AGGREGATE CONSTR. v. AARON SWAN & ASSOCS.

On December 31, 2007, Aggregate delivered samples of Type 2A

aggregate to Swan for sodium-sulfate soundness testing.1 Aggregate planned to

quote prices for the material to prime contractors that intended to bid on a SDDOT

project requiring the material. Before quoting prices, Aggregate engaged Swan to

test material from the Ophiem pit in Perkins County, South Dakota, to determine

whether it met SDDOT specifications, which required a maximum soundness loss of

15. In January 2008, Swan informed Aggregate that preliminary testing indicated

that the material from the Ophiem pit met SDDOT specifications and that the

soundness result would be further lowered after the unprocessed pit-run material

was processed. Aggregate subsequently quoted a price for the material to prime

contractors, one of which, Bituminous Paving, Inc., was awarded the contract for

the project. Thereafter Bituminous and Aggregate entered into a subcontract for

the supply of the material.

[¶3.] In August 2008, SDDOT sampled and tested the material from the

Ophiem Pit. SDDOT advised Aggregate that the sample failed sodium-sulfate

soundness testing with a score of 19. Aggregate contacted Swan to inform it that

the material had failed SDDOT testing. Swan informed Aggregate that there had

been an error in Swan’s calculation and that the correct result should have been

21.3.

[¶4.] SDDOT determined that the Ophiem Pit aggregate would need to be

blended with other material to ensure compliance with specifications. In September

2008, Aggregate started blending “Fisher Chips” with the Ophiem Pit aggregate

and stockpiled the blend at three locations: Ophiem, Shade Hill, and Bison. SDDOT

took samples from the three stockpiles, consolidating the samples for purposes of

sodium-sulfate soundness testing. SDDOT notified Aggregate in October that the

material still failed testing with a score of 16. In December, SDDOT informed

Aggregate that the material could not be used absent corrective action.

[¶5.] In February 2009, Aggregate challenged the composite sample of

aggregates from the stockpiles. It requested split sampling and submission to an

independent laboratory for testing. It also gave notice of a potential claim due to

alleged improper sampling and testing. SDDOT refused to resample or retest the

stockpiles. After further dispute of SDDOT testing procedures, in March 2009,

SDDOT admitted that its sampling techniques had not been followed and it would

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therefore obtain new samples and test each stockpile separately. Finally, in April

2009, SDDOT informed Aggregate that all three samples passed soundness testing.

[¶6.] These problems with the blend resulted in multiple delays in

Aggregate’s ability to provide the material to Bituminous. As a result, Bituminous

obtained Type 2A cover aggregate from a different pit to use on a segment of the

project. Bituminous alleged that Aggregate had breached its contract. Thereafter,

it charged increased costs to Aggregate and withheld payment. Aggregate filed a

claim with SDDOT for damages in the amount of $453,006.47; SDDOT denied the

claim. Aggregate then initiated a lawsuit against SDDOT. Aggregate and SDDOT

settled the lawsuit and executed a “Full and Final Release of All Claims.”

[¶7.] After settling the lawsuit against SDDOT, Aggregate filed this action

against Swan, alleging breach of contract and negligence. Swan moved for

summary judgment and argued that the release between Aggregate and SDDOT

barred the claims against it. The circuit court agreed. It granted summary

judgment and dismissed the claims against Swan. Aggregate appeals, and we

restate its issues as follows: whether the circuit court erred in determining that the

release applies to the contract and negligence claims against Swan.

Standard of Review

[¶8.] “We will affirm the [circuit] court’s grant or denial of a motion for

summary judgment when no genuine issues of material fact exist, and the legal

questions have been correctly decided.” Arch v. Mid-Dakota Rural Water Sys., 2008

S.D. 122, ¶ 7, 759 N.W.2d 280, 282 (quoting A-G-E Corp. v. State, 2006 S.D. 66, ¶

13, 719 N.W.2d 780, 785). “The interpretation of a contract is a question of law,

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which is reviewed de novo.” Id. (quoting A-G-E Corp., 2006 S.D. 66, ¶ 15, 719

N.W.2d at 786).

Analysis

[¶9.] Aggregate contends that the circuit court erred because Swan’s alleged

negligence or breach of contract2 occurred in January 2008 rather than “during

construction season 2008-2009” as required by the release. Therefore, according to

Aggregate, neither its contract nor negligence claim against Swan should have been

dismissed because the release does not apply.

