#24543-a-JKM
2008 SD 35
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
GETTYSBURG SCHOOL DISTRICT
53-1, Plaintiff and Appellee,
v.
HELMS AND ASSOCIATES,
a division of SCHUMUCKER, PAUL,
NOHR and ASSOCIATES, INC., Defendants,
and
BITUMINOUS PAVING, INC., Defendant and Appellant.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
POTTER COUNTY, SOUTH DAKOTA
* * * *
HONORABLE JAMES W. ANDERSON
Judge
* * * *
KENNETH E. BARKER
MICHAEL TRUMP of
Barker Wilson Law Firm, LLP Attorneys for plaintiff
Belle Fourche, South Dakota and appellee.
RONALD G. SCHMIDT of
Schmidt, Schroyer, Moreno,
Lee & Bachand, PC Attorneys for defendant
Rapid City, South Dakota and appellant.
* * * *
ARGUED ON FEBRUARY 13, 2008
OPINION FILED 04/30/08
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MEIERHENRY, Justice
[¶1.] Bituminous Paving, Inc. (Bituminous) appeals from a jury verdict in
favor of the Gettysburg School District (District) for faulty construction of an
outdoor track. We affirm.
[¶2.] The District entered into a contract with Bituminous for the
construction of an outdoor track and with Helms and Associates (Helms) for
engineering services of designing and inspecting the construction of the track.
Bituminous’ contract with the District required Bituminous to remove the old track,
prepare the base of the new track, and lay the asphalt running surface. Bituminous
appeared to have completed the project by the required deadline of September 2002;
however, unknown to the District, Bituminous had failed to adequately compact the
soil sub base and gravel layer that was designed to support the asphalt top. Defects
developed within a few weeks of the track’s completion. The District’s athletic
director and track coach reported noticeable construction problems and safety
concerns with the track including uneven lanes and depressions in the surface. A
school board member additionally observed cracking asphalt and “pop-outs.” By
October 22, 2002, Helms wrote Bituminous with concern about the cracking of the
asphalt and with a directive that the cracking be examined in the spring.
[¶3.] The following spring, Helms provided Bituminous a punch list of
needed repairs to the track. The needed repairs included fixing depressions in the
asphalt, uneven surface cracking, and areas that held water. Bituminous finished
its repair work in August of 2003; however, the repair work did not fix the problems
and arguably made them worse. Thereafter, Bituminous’ project manager offered to
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re-repair the defective areas. Helms followed up with a letter to the District on
April 1, 2004, proposing how Bituminous should address the known surface
deficiencies in the track. At its April board meeting, in response to Helms’ proposal,
the District discussed its frustration with the year-and-a-half delay in completion of
the track repairs. Later, representatives of Helms, the District, and Bituminous
met and inspected the track. The District conditionally accepted Helms’ proposal
for the completion of the re-repair work on the track surface, including
arrangements for payment. Helms memorialized the agreement on May 25, 2004.
Thereafter, Helms directed Bituminous to complete five specific work items between
May 27 and August 15, 2004.
[¶4.] In the meantime, the District met with Sam Fisher, a certified track
builder and owner of Fisher tracks, to inspect the track’s defects on June 7, 2004.
On June 10, 2004, Fisher faxed two reports to the District that raised concerns
about whether the needed re-repair work set forth in Helms’ letter to Bituminous
would address the track’s underlying structural defects. According to Fisher, trying
to fix or patch the track’s structural faults would be nearly impossible.
[¶5.] Reacting to Fisher’s concerns, the District’s Superintendent contacted
and instructed Bituminous not to return to the track and not to perform its
proposed “re-repair” work. On August 8, 2005, the District officially rescinded the
“re-repairs” agreement with Bituminous and voted to bring an action against both
Helms and Bituminous because of the defective repairs and underlying structural
defects.
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[¶6.] The District retained two experts, Fisher and Chunhua Han, PhD PE
(a paving expert). After a closer inspection, Fisher and Han determined that the
track’s defects were both structural and material. Structurally, the ground base
material and subsequent top layers of asphalt were unevenly laid and compacted.
