Border States Paving v. State

No. 96-099

IN THE SUPREME COURT OF THE STATE OF MONTANA

1997

BORDER STATES PAVING, INC.,
ECKART TRUCKING, INC., and
FISHER SAND & GRAVEL,

Plaintiffs and Appellants,

THE STATE OF MONTANA, ACTING
THROUGH THE MONTANA DEPARTMENT
OF TRANSPORTATION,

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 Dorothy McCarter, Judge presiding.

COlJNSEL OF RECORD:

For Appellant:

Ronald G. Schmidt, Schmidt, Schroyer, Colwill & Moreno, Pierre. South
Dakota; Patrick E. Melby. Luxan & Murfitt. Helena, Montana

For Respondent:

Stephen F. Garrison, Lyle Manley, Montana Department of Transportation,
Helena. Montana

Submitted on Briefs: October 3 1. 19%

Decided: A p r i l 1 5 , 1 9 9 7
Filed:
Justice James C. Nelson delivered the Opinion of the Court.

Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1995 Internal

Operating Rules, the following decision shall not be cited as precedent and shall be published

by its filing as a public document with the Clerk of the Supreme Court and by a report of its

result to State Reporter Publishing Company and West Publishing Company.

Appellants Border States Paving, Inc. (BSP), Eckart Trucking, Inc. (Eckart), and

Fisher Sand & Gravel (Fisher) filed a complaint against the Montana Department of

Transportation (MDT) over a project to reconstruct aportion of Interstate 90 within the Crow

Indian Reservation. Appellants alleged damages of more than $2,000,000. The District

Court for the First Judicial District, Lewis and Clark County, awarded damages to BSP in

the amount of $5,634.75 and to Fisher in the amount of $1 1,000. BSP, Eckart and Fisher

appeal this jud,ment along wlth several post-trial motions denied by the District Court. We

affirm in part and remand in part.

Respondent MDT has consolidated Appellants' 11 lengthy and confusing issues into

the following 8 issues, which we address on appeal:

1. Whether the District Court erred in holding that the Tribai EmpIoynent Rights

Office (TERO) ordinance could be enforced by the Crow Tribe in this case.

2. Whether the District Court erred in ruling that the contractor had a duty to

provlde notice to MDT of Tribal interference.
 3. Whether the District Court erred in ruling that MDT did not breach the implied

covenant of good faith and fair dealing.

4. Whether the District Court denied Appellants' right to due process by adhering

to a six-day trial schedule.

5. Whether the District Court erred in ruling that MDT's notice provision is not

void, unenforceable, contrary to public policy, or unconscionable.

6. Whether the District Court erred in not reforming the contract to exclude the

notice provision.

7. Whether the District Court erred in allowing MDT to introduce into evidence

earlier versions of Appellants' claims.

8. Whether the District Court erred in not re-opening the trial for evidence on

Appellants' claims of "unlitigated final quantities."

In addition, MDT presents the following issue on cross-appeal:

Whether the District Court erred by not ruling on the issue of Appellants' alleged

violation of the False Claims Act, 5 17-8-231, MCA.

Factual and Procedural Background

In 1990, MDT prepared plans for reconstruction of a portion of Interstate 90 within

the Crow Indian Reservation. MDT solicited bids for the project and included within the bid

package a "Notice" to all potential bidders which stated:

For your information, some or all of this project will take place on the Crow
Indian Reservation. The Crow Tribe has enacted an ordinance requiring all
 employers subject to thc Tribe's jurisdiction to gi>e preference in training,
employment, contracting and subcontracting to Indians. Contract fees may
also be imposed. For more information about these requirements, contact:
Crow TERO Office . . . .

Please note that the State is not a party to Indian preference or contract fee
requirements. These are matters solely between the Tribe and the contractor.
The State will not assist the Tribe to enforce these requirements, nor will it
assist a contractor who has been charged by the Tribe with violating these
requirements, nor will it consider requests for contract modifications to cover
additional costs incurred because of such violations.

The ordinance referred to in the "Notice" required of any contractor coming onto the

reservation that at least 95% of its workforce be made up of Crow Indians.

The 1-90 project covered an area almost 8 miles long and required an extensive

amount of hauling material to and from the site. The project included an area approximately

8500 feet long requiring excavation up to five feet deep. The excavated material was to be

hauled away to a gravel pit and used as fill material, then new material hauled back to the site

for placement. In addition, the old asphalt had to be "milled" off and hauled away to state

stockpile areas. Hot bituminous pavement would then be hauled back to the site in

preparation for paving.

