t h e c o n t r a c t o r ' s concern regarding t h e e f f e c t
of t h e d e l a y s on t h e o v e r - a l l p r o j e c t .
'i. A
T h e r e a f t e r t h e S t a t e considered t h e m a t t e r , a u d i t e d Zook's
r e c o r d s r e g a r d i n g i t s c l a i m f o r standby expenses and h e l d s e v e r a l
h e a r i n g s , a t Zook's r e q u e s t , regarding t h e v a r i e d claims of Zook.
To d a t e , Zook h a s r e c e i v e d o n l y an o r a l d e n i a l of i t s claims on
February 26, 1973, by t h e D i r e c t o r of t h e S t a t e Highway Department.
L i t i g a t i o n was commenced A p r i l 20, 1973 and i s c l e a r l y n o t b a r r e d
by t h e c o n t r a c t u a l l i m i t a t i o n s nor t h e s t a t u t o r y l i m i t a t i o n s . The
l o g i c a l r u l e , and t h e r u l e adopted i n o t h e r j u r i s d i c t i o n s , i s t h a t
a c l a i m o r d i s p u t e ARISES a t t h e time t h e S t a t e submits a f i n a l
e s t i m a t e t o t h e c o n t r a c t o r f o r h i s approval o r r e j e c t i o n . Terry
C o n t r a c t i n g , I n c . v. S t a t e of New York, 280 N.Y.S.2d 450 (1967);
Waterman v. S t a t e of New York, 241 N.Y.S.2d 314 (1963). To d a t e ,
no such f i n a l e s t i m a t e has e v e r been submitted t o Zook by t h e S t a t e .
The S t a t e ' s r e l i a n c e on s t a t u t o r y o r c o n t r a c t u a l l i m i t a t i o n s
i s a l s o without m e r i t f o r t h e reason t h e S t a t e , through i t s own
a c t i o n s , l e d Zook t o b e l i e v e t h a t i t s claim would r e c e i v e t i m e l y
a t t e n t i o n and would be reviewed by t h e S t a t e pending an adminis-
t r a t i v e d e c i s i o n on i t s m e r i t s . Zook r e l i e d upon t h e a s s u r a n c e s
i n t h e S t a t e ' s l e t t e r d a t e d September 12, 1967, t h a t t h e S t a t e
would g i v e f u l l c o n s i d e r a t i o n t o a l l f a c t o r s r e l a t i v e t o t h e S t a t e ' s
f a i l u r e t o o b t a i n right-of-way. Clearly, the S t a t e i s foreclosed
from r a i s i n g a s t a t u t e of l i m i t a t i o n s defense given t h e above f a c t s .
The S t a t e a l s o u r g e s t h e r e was i n s u f f i c i e n t evidence i n
t h e r e c o r d of t h e d i s t r i c t c o u r t t o support a f i n d i n g t h e r e was a
breach of c o n t r a c t upon which t o base an award of damages t o t h e
c o n t r a c t o r , Zook. This Court, i n detemining a s i m i l a r d i s p u t e , h e l d
t h e f a i l u r e t o o b t a i n highway right-of-way i s a m a t e r i a l breach o f
c o n t r a c t which, i f i t d e l a y s a c o n t r a c t o r , w i l l s u s t a i n an award of
damages. Laas v. Montana Highway Comm'n, 157 Mont. 121, 125, 132,483
P.2d 699 (1971).
