Case Title: State Highway Com'n of Wyoming v. Brasel & Sims Const. Co., Inc.

Citation: 

Docket Number: 83-92

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-09-12T00:00:00Z

Document:
State Highway Com'n of Wyoming v. Brasel & Sims Const. Co., Inc.1984 WY 97688 P.2d 871Case Number: 83-92, 83-93Decided: 09/12/1984STATE HIGHWAY COMMISSION OF WYOMING, APPELLANT (DEFENDANT), 

v. 

BRASEL & SIMS CONSTRUCTION CO., INC., A WYOMING CORPORATION, APPELLEE (PLAINTIFF). 

BRASEL & SIMS CONSTRUCTION CO., INC., APPELLANT (PLAINTIFF), 

v. 

STATE HIGHWAY COMMISSION OF WYOMING, APPELLEE (DEFENDANT).
Supreme Court of Wyoming
STATE HIGHWAY COMMISSION 
OF WYOMING, APPELLANT (DEFENDANT), 

v. 

BRASEL & SIMS 
CONSTRUCTION CO., INC., A WYOMING CORPORATION, APPELLEE (PLAINTIFF). 

BRASEL & SIMS 
CONSTRUCTION CO., INC., APPELLANT (PLAINTIFF), 

v. 

STATE HIGHWAY COMMISSION 
OF WYOMING, 
APPELLEE (DEFENDANT).

Rehearing Denied November 
1, 1984.

 
 
Appeal from the 
District Court, LaramieCounty, Paul T. Liamos, Jr., 
J.

 
 
A.G. McClintock, 
Atty. Gen., Glenn A. Williams, Senior Asst. Atty. Gen., Lawrence A. Bobbitt, 
III, Asst. Atty. Gen., A. Joseph Williams, Sp. Asst. Atty. Gen., Cheyenne, 
for State Highway Commission of Wyoming.

John T. Pappas 
and L.M. Chipley, Western Law Associates, P.C., Lander, for Brasel & 
Sims Construction Co., Inc.

Before 
ROONEY, C.J., and THOMAS, ROSE, BROWN and CARDINE, JJ. 

ROSE, Justice.

[¶1.]     Brasel & Sims 
Construction Company, Inc. (Brasel & Sims), an experienced builder of roads 
in this state, brought this action against the State Highway Commission of 
Wyoming to recover damages it sustained in performing a highway-construction 
contract. Brasel & Sims alleged that the contract, ostensibly a one-year 
project, required two years to complete and entailed unanticipated expenses as a 
result of the failure of the state highway department1 to supply an adequate source of 
water and to accurately represent the quality of the designated gravel pit. 
Following a trial to the court, a judgment was entered in favor of Brasel & 
Sims in the amount of $1,945,520.84.

[¶2.]     On appeal, the 
commission concedes that the evidence is sufficient to support a finding of 
liability. The commission takes the position, however, that the 
dispute-resolution clause in the contract, which authorizes the department 
engineer and the commission to decide questions arising under the contract, 
should have been enforced by the trial court to preclude recovery by Brasel 
& Sims. The commission also challenges Brasel & Sims' method of proving 
damages at trial. Brasel & Sims cross-appeals the refusal of the trial court 
to award actual or prejudgment interest. We will affirm the judgment of the 
district court in all respects.

BACKGROUND

[¶3.]     Brasel & Sims and 
the commission entered into a contract on October 19, 1978, for the construction 
of a portion of Wyoming Highway No. 387. Article VII of the contract specified 
the manner in which disputes were to be resolved:

"VII. Any dispute 
concerning a question of fact arising under this contract which is not disposed 
of by agreement shall be decided by the Engineer, who shall reduce his decision 
to writing and mail or otherwise furnish a copy thereof to the Contractor. The 
decision of the Engineer shall be final and conclusive unless, within 30 days 
from the date of receipt of such conclusion, the Contractor mails or otherwise 
furnishes the Wyoming State Highway Commission written appeal. In connection 
with any appeal proceeding under this clause, the Contractor shall be afforded 
an opportunity to be heard and to offer evidence in support of his 
appeal."

The contract 
also adopts by reference the Wyoming Highway Department Specifications for Road 
and Bridge Construction, 1974. Section 105.17 sets out a claims 
procedure:

"105.17 CLAIMS FOR 
ADJUSTMENTS AND DISPUTES.

"If in any case the 
Contractor deems that additional compensation is due him for work or material 
not clearly covered in the contract or not ordered as extra work as defined 
herein, or that contract time be extended, the Contractor shall notify the 
Engineer in writing within a reasonable time of his intention to make claim for 
such additional compensation or extended time. This notification should also 
specify the basis for the claim. The Engineer will acknowledge receipt of said 
intention and advise the Contractor that consideration will be given the claim 
when it is submitted in a formal manner with complete and thorough justification 
for every item.

"Within sixty (60) days 
from the date of the Contractor's formal claim, the Department will render to 
the Contractor a judgment in writing. This judgment shall be final and binding 
upon both parties to the contract unless the Contractor files within thirty (30) 
days of the date of said judgment a written notice of appeal with the Secretary 
of the Highway Commission. Subsequent to the filing of the notice of appeal, the 
claim will be pursued according to the Contractor's Claim Procedure adopted by 
the Highway Commission.

"Under no circumstances 
will a claim be considered if submitted later than sixty (60) days after 
publication of first advertisement that work has been accepted as 
complete.

"If the claim is found to 
be just, it will be paid on the basis of actual costs to which no percentage 
will be added. The justification for payment may be based upon an audit by the 
Department of the Contractor's project records and cost accounting 
system."

[¶4.]     Pursuant to these 
provisions, Brasel & Sims filed its claim to recover the costs it had 
incurred as a result of alleged breaches by the highway department. The claim 
was ultimately denied by the commission, and this denial was affirmed by the 
district court, upon Brasel & Sims' petition for review. Brasel & Sims 
appealed that decision to this court. Brasel & Sims Construction Co., Inc. v. 
State Highway Commission of Wyoming, Wyo., 655 P.2d 265 (1982). We dismissed 
the appeal, holding that the district court, and therefore this court, lacked 
jurisdiction to entertain a petition for review since the highway commission had 
no authority to decide the contract dispute in the first place. We noted in that 
case that Brasel & Sims had filed a separate action in district court 
seeking recovery of the same damages that it had claimed by way of the 
administrative procedure. We said:

"Appellant's [Brasel 
& Sims'] relief may be found in its action on the contract filed in the 
District Court, LaramieCounty, First Judicial District." 655 P.2d  
at 268.