BSP submitted the low bid and was awarded the contract in November 1990. BSP

owned 9 trucks which it planned to use for hauling away the old asphalt milled off the site

and hauling back the new material used to repave the road. BSP subcontracted with Eckart

for an additional 9 trucks to haul the fill material back and forth from the excavation site with

assurances of being able to get up to 18 trucks if desired or needed to expedite the job.
 Substantial quantities of sand and gra-velproducts were needed to complete the project

so BSP subcontracted with Fisher who agreed to manufacture and furnish the materials to

meet MDT specifications. Fisher was also dependent upon the availability of tr-ucks to haul

the sand and gravel to the site.

BSP began work on the project in April 1991. Eckart moved its trucks to the project

by May 15, 1991, and contacted the TERO to send drivers for testing. Of the 13 drivers

referred by TERO, Eckarl hired only 2, complaining that of the 13 drivers tested, most could

not shift gears or back up. On Tuesday, May 2 1, 1991, four trucks were required for hauling,

so Eckart, without a full staff of Crow drivers, sent out four of its own drivers. The TERO

threatened to fine Eckart $5,000 a day for not complying with the Tribe's hiring ordinance.

Eckart 's trucks are valued at $50,000 each. Eckart was concerned about damage to

the trucks resulting from operation by unqualified drivers, but offered to hire Crow drivers

it felt were unqualified if the Tribe would assure Eckart that the Tribe would pay for any

damage to the trucks caused by their drivers. The TERO refused and filed an action in Crow

Tribal Court to enjoin Eckart from further work until it complied with the requirements of

the ordinance. Bill Eckart later testified that he was afraid the Tribe might confiscate his

trucks which were his only livelihood. Rather than comply with the ordinance, Eckart

abandoned the job. Neither Eckart nor BSP apprised MDT of the problems Eckart was

experiencing and MDT was not aware of them until after Eckart left the project.
 BSP subsequently contracted with the Crow Tribal Council for trucking services. As

of May 22, 1991, the Tribe did not have any trucks, mechanics, maintenance facilities or

spare parts for trucks. The TERO bought four used trucks for use on the project. In the

month it took the TERO to find and purchase these trucks, the loss of trucking impacted all

other project work. In addition, the trucks furnished by the Tribe had a smaller load capacity

than Eckart's hueks. Where Eckart could haul 27-28 tons per load, the Tribe's trucks could

only haul 18-20 tons per load. Furthermore, where Eckart had subcontracted to furnish

trucking at a rate of $52.96 per hour, the TERO subcontracted to furnish trucking at a rate

of $68.75 per hour.

The shortage in trucking caused BSP to fall further and tkrther behind on the project.

Originally, BSP estimated that the project would begin in April 1991, and be completed by

August IS, 1991, at the latest. Afier Eckart pulled out, BSP was forced to work up to 15

hours a day, 6 days a week to t y to meet their schedule and complete the project.
r

On September 25, 1992, Appellants BSP, Eckart and Fisher sued MDT alleging,

among other things, that MDT had breached its implied duty of good faith and fair dealing

and that the "exculpatory" clause in the notice was void and unenforceable as it contravenes

public policy and is unconscionable. Appellants alleged they were entitled to compensation

for their extra costs amounting to more than $2,000,000.

A bench trial lasting 5 days mas originally scheduled, but at a later scheduling

conference, the time for trial was extended to 6 days. At the pre-trial hearing on the first day
of trial, the District Court Judge announced that the 6 days would be split into 3% days for

Appellants and 2% days for MDT. The trial actually lasted 6% days, with Appellants taking

almost 4% days. After trial, the court issued its Findings of Fact, Conclusions of Law and

Order awarding damages to BSP in the amount of SS,634.75 and to Fisher in the amount of

$1 1,000. Appellants filed several post-trial motions, which the District Court subsequently

denied, including a motion requesting more time to present evidence. Appellants now appeal

the District Court's judgment as well as the court's orders denying their motions. MDT

cross- appeals contending that Appellants violated the False Claims Act, 5 17-8-231, MCA.
Standard of Review

We review a district court's findings of fact to determine whether they are clearly

erroneous. Daines v. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906 (citmg

Columbia Grain Intern. v. Cereck (1993), 258 Mont. 414, 417, 852 P.2d 676, 678). We

adopted a three part test in Interstate Production Credit Ass'n v. DeSaye (1991), 250 Mont.

