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Jim Psenak Construction v. State11/16/2005
to competitive bid. The State, after the bid process was concluded, contracted to have the work completed for $206,886.00.
Psenak then filed a complaint for wrongful termination of his contract. The Contracting Officer ruled against Psenak and Psenak appealed to the Commissioner of the Department. The Commissioner appointed a hearing officer. After a four week hearing where 25,000 pages of material were entered into evidence, the hearing officer concurred with the procurement officer. In addition the hearing officer determined that Psenak made misrepresentations to the department in violation of AS 36.30.687(a), and all of Psenak's claims were forfeited pursuant to AS 36.30.687(a)(1). The Commissioner adopted, in its entirety, the hearing officer's Recommended Decision thereby denying Psenak's claims and awarding the State damages on their counterclaims to collect overpayments, liquidated damages, and costs of contract completion. This appeal follows.
III. Standard of Review
This appeal raises questions of contract interpretation and statutory construction. See e.g., State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d 1074, 1076 (Alaska 2001). When the superior court acts as an intermediate court of appeal it substitutes its own judgment for questions of law not involving agency expertise, such as contract interpretation. See Alaska Hous. Fin. Corp. v. Salvucci, 950 P.2d 1116, 1119 (Alaska 1997). The court resolves questions of statutory construction de novo by applying its independent judgment. See Progressive Ins. Co. v. Simmons, 953 P.2d 510, 512 (Alaska 1998) (citing Deal v. Kearney, 851 P.2d 1353, 1356 n.4 (Alaska 1993)). In doing so, it should "adopt the rule of law that is most persuasive in light of precedent, reason, and policy." Id. (internal quotation marks omitted) (quoting Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979)).
For questions of fact, however, this court reviews the hearing officer's findings of fact under the substantial evidence test. Quality Asphalt Paving, Inc. v. State, Dept. of Transp. & Pub. Facilities, 71 P.3d 865, 870 (Alaska 2003) (citing Estate of Basargin v. State, Commercial Fisheries Entry Comm'n, 31 P.3d 796, 799 (Alaska 2001)). The court will uphold the hearing officer's findings if they are supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Id. at 800.
IV. Termination
Psenak argues that it was improperly terminated for two reasons. First, Psenak argues that it was improperly terminated because the State was in material breach of the contract at the time of the alleged default. Second, Psenak asserts that it was not in default at the time of termination.
a. Was the State in material breach of the contract at the time it terminated Psenak for default?
Psenak argues that it was incorrectly terminated for default because the State was in material breach of the contract at the time of the alleged default. Specifically, Psenak claims the State breached the implied warranty of accuracy, suitability, and constructability of the plans and specifications. Psenak claims this breach arises out of the conflict created by the prepositional phrase in Special Provision 203-3.02 of the Special Provisions. Flowing from this breach, Psenak also argues that the State was in breach for its failure to (1) adequately administer a change and compensate Psenak for significant re-excavation, (2) and give timely and adequate direction to Psenak after the discovery of the design conflict. Thus, because substantially all of Psenak's wrongful termination claims flow from the design conflict, the court must determine whether the conflicting
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