NO. 94-301
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
TOPCO, INC., a Montana
Corporation,
Plaintiff/Appellant,
STATE OF MONTANA,
DEPARTMENT OF HIGHWAYS,
Defendant/Respondent
and Cross-Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Jeffrey Sherlock, Judge presiding
COUNSEL OF RECORD:
For Appellant:
Richard A. Reep, Reep, Spoon & Gordon, Missoula,
Montana; Dennis E. Lind, Datsopoulos, MacDonald &
Lind, Missoula, Montana
For Respondent:
Nick A. Rotering, Stephen F. Garrison, Montana
Department of Transportation, Helena, Montana
Submitted on Briefs: October 12, 1995
Decided: March 11, 1996
Filed:
Justice James C. Nelson delivered the Opinion of the Court.
Topco, Inc. (Topco) appeals from the Findings of Fact,
Conclusions of Law and Order of the First Judicial District Court,
Lewis and Clark County, awarding certain damages to Topco under a
clearing and grubbing contract with the State of Montana,
Department of Highways (State). The State cross-appeals on the
assignment of the contract to Topco. We affirm in part, reverse in
part and remand.
We address the following issues on appeal:
1. Whether the District Court erred in failing to find that
the assignment to Topco from Washington Construction violated the
terms of the contract.
2. Whether the District Court erred in awarding damages to
Topco at the subcontract price rather than at the contract price.
3. Whether the District Court erred in determining that
acreage measurement should use horizontal rather than slope
distances.
4. Whether the District Court erred in failing to award
Topco consequential damages as a result of the State's breach of
contract.
5. Whether the District Court erred in failing to award
Topco payment for acres cleared but not paid for by the State.
6. Whether the District Court erred in changing venue from
Missoula County to Lewis and Clark County.
Background Facts
On October 7, 1988, the State awarded a highway construction
contract to Washington Construction co. (Washington) for
reconstruction of 16 miles of highway between Libby and Troy,
Montana. The project involved realignment of the existing roadway
through a canyon and bordering a river. The State prepared plans
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and cross-section drawings that showed the actual profile of the
construction site.
Under the contract, clearing and grubbing, the process of
clearing trees, tree stumps and brush from the construction site,
was to extend 10 feet beyond the construction limits. The plans
and specifications prepared by the State did not indicate any
exclusion for the 50 acres of old highway or paved travel way (PTW)
from the clearing and grubbing area.
John Richards (Richards), the sole shareholder of Topco,
inspected the construction site prior to submitting a bid to
Washington for the clearing and grubbing. Only a few of the stakes
showing the clearing limits were in place at the time Richards
inspected the site. Richards submitted Topco's bid to Washington
taking into account that some areas of the construction site would
require little or no clearing and grubbing and other areas would
require substantial clearing and grubbing.
On November 1, 1988, Topco entered into a subcontract with
Washington for clearing and grubbing of 183.7 acres at $1725 per
acre. Washington had been awarded the prime contract with a
clearing and grubbing price of $3600 per acre. The 1987 edition of
the Standard Specifications for Road and Bridge Construction
(Standard Specifications) was made a part of Washington's contract
with the State.
Topco commenced clearing and grubbing in November 1988. A
short time later, a dispute arose between Topco and the State with
respect to the measurements for payment of the clearing and
grubbing. The contract between Washington and the State required
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that all claims of subcontractors be made through Washington as the
general contractor. On June 27, 1989, Topco, through Washington,
asserted a claim against the State regarding inclusion of the PTW
and the method of measurement of the acreage cleared and grubbed.
The State denied Topco's claim.
On February 6, 1990, Topco made a formal claim for payment of
additional acreage, including the PTW. This claim was denied by
the District Engineer in March 1990. Topco then appealed to the
Board of Contract Appeals. On July 23, 1990, the Board affirmed
the District Engineer's decision without comment. On August 1,
1990, the State affirmed that all administrative remedies had been
exhausted by Washington and Topco.
