Meier's Trucking Co. v. United Construction Co. , 237 Kan. 692 ( 1985 )

The opinion of the court was delivered by

McFarland, J.:

This is a dispute between a subcontractor (Meier’s Trucking Company) and the general contractor (United Construction Company, Inc.) involving a highway construction project. Meier’s three-count petition claims: (1) it is owed money for work performed; (2) it is owed damages arising from United’s breach of its contract; and (3) United is guilty of civil conspiracy. The case was called for jury trial. At the conclusion of plaintiff Meier’s case in chief, the trial court: (a) entered judgment in favor of Meier’s on count No. 1 in the amount of $24,029.43 (this claim was not disputed by United); (b) directed a verdict in favor of United on count No. 2, finding no breach of contract had occurred; and (c) dismissed count No. 3. Meier’s appeals, contending the trial court erred in not submitting claims 2 and 3 to the jury. United’s cross-appeal involves the rationale utilized by the trial court in dismissing count No. 3. The trial court held that the failure of Meier’s to establish a breach of contract under count No. 2 was fatal to the count No. 3 conspiracy claim. The issue on the cross-appeal is submitted for consideration only in the event the directed verdict on count No. 2 is reversed. There is no issue before us relative to the $24,029.43 judgment entered on count No. 1.

The key issue in the appeal is whether or not the trial court erred in ruling, as a matter of law, that United did not breach the parties’ contract. Meier’s contends that a certain change order, greatly reducing the amount of work to be performed by Meier’s, constituted a breach of contract. In order to determine this issue the complex factual situation from which this litigation arose must be set forth in considerable detail.

As anyone familiar with the area knows, many substantial alterations in the topography of Johnson County have occurred in recent years and continue to occur as a result of highway construction. Looking forward to the future construction of the interchange of 1-435 and 1-35 (said interchange known as the Maltese Cross), certain contracts were let in 1979 by the Kansas Department of Transportation (KDOT) for the area. United was awarded a contract for what was known as the 1-435 project. This was characterized as a “heavy grading project” for the construction of the roadway and building of bridges. Final surfacing was not included. The work was to be performed in an area bounded roughly by 87th Street, Lackman Road, 103rd Street, and Renner Road.

At about the same time, KDOT awarded two other heavy grading projects of similar nature to Clarkson Construction Company. These projects were commonly referred to as the K-12 project, with the work to be performed in an area bounded roughly by 95th Street, Renner Road, 111th Street, and Lone Elm Road. The Clarkson and United work areas abutted each other and each involved hauling a portion of the excavated materials to common stockpiles situated near the future site of the Maltese Cross intersection for use in construction thereof. Otherwise the K-12 and 1-435 projects were considered to be independent of each other.

The United contract called for the excavation of an estimated 810,524 cubic yards (c.y.) of common, or earth, and 1,699,983 c.y. of rock. The contract price was $6,477,108.06. As previously stated, a portion of this material was to be hauled to the Maltese Cross stockpiles. United entered into a subcontract with Meier’s wherein Meier’s was to haul an estimated 245,432 c.y. of common excavation at a unit price of 1.39/c.y. and 316,668 c.y. of rock excavation at a unit price of 1.64/c.y. to the stockpiles for a total contract price of $860,486.00. Excavation was commenced by United and Meier’s began hauling material to the stockpiles under the subcontract. United became concerned that there was a substantial shortfall between the estimated amount of material to be excavated and the actual quantities. United sought to renegotiate the per c.y. price it was to receive from KDOT based upon the shortfall. KDOT checked into the matter and denied there was a shortfall. On April 26, 1980, United advised Eugene Meier (a partner in the firm) to discontinue hauling as a result of the shortfall dispute it had with KDOT. On May 2,1980, Eugene Meier conferred with officials of United in the latter’s Kansas City office as to when hauling would resume. Meier stated he needed an idea of the time frame involved in the interruption as he was looking at some other construction projects. United offered to let him out of the subcontract. Meier stated he neither accepted nor rejected the offer. United officials believed Meier had accepted the offer and sent him a letter confirming the same on May 5, 1980. (For purposes of determining the propriety of the directed verdict, we accept Meier’s version). At the time work under the subcontract ceased, Meier had hauled 72,264 c.y. of material.

It is necessary at this point to turn our attention to the Clarkson K-12 project. Santa Fe railroad tracks bisect the Clarkson work area from north to south. The Clarkson project was bid on the basis that the contractor would be able to move, by vehicles, large quantities of excavation across the tracks. Santa Fe refused to agree to this. Clarkson was faced with greatly increased costs as it would have to build an expensive conveyor system over the tracks. Clarkson believed this increased cost factor should be borne by KDOT, who did not agree. To fortify its position, Clarkson contacted other bidders on the K-12 project to see if they, too, had understood vehicle passage over the tracks would be afforded and had bid with that understanding. United had been one of the unsuccessful bidders on the K-12 project and was thus contacted. The individual contacted was James Supica, United’s president. The telephone call occurred sometime in the late spring or early summer of 1980. Clarkson was unable to negotiate a settlement of its problem with KDOT and filed a multi-million dollar damage suit against KDOT.