[¶5.]     At trial in the present 
case, Brasel & Sims used the "total cost" method to calculate and prove 
damages. By subtracting the estimated cost of doing the work under conditions as 
represented from the actual cost of doing the work in the nine areas affected by 
the breach,2 Brasel & Sims arrived at a 
damages claim of $2,010,552.

[¶6.]     The trial court, in its 
Findings of Fact, approved the costs claimed by Brasel & Sims in five of the 
nine areas,3 which costs amounted to $1,887,362. 
These costs were found by the court to be reasonable:

"THE DEFENDANT BREACHED 
THE OCTOBER, 1978 CONTRACT AND THE WARRANTIES, AND AS A NATURAL RESULT, THE 
PLAINTIFF HAS PERFORMED WORK AND SUPPLIED MATERIALS NOT CLEARLY COVERED IN THE 
ORIGINAL CONTRACT, THE ACTUAL AND REASONABLE COST OF THE EXTRA WORK AND MATERIAL 
BEING $1,887,362.00, SAID AMOUNT BEING THE DIFFERENCE BETWEEN THE REASONABLE 
COST OF DOING THE WORK UNDER THE CONDITIONS REPRESENTED AND THE REASONABLE COST 
OF DOING THE WORK UNDER ACTUAL CONDITIONS."

The court 
determined, however, that an "equitable and appropriate" award would be 
$1,691,757.25, the difference between Brasel & Sims' total cost for the 
entire construction project and the amount of money paid to Brasel & Sims by 
the highway department for the entire project. The court allowed a profit of 15% 
of the additional cost for a total award to Brasel & Sims of 
$1,945,520.84.

ISSUES ON 
APPEAL

[¶7.]     The commission presents 
the following issues for our consideration on appeal:

"THE DISTRICT COURT ERRED 
IN REFUSING TO ENFORCE THE DISPUTES CLAUSE OF THE 
CONTRACT,"

and

"THE PLAINTIFF FAILED TO 
PROVE ITS DAMAGES."

Brasel & 
Sims raises a single issue:

"Did the court err in not 
awarding either actual interest or statutory pre-judgment 
interest?"

I

[¶8.]     In analyzing the effect 
of the dispute-resolution provisions in the construction contract, it is helpful 
to review our earlier decision involving these parties in which we dismissed the 
appeal. Brasel & Sims Construction 
Co., Inc. v. State Highway Commission of Wyoming, supra. The crux of that 
opinion is that administrative agencies, absent statutory authority, may not 
adjudicate contract disputes. We said that agencies are free to establish 
claims-resolution procedures for the negotiation of additional compensation or 
the adjustment of disputes. Such procedures, however, cannot constitute formal 
administrative proceedings under the Wyoming Administrative Procedure Act, §§ 
16-3-101 through 16-3-115, W.S. 1977, unless an express statute authorizes the 
agency to adjudicate its contract disputes.4 No such enabling legislation exists 
with respect to the state highway commission:

"* * * We can find no 
statutory authority for the appellee [State Highway Commission of Wyoming] to 
conduct a hearing and make findings, conclusions of law, and a decision in a 
dispute between itself and one of its contractors, which is reviewable by the 
district court on a petition for review." Brasel & Sims Construction Co., Inc. v. 
State Highway Commission of Wyoming, supra, 655 P.2d  at 
268.

Thus, as an 
aggrieved party, Brasel & Sims' remedy was a suit on the contract in a court 
of law, where it could obtain a trial de novo, notwithstanding the adjudicatory 
process established by the commission for resolving contractual 
disputes.

[¶9.]     Our holding in Brasel & Sims Construction Co., Inc. v. 
State Highway Commission of Wyoming, supra, does not prevent parties from 
agreeing to submit disputes to one of the parties to the contract and further 
agreeing to be bound by that party's decision. Such provisions are fairly common 
in construction contracts and are enforceable in court. United 
States v. 
Moorman, 338 U.S. 457, 70 S. Ct. 288, 94 L. Ed. 256 
(1950). These provisions are valid because the court, not the agency, performs 
the judicial function of interpreting the terms of the contract and their legal 
effect in accordance with the familiar requirements of good faith and absence of 
collusion, fraud or mistake. United 
States v. Moorman, supra; 3A Corbin on Contracts, § 652, pp. 121-131. We 
recognized the validity of self-imposed prerequisites to the initiation of a 
suit in Brasel & Sims Construction 
Co., Inc. v. State Highway Commission of Wyoming, supra, 655 P.2d at 
268:

"* * * Parties to a 
contract can create valid conditions precedent to the right to bring an action 
and the claim will not accrue until the condition has been 
performed."

To the same 
effect, see United States v. Joseph A. 
Holpuch Company, 328 U.S. 234, 66 S. Ct. 1000, 90 L. Ed. 1192 (1946); United States v. Blair, 321 U.S. 730, 64 S. Ct. 820, 88 L. Ed. 1039, reh. denied 322 U.S. 768, 64 S. Ct. 1052, 88 L. Ed. 1594 
(1944). 

[¶10.]  It is undisputed that Brasel & Sims 
invoked the dispute-resolution provisions set out in the construction contract. 
It is also undisputed that the commission, pursuant to its authority under the 
pertinent contract provisions, denied Brasel & Sims' claim for additional 
compensation. The determinative question, then, is what effect the courts should 
give to these contract provisions and to the corresponding decision of the 
commission.

[¶11.]  The commission contends that the trial 
court should have enforced the written agreement of the parties and deferred to 
the decision of the commission which denied Brasel & Sims' claim for 
additional compensation. In support of this contention, counsel for the 
commission quote in their brief from 3A Corbin on Contracts, supra, at 
121-122:

"In construction 
contracts it is not unusual for the parties to submit certain questions to the 
architect, engineer, or other supervising expert, and to agree that his finding 
or decision shall be final and conclusive. Other kinds of contracts, also, may 
contain similar provisions. There is nothing illegal or contrary to general 
public policy in such provisions. Usually, however, the supervising expert is in 
the pay of one of the parties and not of the other. This makes it necessary, in 
giving conclusive effect to the expert's decision, for the court to make very 
sure that the decision was rendered in good faith, without improper collusion 
with any one, and after a fair investigation of the 
facts."

