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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 3-D & Co. v. Tew's Excavating, Inc. (8/26/2011) sp-6596

3-D & Co. v. Tew's Excavating, Inc. (8/26/2011) sp-6596, 258 P3d 819

        Notice:  This opinion is subject to correction before publication in the PACIFIC REPORTER. 
        Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 
        K   Street,   Anchorage,   Alaska   99501,   phone   (907)   264-0608,   fax   (907)   264-0878,   email 
        corrections@appellate.courts.state.ak.us. 

                 THE SUPREME COURT OF THE STATE OF ALASKA 

3-D & CO.,                                      ) 
                                                )       Supreme Court No. S-13425 
                Appellant,                      ) 
                                                )       Superior Court No.  3PA-07-01129 CI 
        v.                                      ) 
                                                )       O P I N I O N 
TEW'S EXCAVATING, INC.,                         ) 
                                                )       No. 6596 - August 26, 2011 
                Appellee.                       ) 
                                                ) 

                Appeal from the Superior Court of the State of Alaska, Third 
                Judicial District, Palmer, Beverly W. Cutler, Judge. 

                Appearances:   Kevin Williams and Louis A. Breuer, Willow, 
                for    Appellant.      Jason     L.  Bergevin,     Royce     &    Brain, 
                Anchorage, for Appellee. 

                Before:       Carpeneti,     Chief   Justice,   Fabe,   Winfree,     and 
                Stowers, Justices.   [Christen, Justice, not participating.] 

                STOWERS, Justice. 

I.      INTRODUCTION 

                This   case   involves   a   contract   dispute   between   3-D   &   Co.   and   Tew's 

Excavating, Inc.   The dispute is over the terms of a construction contract for two roads 

in Scenic View Subdivision of the Matanuska-Susitna Borough. 3-D & Co. contends that 

the superior court applied the wrong legal standards and arrived at the wrong factual 

conclusions regarding the terms of the contract by:  (1) admitting extrinsic evidence to 

----------------------- Page 2-----------------------

determine the meaning of the contract, (2) applying the preponderance of the evidence 

standard of proof rather than a clear and convincing evidence standard, (3) finding no 

material   breach   of   the   contract,   (4)   finding   that   the   contract   was   for   a   fixed   price, 

(5)  finding   that   both   parties   assented   to   constructing   a   T-intersection   rather   than   a 

cul-de-sac,   (6)   finding   that   a   construction   change   would   likely   be   accepted   by   the 

Matanuska-Susitna Borough, (7) awarding damages for the culvert work, (8) finding that 

there was not sufficient proof for damages on road width deficiencies, (9) finding that 

there was no breach of contract in not meeting the contract deadline, (10) erroneously 

applying theories of estoppel or waiver in awarding no damages, (11) considering the 

duty to notify and provide an opportunity to cure, and (12) failing to award damages for 

the incidental cost of removing the lien placed on the property.  We affirm the superior 

court's decisions in all respects. 

II.     FACTS AND PROCEEDINGS 

                3-D & Co. (Derr) is an Alaskan realty development corporation wholly 

owned by Daniel Derr.         Derr purchased 40 acres of land within the Matanuska-Susitna 

Borough (the Borough) intending to develop it into Scenic View Subdivision.  The land 

was located just beyond the developed portion of Foothills Boulevard. 

                Tew's Excavating, Inc. (Tew) is an Alaskan corporation whose business 

involves road maintenance, contracting work, and road construction. Prior to his contract 

with   Derr,   Tew   had   completed   two   road   construction   projects:     one   for   the   City   of 

Houston and another for a private subdivision.               Both jobs utilized three inch minus 

                                                   -2-                                             6596
 

----------------------- Page 3-----------------------

gravel.1   In addition Tew had at least three contracts with the Borough to provide road 

maintenance. 

                In late 2005 or early 2006 Derr contacted Tew about constructing roads in 

his new subdivision.   Tew provided Derr with an estimate for the work on one of these 

roads, Foothills Boulevard.   This estimate set a price of $30 per linear foot to construct 

the road to Borough standards.   The price estimate indicated, "This will not include any 

gravel, engineering, culverts or clearing."   At the time of the estimate, Derr anticipated 

performing the clearing and grubbing on Foothills Boulevard himself.  Derr was unable 

to complete the clearing and grubbing because he was arrested for felony DUI.                     Derr 

spent the next two years in jail and residential treatment.  Due to the arrest Tew and Derr 

discussed whether the project would continue. Tew visited Derr multiple times to discuss 

various options for the project. In May 2006 Derr and Tew orally agreed that Tew would 

clear and grub the road - charging hourly - and construct Foothills Boulevard pursuant 

to   the   terms   and   conditions   of   the   estimate. The   parties   did   not   create   a   written 

agreement about the price for the clearing and grubbing. 

                In May 2006 Derr and Tew began discussing the construction of Range 

View Drive.   By July 2006 Tew provided an oral estimate for the work and Derr agreed 

to the terms. Tew was now responsible for building both Foothills Boulevard and Range 

View Drive. 

                Tew billed Derr periodically for the work on Derr's land in the spring of 

2006. Disputes arose about the bills during this period. Tew provided Derr with invoices 

detailing the equipment used and hours worked.  Derr believed that the work was taking 

        1       "Three inch minus" describes gravel that will pass through a sieve with 

three - inch by three - inch square openings.           See ALASKA DEP'T OF TRANSP. & PUB. 
FACILITIES, ALASKA FIELD GUIDE FOR  SOIL CLASSIFICATION 1-2 (2003), available at 
http://www.dot.state.ak.us/stwddes/desmaterials/mat_geology/assets/pdf/geotechman/ 
soilguide.pdf. 

                                                  -3-                                            6596
 

----------------------- Page 4-----------------------

too   long   and   he   was   paying   too   much.   The   parties   negotiated   and   revised   several 

versions of a contract before they agreed to sign a written contract on August 14, 2006. 