Washington assigned all right, title and interest in and to
the clearing and grubbing portion of the contract to Topco on
October 24, 1990, so that Topco could pursue the contract claims
directly. On November 14, 1990, Topco filed a complaint against
the State in Missoula County. On the State's motion, venue was
changed to Lewis and Clark County in October 1991.
A bench trial was held in November 1993. The District Court
issued its Findings of Fact, Conclusions of Law and Order on March
17, 1994, wherein the court ordered the State to pay Topco for the
50 acres of PTW at $1750 per acre (even though the subcontract
specified $1725 per acre). Topco appeals the District Court's
decision in several respects and the State cross-appeals on the
assignment of the contract to Topco.
Standard of Review
We review a district court's findings of fact to determine
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whether they are clearly erroneous. Dairies v. Knight (1995), 269
Mont. 320, 324, 888 P.2d 904, 906 (citing Columbia Grain
International v. Cereck (1993), 258 Mont. 414, 417, 852 P.2d 676,
678). A finding is clearly erroneous if it is not supported by
substantial evidence, if the district court misapprehended the
effect of the evidence, or if, after reviewing the record, this
Court is left with a firm conviction that a mistake has been made.
Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 323,
820 P.2d 1285, 1287.l
We review a district court's conclusions of law to determine
whether the court's interpretation of the law is correct. Carbon
County v. Union Reserve Coal Co., Inc. (1995), 271 Mont. 459, 469,
898 P.2d 680, 686 (citing Steer, Inc. v. Department of Revenue
(1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603-4).
Issue 1.
Whether the District Court erred in failing to find
that the assignment to Topco from Washington Construction
violated the terms of the contract.
In its March 17, 1994, Findings of Fact, Conclusions of Law
and Order, the District Court concluded that there was an
assignment of Washington's contract to Topco. The State, in its
cross-appeal, argues that this assignment is invalid because it
violates the terms of the contract and the Standard Specifications
1
In our recent opinion in Bauer v. State (Mont. 19961,
P.2d 53 St.Rep. 65, we said that if a finding of fact3
supported by substantial credible evidence the finding is not
clearly erroneous. However, it was not our intention that this be
interpreted as modifying the three-part test set forth in D&aye.
In Bauer, the test was simply satisfied at the first prong without
proceeding further. The standard of review for a district court's
findings of fact is still as stated in DeSave.
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which had been made a part of the contract. Contrary to the
State's argument that any assignment of the contract required the
written consent of the State, Topco argues that the Standard
Specifications only require written consent if the portion of the
contract transferred is more than 50 percent of the potential
earnings under the contract.
Standard Specification § 108.01(A) states:
The Contractor shall assign not more than 50 percent of
the potential earnings or transfer, convey, or otherwise
dispose of the right, title, or interest therein to any
other person, firm, or corporation without the written
consent of the surety and of the Department. [Emphasis
added.]
At trial, the testimony of one of the State's own witnesses
showed that the portion of the contract regarding clearing and
grubbing consisted of only 5.42 percent of the potential earnings
under the contract. Consequently, since written consent of the
State was not required, the assignment to Topco did not violate the
terms of the agreement.
Furthermore, Topco argues that the State waived its objection
to the assignment because in the Pretrial Order, the State
stipulated to the fact that Washington assigned its contract to
Topco on October 24, 1990. We have previously stated that it is
improper to raise an issue on appeal as to a question of law or
fact after the parties have entered into a stipulation as to that
law or fact. Penn v. Burlington Northern, Inc. (1980), 185 Mont.
223, 228, 605 P.Zd 600, 603-4 (citing Oregon Automobile Insurance
Company v. Watkins (1973), 264 Or. 464, 506 P.2d 179).
Accordingly, on either approach to this issue, we hold that
the District Court was correct in concluding that the assignment of
the contract to Topco was valid.
Issue 2.
Whether the District Court erred in awarding damages
to Topco at the subcontract price rather than the
contract price.