[¶12.]  The force and validity of the 
commission's position depends upon whether the parties have in fact agreed to 
treat the finding of the commission as final and binding. The intention of the 
parties to submit their disputes to conclusive determination by a contractually 
designated agent should be made manifest by plain language. United States v. Moorman, supra, 338 U.S.  at 462, 70 S. Ct.  at 291. 
Finality of the arbiter's decision is not to be implied. Mercantile Trust Company v. Hensey, 205 U.S. 298, 27 S. Ct. 535, 51 L. Ed. 811 
(1907).

[¶13.]  In O.K. Johnson Electric, Inc. v. Hess-Martin 
Corporation, Inc., 204 Kan. 478, 464 P.2d 206 (1970), the Supreme Court of 
Kansas, in interpreting a construction contract, refused to treat the decisions 
of the architect and prime contractor as final, notwithstanding the contract 
provision that payment to the subcontractor was subject to their 
approval:

"* * * In building and 
construction contracts the parties frequently agree that the finding of an 
architect or other designated person in respect to quantity and character of 
work done shall be conclusive, in which case it can only be impeached upon the 
ground of fraud, gross mistake, bad faith, undue influence, or some other good 
cause. * * *

* * * * * 
*

"The `subject to 
approval' clause now under consideration lacks plain and unequivocal language 
indicating a binding, conclusive effect was to be given any decision rendered by 
Hess and the architect." 464 P.2d  at 210-211.

[¶14.]  In the instant case, the parties agreed 
to follow certain dispute-resolution procedures as set out in Article VII of the 
contract and § 105.17 of the Specifications, supra. However, these provisions 
make no mention of a final, binding or conclusive decision by the commission. 
Article VII specifies that:

"* * * The decision of 
the Engineer shall be final and conclusive unless, within 30 days from the date 
of receipt of such conclusion, the Contractor mails or otherwise furnishes the 
Wyoming State Highway Commission written appeal."

We believe that 
this provision is properly interpreted as a 30-day limitation of actions rather 
than as a finality clause. It is true that the engineer's decision binds the 
parties unless an appeal is taken to the commission within 30 days. However, the 
initiation of the appeal process deprives the engineer's decision of finality, 
and the contract fails to specify that the commission's decision shall bind the 
parties.

[¶15.]  The same effect must be given to the 
claims procedure set out in § 105.17 of the Specifications. That section 
provides in pertinent part:

"* * * The Department 
will render to the Contractor a judgment in writing. This judgment shall be 
final and binding upon both parties to the contract unless the Contractor files 
within thirty (30) days of the date of said judgment a written notice of appeal 
with the Secretary of the Highway Commission. Subsequent to the filing of the 
notice of appeal, the claim will be pursued according to the Contractor's Claim 
Procedure adopted by the Highway Commission."

Again, no 
provision is made for a final decision by the commission. As we said earlier, 
the "Contractor's Claim Procedure" is invalid under our holding in Brasel & Sims Construction Co., Inc., v. 
State Highway Commission of Wyoming, supra, since the procedure contemplates 
administrative adjudication of the contract dispute, subject only to limited 
review in court.

[¶16.]  We conclude that the parties did not 
manifest by plain language an intent to be bound by the commission's decision in 
this case.5 Accordingly, no final or conclusive 
dispute-resolution clause existed for judicial enforcement, and the trial court 
was free to consider the evidence and resolve the parties' dispute, independent 
of the decision made by the commission.

II

[¶17.]  The commission contends that Brasel & 
Sims calculated and attempted to prove damages using a discredited method and, 
therefore, it failed to establish with sufficient certainty those injuries that 
resulted from the department's breach. We will hold that the total-cost standard 
(the difference between actual costs and bid or estimated costs), employed by 
Brasel & Sims, was appropriate under the facts of this case and that the 
actual award as determined by the trial court represented a fair and reasonable 
approximation of the damages sustained by Brasel & Sims as a result of the 
department's breach.

[¶18.]  The proper measure of damages is the 
amount of the contractor's extra costs directly attributable to the government's 
breaches. J.D. Hedin Construction 
Company, Inc. v. United 
States, 347 F.2d 235, 259, 171 Ct.Cl. 70 
(1965). Obviously, the preferable method for calculating such losses would be to 
itemize and total the cost of each piece of equipment or material and each man 
hour necessitated by the unanticipated conditions encountered in performing the 
contract. Such exactness is not always possible or 
necessary.

[¶19.]  The total-cost method of computing 
recovery, while generally disfavored by the courts, is permissible where the 
breach or unexpected conditions pervade substantial areas of performance. J.D. Hedin Construction Company, Inc. v. 
United States, supra. The United States Court of Claims in WRB Corporation v. The United States, 
183 Ct.Cl. 409 (1968), set out the requirements for use of the total-cost 
method to prove damages:

"* * * The acceptability 
of the method hinges on proof that (1) the nature of the particular losses make 
it impossible or highly impracticable to determine them with a reasonable degree 
of accuracy; (2) the plaintiff's bid or estimate was realistic; (3) its actual 
costs were reasonable; and (4) it was not responsible for the added expenses. * 
* *" 183 Ct.Cl. at 426.

The case at bar 
meets these tests.

[¶20.]  Brasel & Sims isolated the areas of 
the construction project affected by the breach and applied the total-cost 
method to calculate increased costs with respect to each area. Essentially, the 
inadequate water supply and the unexpected deposits of clay in the gravel pit 
resulted in delays throughout the entire construction period, the cost of which 
would have been difficult, if not impossible, to calculate by any other method. 
The daily difficulties encountered in crushing and handling wet clay or in 
excavating large quantities of dirt with insufficient water resulted in 
additional costs which were not subject to precise 
measurement.

