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Stern Oil Co. v. Border States Paving, Inc.

Supreme Court of South Dakota

May 14, 2014

STERN OIL COMPANY, Plaintiff and Appellant,
v.
BORDER STATES PAVING, INC. and LIBERTY MUTUAL INSURANCE COMPANY, AS ITS SURETY, Defendants and Appellees and STATE OF SOUTH DAKOTA ex rel. STERN OIL COMPANY, Plaintiff,

Argued March 26, 2014

Page 274

APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA. THE HONORABLE JON S. FLEMMER, Judge.

Affirmed.

DANIEL K. BRENDTRO of Zimmer, Duncan & Cole, LLP, Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.

THOMAS R. OLSON of Olson Construction Law, PC, West Saint Paul, Minnesota, Attorneys for defendants and appellees.

GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 275

[¶1] Border States Paving Company, Inc. (Border States) was the prime contractor on a road construction project. Stern Oil Company (Stern Oil) sued Border States and its surety, Liberty Mutual Insurance Company (Liberty Mutual), for fuel and petroleum products Stern Oil sold to a Border States subcontractor, Weatherton Contracting Company, Inc. (Weatherton). Stern Oil asserted three causes of action: one on Liberty Mutual's bond, one against Border States for breach of an asserted third-party contract to pay the bill, and one against Border States for unjust enrichment. The circuit court granted summary judgment against Stern Oil on all claims. We affirm.

Background

[¶2] Border States was the prime contractor on a South Dakota Department of Transportation (DOT) construction project involving U.S. Highway 281. As required by SDCL 31-23-1, Border States acquired a performance bond from Liberty Mutual for the project.

[¶3] Weatherton entered into a subcontract with Border States to supply crushed aggregate that would be incorporated into the highway. In 2008, Stern Oil sold Weatherton the fuel and petroleum products it needed to perform its subcontract. However, Weatherton failed to pay Stern Oil. In June 2009, Stern Oil obtained a judgment against Weatherton for the unpaid bills.

[¶4] During the same year that Weatherton was supplying crushed aggregate on the Highway 281 project, Weatherton was also supplying material to Upper Plains Contracting, Inc. (Upper Plains), a contractor on an Aberdeen airport project. Mistakenly believing that its fuel had been used on the Aberdeen airport project, Stern Oil initiated a bond claim in November 2010 against Upper Plains and its bond company. On April 5, 2011, Carl Weatherton, owner of Weatherton, was deposed in the Upper Plains litigation. During his deposition, he testified that Stern Oil's fuel had been used on the Highway 281 project rather than the Aberdeen airport project.

[¶5] Additional discovery in the Upper Plains litigation revealed that Weatherton

Page 276

and Border States had communicated about Stern Oil's unpaid bills. In November 2008 correspondence, Weatherton sent Border States a ledger of Weatherton's unpaid suppliers. In that ledger, Weatherton stated that there were " checks to be issued" to Stern Oil totaling $111,012.37. Border States did not issue checks to Stern Oil for that amount. And, at the time of his deposition, Carl Weatherton believed that " Stern Oil should have been paid all they were owed or Border States is still holding the money there, one or the other."

[¶6] Stern Oil did not bring this suit against Border States and Liberty Mutual until June 2011. At that time, the statute of limitations had run on Stern Oil's claim on Liberty Mutual's performance bond. See SDCL 31-23-4.[1] However, Stern Oil contended that the statute of limitations should be equitably tolled. Stern Oil also pleaded timely, direct causes of action against Border States for unjust enrichment and breach of an alleged third-party beneficiary payment agreement between Weatherton and Border States under which Border States was to pay Weatherton's obligation to Stern Oil.

[¶7] Border States moved for summary judgment. On the bond claim, Border States and Liberty Mutual relied, among other things, on Stern Oil's failure to timely file suit within the one-year statute of limitations. On the direct claims, Border States relied on the terms of its subcontract with Weatherton and the payments Border States made to Weatherton under the subcontract. Border States argued that it was not unjustly enriched because it paid more for the materials Weatherton was to provide than Weatherton was entitled to receive under the subcontract.[2] On the third-party beneficiary breach of contract claim, Border States presented an affidavit of Carl Weatherton, dated October 24, 2012, refuting that there was a third-party beneficiary contract to pay Stern Oil. He stated, " I requested that Border States pay several of Weatherton's suppliers for the Project, by way of joint check or ...


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