James Supica testified he became concerned over the Clarkson lawsuit and the possible chilling effect it might have on future highway construction projects in Johnson County. The actions of Mr. Supica at this point are the basis of Meier’s claim of breach of contract. In reviewing the propriety of a directed verdict, an appellate court is required to resolve all facts and inferences in favor of the party against whom the judgment was entered. (Stair v. Gaylord, 232 Kan. 765, 659 P.2d 178 [1983]). We will, therefore, include herein the version of subsequent events which is contained in Meier’s brief before this court as follows:

“After Clarkson filed a lawsuit against KDOT regarding the K-12 project, James Supica of United inquired of Dean Testa of KDOT whether the State had ever considered looking at the K-12 project of Clarkson and the 1-435 project of United as one area rather than two separate contracts. No one else ever made this same suggestion to Dean Testa. After James Supica made this suggestion, Dean Testa reviewed the plans for the two separate projects to see if some unified solution could be made which would eliminate the Clarkson lawsuit. In July of 1980 a meeting was held with James Supica, William Clarkson and representatives of KDOT in attendance. The intent of the parties at this meeting was to reach an agreement to modify both the Clarkson K-12 project and the United 1-435 project in an acceptable manner to both parties and to KDOT and remove the Clarkson litigation. Dean Testa had visited with both United and Clarkson prior to the meeting regarding changes in stockpiles. James Supica of United volunteered to come to the meeting when asked by KDOT. Supica on behalf of United submitted a change of unit price on excavation from $2.58 a yard to $1.83 a yard which was accepted by KDOT. Supica on behalf of United Construction voluntarily agreed and acquiesced in the understanding reached at the July 1980 meeting. Supica also voluntarily signed all the change orders that resulted from the July 1980 meeting. A supplemental agreement was also prepared by KDOT and signed by James Supica on behalf of United. At the time that the changes in the projects were made, James Supica of United was aware that the Meier’s subcontract would be affected. The State Engineer was uncertain what would have been done to make the changes in the projects if United had not agreed to the changes. He believed there may have been some difficulty since the changes involved two different contracts.

“After the changes were made United had the opportunity to use its own equipment to dispose of the material which was previously to have been hauled by Meier’s Trucking, and pursuant to change order 13-F, was now to be wasted on the project. United would be able to haul the same material cheaper because it could use larger on-site equipment rather than dump trucks such as used by Meier’s. In addition, the material would be hauled to a closer off-site waste area.

“Under change order 13-F the remainder of the material which was to be hauled to the stockpile by Meier’s Trucking was ‘underrun’ thereby eliminating the task for which Meier’s Trucking had been employed. This amount of material (489,597 cubic yards) was added to the contract as ‘excavation special’ to be hauled at a reduced unit price of $1.83 [per] cubic yard and then wasted at sites provided by United. Meier’s Trucking was informed by United that it had hauled 72,264 yards at that time by United’s count. The State determined that 39,420 cubic yards of common excavation and 33,083 cubic yards of rock had been hauled to the stockpiles to that point.

“Under Change Order 13-F the same excavation material that was to be hauled by Meier’s Trucking to state-owned stockpiles was to be ‘wasted’ at sites provided by United. A stockpile is a place where rock or dirt is collected for later use. The stockpiles to which Meier’s Trucking was hauling materials were to be used in the future construction of the Maltese Cross Interchange. ‘Waste’ is simply material that is being excavated from a project and not incorporated into the project. Common excavation wasted off a project in Johnson County, Kansas, is a valuable commodity.”

It should be noted the change orders issued on the Clarkson job in January, 1981, resulted in a reduction of the Clarkson contract price of approximately $750,000. United change order (No. 13-F), also issued in January, 1981, reduced the United contract price by $367,197,75. Thus, the change orders resulted in contractual savings to the owners (State of Kansas) of over $1,000,000. Additionally, the Clarkson litigation was eliminated.

The trial court held United had not breached its contract with Meier’s by virtue of its activities culminating in the issuance of change order No. 13-F. We agree.

The subcontract between Meier’s and United provides in pertinent part:

“Section 1. The Subcontractor agrees to furnish all necessary materials and/or to furnish all labor, tools, equipment and supplies necessary to perform, and to perform all work set forth in ‘Section 2’ hereof in the construction of [the 1-435 project] for Kansas Department of Transportation, hereinafter called the Owner, at Topeka, Kansas, in accordance with the terms and provisions of the Contract between the Owner and the Contractor, dated Dec. 12,1979, including all the General and Special Conditions, Drawings and Specifications and other Documents forming or by reference made a part of the Contract between the Contractor and the Owner, all of which shall be considered part of this Subcontract by reference thereto, and the Subcontractor agrees to be bound to the Contractor and the Owner by the terms and provisions thereof.