Also, in several locations, the track sloped opposite of the designed slope direction,
allowing water to pool improperly and accumulate. The asphalt also failed to meet
material specifications. It contained shale-like material that caused “pop-outs” or
holes along the surface that allowed water to pool up to three-quarters of an inch in
depth. The overall condition of the track caused the Board to be concerned about
the students’ safety.
[¶7.] The District settled its claims against Helms prior to trial. At trial,
the jury determined that Bituminous breached its agreement with the District,
negligently constructed the track, breached express or implied warranties and
breached its duty of good faith to the District. The jury found that the District had
been damaged in a total amount of $215,500, allocating 70% liability to Bituminous.
The jury also awarded prejudgment interest on $182,000 of the District’s damages,
beginning July 1, 2004. In post trial motions, the trial court granted the District’s
motions for apportionment of prejudgment interest, statutory costs, disbursements
and attorneys’ fees against Bituminous. The judgment against Bituminous totaled
$278,450 (including costs and prejudgment interest). Bituminous appeals raising
several issues.
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1. Bituminous claims that the District’s breach of contract
claim is barred, estopped and/or waived because the District
failed to satisfy conditions precedent in the contract.
[¶8.] Bituminous contends that the District should be barred from bringing
a claim because (a) the District failed to plead that the conditions precedent were
satisfied, (b) the District failed to provide Bituminous proper notice of defects, and
(c) the District failed to seek a decision from the engineer or wait for “substantial
completion” of the project before seeking court action. Bituminous also argues that
the District’s failure to meet these conditions precedent constituted waiver and
estoppel.
a. Failure to plead that conditions precedent were satisfied
[¶9.] Bituminous claims that the District should not be permitted to sue on
the contract because, as required by SDCL 15-6-9(c), it failed to plead that all
conditions precedent were satisfied. Bituminous, however, did not raise this issue
to the trial court, and we will not consider it for the first time on appeal. Hall v.
State ex rel. South Dakota Dep’t of Transp., 2006 SD 24, ¶12, 712 NW2d 22, 26
(stating “[w]e have repeatedly stated that we will not address for the first time on
appeal issues not raised below”) (citations omitted).
b. Failure to give proper notice of defects
[¶10.] Bituminous claims that the District did not provide Bituminous with
contractually required seven (7) days written notice 1 of defects in the track prior to
1. Bituminous also claims that other Articles in their contract requiring notice
were not adhered to by the District. However, the contract provides for and
supports a number of different methods of seeking remedies and fulfillment
of the contract. The District properly applied the procedures of Article 13;
(continued . . .)
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bringing a lawsuit for its defective work. The record shows that Bituminous did
receive written notice from Helms of the known defects as early as October 22,
2002. In response to the notice, Bituminous attempted to fix the defects, but was
unsuccessful. Helms then provided yet another written re-repair list. However,
when the District sought another opinion from Fisher, it discovered that Helms’ list
of repairs was inadequate and only addressed surface problems and that the track
would need to be rebuilt. Bituminous claims that it technically should have been
provided written notice of all the defects that the District learned from Fisher
before the District brought a lawsuit. Bituminous’ notice argument is without
merit. Under the terms of the agreement, Bituminous was sufficiently provided
notice of the known defects and had the opportunity to correct them. Although
additional defects later became apparent to the District, they were not obligated to
amend the previous notices of defects. Indeed, the totality of defects did not become
fully known to the District until the discovery phase of litigation.
[¶11.] Moreover, although Bituminous veils this issue under notice grounds,
the heart of its argument is that Bituminous was not allowed the opportunity to
complete the project. 2 Bituminous presented this exact defense to the jury. Indeed,
Bituminous proffered and the court instructed on this exact issue as follows:
__________________________
(. . . continued)
therefore, we need not discuss whether other notice requirements were met
for irrelevant portions of the contract.
2. During oral arguments, when questioned about how the purported lack of
notice prejudiced Bituminous, Bituminous responded that if the
District/Helms would have provided the seven days notice Bituminous would
(continued . . .)
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You are instructed that Plaintiff Gettysburg School District 53-1
is not entitled to be compensated for work that remained
unfinished if you find that Bituminous Paving, Inc. was willing
to perform such work but was ordered off the job and not
allowed to complete such work.