[¶21.]  We find pertinent the analysis of the 
Court of Claims in J.D. Hedin 
Construction Company, Inc. v. United States, supra, in approving the 
total-cost method used by the contractor to calculate its reimbursement for 
additional foundation work caused by faulty government 
specifications:

"Defendant challenges the 
manner in which these costs were computed by arguing that the commissioner's 
report erroneously accepts the `total cost' theory expressly rejected by us in 
[citations]. We are aware that we have on a number of occasions expressed our 
dislike for this method of computing breaches of contract damages, and we do not 
intend to condone its use as an universal rule. However, we have used this 
method under proper safeguards where there is no other alternative, since we 
recognized that the lack of certainty as to the amount of damages should not 
preclude recovery. [Citations.] In all these cases the fact of government 
responsibility for damages was clearly established; the question was how to 
compute reasonable damages where no other method was available. [Citation.] We 
think this is such a case. The exact amount of additional work which plaintiff 
had to perform as a result of the foundation problem is difficult, if not 
impossible, to determine because of the nature of the corrective work which was 
being performed. The adverse weather conditions during the extended period in 
which the excavations remained open caused a myriad of problems. Additional 
trenching, form construction, and pumping of surface water became necessary. 
Re-excavation by hand was sometimes required. The extreme muddy conditions 
caused difficulties and slowed down performance. There is no precise formula by 
which these additional costs can be computed and segregated from those costs 
which plaintiff would have incurred if there had been no government-caused 
difficulties. However, the reasonableness and accuracy of plaintiff's estimate, 
which was prepared by an experienced engineer whose qualifications have been 
unchallenged, have been established. * * Plaintiff on prior occasions had 
successfully constructed a number of large projects for the Veterans 
Administration. Plaintiff has established the fact that it performed additional 
work. Moreover, the responsibility of defendant for these damages is clear. The 
only possible method by which these damages can be computed is by resort to the 
`total cost' method. Under such circumstances, * * we think that the government 
should not be absolved of liability for damages which it has caused, because the 
precise amount of added costs cannot be determined." 347 F.2d  at 
246-247.

In similar 
fashion, we know of no precise formula by which the costs of coping with 
insufficient water and adulterated gravel can be isolated from those costs which 
Brasel & Sims would have incurred in the absence of the department's breach. 
The pervasive nature of the problems rendered an exact calculation of losses 
impossible or highly impracticable. Additional cases in which review courts have 
approved the application of the total-cost theory under circumstances similar to 
the instant case include Moorhead 
Construction Co., Inc. v. City of Grand Forks, 508 F.2d 1008 (8th Cir. 
1975); Zook Brothers Construction Company 
v. State, 171 Mont. 64, 556 P.2d 911 (1976); and Thorn Construction Company, Inc. v. Utah 
Department of Transportation, Utah, 598 P.2d 365 
(1979).

[¶22.]  As to the second element of the WRB 
Corporation test, the evidence supports the finding of the trial court that 
Brasel & Sims' bid or estimate was realistic in all respects. The estimator 
for the highway department testified that Brasel & Sims' bid was reasonable 
and that he recommended its acceptance by the commission as the low bid on the 
project.

[¶23.]  The commission asserts that Brasel & 
Sims failed to satisfy the third requirement of the WRB Corporation test, since 
Brasel & Sims offered no evidence that its proven, actual costs were 
reasonable. However, expert witnesses from two independent construction 
companies testified as to the reasonableness of the manner in which Brasel & 
Sims handled problems created by the department's breach. More importantly, 
proven, actual costs in contract-claim cases are presumed reasonable, and the 
burden was on the commission to rebut this presumption with evidence that the 
costs were unreasonable. Oliver-Finnie 
Company v. United States, 
279 F.2d 498, 150 Ct.Cl. 189 (1960); Sornsin Construction Company v. State, 
180 Mont. 248, 
590 P.2d 125 (1978). Since the commission failed to refute the reasonableness of 
Brasel & Sims' extra costs, we cannot reject the total-cost method on the 
ground that Brasel & Sims' costs were unreasonable.

[¶24.]  As to the fourth requirement of the WRB 
Corporation test, the commission does not challenge on appeal the trial court's 
factual finding that no error or mismanagement on the part of Brasel & Sims 
contributed to the additional expenses. The evidence indicated that Brasel & 
Sims had adjusted its estimate upward to reflect anticipated day-to-day problems 
on the job. Thus, normal delays caused by Brasel & Sims were included in the 
elevated estimate, thereby reducing the claims for additional compensation to 
cover problems which arose as a result of breaches by the 
department.

[¶25.]  The trial judge concluded that the 
total-cost method, as applied by Brasel & Sims to those areas of the project 
affected by the department's breach, constituted a reasonable and sufficient 
basis upon which to award damages. The court made the following determination as 
part of its extensive Findings of Fact:

"* * * IN ANY CASE, AND 
IN PARTICULAR IN THIS CASE, WHERE THE ACTUAL DAMAGES SUFFERED ARE OF SO 
SUBSTANTIAL AN AMOUNT, AND WHICH DAMAGES OCCURRED OVER SUCH A LONG PERIOD OF 
TIME, MATHEMATICAL PRECISION AND EXACTITUDE IS NOT NECESSARY IN THE COMPUTATION 
OF DAMAGES. ALL THAT IS REQUIRED IS THAT THE DAMAGES BE REASONABLE. THE 
COMPUTATION USED BY PLAINTIFF IS A REASONABLE COMPUTATION WHICH HAS RESULTED IN 
THE CALCULATION OF REASONABLE DAMAGES. IN ADDITION, WHERE DAMAGES ARE TO BE 
CALCULATED FOR MISREPRESENTATION WHICH ALLEGEDLY INDUCED A BID AND ESTIMATE 
LOWER THAN WOULD BE SUBMITTED IF ACTUAL CONDITIONS WERE KNOWN, THE CORRECT 
MEASURE OF DAMAGES IS PLAINTIFF'S OUT-OF-POCKET LOSS. IN COMPUTING SUCH LOSS, IT 
IS NECESSARY TO CONSIDER BOTH THE ESTIMATE AND THE ACTUAL COST. A CONTRACTOR 
GENERALLY, AND PLAINTIFF SPECIFICALLY, IS NOT REQUIRED TO HAVE A LAWYER IN HIS 
HIP POCKET, AT A JOB SITE, DURING CONSTRUCTION OF A ROAD. THE METHOD PLAINTIFF 
USED TO COMPUTE ITS DAMAGES IS REASONABLE UNDER THE CIRCUMSTANCES AND CERTAIN 
ENOUGH TO BASE AN AWARD OF DAMAGES."

[¶26.]  The court found that the reasonable cost 
of the additional work and material necessitated by the breach and proven by 
Brasel & Sims amounted to $1,887,362. However, the court concluded that the 
concepts of equity demanded that the award be reduced to the difference between 
the actual cost of the entire project and the total amount paid to Brasel & 
Sims by the commission.