“Section 2. It is agreed that the materials to be furnished and/or work to be done by the Subcontractor are as follows:

Description Estimated Quantity Unit Units Price Amount

Truck Haul Common Excavation to Stockpile No. 1 (Soil & Shale) 245,432 C.Y. 1.39 $341,150.48

Truck Haul Rock Excavation to Stockpile No. 2 (Limestone) 316,668 C.Y. 1.64 $519,335.52 $860,486.00

“Section 3. The Contractor agrees to pay the Subcontractor for the materials to be furnished and work to be performed hereinunder, and performance of this contract as otherwise provided for herein, the sum of eight hundred sixty thousand four hundred eighty six and no/100 dollars ($860,486.00), subject to additions and deductions for changes as may be agreed upon, or determined, as provided for herein ....

“Section 4. The Contractor reserves the right to make changes in materials to be furnished or work to be performed under this Subcontract, or additions thereto or omissions therefrom, upon written order to the Subcontractor.

“Section 8. The Subcontractor further specifically obligates himself to the Contractor in the following respects, to wit: ...(F) The Subcontractor assumes towards the Contractor all the obligations and responsibilities that the Contractor assumes toward the Owner, as set forth in the Contract, General and Special Conditions, Drawings, Specifications and other Documents hereinabove referred to, insofar as applicable, generally or specifically, to the materials to be furnished and the work to be performed under this Subcontract; (g) In the event of any inconsistency or conflict between the provisions of this subcontract and the contract between the owner and contractor, the contract between owner and contractor shall prevail.” (Emphasis added).

The general contract provides in pertinent part:

“104.03 ALTERATIONS OF PLANS OR CHARACTER OF WORK — The Commission [State Highway Commission, now Kansas Department of Transportation] reserves the right to make, at any time during the progress of the work, such increases or decreases in quantities and such alterations in the details of construction, including alterations in the grade or alignment of the road or structure or both, as may be found to be necessary or desirable. Such increases or decreases and alterations shall not invalidate the Contract nor release the Surety, and the Contractor agrees to accept the work as altered, the same as if it had been a part of the original Contract.”

Change order No. 13-F, which eliminated much of the hauling that would have been performed by subcontractor Meier’s, was prepared by KDOT and resulted in substantial contractual savings to it. The Clarkson change orders resulted in even greater contractual savings for KDOT and the elimination of a substantial lawsuit against it.

Meier’s does not really challenge KDOT’s right to issue change orders or that terms and alterations in the general contract are binding upon it as a subcontractor. Rather, Meier’s contends that United’s change order to it (issued as a result of KDOT’s change order No. 13-F) is not a change order but, in reality, constitutes a termination of the subcontract and should be subject to contractual provisions relative to termination. We do not agree. Omission of work is one of the categories of changes provided for in Section 4 of the subcontract. It should be emphasized that the hauling subcontracted to Meier’s was for material to be hauled in dump trucks to the two designated Maltese Cross stockpiles. The No. 13-F change order eliminated hauling to these sites. “Wasting” the material did not involve hauling the excavated material by dump truck. We do not have a situation where the general contractor took over the work previously subcontracted to another.

In 1981, when additional material was hauled to the Maltese Cross stockpiles from this project, Meier’s did the hauling. Certainly the work of the subcontractor was reduced by the change order. The situation may be likened to the owner eliminating a brick facade on a construction project to save money. The change order may eliminate much of the masonry subcontract but if the parties have agreed to be bound by changes in design the subcontractor has no legal complaint absent circumstances not present herein. Meier’s entered into the subcontract herein which was to haul estimated quantities of material to two designated stockpiles, subject to addition and omission thereto, and subject to conditions imposed upon the general contractor in its contract with the Highway Commission (KDOT). The quantity of work was modified by the change order.

Next Meier’s argues that the fact that it was United who first mentioned to KDOT the idea of combining the abutting Clark-son and United projects as a means of saving KDOT contractual costs on both projects and eliminating the Clarkson lawsuit is evidence of bad faith on the part of United — especially when coupled with the fact that the material “wasted” to United as a result of the subsequent change order may be of Value to United. We do not agree. To penalize a general contractor for suggesting to the owner a possible means of saving the owner money by changing construction plans is, generally speaking, poor public policy and is all the more so when tax dollars are paying the project’s cost. We agree with the trial couit that the evidence herein, taken in the light most favorable to Meier’s, is insufficient, as a matter of law, to constitute bad faith on the part of United so as to support a claim of breach of contract. We conclude the trial court did not err in finding that, as a matter of law, United did not breach its contract with Meier’s and, accordingly, in directing a verdict in favor of United on count No. 2.

Meier’s claim of error relative to the trial court’s dismissal of count No. 3 (civil conspiracy) is dependent upon a successful challenge to the trial court’s determination that no breach of contract occurred. Our affirmance of the breach of contract issue disposes of the issues relative to count No. 3 raised on the appeal and cross-appeal.

The judgment is affirmed.