Obviously, based on this instruction, the jury considered whether Bituminous was
provided the opportunity to complete the project as contracted. The quoted
instruction plainly directed the jury to offset damages that resulted from the
District excluding Bituminous from the project, regardless of whether the exclusion
was proper or improper. Furthermore, it is possible that the jury reduced
Bituminous’ liability because of this instruction. We presume that juries
understand and abide by instructions. First Nat’l Bank of Minneapolis v. Kehn
Ranch, Inc., 394 NW2d 709, 720 (SD 1986).
c. Failure to seek engineer’s decision or wait for “substantial completion”
[¶12.] Bituminous next claims that the District did not satisfy the condition
precedent of seeking a decision from Helms prior to filing this suit, citing contract
provision 9.09. Provision 9.09 made the engineer “the initial interpreter” of the
contract requirements and “judge” of the work’s acceptability. The provision
required Helms to decide a dispute before either party could seek a remedy under
the law. On at least two occasions, the District provided notice to Helms of
deficiencies in the work. Helms, in turn, conveyed to Bituminous a decision/plan on
what must be done to remedy the District’s concerns. After the District learned
__________________________
(. . . continued)
have cured all of the track’s defects within the seven days allotted by the
contract.
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that Helms’ plan would not remedy the defects, the District decided to sever its
relationship with both Helms and Bituminous and pursue legal remedies against
both of them. Contract provision 13:09 gave the District the right to “exclude
[Bituminous] from all or part of the Site, take possession of all or part of the Work
and suspend [Bituminous’] service related thereto” “if [Bituminous] fails to perform
the Work in accordance with the Contract Documents.”
[¶13.] The District followed the contract process in attempting to repair the
defective track; however, after rejecting Helms’ and Bituminous’ plan to repair the
track, the District was entitled to sue on the contract. Moreover, the District sued
Helms for its negligence as well. The District had completely lost confidence in the
work of Helms and Bituminous because all attempts to repair the track’s defects
had failed. The contract did not contemplate infinite opportunities to repair a
structurally defective project that was scheduled for completion almost two years
earlier. Nor did the contract require the District to submit its dispute to the
engineer, who was also alleged to have breached the contract.
[¶14.] Bituminous also claims that the contract required the District to
obtain a certificate of completion from the engineer as a condition precedent to
pursuing legal action. The District brought this action nearly three years after the
initial completion date of the project and after the final payment had been
approved. During that time, both Helms and Bituminous were provided ample
opportunity to cure the defects and for Helms to issue or Bituminous to request a
certificate of substantial completion. In fact, the contract charged Bituminous, not
the District, with the responsibility to request a certificate of substantial
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completion. Only after Helms’ and Bituminous’ attempts to repair the problems
failed and the District realized that the track could not be repaired, did the District
reject the work. Bituminous now clings to technical aspects of the contract in an
attempt to set aside the adverse jury verdict. The basis of Bituminous’ claims are
insufficient to support dismissal of the District’s breach of contract claim or
implicate waiver or estoppel. Consequently, we affirm the verdict for the District on
its breach of contract claim.
2. Bituminous claims that the negligence cause of action is
barred because of the jury’s apportionment of fault.
[¶15.] Bituminous claims that since the jury determined that Bituminous
was responsible for 70% of the damages, the relative fault of the District must have
been 30%, which as a matter of law is more than slight and a bar to the District’s
negligence claim. 3 The verdict form directed the jury first to answer “questions 1
through 4,” which corresponded to each of the claims. Therefore, as to each claim
(breach of contract, negligence, warranty, and good faith and fair dealing) the jury
had to find for the District or Bituminous. In addition, the verdict form directed the
jury as follows:
If you answered in favor of Gettysburg School District on
ANY of questions 1 through 4, please complete the following:
1. We find that Gettysburg School District has been damaged in
the amount of $_______________.
2. We find that Bituminous Paving is _______% responsible for
Gettysburg School District’s damage.
3. Bituminous cites the case of Woods v. City of Crooks, 1997 SD 20, 559 NW2d
558 for this proposition.
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3. We award Gettysburg School District prejudgment interest
on $_____________ from and after _______________.