"* * * THE COURT FINDS 
THAT THE SUM OF $1,887,362.00 EXCEEDS THE SUM OF $1,691,757.25 WHICH IS THE 
DIFFERENCE BETWEEN THE TOTAL ACTUAL COST OF THE PROJECT AND THE TOTAL PLAINTIFF 
HAS BEEN PAID AND THAT IT WOULD NOT BE EQUITABLE TO EXCEED THAT AMOUNT AND THUS 
FINDS THAT JUDGMENT IN THE AMOUNT OF $1,691,757.25 WOULD BE EQUITABLE AND 
APPROPRIATE."

Using the 
increased costs established by Brasel & Sims as a basis, the court arrived 
at a final award which it considered equitable under the circumstances. By 
taking into consideration Brasel & Sims' costs for the entire project, the 
court offset the increased costs in the affected areas by any savings in costs 
achieved by Brasel & Sims in the nonaffected areas.

[¶27.]  This procedure, whereby the trial judge 
bases his award on the costs claimed by the contractor, but reduces the amounts, 
has been termed a "jury type" verdict. Metropolitan Sewerage Commission of the 
County of 
Milwaukee v. R.W. 
Construction, Inc., 78 Wis.2d 451, 255 N.W.2d 293 (1977). Such awards are 
appropriate where the contractor has been injured by unanticipated conditions, 
liability is clear, no reliable method exists to assess specific damages, and 
the evidence is sufficient to make a fair and reasonable approximation. WRB Corporation v. The United States, 
supra, 183 Ct.Cl. at 425; Metropolitan Sewerage Commission of the 
County of Milwaukee v. R.W. Construction, Inc., supra, 255 N.W.2d  at 
299-300.

[¶28.]  In the present case, the trial judge 
assessed the breach-related losses in light of the entire project and the amount 
that the highway department had already paid to Brasel & Sims. In view of 
our holding that the total-cost method of proving damages was justified under 
the circumstances of this case, we conclude that the trial court's award of 
$1,691,757.25 plus 15% profit constitutes a fair and reasonable approximation of 
the damages sustained by Brasel & Sims as a result of the highway 
department's breach of contract.

[¶29.]  Brasel & Sims has not challenged this 
"jury type" award as too low. The commission, however, would have this court 
overturn the award on the grounds that Brasel & Sims failed to prove the 
reasonableness of its costs and that the trial court contrived its own theory of 
damages. As we said earlier, the commission has presented no data to refute the 
reliability of Brasel & Sims' costs. Neither has the commission impeached 
the method employed by the trial court in making its final award. Under such 
circumstances, we decline to disturb the award determined by the trial judge to 
be fair and reasonable. We agree with that said by the Supreme Court of 
Washington in V.C. Edwards Contracting 
Co., Inc. v. Port of Tacoma, 83 Wn.2d 7, 514 P.2d 1381 (1973), in approving 
an award to a contractor based upon its total costs to complete the project 
under unanticipated circumstances, less a deduction for 
overmanning:

"There is substantial 
evidence to support the court's determination of the total reasonable cost of 
the project, less a deduction for overmanning. * * * The trier of fact must 
exercise a large measure of responsible and informed discretion where the fact 
of damages is proven. * *

* * * * * * 

"* * * While the way in 
which the offset was reached was admittedly speculative, it would seem to us 
incumbent upon the appellant Port to furnish the trial court with more precise 
figures to substantiate any claimed larger sum. Having failed to do so, the Port 
cannot now complain about a lack of precision of proof to substantiate its own 
claim." 514 P.2d  at 1387.

The "total cost" 
method of computing damages was appropriate under the facts of this case, and 
the trial judge properly exercised his discretion in basing the final award upon 
these figures. Under such circumstances, the lack of certainty as to the precise 
amount of extra costs should not absolve the government of liability for damages 
which it has caused. J.D. Hedin 
Construction Company, Inc. v. United States, supra.

III

[¶30.]  Brasel & Sims urges this court to 
hold that the trial court erred in failing to award the actual interest Brasel 
& Sims paid on money borrowed as a result of the project losses, or, 
alternatively, to hold that prejudgment interest should have been awarded as a 
matter of law.

Direct 
Damages

[¶31.]  Interest paid on funds borrowed to 
maintain liquidity has been considered a normal and foreseeable incident arising 
from a breach of contract and, therefore, compensable as damages. Certain-Teed Products Corporation v. Goslee 
Roofing & Sheet Metal, Inc., 26 Md. App. 452, 339 A.2d 302, cert. denied 
(1975). The trial court, however, refused to award actual interest in the 
present case, based on its finding that:

"* * * EVIDENCE OF 
INTEREST * * IS TOO SPECULATIVE AND NOT REASONABLY ASCERTAINABLE AND NO DAMAGES 
SHOULD BE AWARDED FOR SUCH LOSS."

[¶32.]  There was testimony at trial that Brasel 
& Sims borrowed funds to finance its entire operation, but that its books 
were not set up to show the amount of interest paid on a particular job. All 
borrowed funds were commingled. Brasel & Sims' claim for actual interest was 
calculated from its total claim for costs in the affected project areas and did 
not take into consideration payments made by the state during the course of 
performance or cash reserves. We agree with the trial court that Brasel & 
Sims' evidence of actual interest was speculative and did not support an award. 
The court is not permitted to speculate or conjecture in awarding damages. Krist v. Aetna Casualty&Surety, Wyo., 
667 P.2d 665 (1983).

Prejudgment 
Interest

[¶33.]  This court reviewed the requirements for 
a recovery of prejudgment interest in Rissler & McMurry Company v. Atlantic 
Richfield Company, Wyo., 559 P.2d 25 (1977). There we said 
that:

"* * * interest is 
recoverable on liquidated but not on unliquidated claims and * * * a claim is 
considered liquidated when it is readily computable by simple mathematical 
computation." 599 P.2d  at 31.

We said further 
that the contested nature of a claim or the need for prolonged litigation does 
not necessarily cause a claim to be unliquidated.

"The real consideration 
is the ease with which the amount due can be reached." 559 P.2d  at 
32.