Since we have already determined that Washington's assignment
of the clearing and grubbing portion of the contract to Topco was
valid, it follows that all of Washington's interest in the contract
as to clearing and grubbing was assigned to Topco and is therefore
recoverable by Topco. This Court has previously held that an
assignee of a contract is subject to all of the terms of the
contract between the account debtor and assignor, and any defense
or claim arising therefrom. Massey-Ferguson Credit Corp. v. Brown
(1977), 173 Mont. 253, 256, 567 P.2d 440, 442.
The contract price for clearing and grubbing was $3600 per
acre. Once the District Court found that the contract had been
assigned to Topco, it should have enforced the contract as written
and should not have changed the terms by substituting the
subcontract price for the contract price. Where contract
provisions are unambiguous, the courts have no authority to insert
provisions in, or delete provisions from, the contract. Westfork
Const. Co. v. Nelcon, Inc. (1994), 265 Mont. 398, 404, 677 P.2d
481, 485.
The State argues that paying the contract price would result
in a windfall to Topco because the $3600 per acre figure included
Washington's overhead and mobilization costs which were not
attributable to Topco as the subcontractor. However, it is not up
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to the State to "protect" Washington's interests. As provided for
in the subcontract, Topco could have required Washington to pursue
Topco's claims. However, the parties agreed to an assignment of
contract rights to Topco in exchange for Washington's release from
liability. In contrast to the State's argument, any windfall would
go to the State if it were required to pay only $1750 per acre
instead of its contractual obligation of $3600 per acre.
Accordingly, we hold that the District Court erred in awarding
damages to Topco at the subcontract price rather than the contract
price. Topco is entitled to the contract price of $3600 per acre
for the PTW acreage included by the District Court in its Order.
Issue 3.
Whether the District Court erred in determining that
acreage measurement should use horizontal rather than
slope distances.
The central dispute in this case involves the method used to
measure the acreage cleared and grubbed. A measurement using slope
distances follows the natural contour of the terrain whereas a
horizontal measurement follows the plane of the earth. The acreage
measured by these two methods can vary extensively when clearing
and grubbing is required on steeply sloped ground as in the
construction project involved in this dispute.
Topco argues that the State incorrectly employed horizontal
measurements and as a result Topco was not properly paid for all
the acres it had cleared and grubbed. Section 109.01 of the
Standard Specifications provides for the method of measurement to
be used:
The method of measurement and computations to be
8
used in determination of quantities of material furnished
and of work performed under the contract will be those
methods generally recognized as conforming to good
engineering practice.
Unless otherwise specified, longitudinal
measurements for area computations will be made
horizontally, and no deductions will be made for
individual fixtures having an area of 9 square feet or
less. Unless otherwise specified, transverse
measurements for area computations will be the neat
dimensions shown of the plans or ordered in writing by
the Engineer. [Emphasis added.]
The transverse measurement is the measurement in question.
Topco argues that while the word "transverse" does not denote
slope, something different than horizontal was intended. Topco
further argues that the phrase "neat dimensions" refers to a slope
measurement and that if the State, which drafted the Standard
Specifications, had intended horizontal measurements, it would have
said horizontal measurements. Uncertain terms in a contract are to
be construed against the party causing the uncertainty. Section
28-3-206, MCA; Mueske v. Piper, Jaffray & Hopwood, Inc. (1993), 260
Mont. 207, 216, 859 P.2d 444, 449-50.
In addition, 5 201.03 of the Standard Specifications relating
to payment per acre supports Topco's contention that the State
intended to pay based upon the actual working area acceptably
cleared and grubbed. Section 201.03 states:
(B) Area Basis. Measurement of clearing, grubbing,
or clearing and grubbing on an area basis will be the
number of acres and fractions thereof acceptably cleared,
grubbed, or cleared and grubbed to the limits shown on
the plans or staked by the Engineer.
As Topco points out, both clearing and grubbing and seeding
and fertilizing use 5 109.01 of the Standard Specifications for
calculating area measurement. There was no differentiation in the
9
contract as to clearing and grubbing versus seeding and fertilizing
and in actuality, the same terrain is covered in both operations.