The Standard S p e c i f i c a t i o n s p o r t i o n of t h e c o n t r a c t e n t e r e d
i n t o h e r e provides i n p a r t :
"07.17 FURNISHING RIGHT-OF-WAY. A l l right-of-way
f o r t h e roadway s h a l l be provided by t h e Commission
w i t h o u t c o s t t o t h e c o n t r a c t o r . A l l right-of-way may
n o t have been obtained a t t h e time when t h e b i d s a r e
opened and t h e proposal c o n s i d e r e d , and i n t h a t c a s e t h e
award w i l l n o t be made u n t i l t h e e n t i r e right-of-way h a s
been o b t a i n e d . The 'submission of a b i d w i l l be c o n s t r u e d
a s an acceptance of t h i s c o n d i t i o n by t h e b i d d e r , and no
c l a i m f o r damage o r l o s s of unavoidable d e l a y i n s e c u r i n g
right-of-way w i l l be considered by t h e Commission. I f
t h e c o n t r a c t i s m a t e r i a l l y delayed because of right-of-way
d i f f i c u l t i e s , due c o n s i d e r a t i o n w i l l be given by t h e
Commission i n extending t h e c o n t r a c t time t o make proper
allowances t h e r e f o r . " (Emphasis s u p p l i e d . )
The c o n t r a c t between Zook and t h e S t a t e was signed n e a r l y f o u r
months p r i o r t o t h e S t a t e ' s o b t a i n i n g of t h e right-of-way i n t h e
a r e a of t h e mining claims. Considering s i m i l a r evidence a s e s t a b l i s h -
ing a breach of c o n t r a c t , t h i s Court noted i n Laas: -
"There i s l i t t l e q u e s t i o n b u t t h a t t h e r e was a breach
of c o n t r a c t by t h e S t a t e i n f a i l i n g t o s e c u r e t h e
right-of-way a c r o s s t h e Emery p r o p e r t y . *** The
s t a n d a r d s p e c i f i c a t i o n s , one of t h e c o n t r a c t i n g docu-
ments, s p e c i f i c a l l y provided t h a t t h e S t a t e would
provide a l l of t h e right-of-way f o r t h e roadway w i t h o u t
c o s t t o t h e c o n t r a c t o r . The same document f u r t h e r
provided t h a t i f t h e right-of-way had n o t been o b t a i n e d
a t t h e time when t h e b i d s were opened, t h e award would
n o t be made u n t i l t h e e n t i r e right-of-way had been o b t a i n e d .
C l e a r l y , t h e p l a i n t i f f had a r i g h t t o assume, when he
r e c e i v e d t h e award and t h e o r d e r t o proceed, t h a t t h e
right-of-way had been o b t a i n e d , o r would be obtained
w i t h o u t d e t r i m e n t t o him.
"The s t a n d a r d s p e c i f i c a t i o n s t a k e i n t o account t h a t t h e r e
may be d e l a y between t h e time t h e b i d s a r e opened and t h e
award i s .made because of unavoidable d i f f i c u l t i e s i n
s e c u r i n g t h e right-of-way, and f u r t h e r provide t h a t no
c l a i m f o r damages o r l o s s of a n t i c i p a t e d p r o f i t s on t h a t
account may be made. But, no p r o v i s i o n i s made f o r d e l a y
i n s e c u r i n g right-of-way a f t e r t h e award has been made and
t h e o r d e r t o proceed given. The s t a n d a r d s p e c i f i c a t i o n s
f u r t h e r provide t h a t i f t h e c o n t r a c t i s m a t e r i a l l y delayed
because of right-of-way d i f f i c u l t i e s , due c o n s i d e r a t i o n w i l l
be g i v e n by t h e S t a t e i n extending t h e c o n t r a c t t i m e t o make
proper allowance t h e r e f o r . T h i s may a s s i s t t h e c o n t r a c t o r
i n avoiding t h e p e n a l t y c l a u s e , b u t i t i s a f a r c r y from
compensating him f o r i d l e d men and equipment because of
d e l a y brought about by t h e f a i l u r e of t h e S t a t e t o
s e c u r e t h e right-of-way b e f o r e awarding t h e c o n t r a c t ,
."
o r i n r e a s o n a b l e time t h e r e a f t e r
The d i s t r i c t c o u r t determined i n i t s c o n c l u s i o n s of law
t h a t "The S t a t e of Montana m a t e r i a l l y breached i t s c o n t r a c t w i t h
Zook and t h e damages which Zook s u f f e r e d t h e r e b y were a d i r e c t
and proximate r e s u l t of such breach." It i s c l e a r t h e record
s u p p o r t s such a c o n c l u s i o n and i t w i l l n o t be s e t a s i d e by t h i s
Court. Zook a c t e d i n r e l i a n c e upon t h e S t a t e ' s i m p l i c i t r e p r e -
s e n t a t i o n t h e right-of-way had been o b t a i n e d and s u f f e r e d g r e a t
I
expense a s a r e s u l t .