[¶34.]  In the present case, Brasel & Sims 
was entitled to recover its reasonable costs stemming from the contractual 
breach. That premise was not altered by Brasel & Sims' use of the total-cost 
standard to compute damages. It follows then that the amount of the claim was 
not liquidated until the trier of fact had determined what were Brasel & 
Sims' reasonable costs. See Rissler & 
McMurry Company v. Atlantic Richfield Company, supra, 559 P.2d  at 36, 
McClintock, J., dissenting in part. This rule was applied in Hopkins v. Ulvestad, 46 Wn.2d 514, 282 P.2d 806, 810 (1955), where the Washington Supreme Court denied prejudgment 
interest in an action to foreclose a lien for labor and material furnished in 
the construction of a house: 

"* * * This is not a case 
involving a promise to pay for labor and material at an agreed rate and thus capable of being 
referred to as a `liquidated' claim. It is rather a case involving an implied 
promise to pay at a reasonable rate 
for labor and material furnished, and hence is an `unliquidated' claim. 
[Citations.] Until judgment is entered in such a case, there can be no 
liquidated claim, and hence no interest runs thereon prior to 
judgment."

[¶35.]  We hold that Brasel & Sims' claim for 
reasonable, additional costs was not liquidated prior to judgment and, 
therefore, prejudgment interest was properly denied by the trial 
judge.

[¶36.]  Affirmed.

1 Section 24-2-101, W.S. 
1977, 1984 Cum.Supp., creates the state highway department consisting of a state 
highway commission and a state highway superintendent. Seven commissioners, one 
from each highway district, are appointed by the governor, with the advice and 
consent of the senate, to serve six-year terms. Section 24-2-105, W.S. 1977, 
provides that the commission shall appoint a state highway superintendent who 
"shall be experienced and skilled in highway and bridge construction and 
maintenance * * *."

2 Brasel & Sims 
claimed that it incurred the following increased costs as a result of the 
highway department's breach of contract:

"Water .................. 
    $          
347,498 

"Excavation & 
Embankment            
561,903 

"Surfacing .............. 
              
953,642 

"Bridge and Riprap ...... 
                   
21,356 

"Fence .................. 
                
52,514 

"Revegetation ........... 
                       
44,036 

"Reclamation ............ 
                       
15,742 

"Traffic Control ........ 
                        
18,373 

"Guardrail .............. 
               
5,488  

"Subtotal ........... 
       $ 
         
2,020,552 

"Profit at 15% .......... 
                        
303,083 

$          
2,323,635"

3 The trial court approved 
the additional costs incurred by Brasel & Sims for water, excavation and 
embankment, surfacing, reclamation, and guardrail.

4 Section 16-3-101(b)(ii) 
defines a "contested case" as follows:

"`Contested case' means a 
proceeding including but not restricted to ratemaking, price fixing and 
licensing, in which legal rights, duties or privileges of a party are required 
by law to be determined by an agency after an opportunity for hearing * * 
*."

5 We note that the 
standard dispute-resolution clause included in the federal government contract 
interpreted by the United States Supreme Court in Crown Coat Front Co., Inc. v. 
United States, 386 U.S. 503, 506, n. 1, 87 S. Ct. 1177, 1179, 18 L. Ed. 2d 256 
(1967), leaves no room for doubt as to the conclusive effect of the agency's 
decision:

"`Except as otherwise 
provided in this contract, any dispute concerning a question of fact arising 
under this contract which is not disposed of by agreement shall be decided by 
the Contracting Officer, who shall reduce his decision to writing and mail or 
otherwise furnish a copy thereof to the Contractor. Within 30 days from the date 
of receipt of such copy, the Contractor may appeal by mailing or otherwise 
furnishing to the Contracting Officer a written appeal addressed to the 
Secretary, and the decision of the Secretary or his duly authorized 
representative for the hearing of such appeals shall, unless determined by a 
court of competent jurisdiction to have been fraudulent, arbitrary, capricious, 
or so grossly erroneous as necessarily to imply bad faith, be final and 
conclusive; provided that, if no such appeal is taken, the decision of the 
Contracting Officer shall be final and conclusive. In connection with any appeal 
proceeding under this clause, the Contractor shall be afforded an opportunity to 
be heard and to offer evidence in support of its appeal. Pending final decision 
of a dispute hereunder the Contractor shall proceed diligently with the 
performance of the contract and in accordance with the Contracting Officer's 
decision.'" (Emphasis added.)

ROONEY, Chief Justice, dissenting, with whom 
BROWN, Justice, joins.

THE DISPUTES CLAUSE OF 
THE CONTRACT SHOULD BE ENFORCED

[¶37.]  The majority opinion is 180 degrees 
contrary to our regularly held propositions relative to contract construction. 
This contract has a disputes clause. The language of it is plain, it definitely 
expresses the intent and purpose of the parties, and its spirit and tenor cannot 
be misunderstood.

[¶38.]  The contract is identical to those 
previously executed by Brasel & Sims Construction Co., Inc. (hereinafter 
appellee) and under which it has often performed. It provides for final dispute determination or final arbitration, subject only to one 
well-defined appeal within the purview of the Wyoming Administrative Procedure 
Act, § 16-3-101, et seq., W.S. 1977, concerning a due process 
hearing.

[¶39.]  Although the majority opinion 
acknowledges the propriety of finality in a disputes resolution clause, it 
lamely attempts to ascribe a lack of specified finality in this clause. This, of course, is 
contrary to the rules of statutory construction looking toward ascertainment of 
the intent of the parties; and it disregards the finality of an arbitration 
award, except for specified purposes, as recognized by the legislature in the 
Uniform Arbitration Act, § 1-36-101, et seq., W.S. 1977.

[¶40.]  We have long recognized the law in 
support of the foregoing. The rules of contract construction in this respect 
were summarized in Amoco Production 
Company v. Stauffer Chemical Company of Wyoming, Wyo., 612 P.2d 463, 465 
(1980):

"Our basic purpose in 
construing or interpreting a contract is to determine the intention and 
understanding of the parties. Fuchs v. 
Goe, 62 Wyo. 134, 163 P.2d 783 (1945); Shellhart v. Axford, Wyo., 485 P.2d 1031 (1971); Oregon Short Line Railroad Company v. Idaho 
Stockyards Company, 12 Utah 2d 205, 364 P.2d 826 (1961). If the 
contract is in writing and the language is clear and unambiguous, the intention 
is to be secured from the words of the contract. Pilcher v. Hamm, Wyo., 351 P.2d 1041 (1960); Fuchs v. Goe, supra; Hollabaugh v. Kolbet, Wyo., 604 P.2d 1359 (1980); Wyoming Bank and Trust 
Company v. Waugh, Wyo., 606 P.2d 725 (1980). And the contract as 
a whole shall be considered, with each part being read in light of all other 
parts. Shepard v. Top Hat Land & 
Cattle Co., Wyo., 560 P.2d 730 (1977); Rossi v. Percifield, Wyo., 527 P.2d 819 
(1974); Shellhart v. Axford, supra; 
Quin Blair Enterprises, Inc. v. Julien 
Construction Company, Wyo., 597 P.2d 945 (1979). The interpretation and 
construction is done by the court as a matter of law. Hollabaugh v. Kolbet, supra; Bulis v. Wells, Wyo., 565 P.2d 487 
(1977); Shepard v. Top Hat Land & 
Cattle Co., supra.