320,323,820 P.2d 1285, 1287, to determine whether the findings are clearly erroneous. This

test provides that we review the record to see if the findings are supported by substantial

evidence. If they are supported by substantial evidence, we will determine if the trial court

has misapprehended the effect of the evidence. If substantial evidence exists and the effect

of the evidence has not been misapprehended, we may still hold that a finding is clearly

erroneous, when, although there is evidence to support it, a revtew of the record leaves this

Court with a definite and f r conviction that a mistake has been made.
im
 In addition, u#erecently noted that it is within the province of the hicr of fact to weigh

the evidence and assess the credibility of vvitnesses and we will not second-guess those

determinations. Rafanelli v. Dale (1996), 924 P.2d 242, 245, 53 St.Rep. 746, 748 (citing

Double AA Corp. v. Newland & Co. (1995), 273 Mont. 486,494,905 P.2d 138, 142). We

will uphold a district court's findings when there is substantial evidence to support them even

when there is also evidence supporting contrary findings. Rafanelli, 924 P.2d at 246 (citing

Wiesner v. BBD Partnership (1993), 256 Mont. 158, 161, 845 P.2d 120, 122).

Furthermore, 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).

Issue 1.

Whether the District Court erred in holding that the TERO ordinance
could be enforced by the Crow Tribe in this case.

Contrary to Appellants' contentions, the District Court did not rule on whether the

TERO ordinance could be enforced in this case. Moreover, the District Court does not have

jurisdictio~to decide this issue. Issues dealing with jurisdiction of a Tribe within its

boundaries must he litigated and exhausted in Tribal court before other courts may have

jurisdiction. National Fanners Union Ins. Co. v. Crow Tribe (1985), 471 U.S. 845, 857, 105

S.Ct. 2447,2454, 85 L.Ed.2d 8i8, 828; Wellman v. Chevron U.S.A., inc. (1987), 815 F.2d

577, 578-79.
 The TERO filed a complaint in Crow Tribal Court to enjoin Eckart from further work

until it complied with the requirements of the ordinance. Rather than litigate the issuc in

Tribal Court, Eckart stipulated to dismissal of the action agreeing that it would do no further

work on the Crow Indian Reservation without full compliance with TERO resolutions and

procedures. Eckart failed to litigate the issue in Tribal Court and thus exhaust Tribal Court

jurisdiction prior to filing the complaint in the instant case.

Moreover, BSP chose to bid for the project, knowing full well it would have to work

on the Reservation and abide by the Tribe's ordinance, thus subjecting itself to Tribal Court

jurisdiction. Besides the notice provision informing bidders of the TERO ordinance and

directing bidders to contact the TERO to learn the rcquirements before tbcy submitted bids,

MDT Standard Specification 107.01 provided that anyone bidding on the project was

rcquired to keep informed of and comply with "all local laws, ordinances and regulations and

all orders and decrees of bodies or tribunals having any jurisdiction or authority that affect

those engaged or employed in the work or that affect the conduct of the work."

Eckart, as a subcontractor to BSP, agreed to "be bound to the Contractor by terms of

the General Contract [and] to conform to and comply with all of the terms of the General

Contract . . . ." Thus Eckart was also bound by MDT Standard Specification 107.01 and

required to keep informed of and comply with "all local laws, ordinances and regulations."

Issues 2 and 3.

Whether the District Court erred in ruling that the contractor had a duQ
to provide notice to MDT of Tribal interference.
 Whether the District Court erred in rufing that MDT did not breach the
implied covenant of good faith and fair dealing.

A4ppe!lantscontend that MDT breached the implied covenant of good faith and fair

dealing in not negotiating with the TERO in advance to define specific requirements for

contractors and employers working on the reservation. The District Court found insufficient

evidence to support a finding that MDT failed to act in good faith by refusing to assist

Appellants in resolving their problems with TERO and concluded that MDT's failure to

negotiate with the TERO did not constitute a breach of the implied covenant of good faith

and fair dealing.

MDT had let several other projects on the Crow Indian Reservation in the past using

the same notice provision. BSP had worked on some of these earlier projects without

encountering any difficulties. On this occasion, neither Eckart nor BSP attempted to apprise

MDT of the problems Eckart was having in working with the TERO to hire Crow drivers.