                 The written contract specified:  "All gravel for road[s] will be taken from 

Tract A.     Per [the Borough's] preliminary plat."           Derr wanted to turn the gravel pit in 

Tract   A   from   which   road   gravel   was  to   be   removed   into   a   pond,   and   had   specific 

instructions for how the gravel should be removed.  Tew did not inspect the gravel prior 

to   the   formation   of   the   contract.  The   available   gravel   was   sufficient   to   meet   the 

Borough's standards for the bottom 18 inches of the road but insufficient for the top six 
inches.2   Tew requested that Derr rent screening equipment needed to ensure three inch 

minus   gravel   was   used   for   the   top   of  the   road   and   offered   to   do   the   physical   labor 

involved in screening the gravel.   Derr did not want to incur the costs of this process, so 

Tew suggested he could try processing the gravel using graders and gird-rollers to crush 

smaller rocks and remove larger rocks.  Tew explained that this processing would take 

longer than screening and would not produce true three inch minus gravel. Tew said that 

the Borough would probably approve the road anyway and indicated that he had used the 

same process on a previous job that passed the Borough's inspection.                      Derr agreed to 

process the gravel using Tew's equipment. 

                 Tew processed the gravel as he and Derr agreed, completing the project in 

late October 2006.        When he completed the processing, he informed Wayne Whaley, 

Derr's onsite representative, that the project was complete; Whaley agreed.                       Whaley 

inspected the project and determined that it was ready for the Borough's inspection. 

After Whaley's inspection Tew moved his equipment off of Derr's property. 

                 Derr never informed Tew that he felt that Tew's work was incomplete or 

insufficient.     Derr   measured   random   road   widths   and   determined   the   road   was   not 

        2        The Borough requires three inch minus gravel for the top six inches. 

                                                    -4-                                                 6596 

----------------------- Page 5-----------------------

uniformly 24 feet wide.  He felt some of the culvert installations were incomplete or in 

need of repair. He noted that some of the rocks in the road were not three inch minus and 

some of the rocks in the ditches were not six inch minus, thus not meeting Borough 

standards.     He felt that the angle of the road slope was improper at various points.            He 

was also unsatisfied with the intersection of Range View and Rolling Hills because it 

formed a T-intersection rather than a cul-de-sac. 

                The only information that Tew received about potential problems was a 

communication from Whaley indicating that minor culvert repairs or modifications might 

be required.   Tew was willing to make the repairs if needed. 

                In   the   fall   of   2006,   while   Tew   was   still   working   on   the   project,   Derr 

solicited bids from other companies to complete work on the roads.  Derr received bids 
from      Northern      Dame      (Fall   2006     oral    estimate),3    Kennerson       Excavation 

(October 12, 2006),4 and Steppers Construction (October 17, 2006) to complete road 

construction.   He chose not to use any of these contractors and did not inform Tew that 

Tew had not completed the job to his satisfaction. 

                Tew submitted a final written invoice to Derr for the remaining $50,000 

Derr owed.      When Derr did not pay this final invoice, Tew phoned Derr several times 

about the money but still did not receive payment.  In January 2007 Tew filed a $50,000 

lien against the property.       Derr's lawyer sent a letter acknowledging that $50,000 was 

owed upon completion of the project but claimed the project was not complete because 

a Borough inspection had not occurred and the roads did not meet Borough specification. 

        3       Northern Dame submitted a second proposal to complete the road projects 

on October 7, 2008. 

        4       Kennerson submitted a second proposal to complete the road projects on 

November 1, 2007. 

                                                  -5-                                              6596 

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This was the first time Tew was made aware that Derr was not completely satisfied with 

the work Tew had done.   Nevertheless, Derr paid off the lien in three months. 

                Derr requested a formal Borough inspection in March 2007.                   Tew was 

neither notified of the inspection nor invited to attend. The inspection report by ArcTerra 

Engineering was submitted to the Borough; it noted that with the exception of a few 

minor repairs the road work was completed to Borough standards. The inspection report 

was not shared with Tew.   Another formal inspection was conducted by the Borough in 
July 2007.   The inspection resulted in a punch list5 with a few minor items that required 

correction.     Tew   was   not   provided   the   punch   list   or   copies   of  correspondence   with 

inspectors.   Tew was never provided an opportunity to fix the minor items identified on 

the punch list. 

                Derr filed a complaint alleging breach of contract, breach of the implied 

covenant      of  good   faith  and   fair  dealing,  and    violation   of   Alaska's    lien  statute, 
AS 34.35.074(b).6      An eight-day trial began on December 2, 2008. 

                The superior court determined that Derr proved breach of contract regarding 

the requirement that the roads be 24 feet wide, but that Derr had not proven damages to 

        5       Punch lists are commonly used in the construction industry to indicate a list 

of tasks or items requiring completion. 

        6       AS 34.35.074(b) states: 

                A claimant who gives a stop-lending notice or has a claim of 
                lien recorded under AS 34.35.075 and who fails to promptly 
                revoke the stop-lending notice or remove the claim of lien 
                from the record upon receiving payment in full on the claim 
                or discovering that the stop-lending notice or claim of lien is 
                in error, unjust, premature, or excessive is liable for actual 
                and consequential damages caused by giving the stop-lending 
                notice    or  improperly     recorded    claim   of  lien  plus   costs, 
                including reasonable attorney fees. 

                                                  -6-                                            6596
 

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any degree of certainty regarding the breach, and that Derr failed to provide Tew a 

reasonable opportunity to cure.     The court also found several deficiencies with culvert 

work, road slope, and angles. The court, in accordance with the substantial performance 

doctrine, held that Tew should pay Derr: (1) $800 for culvert deficiencies, (2) $5,000 for 

slope cover deficiencies, and (3) $5,000 for angle deficiencies. 

               Derr appeals. 