"If the contract is 
ambiguous, resort may be had to extrinsic evidence. J.W. Denio Milling Co. v. Malin, 25 
Wyo. 143, 165 P. 1113 (1917); Kilbourne-Park Corporation v. Buckingham, Wyo., 
404 P.2d 244 (1965). An ambiguous contract `is an agreement which is obscure in 
its meaning, because of indefiniteness of expression, or because a double 
meaning is present.' Bulis v. Wells, supra, 565 P.2d  at 490. 
Ambiguity justifying extraneous evidence is not generated by the subsequent 
disagreement of the parties concerning its meaning. Homestake-Sapin Partners v. 
United 
States, 10th Cir. 1967, 375 F.2d 507."

[¶41.]  Article VII of the contract is plain in 
providing that:

"VII. Any dispute 
concerning a question of fact arising under this contract which is not disposed 
of by agreement shall be decided by the Engineer, * * *. The decision of the Engineer shall be final 
and conclusive unless, within 30 days from the date of receipt of such 
conclusion, the Contractor mails or otherwise furnishes the Wyoming State 
Highway Commission written appeal. In connection with any appeal proceeding under this clause, the 
Contractor shall be afforded an opportunity to be heard and to offer evidence in 
support of his appeal." (Emphasis added.)

The entire 
disputes procedure with reference to finality is there set forth. The engineer's 
decision is final, subject only to any change made by the commission on 
appeal.

[¶42.]  The same is true under Section 105.17 of 
the Wyoming Highway Department Specifications for Road and Bridge Construction 
(1974). Within 60 days from the date of a claim for extra work or 
material

"* * * the Department 
will render to the Contractor a judgment in writing. This judgment shall be final and binding 
upon both parties to the contract unless the Contractor files within thirty (30) 
days of the date of said judgment a written notice of appeal with the Secretary 
of the Highway Commission. Subsequent to the filing of the notice of appeal, the 
claim will be pursued according to the Contractor's Claim Procedure adopted by 
the Highway Commission." (Emphasis added.)

[¶43.]  The intent to settle the dispute without 
recourse to the courts (other than for fraud, lack of due process, etc.) is 
manifest, and appellee well knew it to be so when it entered into the agreement. 
Appellee has been in the business for a long time. This disputes resolution 
procedure is essentially the same as in other construction contracts. Abadou v. Trad, Alaska, 624 P.2d 287 
(1981); G.L. Rugo & Sons, Inc. v. 
Town of Lexington, 338 Mass. 746, 157 N.E.2d 521 (1959); State Highway Department v. MacDougald 
Const. Co., 189 Ga. 490, 6 S.E.2d 570, 137 A.L.R. 520 
(1939).

"With respect to claims 
arising under the typical government contract, the contractor has agreed in 
effect to convert what otherwise might be claims for breach of contract into 
claims for equitable adjustment. The changes clause, for example, permits the 
Government to make changes in contract specifications. Such changes are not 
breaches of contract. They do give rise to claims for equitable adjustments 
which the Government agrees to make, if the cost of performance is increased or 
the time for performance changed. But whether and to what extent an adjustment 
is required are questions to be answered by the methods provided in the contract itself. 
The contractor must present his claim to the contracting officer, whose decision 
is final unless appealed for final action * * *." (Emphasis added.) Crown Coat Front Co. v. United States, 386 U.S. 503, 511, 
87 S. Ct. 1177, 1182, 18 L. Ed. 2d 256 (1967).

[¶44.]  In speaking of dispute clauses, the 
United States Supreme Court said in United States v. Joseph A. Holpuch Co., 
328 U.S. 234, 239, 66 S. Ct. 1000, 1003, 90 L. Ed. 1192 (1946), a dispute clause 
is

"something more than a 
dead letter to be revived only at the convenience or discretion of the 
contractor. It is a clear, unambiguous provision applicable at all times and 
binding on all parties to the contract. No court is justified in disregarding its 
letter or spirit. * * *" (Emphasis added.)

This 
"unjustified action" is now being taken by this court.

[¶45.]  Should there be any question about the 
intent of the parties as expressed in the plain words of the contract, such 
intent is obvious from the contract as a whole and from the recognition that 
both an administrative trial and a judicial trial are a waste of state money. If 
the disputes clause is useless at any time the contractor decides to go to 
court, why have it? The highway department does have it. It was not intended to 
be a useless thing. Appellee and other contractors know that they are subject to 
it when they bid and when they enter into the contract. The intent of all 
parties is to use the disputes clause in a final fashion. The holding of the 
majority opinion makes use of the clause a waste of time. Eight or nine days 
were spent in the commission hearing alone. Although the intent was to have the 
clause mean something, the majority opinion completely disregards this manifest 
intent. The department might well do away with the clause and burden the court 
system with the problems intended by the parties to be handled under the 
clause.

[¶46.]  If there is any doubt as to the intent, 
it should be resolved in favor of arbitrability. Oil, Chemical and Atomic Workers 
International Union, Local 2-124 v. American 
Oil Company, 528 F.2d 252, 254 (10th Cir. 1976). There is a national policy 
that doubts should be resolved in favor of arbitration, and parties should not 
be required to litigate disputes which are subject to arbitration. American National Bank of Denver v. Cheyenne Housing 
Authority, Wyo., 562 P.2d 1017, 1020 
(1977).