The r e c o r d i n d i c a t e s t h a t Zook assembled ample equipment
t o complete t h i s p r o j e c t i n t h e time i n t e n d e d . Testimony from
Zook's and t h e S t a t e ' s w i t n e s s e s was p r e s e n t e d t o t h e e f f e c t t h a t
Zook was a competent and e f f i c i e n t highway c o n t r a c t o r and t h i s
p r o j e c t was performed a s e f f i c i e n t l y a s p o s s i b l e , under t h e c i r -
cumstances. Zook proceeded w i t h g r a d i n g a c t i v i t i e s even though
f o r e c l o s e d from o p e r a t i o n i n two c r i t i c a l a r e a s , Frontage Road No. 4
and t h e r a i l r o a d o v e r p a s s . Zook a l s o worked a s much a s p o s s i b l e
d u r i n g t h e w i n t e r shutdown a s allowed by t h e c o n t r a c t , and t h e r e b y
made some u s e of t h e equipment h e l d on t h e p r o j e c t f o r completion
i n the spring. Thus, Zook made e v e r y r e a s o n a b l e a t t e m p t t o m i t i g a t e
i t s damages under t h e S t a t e ' s breach.
Having determined t h e S t a t e ' s f a i l u r e t o t i m e l y r e l o c a t e
t h e u t i l i t y l i n e s and o b t a i n right-of-way through t h e mining c l a i m s
was a b r e a c h of c o n t r a c t t h a t materially damaged Zook, t h e
q u e s t i o n now becomes t h e p r o p e r measure of t h o s e damages. Section
17-301, R.C.M. 1947, p r o v i d e s :
"For t h e breach of an o b l i g a t i o n a r i s i n g from
c o n t r a c t , t h e measure of damages, except where
otherwise e x p r e s s l y provided by t h i s code, i s
t h e amount which w i l l compensate t h e p a r t y aggrieved
f o r a l l detriment proximately caused thereby, o r
which, i n t h e o r d i n a r y course of t h i n g s , would be
l i k e l y t o r e s u l t therefrom."
For damages t o be r e c o v e r a b l e under s e c t i o n 17-301, t h e y
must "have been w i t h i n t h e contemplation of t h e p a r t i e s when
they e n t e r e d i n t o t h e c o n t r a c t , and such a s might n a t u r a l l y be
expected t o r e s u l t from i t s v i o l a t i o n . " Myers v. Bender, 46
Mont. 497, 508, 129 P. 330.
O a p p e a l , Zook seeks compensation f o r t h r e e s e p a r a t e
n
a r e a s of damage: 1 ) i n c r e a s e d c o s t s of performing t h e c o n t r a c t ;
2) standby c o s t s f o r i d l e d equipment; and 3) l o s t p r o f i t s . These
c o n s t i t u t e t h e proper measure of damages under t h e f a c t s . The
c o n t r a c t was l e t f o r almost $3,000,000. I t involved complete c o n s t r u c -
t i o n of over s i x m i l e s of i n t e r s t a t e highway. A t one time o r
a n o t h e r , Zook had approximately $3,000,000 worth of equipment on
t h e job. It i s c l e a r t h e l o s s e s claimed by Zook were f o r e s e e a b l e
and would n a t u r a l l y flow from a s u b s t a n t i a l d e l a y i n performance
of t h e c o n t r a c t . The d e l a y t h a t d i d occur was caused by t h e S t a t e ,
t h e r e f o r e t h e s e l o s s e s a r e p r o p e r l y compensable under s e c t i o n 17-301,
R.C.M. 1947.
1) To e s t a b l i s h i t s claim f o r i n c r e a s e d performance c o s t s ,
Zook u t i l i z e d t h e a c t u a l b u s i n e s s r e c o r d s maintained d u r i n g i t s
work on t h e Montana C i t y P r o j e c t . These r e c o r d s were introduced
and admitted without o b j e c t i o n during t r i a l . Zook's r e c o r d s con-
t a i n e d a c t u a l c o s t s c o n s i s t e n t w i t h t h e pay items w i t h i n t h e S t a t e ' s
contract. Zook l i m i t e d i t s cla.im t o n i n e c r i t i c a l items of highway
c o n s t r u c t i o n c o s t s t h a t were i n f l u e n c e d by t h e S t a . t e ls breach.
Zook's r e c o r d s show i t c o s t Zook $1,440,483 i n s t r a i g h t f i e l d c o s t s
t o perform t h e work. I t a l s o i n c u r r e d i n d i r e c t job c o s t s of
$166,088 and a g e n e r a l a d m i n i s t r a t i v e expense of $158,408.