Testimony at trial showed that seeding and fertilizing was paid by
actual acreage using slope measurements.
The District Court found that "every witness who testified in
this case, except for Topco, indicated that the practice in Montana
has been to pay for clearing and grubbing on a horizontal basis and
not on a slope basis." Additionally, the court concluded that good
engineering practice does not allow for payment of clearing and
grubbing on the slope. However, the contract at issue provides:
It is further understood and agreed that said
construction and work shall be done in strict compliance
with said standard specifications and further, it is
expressly understood and agreed that no rules, customs or
usages, either local or otherwise, shall in any way be
considered, implied, 01 inferred into this contract.
[Emphasis added.]
It was error to admit the testimony concerning custom and
usage where the contract explicitly excluded its consideration and
then to rely on that testimony in interpreting the contract to
define the area on which Topco was to be paid for clearing and
grubbing. Accordingly, we hold that the District Court erred in
determining that acreage measurement should use horizontal rather
than slope distances, and we remand for calculation of the amount
due Topco based on slope measurement.
Issue 4.
Whether the District Court erred in failing to award
Topco consequential damages as a result of the State's
breach of contract.
Topco contends that its damages, other than for payment for
omitted acres, exceed $1 million. These damages include lost
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profits, penalties and assessments by the Internal Revenue Service
and the Montana Department of Revenue, as well as losses on
properties that had to be sold for less than their fair market
value. In its Findings of Fact, Conclusions of Law and Order, the
District Court concluded that the various consequential damages
requested by Topco were "too speculative to award."
The measure of damages for breach of contract is the amount
which will compensate the aggrieved party for all detriment
proximately caused by the breach. Daines v. Knight (19951, 269
Mont. 320, 329, 888 P.2d 904, 909. "In all cases, damages must be
reasonable." Daines, 888 P.2d at 909.
Topco argues that the losses it sustained were the direct
result of the State's failure to pay Topco in accordance with the
contract. Conversely, the State argues that Topco failed to prove
with sufficient certainty that any consequential damages arose from
the State's failure to pay.
Damages for lost profits may be awarded if such loss is shown
to be the "natural and direct result of the act of the defendant"
and if the loss is not speculative. Olson v. Parchen (19911, 249
Mont. 342, 348, 816 P.2d 423, 427 (citing Hostetter v. Donlan
(1986), 221 Mont. 380, 382, 719 P.2d 1243, 1245). The prohibition
against speculative profits does not necessarily apply to
uncertainty about the amount of such profits, but applies to
uncertainty about "whether the loss of profits is the result of the
wrong and whether such profit would have been derived at all."
Olson, 816 P.2d at 427.
Contrary to Topco's argument that since the State failed to
11
present any evidence refuting Topco's damage claim, Topco is
entitled to all damages it claims for the State's breach of
contract, it was Topco's burden to prove damages. At trial,
Richards conceded that the problems that developed between Topco,
the IRS and the Montana Department of Revenue could be attributed
to other construction projects that Topco was working on at the
same time as the Troy-Libby project.
Topco contends that "uncertainty in the amount of damages is
excusable and is not a bar to recovery." However, the uncertainty
here is not in the amount of the damages, but whether the damages
claimed were caused by the breach.
We will not substitute our judgment for that of the trial
court where the issue relates to the weight given to certain
evidence or the credibility of the witnesses. Wilson v. Liberty
Mut. Fire Ins. (Mont. 1995), 903 P.2d 785, 787, 52 St.Rep. 990, 991
(citing Burns v. Plum Creek Timber Co. (1994), 268 Mont. 82, 84,
885 P.2d 508, 509).
Accordingly, we hold that the District Court did not err in
concluding that Topco failed to prove with sufficient certainty
that any consequential damages arose from the State's breach of
contract and we affirm the District Court on this issue.
Issue 5.
