Case Title: HAGGERTY v SELSCO

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1975-04-29T00:00:00Z

Document:
No. 12868 I N THE SUPREME COURT OF THE STATE O F M O N T A N A 1975 T. G. HAGGER'i'Y and F. P. M E S S M E R e t a l . , P l a i n t i f f s and Respondents, -vs - SELSCO, a Utah corporation et a l . , Defendant and Appellant. Appeal from: D i s t r i c t Court of the Eighteenth J u d i c i a l D i s t r i c t , Honorable W. W. Lessley, Judge presiding. Counsel of Record: For Appellant : Landoe and Gary, Bozeman, Montana J. Robert Planalp argued, Bozeman, Montana For Respondents: Berg, Angel, Andriolo and Morgan, Rozeman, Montana Ben E. Berg argued, Bozeman, Montana Submitted: March 4 , 1975 Decided : APR 2 9 1975 /.$pk 2 3 Filed : ~ ~ L W " , Q / %"@p l e r k M r . J u s t i c e John Conway Harrison delivered the Opinion of the Court. This is an appeal from a judgment f o r p l a i n t i f f s T.G. Haggerty and F.F. Messmer, co-partners, doing business a s Haggerty-Messmer Co., a partnership, i n an action f o r foreclosure of a mechanic's l i e n against a t r a i l e r court owned by defendant Selsco, a Utah corporation qualified t o do business i n Montana. Action was brought t o recover the balance due under a contract t o e r e c t c e r t a i n buildings and i n s t a l l t r a i l e r court f a c i l i t i e s . Defendant f i l e d a cross-complaint. T r i a l was held i n Gallatin County, Hon. W. W. Lessley presi.ding without a jury. Judgment f o r p l a i n t i f f s was i n the amount of $70,680.55, plus i n t e r e s t a t 6 percent o r $6,738.85, and attorney fees i n t h e amount of $7,500. P l a i n t i f f s entered i n t o a contract with defendant f o r the construction of the West Yellowstone United Campground. The con- t r a c t was signed on May 28, 1971,and by June 2, 1971, p l a i n t i f f s had moved onto the s i t e and begun construction work. Time was of the essence because defendant desired t o open the campground i n August 1971. P l a i n t i f f s were t o construct a road system, water system, auxiliary r e s t rooms, and f i n i s h construction of t h e main administration building; a l l work was t o be completed i n sixty-one calendar days. P l a i n t i f f s had two general superintendents on the job s i t e during construction. One was i n charge of the buildings, the other i n charge of the sewer lagoon, s i t e grading throughout the area, and a l l roads. The engineering firm of Morrison-Maierle designed the project and was responsible f o r overseeing construction. This firm, from i t s o f f i c e i n Bozeman, had primary responsibility of checking t h e project and i t s resident engineer, Olmstead, was i n charge of the general overseeing job. The f i r s t probtlem t h a t arose was the construction of the main administration building which defendant had contracted t o another company, Diamond Homes. While p l a i n t i f f s were responsible f o r building the t o i l e t and shower buildings, they were only responsible f o r the foundation of the main administration building. Diamond Homes was t o e r e c t i t and then p l a i n t i f f s were t o f i n i s h o f f some i n t e r i o r work. The pre-fab Diamond Homes building did not a r r i v e on the s i t e u n t i l July 2, 1971. There was no representative of Diamond Homes there t o unload it, therefore p l a i n t i f f s unloaded the building. Certain materials were unsatisfactory and another eighteen days went by before replacements arrived. I n the meantime Diamond Homes made a deal, known t o defendant, with p l a i n t i f f s t o e r e c t t h e 1 1 1 1 A frame building and t h i s work began on July 20, 1971. It is estimated by Bergan, p l a i n t i f f s ' construction superintendent, t h a t t h i s work took from three weeks t o a month. P l a i n t i f f s b i l l e d Diamond Homes $3,382.90 f o r the work. Defendant, knowing of the deal made by Diamond Homes with p l a i n t i f f s , paid Diamond Homes f o r the work but Diamond Homes f a i l e d t o pay p l a i n t i f f s . Defendant paid p l a i n t i f f s a l l amounts owed, l e s s retainage, through August 20, 1971, but has refused t o make any f u r t h e r pay- ments because of alleged defects i n the performance of the con- t r a c t and counterclaims it is e n t i t l e d t o liquidated damages i n an amount of $200 per day f o r a delay of 57 days. The contract provided t h a t the supervising engineers, Morrison- Maierle, would decide a l l questions which arose concerning accept- a b i l i t y of materials furnished, work performed, r a t e of progress of work, interpretation of drawings and specifications, and a l l questions a s t o acceptable fulfillment of the contract on the contractor's part. Two major items i n the contract appear t o have caused the disputes which arose between p l a