In answering the second question, the jury generally found Bituminous 70%
responsible for the damage.
[¶16.] In addition to instructing the jury on negligence and contributory
negligence, the court also gave instructions on the contract related claims. The
court instructed the jury to consider all claims or cross-claims against Helms as
follows:
The District’s claims against Helms have been settled prior to
trial. Nevertheless, the cross-claim by Bituminous against
Helms still remains and thus the jury must consider whether
Helms is responsible for the defective track which the District is
seeking civil damages, and if so, to what degree it is responsible.
Since the jury found in favor of the District on all of the claims, the general verdict
on percentage of responsibility is not tied to any particular cause of action. Thus,
the apportionment could be based on the relative responsibility between Helms and
Bituminous on the breach of contract claim or the relative fault between
Bituminous and the District on the negligence claim, or a combination of the two
claims. The fact that the jury found Bituminous responsible for 70% of the damages
does not necessarily equate to the District being 30% contributorily negligent. We
presume a general verdict is properly based on one or all of the presented theories.
We said in Allen v. McLain that “[a]s between proper and improper grounds or
theories, a general verdict will often be presumed to be based on that ground or
theory on which it can properly be sustained.” 75 SD 520, 529, 69 NW2d 390, 395
(1955) (citation omitted). See Thomas v. Sully County, 2001 SD 73, ¶¶8-9, 629
NW2d 590, 592-93 (holding that the jury verdict must be upheld if it could be
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sustained on one of the theories properly presented); Martinmaas v. Engelmann,
2000 SD 85, ¶72, 612 NW2d 600, 615 (Konenkamp, J., concurring) (stating that
“when a jury returns a general verdict encompassing two or more issues and the
verdict is supported by at least one issue, the case will not be reversed”).
3. Bituminous claims that the verdict should be reversed
because the verdict form was confusing and prejudicial.
[¶17.] Bituminous generally complains that the special verdict form was
confusing and prejudicial when read in light of the related jury instructions for
contributory negligence, comparative fault, and joint tortfeasor apportionment of
fault.
[¶18.] Supreme Court Rule 49, codified in SDCL 15-6-49(a) allows for special
verdicts. The rule on special verdicts provides in relevant part as follows:
The court may require a jury to return only a special
verdict in the form of a special written finding upon each issue of
fact. In that event the court may submit to the jury written
questions susceptible of categorical or other brief answer or may
submit written forms of the several special findings which might
properly be made under the pleadings and evidence; or it may
use such other method of submitting the issues and requiring
the written findings thereon as it deems most appropriate. The
court shall give to the jury such explanation and instruction
concerning the matter thus submitted as may be necessary to
enable the jury to make its findings upon each issue. . . .
SDCL 15-6-49(a). The use of a special verdict form is within the sound discretion of
the trial court. Miller v. Hernandez, 520 NW2d 266, 270 (SD 1994). We review the
decision to utilize a special verdict form under the abuse of discretion standard. Id.
“Abuse of discretion refers to ‘a discretion exercised to an end or purpose not
justified by, and clearly against, reason and evidence.’” Id. (quoting Kanta v.
Kanta, 479 NW2d 505, 507 (SD 1991)).
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[¶19.] Bituminous first challenges the initial interrogatory in the verdict
form, which questioned whether Bituminous had breached its agreement with the
District. The court noted that Helms had settled out of court. The question stated
as follows:
1. Gettysburg School District claims that both Helms &
Bituminous Paving breached their agreements with the
Gettysburg School District. (Helms has settled out of court.)
________ We find that Gettysburg School District has proven its
claim of breach of agreement against Bituminous Paving.
(Check one)
________ We find that Bituminous Paving has not breached its
agreement with Gettysburg School District.
....
Bituminous also challenges the second special interrogatory, which stated as
follows:
2. Gettysburg School District claims that Helms and
Bituminous Paving were negligent in the design and/or
construction of the Gettysburg track. (Helms has settled out
of court).
________ We find that Gettysburg School District has proven its
claim of negligence against Bituminous Paving. (Or we find that
Gettysburg School District’s negligence was slight or less than
slight as compared to any negligence of Bituminous Paving and
have adjusted our award of damages accordingly.)