Whether the District Court erred in failing to award
Topco payment for acres cleared but not paid for by the
State.
Topco argues that in addition to the PTW acres, several other
areas had been omitted from measurement and Topco has never been
paid for those areas. Topco contends that many of those areas had
12
been cleared and grubbed by Topco and that all calculations
relative to this missing acreage were based upon the State's own
books.
In its Findings of Fact, the District Court determined that
the contract required payment of all acreage contained within the
construction limits plus 10 feet, yet the District Court failed to
award Topco payment for additional acres cleared by Topco but not
paid for by the State. The contract plans and specifications
excluded only certain designated areas. The remainder of the area
was within the construction limits.
Accordingly, we remand this issue to the District Court for
calculation of those portions of the construction area falling
within the clearing and grubbing contract yet omitted from payment
by the State.
Issue 6.
Whether the District Court erred in changing venue
from Missoula County to Lewis and Clark County.
Topco filed this action in the Fourth Judicial District Court,
Missoula County. The State moved for a change of venue arguing
that Missoula County was not a proper place of trial for this
action and that under § 25-2-121, MCA, the proper place of trial is
either Lewis and Clark County or Lincoln County. The District
Court granted the State's motion and ordered the matter transferred
to the First Judicial District Court, Lewis and Clark County.
A district court's determination of venue is a legal
conclusion and our standard of review is plenary. State v. Cooney
(1995), 271 Mont. 42, 45, 894 P.Zd 303, 305 (citing Emery v.
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Federated Foods, Inc. (1993), 262 Mont. 83, 87, 863 P.2d 426, 429).
The general rule is that the proper place of trial for actions
upon contracts is either the county in which the defendants reside
at the commencement of the action, in this case Lewis and Clark
County, or the county in which the contract was to be performed, in
this case Lincoln County. Section 25-2-121(l), MCA. However,
under § 25-2-126(l), MCA, there is an exception for actions in
which the State is a defendant. This section states in pertinent
part:
(1) The proper place of trial for an action against
the state is in the county in which the claim arose or in
Lewis and Clark County. In an action brought by a
resident of the state, the county of his residence is
also a proper place of trial. [Emphasis added.]
Section 25-'-126(l), MCA. Topco maintains its principal place of
business in Seeley Lake which is located in Missoula County. Thus,
under this statute, Missoula County is also a proper place of
trial. The statute applies as an exception to the general rule for
actions in which the State is a defendant. Kendall v. State
(19881, 231 Mont. 316, 318, 752 P.2d 1091, 1092.
It is well established that when more than one county is
designated as a proper place of trial for an action, an action
brought in any such county is brought in a proper county and a
motion for change of venue may not be granted. Section 25-z-115,
MCA; Gabriel v. School Dist. No. 4, Libby (19941, 264 Mont. 177,
179, 870 P.2d 1351, 1352; Melroe v. Doyle (1989), 239 Mont. 524,
525, 781 P.2d 1134, 1135. "[Olnce an action has been filed in a
proper county the District Court cannot grant a motion to have it
removed." Petersen v. Tucker (1987), 228 Mont. 393, 396, 742 P.2d
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483, 485 (citing Seifert v. Gehle (1958), 133 Mont. 320, 322, 323
P.2d 269, 270).
Consequently, the District Court erred by granting the State's
motion to change venue. However, the error in this case was
harmless because it did not affect Topco's substantial rights.
Abbey v. City of Billings Police Com'n (1994), 268 Mont. 354, 364,
886 P.2d 922, 928 (citing Barrett v. Asarco Inc. (19901, 245 Mont.
196, 799 P.2d 1078).
While contending that Topco's appeal of this issue was not
timely, the State fails to develop its argument or cite authority
in support thereof. It is not the function of this Court on appeal
to advocate a party's position, to develop arguments or to locate
and cite supporting or opposing authority. Accordingly, we will
not further address the State's contention in this regard.
Affirmed in part, reversed in part and remanded for further
wroceedinus consistent with this owinion. A
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