Keith Capps Landscaping & Excavation, Inc. v. Van Horn Construction, Inc.

Cite as 2014 Ark. App. 638

ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-14-309

KEITH CAPPS LANDSCAPING & Opinion Delivered November 12, 2014
EXCAVATION, INC.
APPELLANT APPEAL FROM THE POPE COUNTY
CIRCUIT COURT
V. [NO. CV 2012-268]

HONORABLE DENNIS CHARLES
VAN HORN CONSTRUCTION, INC., SUTTERFIELD, JUDGE
AND TRAVELERS CASUALTY &
SURETY COMPANY OF AMERICA AFFIRMED
APPELLEES

RITA W. GRUBER, Judge

This is a breach-of-contract case filed by appellee, Van Horn Construction, Inc., a

general contractor, against appellant, Keith Capps Landscaping & Excavation, Inc., a

subcontractor. After a bench trial, the circuit court found that Capps had breached the

parties’ subcontract by failing to perform the work in accordance with the contract’s plans

and specifications and ultimately by refusing to complete the contract. The court awarded

Van Horn $245,632 in damages, plus costs and attorneys’ fees. On appeal, Capps argues that

the trial court erred in finding that it breached the subcontract and in awarding an amount

in damages that is in excess of the actual “reasonable damages.” We find no error and affirm

the judgment of the circuit court.

In September 2010, Van Horn was awarded the bid as general contractor for the

expansion of the Searcy water-treatment plant. In connection with that project, Van Horn
Cite as 2014 Ark. App. 638

sought subcontractor bids for the demolition and earthwork from various firms, including

Capps. Capps submitted two bids, which Van Horn rejected because it determined that the

amount of fill was overestimated in one bid and underestimated in the other. Van Horn

accepted Capps’s third proposal, and the parties executed a subcontract on January 3, 2011,

in which Capps agreed to “[f]urnish all required labor, equipment, and materials to complete

the dirtwork for the Searcy Water Treatment Plant Expansion per plans, specifications, and

addenda by Garver Engineers.” The contract included, among other tasks, excavation and

fill for the sedimentation basin. In exchange for this work, Van Horn agreed to pay Capps

$131,700.

There was some confusion in the beginning of the project about the type of fill

material Capps could use for the sedimentation basin.1 In this project, the basin was to be set

on fill material that was placed in layers, or lifts. Each lift was designed to be six to eight

inches high and had to be compacted and tested for proper compaction and moisture content

before another lift was placed on top of it. The specifications required that “class 7” material

be used, but Keith Capps, the owner of Capps, testified that he understood from Van Horn

when he submitted bid proposals that he could use shale, which is not a class 7 material and

which is a considerably cheaper material. Van Horn eventually convinced Wendell Williams,

who was the project-construction observer for the project engineer, and the geotechnical

engineering firm, Grubbs Engineering, to allow Capps to use material that it submitted for

1
According to the parties, a sedimentation basin is a large concrete structure used to
hold the fresh water being treated to allow the natural particles to settle to the bottom
before the water is transported to a filter.

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Cite as 2014 Ark. App. 638

testing from its “borrow pit,” which was originally brought to the site for this purpose. The

borrow pit included shale.

However, when Capps began work on the sedimentation basin, numerous tests of its

lifts failed—generally due either to the moisture content being too high or the shale not being

sufficiently broken up, or processed—and Capps was required to constantly rework the lifts

and reprocess the material, causing considerably more work and expense than it had

anticipated. The project manager for Van Horn, Mark Hurley, testified that when shale is

“dug out,” it comes out in large chunks. The specifications called for the material to be

processed to a certain gradation to be properly compacted. Thus, Capps was required to

process the material before placing it to meet the moisture and compaction requirements. In

addition, Mr. Hurley testified that Capps was attempting to place the fill in layers that were

too thick rather than placing it in six-to-nine-inch layers as the specifications required.

Although Mr. Hurley testified that the plans and specifications were always available

for Capps’s review on the company website and indeed had been brought to a meeting with

Capps before Capps submitted his third proposal, Keith Capps testified that he did not see the

plans and specifications for the project until the day Van Horn picked up Keith’s copy of the

signed subcontract. Keith signed the contract, which included specifications regarding the lifts

and fill material, without reviewing the specifications. He testified that he was instructed by

Van Horn before the contract was signed to use shale for the fill material because it was

cheaper than other fill material. Keith also testified that it was his understanding that he would

be allowed to stockpile material next to the fill site but that after the project began, he was

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Cite as 2014 Ark. App. 638

required to stockpile material 250 yards away and use a loader and dump truck to move it.

He said that he had not anticipated this extra work and expense. He said that he told Van

Horn that it was impossible to accomplish the lifts with the material he was using, but he was

unable to get the matter resolved. He attempted to get Van Horn to agree to a change order

to help with the processing or use a different material, but according to Keith, Van Horn

refused. Mr. Hurley testified that Van Horn did offer to split the cost of “B stone” that did

not require as much processing to use as fill, but Capps declined the offer and quit the project.

Van Horn notified Capps pursuant to Article 10 of the subcontract that Capps had

forty-eight hours to return to the job or Van Horn would terminate the contract. Article 10

states in pertinent part as follows:

If Subcontractor persistently or repeatedly fails or neglects to carry out the work or
otherwise to perform in accordance with the Subcontract, Contractor may, at its
option and after forty-eight (48) hours notice to Subcontractor . . . (ii) declare this
Subcontract terminated, take possession of all materials, tools and appliances belonging
to Subcontractor whether on the job site or stored elsewhere pursuant to agreement,
and either complete the work itself or contract with other parties for the completion
thereof.