III.   STANDARD OF REVIEW 

               We    review   the  trial  court's  factual  determinations,   including   those 
pertaining to the credibility of witnesses, for clear error.7  We will find clear error only 

if "after a thorough review of the record, we come to a definite and firm conviction that 
a mistake has been made."8    All factual findings are reviewed "in the light most favorable 

to the prevailing party below."9    "We give particular deference to the superior court's 

factual findings when, as here, they are based primarily on oral testimony, because the 

superior court, not this court, judges the credibility of witnesses and weighs conflicting 
evidence."10 

       7       Soules v. Ramstack, 95 P.3d 933, 936-37 (Alaska 2004) (citations omitted). 

       8      Id. at 936. 

       9       N. Pac. Processors, Inc. v. City & Borough of Yakutat, 113 P.3d 575, 579 

(Alaska 2005) (citation omitted). 

       10     Josephine B. v. State, Dep't of Health & Social Servs., Office of Children's 

Servs., 174 P.3d 217, 222 (Alaska 2007). 

                                              -7-                                        6596
 

----------------------- Page 8-----------------------

                We apply our independent judgment to questions of law.11                  "When the 

meaning of a contract is at issue, we review the superior court's interpretation of the 
contract terms using our independent judgment."12 

IV.	    DISCUSSION 

        A.	     The   Trial   Court   Did   Not   Err   In   Admitting   Extrinsic   Evidence   In 
                Determining The Meaning Of The Contract. 

                The    superior    court   found   ambiguity    in   the   contract   over   who    was 

responsible for producing the three inch minus gravel.  The superior court looked to the 
interactions between the parties to resolve the ambiguity.13 

                Derr contends that four provisions of the contract establish that Tew was 

responsible for producing the three inch minus gravel required for the top six inches of 

both   Foothills   Boulevard   and   Range   View   Drive:   (1)   "Build   Foothills   Boulevard, 

approximately 4,000 feet for $30.00 per foot.  Footage verified at completion.  (Except 

clearing.)";    (2)  "Build    Range    View    Drive   in  Scenic    View    Subdivision    from    the 

intersection of Foothills Boulevard to property line between lots #3 and #4, Block 5, 

Scenic View Subdivision, per preliminary plat map approved by [the Borough's] Platting 

Board. At this juncture build temporary Cul de Sac to [Borough] satisfaction.";  (3) "All 

road work and back slopes to meet [Borough] specifications."; (4) "All gravel for road 

will be taken from Tract A.          Per [Borough] preliminary plat."          Derr argues that the 

        11       N.W.   Cruiseship   Ass'n   of   Alaska,  Inc.   v.   State,   Office   of   Lieutenant 

Governor, Div. of Elections, 145 P.3d 573, 576 (Alaska 2006) (citing Guin v. Ha, 591 
P.2d 1281, 1284 n.6 (Alaska 1979)). 

        12      Romero v. Cox,      166 P.3d 4, 8 (Alaska 2007) (citing         N. Pac. Processors, 

Inc., 113 P.3d at 579). 

        13      Derr   argues   that   the   contract   was   fully   integrated   and   that   examining 

extrinsic evidence to determine the meaning of the contract was inappropriate.                     The 
August 14, 2006 agreement was not integrated making this argument inapplicable. 

                                                  -8-	                                           6596
 

----------------------- Page 9-----------------------

superior court effectively added the phrase "except not screening or processing gravel 

into 3 [inch] minus form" into the contract after the terms pertaining to building Foothills 

Boulevard and Range View Drive.   Derr also contends that, in accordance with Alaska 
Northern Development v. Alyeska Pipeline Co.14 and Lewis v. Anchorage Asphalt Paving 

Co.,15 the superior court should have held that the contract was an end-result contract and 

Tew was responsible to ensure that the road met Borough specifications.  According to 

Derr, this would mean Tew was responsible for providing three inch minus gravel. 

                 A    contract   is  an   end-result    contract    (1)   "[i]f  no   other   meaning     is 
reasonable,"16 (2) "[t]he contract only calls for a certain result,"17 and (3) "[t]he nature 

of the contract determines to a large degree who is liable for defects in the end product."18 

To establish that the contract in this case was an end-result contract, Derr would need to 

prove that the superior court clearly erred in determining that the written contract did not 

establish who had to provide the three inch minus gravel and that the nature of the 

written contract did not determine who was responsible for the defect of not having three 

inch minus gravel. 

                 The superior court found ambiguity in the contract because the contract did 

not   indicate   who   was   responsible   for   producing   the   three   inch   minus   gravel.     The 

superior court examined both the written contract and extrinsic evidence in determining 

        14       666 P.2d 33 (Alaska 1983). 

        15       535 P.2d 1188 (Alaska 1975). 

        16      Alaska   N.   Development,   666   P.2d   at   39   (holding   as   a   general   rule   of 

contract law:   "If no other meaning is reasonable, the court shall rule as a matter of law 
that the meaning is established."). 

        17      Lewis, 535 P.2d at 1197. 

        18      Id. 

                                                    -9-                                              6596
 

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that   the   contract   contained   an  ambiguity.19      The   contract   contained   two   pertinent 

conditions:   (1) "All gravel for road will be taken from Tract A," and (2) "All road work 

and back slopes to meet [Borough] specifications."             The superior court focused on the 

meaning of "All gravel for road will be taken from Tract A." The contract term specified 

that Derr was responsible for providing the gravel for road construction but did not 

discuss who was responsible for ensuring that the gravel was screened to three inch 

minus.    Derr believed that Tew was responsible for ensuring that the gravel extracted 

from Tract A was suitable to meet the Borough's requirements. Tew, who was not given 

the opportunity to inspect the gravel, believed Derr was responsible for providing the 

three inch minus gravel. 

                The superior court looked to the interactions between the parties to resolve 

the   ambiguity.     Very   little   written   documentation   exists   detailing   the   negotiations 

between Tew and Derr.          Tew provided Derr with a written quote for the work.               This 

quote was for Tew to construct Foothills Boulevard for $30 per linear foot, including the 

cost of all labor and equipment. The quote expressly excluded "any gravel, engineering, 

culverts or clearing."   When the quote was provided, Tew had been unable to inspect the 

gravel   on   Tract   A.    Tew   was   aware   of   the   potential   risks   associated   with   using 

uninspected gravel.       Tew discussed these concerns with Derr, including the potential 

need to screen the gravel.   Given these risks, Tew excluded gravel from the price in his 

January quote. 