(Check one)
________ We find that Bituminous Paving was not negligent in
the construction of the Gettysburg track.
....
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The court further instructed that if the jury found in favor of the District on any of
the claims, the jury was to designate Bituminous’ percentage of responsibility.
Bituminous complains that these special interrogatories did not permit the jury to
determine if Helms was negligent or if the District was contributorily negligent.
[¶20.] Although there was no space on the verdict form for the jury to
designate whether Helms or the District were negligent or contributorily negligent,
the trial court properly instructed the jury on these aspects of the law in other
instructions. The trial court also instructed the jury to allocate degrees of fault
between the co-defendants, Helms and Bituminous, as well as the contributory
negligence of the District. Here, the court required the jury to return a finding on
each cause of action in addition to a general verdict determining the District’s
damages and Bituminous’ percentage of responsibility for those damages.
[¶21.] The court’s jury instructions, as a whole, adequately explained and
instructed the jury on how to answer the interrogatories. Therefore, considering all
of the jury instructions along with the verdict form, it is apparent that the trial
court correctly instructed on the law and that the verdict form was neither
confusing nor prejudicial. 4 See Kehn Ranch, Inc., 394 NW2d at 720 (“The jury was
4. Bituminous also claimed that the instructions on the warranty claim were
confusing and prejudicial. Even assuming the instructions were erroneous
and prejudicial to the extent that reversal on the warranty claim was
granted, the verdict against Bituminous on the breach of contract claim,
negligence claim, and breach of good faith and fair dealing claim still
remains. Because we find that the verdict is sufficiently sustained on these
other theories we need not address whether the trial court erred when it
instructed on the warranty claim. See Thomas, 2001 SD 73, ¶¶8-9, 629
NW2d at 592-93 (holding that a general jury verdict must be upheld if it
could possibly be sustained on one of the theories properly instructed).
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properly instructed on the nature of the applicable comparative fault statute and
the verdict form did not preclude following those instructions. It is, of course,
presumed that the jury understood and abided by these instructions.”) (citing
Fjerstad v. Sioux Valley Hospital, 291 NW2d 786, 788 (SD 1980)). Bituminous has
failed to establish the trial court abused its discretion by using the special verdict
form.
4. Bituminous claims that the award of prejudgment interest
was erroneous as a matter of law.
[¶22.] We have previously stated that “[p]rejudgment interest is mandatory,
not discretionary in an action for recovery of damages.” Setliff v. Stewart, 2005 SD
40, ¶46, 694 NW2d 859, 871 (citation omitted). SDCL 21-1-13.1 provides in
pertinent part that:
Any person who is entitled to recover damages, whether in the
principal action or by counterclaim, cross claim, or third-party
claim, is entitled to recover interest thereon from the day that
the loss or damage occurred, except during such time as the
debtor is prevented by law, or by act of the creditor, from paying
the debt. Prejudgment interest is not recoverable on future
damages, punitive damages, or intangible damages such as pain
and suffering, emotional distress, loss of consortium, injury to
credit, reputation or financial standing, loss of enjoyment of life,
or loss of society and companionship. If there is a question of
fact as to when the loss or damage occurred, prejudgment
interest shall commence on the date specified in the verdict or
decision and shall run to, and include, the date of the verdict or,
if there is no verdict, the date the judgment is entered.
[¶23.] Bituminous argues that the damages were too uncertain to be taxed
with prejudgment interest and also that all the damages impermissibly constituted
future damages. Specifically, Bituminous claims that because the experts could not
agree on a certain figure of damages and because of the necessary apportionment of
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fault the amount of damages were uncertain, and therefore, according to SDCL 21-
1-11, cannot be taxed with prejudgment interest. We disagree. SDCL 21-1-11 does
not apply to this case or any suit that has “commenced on or after July 1, 1990.”