MDT did not "refuse" to assist Appellants, as Appellants contend, because MDT was not

aware of the problems until after Eckart had left the project. MDT cannot be expected to

rectif5~ situation of which it was unaware.
a

Appellants also contend that the exculpatory clause in the notice provision clearly

prohibited and precluded Appellants from notifying MDT of problems with the TERO.

However, there is nothing in the clear language of the clause that states that MDT cannot be

notzjkd of problems with the TERO. Rather, the clause declares that the State will not assist
a contractor who has been "charged by the Tribe with violating" the ordinance. Accordingly,

wc affinn the District Court on these issues.

Issue 4.

Whether the District Court denied Appellants' right to due process by
adhering to a six-day trial schedule.

Appellants contend that the pre-determined limitation of 6 days of trial and the

District Court's daily trial schedule denied Appellants' right to due process and the full and

fair presentation of their case. MDT maintains that Appellants did not raise this issue until

after the District Court had issued its Order adverse to Appellants.

On September 13, 1993, the District Court filed a Scheduling Minute Entry Order

setting trial for August 15, 1994, and stating that the trial is anticipated to last 5 days That

trial date was later vacated and on August 18, 1994, the court filed another Scheduling

Minute Entry Order setting a new tnal date and stating that the tnal is anticipated to last 6

days. Furthermore, in the District Court's February 15, 1995 Order, the court reiterates that

trial will last no longer than 6 days. Nowhere in any of these orders does the court refer to

any requests by Appellants' counsel for more time for trial or any objections by Appellants'

cotmse! that the amount of time scheduled for trial was insufficient.

In their brief, Appellants refer to several instances during trial where both sides were

hampered by time constraints, however, the record does not indicate any objections by

Appellants to the 6-day trial schedule. We will not put a district court in error for a ruling

or procedure in which the appellant acquiesced, participated, or to which the appellant made

11
no objection. State ex. rcl. Ins. Fund v. Berg (1996), 927 P.2d 975,983,53 St.Rep. 1098,

1103 (citing In re Pedersen (1993), 261 Mont. 284,287, 862 P.2d 41 1,413). Therefore. we

affirm the District Court on this issue.

Issue 5.

Whether the District Court erred in ruling that MDT's notice provision
is not void, unenforceable, contrary to public poficy, or unconscionable.

Appellants contend that the notice provision violates $§ 28-2-701,28-2-702 and 49-3-

207, MCA, and is thus void and unlawful. The District Court concluded that MDT's notice

provision is clear and unambiguous, is not unconscionable and is not a violation of the

policies of law set forth in the code sections cited by Appellants. Those sections of the

Montana Code provide:

28-2-701. What is unlawful. That is not lawful which is:
( I ) contrary to an express provision of law;
(2) contrary to the policy of express law, though not expressly prohibited; or
(3) otheiwise contrary to good morals.

28-2-702. Contracts which violate policy of the law -- exemption
from responsibility. All contracts which have for their object, directly or
indirectly, to exempt anyone from responsibility for his own fraud, for willful
injury to the person or property of another, or for violation of law, whether
willful or negligent, are against the policy of the law.

49-3-207. Nondiscrimination provision in all public contracts.
Every state or local contract or subcontract for construction of public buildings
or for other public work or for goods or services must contain a provision that
all hiring must be on the basis of merit and qualifications and a provision that
there may not be discrimination on the basis of race, color. religion, creed,
political ideas, sex, age, marital status, physical or mental disability, or
national origin by the persons performing the contract.
 The general contract for this project did contain a provision as mandated by § 49-3-

207, MCA. Appellants contend that the contract provision conflicts with the notice

provision. However, as the District Court pointed out, these provisions are not inconsistent

and do not constitute a basis for recovery in this action. The Tribal ordinance only authorizes

the TERO to prohibit qualifications criteria. There is no evidence that the TERO exercised

that authority. TERO officials testified at trial that their drivers were qualified to perform

the work. Moreover, Appellants own witnesses admitted that nothing in the contract,

including the notice provision, forced them to hire incapable or incompetent employees.

Nothing in the contract prevented hiring on the basis of merit and qualification. Accordingly,

we affirm the District Court on this issue.

Issue 6.

U7hetherthe District Court erred in not reforming the contract to exclude
the notice provision.