Payments by t h e S t a t e f o r t h e s e s e v e r a l items t o t a l e d $1,146,293.42,
r e s u l t i n g i n Zook's l o s s of $618,685.58 on i t s performance of t h e
contract.
Zook introduced s e v e r a l a l t e r n a t i v e methods of determining
i t s loss. One method c o n s i s t e d of an a u d i t of c o s t s and revenues
f o r t h e e n t i r e job i n c l u d i n g equipment ownership expense. Under
t h i s method, Zook s u f f e r e d a l o s s of $652,542,85. Another method
c a l c u l a t e d t h e reasonable c o s t of performing t h e c o n t r a c t and
compared it t o t h e S t a t e payments. Escalated c o s t s i n e i g h t areas
of job performance were compared a g a i n s t S t a t e revenues. The
r e s u l t showed a l o s s t o Zook of $663,026.66.
Methods of computing t h e amount of damages may v a r y from
case t o case. Under t h e f a c t s of t h i s c a s e , t h e Court b e l i e v e s
t h e r e s u l t d e r i v e d from Zook's a c t u a l c o s t r e c o r d s i s t h e b e s t
evidence of Zook's a c t u a l l o s s . W mention t h e o t h e r methods and
e
t h e l o s s e s they show only t o r e i n f o r c e t h e d e t e r m i n a t i o n t h a t t h e
l o s s shown by Zook's a c t u a l c o s t r e c o r d s i s reasonably c e r t a i n and
accurate.
2) Zook claims damages of $613,387 f o r equipment standby.
The c l a i m i s based on a l i s t of approximately 100 p i e c e s of equip-
ment i d l e d because o f t h e S t a t e ' s breach. Standby time was computed
by examining Zook's b u s i n e s s r e c o r d s t o determine t h e a c t u a l oper-
a t i n g and r e p a i r hours f o r each p i e c e of equipment i n each week of
a 10 month p e r i o d running from August 1967 t o May 1968. These
hours were s u b t r a c t e d from a base of 40 hours p e r week. The
d i f f e r e n c e was standby.
T h i s method of computing standby time was n e c e s s a r y s i n c e
n e i t h e r Zook nor t h e S t a t e maintained standby r e c o r d s during t h e
Montana C i t y P r o j e c t . I n t h e absence of such r e c o r d s , t h e use
of a 40 hour week a s t h e measure of standby time was r e a s o n a b l e
under t h e circumstances. Zook planned t o schedule 2 10-hour work
shifts 6 days a week o r a t l e a s t 2 8-hour s h i f t s 5 days a week.
T h i s , t h e evidence shows, i s common p r a c t i c e i n t h e c o n s t r u c t i o n
industry. Compared t o t h e a n t i c i p a t e d o p e r a t i n g hours of 80
t o 120 hours p e r week, 40 hours i s n o t an a r b i t r a r y g u i d e l i n e .
To e s t a b l i s h t h e c o s t of t h e standby time, Zook used 50
p e r c e n t of t h e h o u r l y r e n t a l r a t e s promulgated by t h e Montana
Highway Department and approved by t h e S t a t e Highway Commission.
There was testimony i n t h e r e c o r d s t a t i n g t h e s e r a t e s were r e a s o n a b l e
and below p r e v a l e n t r e n t a l r a t e s a t tha.t time. During t r i a l ,
counsel f o r t h e S t a t e r e p r e s e n t e d t h a t i t could n o t f i n d c e r t a i n
p i e c e s of equipment shown on Zook's r e c o r d s a s working on t h e
Montana C i t y P r o j e c t . Zook d e l e t e d and e l i m i n a t e d standby claims
f o r s e v e r a l i t e m s , reducing t h e damages claimed by some $66,000.
Zook's c l a i m f o r equipment standby c o s t s of $613,387 i s reasonable
and amply supported by t h e r e c o r d .
