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Jim Psenak Construction v. State11/16/2005
contractual terms mean that the State was in material breach at the time of default termination.
The court agrees with the hearing officer's determination that the conflict in Special Provision 203-3.02 is a true conflict, and not an ambiguity. No method of contract interpretation can harmonize the 3:1 limitation with the directive to construct as shown on the plans. However, to decide that the conflict rises to the level of material breach, Psenak must convince the court that the conflicting language somehow injured it.
To reach this conclusion, Psenak suggests that the court read the contract to mean something other than what it says. Specifically, Psenak argues that although Special Provision 203-3.02 is entitled "Embankment Construction," it should be interpreted to apply to the excavation portions of the project as well. This interpretation is essential to Psenak's material breach argument because Psenak's problems arose out of the excavation side of the project, where, to meet design elevations, it had to recut slopes it had already cut, costing it time and money. Based on the delay caused by the recut, Psenak was also assessed liquidated damages. In contrast, Psenak was not required to reconstruct any slopes on the embankment portion and claimed no increased burden on the embankment side resulting from confusion over Special Provision 203-3.02.
For this question of contract interpretation, the court will apply its independent judgment. See Alaska Hous. Fin. Corp. v. Salvucci, 950 P.2d at 1119. "In determining a contract's meaning, ' he parties' expectations must be gleaned not only from the contract language, but also from extrinsic evidence.' The words of the contract are nevertheless the most important evidence of intention." K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 712 (Alaska 2003) (internal quotations omitted) (emphasis added). On this issue the plain words of the contract are clear: any 3:1 slope limitation applies only to the embankment portion of the contract, and thus the excavation side should have been built to the design elevations. After reviewing the record below and considering the parties' briefing, this court adopts the reasoned analysis of the hearing officer's recommended decision that interprets the contract to mean what it says, i.e., that the 3:1 slope limitation/plan elevation conflict only applies to the embankment portion of the project.
In sum, the State was not in material breach because there was no conflict in the plans and specifications of which Psenak can complain because the plans and specifications were perfectly adequate for the performance of the excavation on the project. The conflict that existed in Special Provision 203-3.02 only applied to the embankment portion of the project and thus caused Psenak no harm.
b. Did the hearing officer correctly find that Psenak was in default when it was terminated?
The State terminated the contract under Section 108-1.08 of the Standard Specifications for default on August 11, 2000, citing Psenak's failure to return overpayments made, and its failure to submit a plan to complete the unfinished work. The hearing officer determined that the State had adequate grounds to terminate Psenak under this section. The hearing officer also determined that Psenak had failed to resume work which had been discontinued after reasonable notice, had become insolvent through no fault of the State, had performed the work unsuitably, had refused to perform anew work which was rejected as unsuitable, and had failed to carry on the work in an acceptable manner. The hearing officer held that even if any of these grounds were not mentioned in the termination notice, t
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