When Capps did not return to finish the project, Van Horn completed the job by hiring other

subcontractors, obtaining fill material and rental equipment, and performing some of the work

itself. Van Horn submitted an itemized list of the costs to complete the project and the

liquidated damages Van Horn was required to pay to the owner for the delay in completing

the contract.

Van Horn then brought a breach-of-contract claim against Capps. Capps

counterclaimed for breach of contract, essentially alleging that Van Horn breached the

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Cite as 2014 Ark. App. 638

contract by refusing to issue a change order for the change in fill material. After a hearing, the

circuit court found that Capps breached the contract by “failing to perform the work in

accordance with the plans and specifications and ultimately refused to complete its contract.”

It also determined that all prior negotiations and proposals of Capps merged into the

subcontract. The court noted that the cost to Van Horn to complete the work was $222,352,

giving Capps credit for the remaining contract balance for work not performed by Capps.

Finally, the circuit court found that Capps’s failure to perform the work delayed the project,

causing Van Horn to incur damages pursuant to Van Horn’s contract with the city of Searcy.

Van Horn negotiated the liquidated-damages amount it would have owed the city for the

delay from $141,000 ($1,000 per day of delay) to $96,541.94 (the cost of the excess onsite

engineering services paid by the city due to the delay). The court allocated $23,280 of the

$96,541.94 to Capps for a total award of damages of $245,632.

In order to prove a breach-of-contract claim, one must prove “the existence of an

agreement, breach of the agreement, and resulting damages.” Schwyhart v. J.B. Hunt, LLC,

2014 Ark. App. 324, at 11, 436 S.W.3d 173, 180. In civil bench trials, the standard of review

on appeal is not whether there is substantial evidence to support the findings of the court,

but whether the court’s findings were clearly erroneous or clearly against the preponderance

of the evidence. Select Concrete Co. v. Cane Creek Concrete Servs., Inc., 2014 Ark. App. 161,

at 4. A finding is clearly erroneous when, although there is evidence to support it, the

reviewing court on the entire evidence is left with a firm conviction that a mistake has been

committed. Id. Where the issue is one of law, our review is de novo. Id.

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For its first point on appeal, Capps contends that the circuit court clearly erred in

finding that it breached the subcontract. Capps argues that the facts demonstrate that it could

not perform the job as promised with the fill material it was using. Capps argues that, due to

the wet weather, it was not the best time to make lifts with shale, that the contract was silent

regarding the material to be used, and that Van Horn knew it was not possible to comply

with the terms of the subcontract using the material Capps had. Capps also argues that Van

Horn “committed fraud in the procurement of the subcontract.”

First, Capps did not plead or argue fraud in the procurement to the circuit court, and

we will not consider an argument that was raised for the first time on appeal. Davis v. Davis,

2013 Ark. App. 180, at 5. Capps’s additional arguments merely reargue facts regarding the

insufficiency of the fill material that it had in its borrow pit and that Van Horn led it to

believe would be acceptable. Contrary to Keith’s testimony and Capps’s argument, the

circuit court believed the testimony of Van Horn’s witnesses that Keith was provided the

plans and specifications before he signed the contract. Disputed facts and determinations of

credibility are within the province of the fact-finder. Bryant v. Osborn, 2014 Ark. 143, at 2.

In any case, although the specifications provided that class 7 material was required (shale was

not a class 7 material), Capps was ultimately allowed to use its shale material in spite of the

contract’s requirements otherwise. The specifications also clearly provided guidelines about

the lifts. After our review of the evidence, we are not left with the definite and firm

conviction that a mistake was committed. City of Jacksonville v. Nixon, 2014 Ark. App. 485,

at 3, ___ S.W.3d ___, ___.

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Cite as 2014 Ark. App. 638

For its second point on appeal, Capps argues that the circuit court erred in awarding

Van Horn a judgment in excess of “actual reasonable damages.” Specifically, Capps contends

that the amount Van Horn spent to complete the dirt work was over two-and-a-half times

higher than the total amount to be paid to Capps for the same work. Capps then claims that,

although the cost to pay other contractors should have been higher, it should not have been

that much higher.

The measure of damages in this case is the amount Van Horn incurred to complete

the work less the amount it would have paid Capps if no breach had occurred. MDH

Builders, Inc. v. Nabholz Constr. Corp., 70 Ark. App. 284, 292, 17 S.W.3d 97, 102 (2000).

Van Horn submitted an itemized spreadsheet detailing the breakdown of costs it incurred to

complete the dirt work. Mr. Hurley testified for Van Horn that most of the contractors it

called to help complete the project did not want to get involved in the middle of a project

that was already underway and therefore that Van Horn had to do some of the work itself.

In order to do this, Van Horn had to rent equipment, purchase material (which it did not

have in a borrow pit as did Capps), and use its own employees, who were not “the best

people at doing dirt work, so then it probably cost a little bit more.” He also testified that the

contractors who agreed to help charged more based on time and material than they would

have charged if they had contracted to perform the whole job from the start. Capps did not

present any testimony or evidence demonstrating that these expenses were excessive. We

hold that the circuit court’s damages award was not clearly erroneous.

Affirmed.

WALMSLEY and HARRISON, JJ., agree.
Lightle, Raney, Streit & Streit, LLP, by: Donald P. Raney, for appellant.
Williams & Anderson PLC, by: David M. Powell and Alec Gaines, for appellee.

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