3) Z o o k , f i n a l l y , a s k s f o r an award of l o s t p r o f i t s on t h e
c o n t r a c t i n t h e amount of $88,249. T h i s amount i s e q u i v a l e n t t o
t h e 5 p e r c e n t p r o f i t Zook a n t i c i p a t e d when i t b i d on t h e job. The
r u l e i n Montana a s s t a t e d by t h i s Court i n Cruse v. Clawson, 137
Mont. 439, 448, 352 P.2d 989, and c i t e d i n -9Laas i s t h a t a party:
"* * J may r e c o v e r f o r l o s s of p r o f i t s where i t i s
;
shown t h a t such l o s s i s t h e n a t u r a l and d i r e c t r e s u l t
of t h e a c t of t h e defendant complained of and t h a t such
amount i s c e r t a i n and n o t s p e c u l a t i v e . "
The r e c o r d i s r e p l e t e w i t h testimony t h a t Zook w a s a
competent and e f f i c i e n t highway c o n t r a c t o r and t h a t i t performed
t h e p r o j e c t a s e f f i c i e n t l y a s p o s s i b l e under t h e circumstances.
Highway c o n s t r u c t i o n i s a hazardous p u r s u i t w i t h no g u a r a n t e e
t h a t a p r o f i t w i l l b e r e a l i z e d on any p a r t i c u l a r job. Under
t h e f a c t s of t h i s c a s e , however, we a r e convinced Zook should r e c o v e r
i t s anticipated profit. The d e l a y s , caused by t h e S t a t e , g r e a t l y
increased operating costs. They s e r i o u s l y d i s r u p t e d Zook's
schedule and moved t h e p r o j e c t i n t o h i g h e r wage p e r i o d s and bad
weather. The evidence showed Zook had t h e necessary equipment
and e x p e r t i s e t o perform t h e c o n t r a c t i n a workmanlike manner
were i t n o t f o r t h e S t a t e ' s breach. Under t h e s e f a c t s , Zook
should r e c e i v e t h e b e n e f i t of i t s b a r g a i n .
Zook a l s o a l l e g e s t h a t i t s l o s s e s on t h e Montana C i t y
P r o j e c t forced i t t o s e l l much of i t s equipment, t h u s d e c r e a s i n g
i t s p r o f i t s f o r s e v e r a l subsequent y e a r s . W concur w i t h t h e
e
d i s t r i c t c o u r t t h a t t h e evidence a s t o t h e s e a l l e g e d l o s s e s i s vague
and s p e c u l a t i v e . W f i n d no b a s i s i n t h e r e c o r d f o r an award of
e
damages f o r l o s s of f u t u r e p r o f i t s .
T h i s Court i n Spackman v . Ralph M. Parsons, Co., 147 Mont.
500, 509, 414 P. 2d 918 (1966), s a i d t h e v e r d i c t of t h e t r i a l c o u r t
w i l l be s e t a s i d e i f :
** i t can be shown w i t h r e a s o n a b l e c o n v i c t i o n
t h a t the [finder of f a c t ] ***(3) made a mistake
of law o r f a c t ; (4) based i t s f i n d i n g s on a m i s -
understanding of law o r f a c t JC * Jc."
Where a v e r d i c t does n o t appear t o have r e s u l t e d from p a s s i o n and
p r e j u d i c e , and any e r r o r may be ascerta.ined by mathematical
c a l c u l a t i o n , t h i s Court may p r o p e r l y modify t h e judgment w i t h o u t
reversing it. See: N e s b i t t v . C i t y of B u t t e , 118 Mont. 84,94,
163 P.2d 251; M i l l e r v. Emerson, 120 Mont. 380, 381, 186 P.2d 220;
A.T. Klemens & Son v. Reber Plumbing and Heating Co., 139 Mont.
115, 126, 360 P.2d 1005.
This Court, a f t e r a review of t h e d i s t r i c t c o u r t ' s f i n d i n g s
of f a c t and conclusions of law, i s unable t o determine a b a s i s
f o r t h e judgment rendered. From t h e r e c o r d we cannot d i s c e r n a
b a s i s t h a t s u p p o r t s t h e damages award g i v e n , e i t h e r i n t h e f i r s t
judgment o r i n t h e amended judgment which added an a d d i t i o n a l amount
i n compensation f o r t r a f f i c c o n t r o l expenses i n c u r r e d . The
d i s t r i c t c o u r t was faced w i t h an enormous volume of h i g h l y complex
accounting evidence and d e t a i l e d t e c h n i c a l testimony p r e s e n t e d
on b e h a l f of Zook and t h e S t a t e . A thorough review of t h e
evidence and t h e r e c o r d of t h e d i s t r i c t c o u r t t r i a l of t h i s
m a t t e r , l e a d s t h i s Court t o t h e conclusion t h a t Zook i s r i g h t f u l l y
e n t i t l e d t o t h e damages s e t f o r t h i n t h i s Opinion, l e s s t h e $140,917
awarded i n t h e d i s t r i c t c o u r t .