                In July 2006 Tew provided invoices 673 and 674 to Derr reflecting work 

on Foothills Boulevard and Range View Drive.  Both invoices indicated   Tew would not 

        19      Courts   may   always   examine   extrinsic   evidence   in   determining   what   a 

contract means.      Froines v. Valdez Fisheries Dev. Ass'n, Inc., 75 P.3d 83, 87 (Alaska 
2003); W. Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657 (Alaska 1991). 

                                                  -10-                                              6596 

----------------------- Page 11-----------------------

provide gravel, and invoice 674 explicitly states, "Owner to provide approved onsite 

gravel." 

                Derr did not want to incur the costs of screening the gravel when Tew and 

Derr realized that the gravel on Tract A would not meet the Borough's specifications. 

Tew indicated he could attempt to process the gravel using his equipment.  Derr agreed 

to process the gravel, even after Tew explained that it would not result in true three inch 

minus gravel and might not meet Borough specifications. 

                These facts taken together support the superior court's conclusion that the 

written contract was ambiguous regarding who was responsible for the three inch minus 

gravel.    The superior court did not err in considering extrinsic evidence and was not 

clearly erroneous in concluding that Derr ultimately took the risk that the processed 

gravel might not result in true three inch minus gravel. 

        B.	     The Superior Court Did Not Err In Applying A Preponderance Of The 
                Evidence   Standard   Rather   Than   A   Clear   And   Convincing   Proof 
                Standard. 

                Derr argues that the superior court reformed the contract and should have 

applied   a   clear   and   convincing   proof   standard   rather   than   a   preponderance   of   the 

evidence standard. Derr claims that the court reformed the contract by adding the phrase 

"except not screening or processing gravel into [three inch] minus form" into the contract 

after the phrases "[b]uild Foothills Boulevard" and "[b]uild Range View Drive."                   Derr 

argues that the superior court inserted this phrase based on a theory of mutual mistake. 

In instances of contract reformation based on mistake courts should apply a clear and 
convincing standard of proof.20 

                However, neither of the parties raised any claim of mutual mistake before 

the   superior   court.    Neither   of   the   parties  requested    reformation    of   the  contract. 

        20      Kupka v. Morey, 541 P.2d 740, 749-50 (Alaska 1975). 

                                                  -11-                                              6596 

----------------------- Page 12-----------------------

Therefore the superior court did not base its decision on a theory of mutual mistake. The 

superior court properly applied the preponderance of the evidence standard to Derr's 
breach of contract claim.21      Because the superior court did not reform the contract, but 

properly resolved contractual ambiguities by examining extrinsic evidence, it applied the 

proper evidentiary standard. 

        C.	     The   Superior   Court   Did   Not   Err  In   Finding   That   Tew   Did   Not 
                Materially Breach The Contract. 

                1.	     Three inch minus gravel 

                Derr argues that Tew materially breached the contract by not providing 

three inch minus gravel.  Derr also argues that a material breach occurred because there 

was no consideration provided for the contract modification. 

                The superior court did not find a material breach because there was an 

ambiguity in the contract regarding responsibility for screening gravel to three inch 

minus.  As we explained above, the superior court resolved the ambiguity by looking to 

extrinsic    evidence,    and   reasonably     determined     that  Tew    was   not  responsible    for 

providing three inch minus gravel.  We conclude that the superior court did not clearly 

err in making these factual determinations. Therefore, the superior court did not err in 

determining   that   Tew   did   not   materially   breach   the   contract   because   Tew   met   the 

conditions of the contract regarding three inch minus gravel.              It follows that there was 

no contract modification requiring additional consideration. 

                2.	     Leaving the job site on October 25, 2006 

                The     superior   court   found    that  the  Tew     left  the  job   site  with   the 

understanding that the job was complete, except for a few minor fixes.  Derr argues that 

Tew breached the contract when he left the job site on October 25, 2006 because the 

roads were not approved by the Borough. 

        21      Fletcher v. Trademark Const., Inc., 80 P.3d 725, 731 (Alaska 2003). 

                                                  -12-                                              6596 

----------------------- Page 13-----------------------

                Tew told Derr he completed the project and was preparing to leave the job 

site.   Whaley, who was Derr's "eyes and ears" on the job site, believed the job was 

substantially completed when Tew left.            Derr never indicated to Tew that the job was 

incomplete or insufficient before Tew left the job site.             When Tew left the job site he 

believed he had completed the project. 

                Derr did not request a Borough inspection before Tew left the job site. 

Derr, not Tew, was in a position to request approval from the Borough; but Derr did not 

request a formal inspection until March 2007, five months after Tew left the job site. The 

inspection resulted in a report indicating that only minor items needed to be addressed. 

A second inspection was conducted in July 2007, resulting in a punch list indicating only 

a   few   minor   items   required   correction.    Neither   the   reports   nor   the   punch   list   was 

provided to Tew.       The evidence supports the superior court's conclusion that Tew had 

substantially completed the contract when he left in October 2006. 

        D.	     The Superior Court Did Not Err In Finding That The Construction Of 
                Foothills Boulevard Was For A Fixed Price. 

                The superior court found that there was an inconsistency between the first 

and second pages of the contract over whether the contract was for a fixed price.                    The 

language      on  the   first  page  of   the  August    2006    contract   stated,   "Build   Foothills 

Boulevard, approximately 4,000 feet for $30.00 per foot. Footage verified at completion. 

