Clearwater Construction & Engineering, Inc. v. Wickes Forest Industries

Citations: 697 P.2d 1146; 108 Idaho 132; 1985 Ida. LEXIS 405Docket: 14169

Court: Idaho Supreme Court; January 23, 1985; Idaho; State Supreme Court

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Clearwater Construction, Engineering, Inc. (Clearwater) entered into a road construction contract with Wickes Forest Industries (Wickes) on August 20, 1975, for the construction of two Forest Service roads, collectively known as the Van Buren Project, which was originally set to be completed by December 31, 1976. The contract stipulated bi-monthly payments with a 10% retainage for performance security. By the end of 1975, Clearwater faced significant challenges, becoming "log bound," meaning ongoing construction was hindered by logs obstructing the right-of-way. Despite commencing work again in September 1976, few logs had been removed, leading to inefficiencies.

On February 1, 1977, the parties executed a new contract that effectively canceled the previous one, extending the deadline to December 31, 1977, and adding a six-mile spur road. This contract required Clearwater to secure a $160,000 performance bond and included a liquidated damages clause of $200 per day for any delays past the new completion date, although Clearwater was exempt from penalties for delays caused by Wickes' failure to clear logs.

Clearwater resumed work on June 20, 1977, but continued to face difficulties, which it attributed mainly to Wickes' failure to remove logs, while Wickes pointed to poor weather, manpower issues, and equipment failures as contributing factors. Relations deteriorated, and both parties claimed default under the new contract in September 1977, with $63,000 remaining unpaid. Wickes subsequently completed the project through another contractor, incurring costs of approximately $71,000. 

On May 22, 1978, Clearwater filed a lawsuit for breach of contract against Wickes, which led to the inclusion of American Fidelity Fire Insurance Company as a third-party defendant. The jury ultimately awarded Clearwater $398,538 in direct damages and $238,215 in consequential damages on October 16, 1980.

Consequential damages awarded included $118,541 for losses on other projects, $111,674 for involuntary equipment liquidations, and $8,000 for attorney fees owed to Valley Bank. Clearwater received additional attorney fees of $125,212 and costs of $4,102.97. Following a motion for judgment notwithstanding the verdict by Wickes, the court found insufficient evidence to support the jury's award for consequential damages, resulting in a reduction of $230,215 from the judgment. Clearwater's motion for pre-judgment interest was denied, with interest allowed only from the verdict date. Clearwater appealed the reduction of its consequential damage award and the denial of pre-judgment interest. Wickes cross-appealed, challenging the trial court's decisions on several grounds, including the submission of Clearwater's damage proof to the jury and the consideration of alleged duress regarding the 1977 contract. The court determined that the trial judge improperly submitted the duress issue to the jury, necessitating a reversal and remand for a new trial. Clearwater argued that the 1977 contract was either valid or the product of unlawful duress. Wickes claimed that the evidence supported the contract's validity and that Clearwater's assertion of duress was prejudicial and irrelevant. The court referenced the elements necessary to establish economic duress, noting that Clearwater needed to demonstrate that Wickes' wrongful acts produced the alleged duress, rather than mere financial pressure. Clearwater contended that Wickes' breaches of the 1975 contract forced it into a precarious financial situation, leading to the signing of the 1977 contract under duress, while Wickes argued that Clearwater's evidence was legally insufficient to support its duress claim.

Wickes argues that Clearwater had a sufficient legal remedy for the breach of the 1975 contract and thus an alternative to the 1977 contract. Clearwater negotiated the 1977 contract, expecting to benefit from the release of retainages and additional compensation for constructing a spur road. Wickes asserts that Clearwater ratified the 1977 contract, regardless of any claims of duress. Although Clearwater does not dispute the evidence for ratification, it claims that the determination should be made by a jury. A contract entered into under duress is voidable rather than void, and ratification can occur through acceptance of benefits or by remaining silent after having the opportunity to reject it. The evidence indicates that Clearwater ratified the contract by starting work on the construction site and later asserting that Wickes was in default. Clearwater's claim of duress arose over three years post-execution, and it has not provided evidence against ratification. The trial court erred in presenting the duress issue to the jury, as the uncontradicted evidence warranted a legal determination of ratification. This misstep prejudiced Wickes by allowing Clearwater to claim damages under the 1975 contract, which was canceled by the 1977 contract, and by permitting inflammatory testimony about Clearwater's financial pressures when signing the 1977 contract, despite evidence of ratification.

The trial court failed to provide the jury with adequate instructions regarding the duress argument. Although the jury was informed of the elements of duress, they were not clearly instructed on the implications of finding that the 1977 contract was a result of unlawful duress. Specifically, they were not told that if the 1977 contract was executed under duress, Clearwater's potential damages would be limited to quantum meruit recovery, thus precluding claims for direct and consequential damages. The court found that this omission constituted reversible error regarding Wickes’ motion for directed verdict on ratification, asserting that the submission of both duress and ratification to the jury was prejudicial to Wickes. Consequently, the case is reversed and remanded for a new trial, rendering further arguments unnecessary. Additionally, while not ruling on its merits, the court noted that Clearwater's use of the 'total cost' approach for damages is generally disfavored and inadequate. The trial court's decision is reversed, and no costs or attorney fees will be awarded on appeal. Judges BAKES, BISTLINE, and HUNTLEY concur, while SHEPARD concurs in the result.