W Concur:
e
Justices
--.".*----
7,
/-*"'-
4..
&& CLL-
V - Hon. & C
Edward T . D u s s a u l t ,
D i s t r i c t Judge, s i t t i n g f o r
Chief J u s t i c e James T . Harrison.
M r . J u s t i c e Frank I. H a s w e l l , c o n c u r r i n g i n p a r t and d i s s e n t i n g
i n part:
I concur i n t h e h o l d i n g o f t h e m a j o r i t y t h a t t h e S t a t e
breached t h e c o n s t r u c t i o n c o n t r a c t and t h a t Zook's c l a i m i s n o t
b a r r e d by t h e s p e c i a l s t a t u t e of l i m i t a t i o n s .
I d i s s e n t from t h e amount of damages awarded by t h e
majority -- $1,320,321.58, o r a l m o s t 1 0 t i m e s t h e damages awarded
by t h e d i s t r i c t c o u r t . T h i s award i s based on Zook's c o n t e n t i o n
t h a t t h e d e l a y s r e s u l t i n g from r e l o c a t i o n o f u t i l i t y p o l e s and
a c q u i s i t i o n o f right-of-way o v e r mining c l a i m s i n o n e segment o f
t h e p r o j e c t c a u s e d a " r i p p l e e f f e c t " on o t h e r segments of t h e
p r o j e c t w i t h t h e r e s u l t t h a t t h e e n t i r e c o n s t r u c t i o n p r o j e c t as
c o n c e i v e d and b i d had t o be changed m a t e r i a l l y which c a u s e d l o s s e s
h a l f a g a i n a s g r e a t a s t h e amount of t h e o r i g i n a l b i d and award.
I n m view, t h e f o c u s of t h e i s s u e i s whether t h e S t a t e ' s
y
b r e a c h c a u s e d t h e damages c l a i m e d by Zook.
On a p p e a l , t h e f u n c t i o n o f t h i s C o u r t i s s i m p l y t o d e t e r -
mine t h e s u f f i c i e n c y o f t h e e v i d e n c e t o s u p p o r t t h e d i s t r i c t
c o u r t ' s f i n d i n g and judgment. H o l e n s t e i n v . Andrews, 166 Mont.
60, 530 P.2d 476; Kirby v. K e l l y , 1 6 1 Mont. 66, 504 P.2d 683,
and c a s e s c i t e d t h e r e i n . H e r e t h e d i s t r i c t c o u r t found t h a t o n l y
$140,917 of t h e c l a i m e d damages w e r e c a u s e d by t h e S t a t e ' s b r e a c h .
The g i s t of t h e d i s t r i c t c o u r t ' s r e a s o n i n g i s found i n t h e f o l l o w -
i n g e x c e r p t from i t s o p i n i o n :
" I t i s t h e o p i n i o n of t h i s C o u r t t h a t b o t h t h e
S t a t e and t h e c o n t r a c t o r m i s c a l c u l a t e d t h e t o t a l
time allowed f o r t h e completion of t h e c o n t r a c t .
There was a n o v e r r u n of 116 d a y s d u e , i n p a r t ,
t o t h e d e l a y s o c c a s i o n e d by t h e S t a t e i n n o t h a v i n g
t h e e n t i r e right-of-way a v a i l a b l e . Work s t a r t e d on
J u l y 25, 1967, and t h e complete right-of-way was
a v a i l a b l e i n mid-October, 1967. However, d u r i n g
t h i s t i m e t h e c o n t r a c t o r w a s a v a i l a b l e t o work on
and d i d work on a major p o r t i o n o f t h e p r o j e c t . "
I n m view, t h e e v i d e n c e , though c o n f l i c t i n g , i s s u f f i c i e n t
y
t o s u p p o r t t h i s f i n d i n g and judgment o f t h e d i s t r i c t c o u r t . I
would a f f i r m t h e judgment.
Justice
- 15 -