(Except   clearing.)."      The   language   in   this   part   of   the   contract   standing   alone   was 

unambiguous - it stated that Tew would be paid $30 per foot and the length would be 

determined   at   the   end   of   the   project. The   second   page   of   the  contract   contained   a 

provision denominated "Terms of Payment," which established a fixed price for the 

contract as a whole. The Terms of Payment listed four tasks and payment corresponding 

to the completion of those tasks, and a total payment for completion of the contract. This 

Terms   of   Payment   provision   resulted   from   the   negotiation   process   preceding   the 

                                                  -13-	                                            6596
 

----------------------- Page 14-----------------------

formation of the written contract. The two terms together created an inconsistency in the 

contract. The superior court found the Terms of Payment contained in the signed August 

contract to be an alteration of the original end-result agreement that was based on the 

July invoices provided by Tew.        The superior court observed that reference to the July 

2006 invoices in the Terms of Payment section of the contract indicated that the parties 

agreed to a fixed price contract for completing Foothills Boulevard.  The superior court 

used the reference to the invoices to resolve the inconsistency and found that the contract 

was for a fixed price.    Derr claims that the superior court should have found that the 

contract for Foothills Boulevard was for $30 per foot and not a fixed price. 

               We define an inconsistency as "the absence of reasonable harmony in terms 
of the language and respective obligations of the parties."22   We have held that courts 

"may initially turn to extrinsic evidence in construing a contract,"23 especially when there 

is an ambiguity or inconsistency.24 

               The    factual  record   supports   the  superior   court's  conclusion    that  the 

inconsistency in the contract is properly resolved by viewing the Terms of Payment as 

an alteration of the original quote and a true representation of the contract's fixed price 

payment term.     It appears that neither Tew nor Derr took steps to verify the length of 

Foothill   Boulevard   when   the   road   was   completed.   Tew   submitted   a   final   invoice 

matching the Terms of Payment listed in the contract.  Derr did not dispute the amount 

of the invoice. Derr did not immediately pay the invoice, but he argued that payment was 

delayed because he could not access funds, not because he disputed the amount on the 

        22     Alaska N. Dev. v. Alyeska Pipeline Co., 666 P.2d 33, 40 (Alaska 1983) 

(citation omitted). 

        23     Alyeska Pipeline Serv. Co., 645 P.2d at 771 n.1. 

        24     W. Pioneer, Inc. v. Harbor Enters., Inc., 818 P.2d 654, 657 (Alaska 1991). 

                                               -14-                                           6596 

----------------------- Page 15-----------------------

invoices.   The January 2007 letter sent by Derr's attorney claimed payment was not due 

because the project was not completed.           The letter did not challenge the amount of the 

invoice.      The   letter   cited   three   contract   provisions   but   did   not   cite   the   provision 

indicating that the cost would be determinedby the length of Foothills Boulevard. Derr's 

January 2007 complaint did not include a claim for adjustment of the final payment based 

on the length of Foothills Boulevard; neither did his amended complaint. Derr's Initial 

Disclosures   did   not   include   a   calculation   of   overpayment   resulting   from   the   length 

measurement of Foothills Boulevard.            These facts taken together support the superior 

court's conclusion that the contract ambiguity could be properly resolved in favor of a 

fixed price contract as written in the Terms of Payment portion of the contract.                   The 

superior court's conclusion was not clearly erroneous. 

        E.	     The Superior Court Did Not Err In Finding That Derr Assented To 
                Building A T-Intersection Rather Than A Cul-De-Sac. 

                The superior court found that the parties agreed to abandon the planned 

cul-de-sac and replace it with a T-intersection.  Derr argues that the "weight of the trial 

evidence shows that Derr never manifested assent" to the construction of a T-intersection 

rather than a cul-de-sac.      We recognize that assent to a contract term "may be imputed 
based on the reasonable meaning of a party's words and acts."25 

                Significant evidence existsto support the superior court's determination that 

Derr assented to construct a T-intersection rather than a cul-de-sac.                  At the start of 

construction on the cul-de-sac it became apparent that the cul-de-sac was improperly 

placed and would both result in a waste of material and reduce the size of connecting 

lots.   Another significant problem was that the cul-de-sac was placed in the middle of a 

        25      Kingik v. State, Dep't of Admin., Div. of Ret. & Benefits,  239 P.3d 1243, 

1251 (Alaska 2010) (citingHowarth v. First Nat'l Bank of Anchorage, 596 P.2d 1164, 
1167 (Alaska 1979)). 

                                                  -15-	                                             6596 

----------------------- Page 16-----------------------

hill on what would eventually be a through road.  Derr and Tew discussed enlarging the 

intersection   of   Range   View   Drive   and   Rolling   Hills   to   provide   a   place   for   road 

maintenance       and    emergency      response     vehicles    to  turn  around.     Based      on  these 

conversations,   Tew   began   to   build   a   T-intersection   rather   than   a   cul-de-sac.        The 

agreement to build the T-intersection cost Tew time in the short run, but he felt that it 

would save time in the long run because the cul-de-sac was temporary.                     Tew relied on 

Derr's agreement to accept the substitute work by proceeding to build the T-intersection. 

The   words   and   actions   of   the   parties   indicate   that   Derr   assented   to   constructing   a 

T-intersection. 

                 The superior court also weighed the credibility of the witnesses in making 

its determination that Derr assented to the construction of a T-intersection rather than a 

cul-de-sac.   We give particular deference to the superior court's factual findings when, 

as here, they are based primarily on oral testimony, because the superior court, not this 
court,   judges   the   credibility   of   witnesses   and   weighs   conflicting   evidence.26       Tew 

provided detailed testimony about his conversations with Derr.  Derr, on the other hand, 

testified that he did not realize the cul-de-sac was not being built until October, just as 

the project was being completed.  The superior court found Tew's explanation of events 

had a "greater ring of truth to them." The superior court also found Derr's testimony less 

credible.     The court noted that Derr appeared forgetful and disorganized.                     Derr had 

difficulty presenting supporting evidence.              Given the superior court's assessment of 

credibility and the factual evidence, strong support exists for the conclusion that Derr 

assented to the construction of a T-intersection rather than a cul-de-sac.                  The superior 

court's finding is not clearly erroneous. 

        26      Josephine B. v. State, Dep't of Health & Social Servs., Office of Children's 

Servs., 174 P.3d 217, 222 (Alaska 2007). 