SDCL 21-1-13.2. The law clearly provides as follows: “The provisions of § 21-1-13.1
apply to any suit commenced on or after July 1, 1990. The provisions of §§ 21-1-11
and 21-1-13 apply to any suit commenced before July 1, 1990.” SDCL 21-1-13.2. In
applying the present rule, we have said: “[T]he adoption of SDCL 21-1-13.1 in 1990
abrogated the rule that prejudgment interest cannot be obtained if damages remain
uncertain until determined by a court. Under the present rule in SDCL 21-1-13.1,
prejudgment interest is allowed from the day the loss or damage occurred
regardless of whether the damages are certain.” City of Aberdeen v. Rich, 2003 SD
27, ¶19, 658 NW2d 775, 781 (internal citations omitted). Thus, “[p]rejudgment
interest is allowed from the date of the loss regardless of whether the damages were
known with certainty.” All Star Constr. Co., Inc. v. Koehn, 2007 SD 111, ¶24, 741
NW2d 736, 742. Moreover, a “[m]ere difference of opinion as to the exact amount of
damages [is] not sufficient to excuse [a defendant] from compensating [a plaintiff]
for loss of the use of its money.” Honomichl v. Modlin, 477 NW2d 599, 601 (SD
1991).
[¶24.] Finally, Bituminous argues that any damages sustained by the District
were future damages because the District has not expended funds to replace the
defective track. Pre-judgment interest begins “from the day that the loss or damage
occurred.” SDCL 21-1-13.1. The loss or damage occurred when the District received
the faulty track. Just because the District has not incurred the expense of replacing
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the track does not make its loss a future damage. The trial court properly
instructed the jury on how to determine damages and the date for prejudgment
interest. Bituminous did not object to the prejudgment interest instructions. We
must assume the jury followed the instructions and, based on the evidence, set July
4, 2004, as the date that the damages “occurred.” Kehn Ranch, Inc., 394 NW2d at
720 (stating that when a jury is properly instructed we “presume[] that the jury
understood and abided by these instructions”) (citing Fjerstad, 291 NW2d at 788).
See also Berry v. Risdall, 1998 SD 18, ¶12, 576 NW2d 1, 5 (stating where “a verdict
is susceptible to more than one construction, the construction which sustains the
verdict must be applied”) (citing Fjerstad, 291 NW2d at 788; Baker v. Jewell, 77 SD
573, 580, 96 NW2d 299, 304 (1959)). The prejudgment interest award was not
erroneous as a matter of law.
5. Bituminous claims the trial court erred in awarding
attorneys’ fees and expert witness costs
[¶25.] Finally, Bituminous contends that the court erred as a matter of law
and/or abused its discretion in awarding attorneys’ fees and expert witness costs. It
is well settled that awarding attorneys’ fees and costs is allowed when expressly
agreed to by the parties. Fuller v. Croston, 2006 SD 110, ¶41, 725 NW2d 600, 612
(citing Credit Collection Serv., Inc. v. Pesicka, 2006 SD 81, ¶6, 721 NW2d 474, 476);
Rich, 2003 SD 27, ¶25, 658 NW2d at 781 (citing Matter of Estate of O’Keefe, 1998
SD 92, ¶17, 583 NW2d 138, 142). In this case, Article 13 of the contract’s general
conditions expressly stated that if Bituminous’ work was found to be defective, as
defined within the contract, Bituminous was responsible for all costs and
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disbursements, including attorneys’ fees, spent by the District in bringing a civil
action. Moreover, Article 13.07 expressly states:
[The District] may have the defective Work removed and
replaced, and all Claims, costs, losses, and damages (including
but not limited to all fees and charges of engineers, architects,
attorneys, and other professionals and all court or arbitration or
other dispute resolution costs) arising out of or relating to such
correction or repair or such removal and replacement . . . will be
paid by [Bituminous].
[¶26.] Because the contract provisions permitted the award of attorneys’ fees
and other costs, the District merely had to establish, by a preponderance of the
evidence, “[t]he basis for such an award.” Credit Collection Serv., 2006 SD 81, ¶6,
721 NW2d at 476 (quoting Jacobson v. Gulbransen, 2001 SD 33, ¶31, 623 NW2d 84,
91). Based on the verdict and contract provision, Bituminous has failed to establish
that the trial court abused its discretion when it awarded attorneys’ fees, expert
witness fees and other costs.
[¶27.] We affirm on all issues.
[¶28.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and
ZINTER, Justices, concur.
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