[¶10.] The release executed between SDDOT and Aggregate provides in

relevant part:

In sole consideration of the payment of One Hundred SeventyTwo Thousand Five Hundred Dollars ($172,500.00) to the undersigned [(Aggregate)] made by or on behalf of the South Dakota Department of Transportation and the agents and employees of SDDOT, hereinafter called Releasee, the receipt and sufficiency of which is hereby acknowledged, the undersigned for itself, its heirs, personal representatives and assigns, releases and forever discharges the aforesaid Releasee, and all others directly or indirectly liable, from any and all claims, demands, liabilities, obligations, damages, costs, expenses, loss of profits, loss of use, loss of services and consortium, actions and causes of action, including each and every right of payment for damages said undersigned may now or hereafter have, arising from any act, occurrence or omission up to the present time and particularly on account of all loss and damage of any kind heretofore sustained, presently existing, or that may hereafter be sustained or that may arise in consequence of incidents that occurred during construction season 2008-2009 on: (1) the Butte County Project, which is the subject matter of Butte County lawsuit 10-298; and (2) the Ziebach County Project, which is the subject matter of Ziebach County lawsuit 10-15.

2. We offer no opinion whether the allegations set forth in the complaint constitute a tort claim, contract claim, or both.

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There are hereby discharged and released not only the Releasee specifically named herein as discharged and released, but also in like manner and to the same extent all other persons, corporations and partnerships whatsoever such as are classified as joint tortfeasors, it being intended hereby to completely bar any right of action against any of such joint tortfeasors whether or not named herein, and vest in the person or persons, corporation or corporations, partnerships or limited partnerships, specifically named herein as released and discharged, all rights as to contribution from any such joint tortfeasor not specifically named herein.

[¶11.] Aggregate contends that Swan’s negligence or breach of contract is not

an “incident[ ] that occurred during construction season 2008-2009.” Swan asserts

that the release applies because its work was performed for a project to be

completed in the 2008-2009 construction season. The circuit court determined that

the release “bars any cause of action related to harms or injuries from the 2008

2009 Project.” We reject each of these three interpretations of the contract’s

language.

[¶12.] The release applies more broadly than to only those claims arising out

of the 2008-2009 construction season. The release bars all “causes of action . . .

arising from any act, occurrence or omission up to the present time[.]” According to

its language, the release bars any claim that Aggregate has against SDDOT from

any “act, occurrence or omission” by SDDOT “and all others directly or indirectly

liable” that had occurred up to the date the release was executed. The phrase

“incidents that occurred during construction season 2008-2009” is part of the

broader phrase: “and particularly on account of all loss and damage of any kind

heretofore sustained, presently existing, or that may hereafter be sustained or that

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may arise in consequence of incidents on: (1) the Butte County Project . . . and (2)

the Ziebach County Project[.]” Therefore, “arise in consequence of incidents that

occurred during construction season 2008-2009” modifies the immediately preceding

phrase “and particularly on account of all loss and damage” rather than “any and all

claims, demands, liabilities, obligations, damages, costs, expenses, loss of profits,

loss of use, loss of services and consortium, actions and causes of action, including

each and every right of payment for damages said undersigned may now or

hereafter have, arising from any act, occurrence or omission up to the present

time[.]” To read the release otherwise would render the phrase “arising from any

act, occurrence or omission up to the present time” meaningless. (Emphasis added.)

See Nelson v. Schellpfeffer, 2003 S.D. 7, ¶ 14, 656 N.W.2d 740, 744 (“An

interpretation which gives a reasonable and effective meaning to all the terms is

preferred to an interpretation [that] leaves a part unreasonable or of no effect.”).

[¶13.] Contrary to Aggregate’s interpretation, this last phrase in the first

paragraph of the release is not a limitation on the release’s applicability. Rather,

the words “and particularly” indicate that the words that follow are those of

emphasis. Therefore, the release applies to the Butte and Ziebach County Projects

in addition to any other claims against SDDOT and “all others directly or indirectly

liable” up to that time. Because of the broad language of the release, Swan’s actions

need only to have occurred by the time the release was executed rather than during

the construction season of 2008-2009. The parties do not dispute that Swan’s

soundness testing occurred in December 2007 or January 2008, which is clearly

prior to the settlement reached with SDDOT and thus covered by the release.

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[¶14.] According to Aggregate, the circuit court’s grant of summary judgment

only applied to its negligence claims. Further, Aggregate asserts that the release

does not bar a contract claim and that it could not do so as a matter of law.

Summary judgment was granted on the entire case, which included the contract

claims against Swan. The court’s order denying Aggregate’s motion to reconsider

and its order “denying [Aggregate’s] motion for trial of breach of contract claims”

clarify that the memorandum decision applied to the contract claims. The court

explicitly states in its order denying the motion for trial on the contract claims that

“the summary judgment decision issued by the [c]ourt on January 10, 2015,

included the breach of contract claim.” Aggregate has not provided any authority

for the proposition that “the release could not have released the contract claim as a

matter of law.” The release’s language barring “any and all claims . . . and causes of

action” is sufficiently broad to release contract claims that Aggregate may have had

against “all others directly or indirectly liable[.]” Lastly, the second paragraph of

the release does not restrict the release’s applicability to joint tortfeasors. Rather, it

expands applicability to joint tortfeasors. Therefore, we affirm the circuit court’s

grant of summary judgment.3

[¶

Because Aggregate and SDDOT executed a release that applied to the

causes of action brought by Aggregate against Swan, we need not reach the other

issues raised by Aggregate.