                                                   -16-                                                 6596 

----------------------- Page 17-----------------------

        F.	     The Superior Court Did Not Err In Finding The T-Intersection Would 
                Likely Be Accepted By The Borough. 

                The superior court found that Tew "reasonably and correctly" informed 

Derr   that   the   Borough   would   accept   either   a   cul-de-sac   or   a   T-intersection   to   meet 

Borough requirements.          The superior court also determined that the Borough would 

likely accept the substitution of the cul-de-sac for the T-intersection once Derr made a 

request for a modification in his initial plans.  Derr argues that no evidence supports the 

superior court's conclusion that the Borough would likely accept the T-intersection as 

a replacement for the cul-de-sac. 

                As discussed above, significant support exists for the determination that 

Derr assented to the T-intersection as a substitution for the cul-de-sac.                 Derr's agent 

Whaley   indicated   that   he   had   a   reasonable   belief   that   the   Borough   would   approve 

a T-intersection modification and construction.              Regardless, the modification of the 

contract was not dependent upon Borough approval. Although the superior court was not 

required   to   determine   whether   the   T-intersection   would   likely   be   approved   by   the 

Borough, its factual assessment is not clearly erroneous. 

        G.	     The   Superior   Court   Did   Not   Err   In   Its   Award   Of   Damages   For 
                Performing The Required Culvert Work. 

                Derr argues that if we find that Tew - and not Derr - was responsible for 

providing the three inch minus gravel, then the superior court improperly found that Derr 

was responsible for some of the delays in performing the culvert work.                    As explained 

above,     we   affirm   the  superior    court's   finding   that  Derr    was   responsible    for  any 

deficiencies in the three inch minus gravel, so Derr's claim for culvert work damages 
fails.27 

        27      The superior court determined that Tew was responsible for some of the 

culvert   cover   deficiencies,   unrelated   to   the   three   inch   minus   gravel,   on   the   private 
                                                                                          (continued...) 

                                                  -17-	                                               6596 

----------------------- Page 18-----------------------

        H.	     The Superior Court Did Not Err In Finding Derr Did Not Prove His 
                Damages Regarding Road Width Deficiencies. 

                The   superior   court   determined   that  Tew   failed   to   meet   the   road   width 

requirements at several points, but also found that Derr did not prove with sufficient 

certainty the number of places where the width was deficient or a reasonable cost for 

repairing the deficiencies to warrant an award of damages.  Derr argues that the superior 

court erred in finding that he had not proved the number of road width discrepancies and 

the costs of remedying them. 

                A   party   seeking   to   recover   damages   is   required   to   present   sufficient 
evidence of his damages to provide a reasonable basis for the trier of fact's award.28 

"While the amount of damages need not be proven with mathematical accuracy, there 
must be 'some competent evidence' upon which to base an award."29                    The amount of 

awarded damages is reviewed for abuse of discretion.30 

                Derr contends that out of a dozen measurements of road width on Foothills 

Boulevard, only one or two met the designated contract requirement. Derr did not record 

any   measurements   along   Range   View   Drive.         The   superior   court   agreed   that   Derr 

demonstrated that certain spots did not meet the requirements but found that he failed to 

prove that this was an indication that the road was not wide enough along a sufficient 

        27      (...continued) 

driveway off of Foothills Boulevard and assessed $800 in damages to Derr to cure the 
deficiencies. 

        28      Ben Lomond, Inc. v. Schwartz, 915 P.2d 632, 636 (Alaska 1996). 

        29      Conam Alaska v. Bell Lavalin, Inc., 842 P.2d 148, 154-55 (Alaska 1992) 

(quotingDowling Supply & Equip., Inc. v. City of Anchorage, 490 P.2d 907, 909 (Alaska 
1971)). 

        30      Breck v. Moore, 910 P.2d 599, 606 (Alaska 1996). 

                                                 -18-	                                           6596
 

----------------------- Page 19-----------------------

number of places to constitute a material breach of the contract.  The superior court also 

found that Derr failed to provide estimates of the cost of widening the road to 24 feet in 

the deficient spots.  Neither of the estimates Derr provided gave a specific estimate for 

making the road sufficiently wide.       Kennerson's estimate did not even mention road 

width.   Northern Dame's estimate only assessed the cost of road width in combination 

with all its other estimated costs of work on Foothills Boulevard.        This lack of both a 

specific estimate of cost and the extent of the road width deficiencies left the superior 

court with no basis for assessing damages.  The superior court's determination not to 

award damages for road width deficiencies because of a failure of proof was not an abuse 

of discretion. 

       I.	     The Superior Court Did Not Err In Finding No Breach Of Contract By 
               Tew's Failure To Meet The September 30, 2006 Deadline. 

               The    contract   specified   that   "[a]ll  work    shall  be   completed     by 

September 30, 2006, weather permitting and gravel source."  Tew did not complete the 

work until October 26, 2006.   The superior court found that the delay in completion was 

the result of weather and gravel source and thus was not a breach of the contract. 

               Derr argues that the superior court erred in finding that the completion 

deadline    was   waived.     The   superior  court  did   not  actually  find  waiver   of  the 

September 30, 2006 deadline. The superior court instead found Derr did not demonstrate 

an actionable breach of the September 30, 2006 deadline.            The contract specifically 

anticipated potential delay in meeting the deadline by providing that the deadline was 

dependent on "gravel source and weather permitting."  This provision is not ambiguous. 

The superior court found some delay occurred due to weather.  The court found greater 

delay occurred due to the need to process the gravel.        The court also found that some 

delay occurred when Tew was grubbing and clearing because Derr was unavailable to 

do the work himself as he originally intended.  The potential for delay was provided for 

                                             -19-	                                        6596
 

----------------------- Page 20-----------------------

in the contract, and the superior court's finding that delay in meeting the deadline was 

justified under this provision is supported by the record.  The superior court's findings 

are not clearly erroneous. 

        J.	     The Superior Court Did Not Rely On Theories Of Estoppel Or Waiver 
                In Not Awarding Damages To Derr. 