"`* * * It is true that 
the intention of parties to submit their contractual disputes to final 
determination outside the courts should be made manifest by plain language. 
[Citation.] But this does not mean that hostility to such provisions can justify 
blindness to a plain intent of parties to adopt this method for settlement of 
their disputes. Nor should such an agreement of parties be frustrated by 
judicial "interpretation" of contracts. If parties competent to decide for 
themselves are to be deprived of the privilege of making such anticipatory 
provisions for settlement of disputes, this deprivation should come from the 
legislative branch of government.' * * *

"It seems clear that it 
is the `clear intent' of the parties that `any dispute concerning * * * this 
contract' should be decided by the Contracting Officer. * * * `* * * No court is justified in disregarding its 
letter or spirit. [The] [disputes clause] * * * creates a mechanism whereby 
adjustments may be made and errors corrected on an administrative level, thereby 
permitting the Government to mitigate or avoid large damage claims that might 
otherwise be created. * * * And in the absence of some clear evidence that the 
appeal procedure is inadequate or unavailable, that procedure must be pursued 
and exhausted before a contractor can be heard to complain in a court.' 
[Citation.]" (Emphasis added.) Moran 
Towing and Transportation Co. v. United States, 192 F. Supp. 855, 
858, 859 (S.D.N.Y. 1960).

[¶47.]  The trial court erred in not recognizing 
the disputes clause of the contract. The action should have been dismissed.1

DAMAGES

[¶48.]  Damages were awarded under the 
"total-cost" method. The majority opinion acknowledges that the "total-cost" 
method is "generally disfavored" by the courts, but it accepts a 
one-two-three-four test set forth in WRB 
Corporation v. The United 
States, 183 Ct.Cl. 409 (1968), and contends 
that the facts in this case meet that test. The facts in this case are not 
nearly as favorable for the test as were they in the WRB Corporation case. They 
were found insufficient in that case. The WRB Corporation court said at pages 
426-427: 

"For claims 22 and 26, 
plaintiff's submission is the `total cost' standard (the difference between 
actual expenses and bid or estimated costs). This theory has never been favored 
by the court and has been tolerated only when no other mode was available and when the reliability of the supporting 
evidence was fully substantiated. See Turnbull, Inc. v. United States, 180 
Ct.Cl. 1010, 1025-26, 389 F.2d 1007, 1015 (1967); J.D. Hedin Construction Co. v. United 
States, 171 Ct.Cl. 70, 86-87, 347 F.2d 235, 246-47 (1965); River Construction Corp. v. United States, 
supra, 159 Ct.Cl. [254] at pages 270-71 [1962]; Oliver-Finnie Co. v. United States, 150 
Ct.Cl. 189, 200, 279 F.2d 498, 505-06 (1960); F.H. McGraw & Co. v. United States, 
131 Ct.Cl. 501, 510-12, 130 F. Supp. 394, 399-400 (1955). The acceptability of 
the method hinges on proof that (1) the nature of the particular losses make it 
impossible or highly impracticable to determine them with a reasonable degree of 
accuracy; (2) the plaintiff's bid or estimate was realistic; (3) its actual 
costs were reasonable; and (4) it was not responsible for the added expenses. 
See J.D. Hedin Construction Co. v. United 
States, supra, 171 Ct.Cl. at pages 86-87, 347 F.2d at pages 246-47; Oliver-Finnie Co. v. United States, 
supra, 150 Ct.Cl. at pages 197, 200, 279 F.2d at pages 505-06; F.H. McGraw & Co. v. United States, 
supra, 131 Ct.Cl. at , 130 F. Supp. at .

"This case clearly fails 
some of these tests. A large measure of 
our present uncertainty is due to the plaintiff's complete failure to maintain 
accurate cost records during performance. The only excuse for this lack of 
diligence was that plaintiff did not expect to become embroiled in litigation 
over the FortHood project. That is 
feeble justification for taking refuge in the total-cost approach. Cf. Commerce Int'l Co. v. United States, 167 
Ct.Cl. 529, 543 n. 10, 338 F.2d 81, 89 n. 10 (1964). Equally telling is the failure to rebut the 
Government's evidence that the increased costs were, in some part, due to 
plaintiff's fault. The record clearly shows that it had a great deal of 
trouble keeping its subcontractors in line. In any event, we would hesitate 
before concluding that plaintiff sufficiently proved the reasonableness of its 
estimates or its actual costs. Among other things, it did not produce a reliable 
breakdown of its overall estimates and the cost of its concrete and carpentry 
operations. And since we deny (see Part II infra) significant aspects of claims 
22 and 26, the plaintiff's total-cost argument, geared to each claim in its 
entirety, has little utility." (Emphasis added.)

[¶49.]  Here, too, the bid was for an entire job. 
The claim was for increased costs in only nine areas. The trial court allowed 
recovery in only five of these areas. However, the damage figure allowed 
resulted from subtracting the total payments made on the entire project from the total cost of 
the entire project. Obviously, 
appellee should not receive reimbursement for losses on the other parts of the 
project which resulted from expenses in excess of its bid on them. As the WRB 
Corporation court said, in such instances the "total-cost" argument "has little 
utility."

[¶50.]  Although the one-two-three-four test is 
set out in WRB Corporation, it is preceded by the basic requirement that the 
"reliability of the supporting evidence was fully substantiated." Appellee's own 
witnesses testified that supporting evidence was lacking, one reason being the 
failure to realize at the time the adverse consequences thereof. Repeating the 
quotation from WRB Corporation, supra, "that is feeble 
justification."

[¶51.]  Another deterrent to use of the 
"total-cost" method, as stated in WRB Corporation, supra, is "the failure to 
rebut the Government's evidence that the increased costs were, in some part, due 
to plaintiff's fault." Such rebuttal is completely lacking here. For example, it 
seems well established that the leaks in the water line installed by appellee contributed to the 
additional expense resulting from transportation of water.

[¶52.]  This being a dissenting opinion, it will 
serve no purpose to further specify wherein the one-two-three-four test 
requirements for use of the "total-cost" method were not met in this case. We 
should not remake the contract for the parties by turning a standard 
bid-acceptance contract into a cost-plus contract. Wyoming Machinery Company v. 
United States Fidelity and 
Guaranty Company, Wyo., 614 P.2d 716 
(1980); Laird v. Laird, Wyo., 597 P.2d 463 
(1979). Appellee failed to properly establish its damages.

1 Reference is made to my 
dissent in Brasel & Sims Construction 
Co., Inc. v. State Highway Commission of Wyoming, Wyo., 655 P.2d 265 (1982), 
reflecting a proper resolution of this matter.