Appellants contend that the contract should be revised to exclude the notice provision,

pursuant to $5 28-2-1611 and 1614, MCA, because the provision does not "truly express the

intention of the parties . . . ." These sections of the Montana Code provide:

28-2-1611, When written contract may be revised by court. When,
through fraud or a mutual mistake of the parties or a mistake of one party
while the other at the time knew or suspected, a written contract does not huly
express the intention of the parties, it may be revised on the application of a
party aggrieved so as to express that intention, so far as it can be done without
prcjudice to rights acquired by third persons in good faith and for value.

28-2-1614. Specific enforcement of revised contract. A contract
may be first revised and then specifically enforced.
 There is no evidence that either party intended anything other than what the contract,

including the notice provision, states. MDT sought bids on the project and the terms of the

contract were clearly set forth to all interested bidders through the public bidding process.

BSP bid on the project and the contract was let to BSP at the bid price.

There was no meeting of the minds that Appellants need not comply with Tribal

ordinances and laws. The clear, unambiguous language of the notice provision reflects just

the opposite. Moreover, revising the contract to delete the notice provision would place an

additional financial obligation on the State which was not contracted for.

Appellants have failed to present any evidence of fraud or mistake that would require

reformation of the contract. Accordingly, we affirm the District Court on this issue

Issue 7.

Whether the District Court erred in allowing MDT to introduce into
evidence earlier versions of Appellants' claims.

Appellants contend that the District Court, over Appellants' objections, allowed MDT

to introduce several superseded versions of Appellants' claims into evidence and that this was

highly prejudicial and confusing to the court. Despite Appellants' claim, a review of the

record reveals that while Appellants' counsel did question the relevancy of the earlier

versions of the claims, he voiced no exception to the exhibit after it was admitted.

A district court has broad discretion to determine whether evidence is relevant and

admissible, and absent a showing of abuse of discretion, the district court's determination will
not be overturned. Galbreath v. Golden Sunlight Mines, Inc. (1995), 270 Mont. 19,22,890

P.2d 382, 384. Appellants have failed to demonstrate that the District Court abused its

discretion by admitting the superseded 'ersions of Appellants' claims, thus we affirm the

District Court on this issue. Appellants suggest that the numerous versions of the claim

confused the judge, however, the transcript of the proceedings reveals that the judge

expressed her confusion with these matters long before this information was offered or

admitted.

Issue 8.

Whether the District Court erred in not re-opening the trial for evidence
on Appellants' claims of "nntitigated final quantities."

Appellants moved the District Court pursuant to Rule 60(b)(3) and (6), M.R.Civ.P.,

for relief from the Judgment in order to present evidence on the issue of "unlitigated final

quantities." Appellants contended in their motion that they reserved their rights during trial

"to prosecute an additional claim should the parties fail to agree on the final quantities and

payment due under the contract." The District Court denied Appellants' motion stating:

The trial previously held in this matter adjudicated the merits of the
claims before the Court. Nothing in the pretrial order or any other pleading
presented to the Court indicated that the trial would be anything less.
Although there was information presented to the Court that some of the
contract costs were still being negotiated, counsel never indicated to the Court
that the trial would not be a determination of the entire cause of action.

We find nothing in the record to contradict the District Court, thus we affirm the

District Court on this issue
 Cross-appeal Issue,

Whether the District Court erred by not ruling on the issue of Appellants'
alkged vio!ation of the Fake Claims Act, 5 17-8-231, MCA.

In its Amended Answer to Second Amended Complaint, filed December 19, 1994.

MDT raised as its Eleventh Defense that Appellants' claims are "false, fictitious or

fraudulent", thus Appellants have forfeited their claims under 5 17-8-231, MCA, which

provides:

Liability for false claims. ( I ) A person who knowingly presents or
causes to be presented a false, fictitious, or fraudulent claim for allowance or
payment to any state agency or its contractors forfeits the claim, including any
portion that may be legitimate, and in addition is subject to a penalty of not to
exceed $2,000 plus double the damages sustained by the state as a result of the
false claim, including all legal costs.
(2) The forfeiture and the penalty may be sued for in the same suit.

MDT raised this issue again in its trial brief, however, the District Court failed to address the

issue in its Findings of Fact, Conclusions of Law and Order.

Accordingly, we hold that the District Court erred by not ruling on the issue of

Appellants' alleged violation of the False Claims Act, 5 17-8-231, MCA, and we remand to

the District Court for entry of a decision on this issue.

Affirmed in part and remanded in part for further proceedings consistent with this

opinion.