                Derr claims the superior court may have relied on theories of waiver or 

estoppel in finding that Derr was not entitled to damages for the failure of performance 

regarding three inch minus gravel, the cul-de-sac, slope angles and coverings, or the 24- 

foot   road   width.   Derr   may   be   referring   to the   superior   court's   statement   that   "the 

occasional failure to meet this requirement [that the road be 24 feet wide] never was 

complained of by Derr to Tew."  But in context, it is clear that the superior court did not 

base its decision not to award damages on theories of waiver or estoppel.  The superior 

court explained: 

                Derr   proved   that   Tew   did   fail   to   fully   meet   the   24   feet 
                requirements, at least at several points in each of the roads as 
                credibly     measured      by  Derr.    Derr     did  not   prove    with 
                 sufficient    certainty   any   precise   number     of   such   places, 
                though, or what a reasonable cost to repair the width problem 
                would have been at the time . . . .       Moreover, the occasional 
                 failure to meet  this requirement never was complained of by 
                Derr     to  Tew    .  .  .  .  Derr  also   has   not  shown     by   [a] 
                preponderance of the evidence the number of length of road 
                 feet where the width of 24 feet was not achieved, nor how 
                much it would have cost in the fall of 2006 to fix each linear 
                 foot. 

Thus, the superior court did not mention or discuss waiver or estoppel, but in context 

explained that its reason for not awarding damages was because Derr failed to prove 

them.  We conclude the superior court did not erroneously rely on theories of waiver or 

estoppel. 

                                                  -20-	                                            6596
 

----------------------- Page 21-----------------------

        K.	     The   Superior   Court   Did   Not   Abuse   Its   Discretion   By   Considering 
                Derr's Duty To Notify And Provide An Opportunity For Cure After 
                The Evidence Had Closed. 

                During      closing   arguments      the  superior    court   requested    supplemental 

briefing from both parties on whether Derr had a duty to give Tew notice and opportunity 

to cure.   Derr argues that this was an abuse of discretion. 

                We   have   recognized   that   Alaska   courts   have   "   'inherent   discretionary 
authority' to decide a case on a legal theory not presented in the pleadings."31  We have 

acknowledged that the power should be "sparingly exercised. In particular it should only 

be used when the new theory applies to the transaction in issue, is related to the theories 
presented by the parties, and is necessary for a proper and just disposition of the case."32 

In  First   National   Bank   we   determined   that   the   superior   court   had   the   authority   to 

examine a new legal theory but erred in "failing to give the parties notice that it would 
do so along with an opportunity to adjust their cases accordingly."33 

                In addition "we have held that when both parties address the substantive 
merits of an issue at trial, the parties have impliedly consented to try it."34   "Although 

mere failure to object to the introduction of evidence potentially relating to a new claim 
does not amount to implied consent to try that claim,"35 directly questioning, presenting 

        31      Alaska Prot. Servs., Inc. v. Frontier Colorcable, Inc., 680 P.2d 1119, 1124 

(Alaska   1984)   (quoting State   v.   First   Nat'l   Bank   of   Anchorage,   660   P.2d   406,   422 
(Alaska 1982)). 

        32      Id. (quoting First Nat'l Bank, 660 P.2d at 423). 

        33      First Nat'l Bank, 660 P.2d at 423. 

        34      Asher v. Alkan Shelter, LLC,           212 P.3d 772, 779 (Alaska 2009) (citing 

Oaksmith v. Brusich, 774 P.2d 191, 199 (Alaska 1989)). 

        35      Id.   (citing  Belluomini   v.   Fred   Meyer   of   Alaska,   Inc.,   993   P.2d   1009,
 

                                                                                          (continued...)
 

                                                   -21-                                             6596
 

----------------------- Page 22-----------------------

evidence, not objecting, and testifying on the matter all support a conclusion of implied 
consent.36 

                The issues of notice and cure were tied to Derr's theory of the case through 
the doctrine of good faith and fair dealing.37       In addition, "[t]he duty to mitigate damages 

is a well-recognized rule of contract law in Alaska."38          Derr was aware of the notice and 

duty   to   mitigate   issues. Attorneys   for both   parties   questioned   Derr   and   Tew   about 

providing notice of incomplete work.  Derr's attorney addressed the issue of mitigation 

during his cross-examination of Tew.  The parties were given the opportunity to submit 

post-trial briefing on these issues.      Derr never requested that the superior court reopen 

the case to take further evidence on either issue.  Tew requested that the superior court 

amend   his   answer   to   include   failure   to   mitigate   in   accordance   with   the   evidence 
presented at trial.39   Under these circumstances it is clear that the parties addressed the 

substantive   merits   of   mitigation   and   damages   and   notice   (or   lack   thereof)   to   Tew 

regarding Derr's allegations of deficient work, and the parties were given an opportunity 

to brief the legal significance of this evidence.           The superior court properly used its 

inherent discretionary authority to order supplemental briefing. 

        35      (...continued) 

1015-16 (Alaska 1999)). 

        36      Id. 

        37      Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979). 

        38      Alaska Children's Servs., Inc. v. Smart, 677 P.2d 899 (Alaska 1984) (citing 

Anchorage Indep. School Dist. v. Stephens, 370 P.2d 531, 533 (Alaska 1962)). 

        39      The request to amend pleadings was made in the conclusion of Tew's reply 

brief on the issue of notice and opportunity to cure.           The superior court did not rule on 
the request for an amendment of the pleadings. 

                                                  -22-                                            6596
 

----------------------- Page 23-----------------------

        L.	     The   Superior   Court   Did   Not   Err   In   Finding   That   Derr   Had   An 
                Obligation To Provide Tew With Notice And An Opportunity To Cure. 

                The   superior   court   discussed   notice   and   the   opportunity   to   cure   in   the 

context of Derr's claim that Tew failed to construct the road to a uniform 24-foot width. 

The court's discussion of the failure of notice and opportunity to cure followed its related 

discussion concerning Derr's failure to mitigate his damages regarding the three inch 

minus gravel issue.       In context, the court's findings and conclusions on these related 

issues   focused   on   Derr's   failures   to   take   reasonable   steps   to   "fix"   or   mitigate   his 

damages, and to permit Tew to "fix" or cure the minor incomplete items remaining on 

the punch list when they could have been resolved at relatively low cost to Derr, or at 

Tew's cost.      Discussed above, the court found that Tew had substantially complied with 

his contractual obligations in constructing the road. The superior court explained: 

                Derr acted in bad faith in failing to mitigate his damages. 
                The opportunity to pay Northern [Dame] to provide and use 
                screened gravel, and the relatively small amount of money 
                asked for by Steppers to screen the gravel while Tew still was 
                on the job both were ignored.         The minimal "fixes" his own 
                engineer, Whaley, told him were necessary in February 2007 
                . . . also went ignored. During these periods of time, Derr had 
                not yet paid Tew the final $50,000, so Derr should have had 
                this much money to use to mitigate his damages if in fact he 
                had been damaged by Tew. 

                                                * * * 

                [Derr] has not proved [Tew] breached the contract except as 
                to   the   required   24   foot   road   widths   and   perhaps   in   one 
                instance the required 22 foot road width on Foothills.           [Derr] 
                has not proven his damages to any degree of certainty as to 
                any such breach, however.   Also, [Derr] accepted this breach 
                until it was too late. Moreover, [Derr] did not give [Tew] any 
                reasonable opportunity to cure any such breach at [Tew's] 
                own expense.   [Derr] therefore is not entitled to any recovery 
                from [Tew] for this claimed deficiency. 

                                                  -23-	                                           6596
 

----------------------- Page 24-----------------------

                        In    accordance      with   the   substantial     performance 
                doctrine,   Tew   should   pay   Derr   the   following   to   cure   the 
                deficiencies      left  from    when     Tew    achieved     substantial 
                completion by working down to the last minute of the season: 

                         1.     $800 for the culvert deficiencies . . . , 

                        2.      $5,000      for   the   cost   of   the   slope    cover 
                deficiencies . . . that were Tew's responsibility to cure, and 

                        3.      $5,000 for the angle deficiencies.  
 

                        No greater sum than $10,800 for these deficiencies was
 
                proved with reasonable certainty. 

Thus, the superior court awarded damages to Derr under the substantial performance 

doctrine, in part based on Derr's failure to provide Tew notice and an opportunity to cure. 

                Derr argues that no obligation exists under the duty of good faith and fair 

dealing or under the obligation to mitigate damages that required him to provide Tew 

with notice of or an opportunity to cure deficiencies in the work.               Derr argues that the 

superior court misapplied Davis v. McCall because the court in that case found that the 
contractors had notice of the defects.40   But in Davis we never stated that there was no 

duty to provide notice or an opportunity to cure.              We held that the McCalls provided 

adequate notice of the deficiencies and that it was not necessary to provide "notice of 
every one of the twenty-four separate defects."41              Davis also does not stand for the 

proposition that an opportunity to cure is unnecessary.               We held that after an initial 
opportunity to cure there was no need for "additional opportunities to make repairs."42 

But the initial opportunity to cure still existed.  A party in Derr's position who believes 

that a contractor has not properly completed his contractual obligations acts at his peril 

        40      568 P.2d 956, 958 (Alaska 1977). 

        41      Id. 

        42      Id. 

                                                  -24-                                               6596 

----------------------- Page 25-----------------------

if   he   fails   to   give   the   contractor   timely  notice   of   the   perceived   deficiencies   and   a 

reasonable opportunity to cure the deficiencies. 

                It   is   not   disputed   that   Derr   did   not   provide   Tew   with   notice   of   the 

deficiencies.    Even after the two Borough inspections, Tew was not provided notice of 

the deficiencies or the opportunity to cure. Tew was not provided the punch list or copies 

of the correspondence with the inspectors.  He was never provided an opportunity to fix 

the minor items identified on the punch list. 

                The superior court determined that Tew had substantially complied with his 

contractual obligations, but that in three relatively minor respects Tew had left several 

deficiencies for which he must pay Derr damages.  The superior court's findings are not 

clearly erroneous and it did not err in considering Derr's failure to provide notice and an 

opportunity to cure in assessing what damages Tew was responsible for paying. 

        M.	     Derr's Claim To Incidental Costs For Removing The Lien Recorded 
                By Tew Was Waived Because Derr Failed To Raise The Claim In The 
                Superior Court. 

                Derr also claims that he is entitled to recover $3,000 in incidental costs he 

incurred in removing the lien recorded by Tew.               This claim for damages by Derr on 
appeal was not made in the superior court and will not be considered on appeal.43 

                Even if we were to consider Derr's argument, it is without merit.                   The 

superior court found Tew did not act in bad faith by filing a lien.  The superior court also 

found that Derr had problems accepting or paying bills to Tew.  Derr's failure to pay left 

Tew with few options.        Tew was statutorily required to file the lien within 120 days of 

        43      Brandon v. Corrs. Corp. of America, 28 P.3d 269, 280 (Alaska 2001) ("A 

party may not raise an issue for the first time on appeal."). 

                                                  -25-	                                              6596 

----------------------- Page 26-----------------------

 finishing work on the project or the lien would not be enforceable.44   We have strictly 

 construed statutory lien deadlines.45     Tew's lien was filed in a timely manner.  Tew took 

 the legally required steps in obtaining the lien and Derr is not entitled to recover the 

 incidental costs of removing it. 

 V.      CONCLUSION 

                We   AFFIRM   the   findings   and   judgment  of   the   superior   court   in   every 

respect. 

         44     AS 34.35.068 (c). 

         45     See, e.g., Frontier Rock & Sand, Inc. v. Heritage Ventures, Inc., 607 P.2d 

 364, 367 (Alaska 1980);H.A.M.S. Co. v. Elec. Contractors of Alaska, Inc., 563 P.2d 258, 
 262-64 (Alaska 1977). 

                                                 -26-                                             6596 
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