i n t i f f s and defendant--the eighteen shower s t a l l s and the road system. The specifications c a l l e d f o r the i n s t a l l a t i o n of commercial grade top quality construction showers, referred t o a s Sanymetal Shower-master u n i t s o r t h e i r equivalent. The shower s t a l l s in- s t a l l e d were not of a commercial grade top quality and t h i s was brought t o t h e a t t e n t i o n of p l a i n t i f f s before t h e i r i n s t a l l a t i o n . In addition t o the f a c t the showers were not the kind specified i n the contract, the shower bases began cracking because t h e shower room concrete f l o o r was improperly l a i d i n t h a t it did not slope t o the drains. Due t o the time factor of getting the camp open, the p a r t i e s agreed p l a i n t i f f s would attempt t o f i x the &owers so they would be equal or equivalent t o what t h e specifications c a l l e d for. The problem of what i t would take t o make the u n i t s equal o r b e t t e r i s one of the disputed issues. Ronald Olmstead, orriso on-Maierle's supervising engineer charged by the contract t o "* * * determine a l l questions a s t o acceptable fulfillment of the contract on t h e part of the con- t r a c t o r " t e s t i f i e d : (1) t h a t it would take $300 per shower t o bring the i n s t a l l e d showers up t o acceptable quality; (2) t o replace the existing showers with those specified it would cost $10,800; and (3) it would take $1,500 t o f i x the slope of the floor so it would drain. A Bozeman master plumber Walter Savage, t e s t i f i e d over plain- t i f f s ' objections t h a t t o r e p a i r and replace the shower s t a l l s a t 1972 c o s t s i t would cost $11,646 and a t 1974 costs $14,886. P l a i n t i f f T o m Haggerty t e s t i f i e d t h a t t o grout under a l l the showers and t o fiberglass the eighteen showers would cost from $400 t o $800. The t r i a l court l a t e r modified i t s o r i g i n a l findings on t h e c o s t t o r e p a i r and replace the shower s t a l l s from $14,886 t o $5,400. Defendant f e e l s t h i s figure inadequate. The second item i n dispute r e l a t e s t o the road system and the award of $1,500 t o replace and r e p a i r the entrance and e x i t roads t o the campground. Engineer Ronald Olmstead t e s t i f i e d p l a i n t i f f s ' u t i l i t y superintendent Elmer Shay primed and surfaced the roads on August 19, 1971, a f t e r he was told by Olmstead t h a t "* * * the road bed wasn't q u i t e ready f o r surfacing yet." After t h i s warning was ignored,, Morrison-Idaierle absolved i t s e l f of responsibility and informed p l a i n t i f f s they might have t o come back and r e p a i r the roads. The entrance and e x i t roads a r e each about 1,200 f e e t i n length and connect the compground with t h e main highway. Olmstead further t e s t i f i e d t h a t , i n h i s opinion, it would cost about $1,000 t o r e p a i r the e x i t road; t h a t the entrance road should have a guarantee of one year on i t , b u t t h a t he had not de- termined what i t would take t o r e p a i r it. He then went on t o t e s t i f y t h a t i t would take $7,000 t o resurface the e n t i r e area. orriso on-Maierle's progress estimate #5 s t a t e d , i n part: "The Total Earned of $293,773.95 does not include t h e prime o r s e a l o i l o r the crushed cover aggregate f o r the Exit Road. These have been deducted from the amount due a t the bottom of Page 5 since the Exit Road construc- t i o n i s not acceptable t o the Engineer o r Owner. I I From t h i s it appears t h a t any damages a r i s i n g from the e x i t road have already been taken out of p l a i n t i f f s ' contract sums due, but nothing was t e s t i f i e d t o a s t o how much the entrance r e p a i r s would be, unless t h e overall f i g u r e of $7,000 was used minus t h e $1,500 finding f o r the c o s t t o r e p a i r t h e e x i t road, leaving a figure of $5,500 f o r r e p a i r s t o the entrance road. The campground was opened and functional on September 27, 1971, and according t o the supervising engineer's estimate was 99 percent complete. When t h e engineer's progress report 1/4, covering the period from August 20 t o November 11, 1971, was submitted f o r the amount of $49,064.45, defendant refused t o pay. When the f i n a l progress estimate -- I t Estimate No. F'ive-~inal", covering November 11,1971 t o August 20, 1972, was submitted t o defendant it declared the project 100 percent complete and directed defendant t o pay p l a i n t i f f s the further sum of $77,414.35. This has not been paid. The t r i a l court awarded p l a i n t i f f s a judgment i n the amount of $70,680.55, plus i n t e r e s t on t h a t amount a t s i x percent per annum t o date of judgment o r $6,738.85, and the sum of $7,500 attorney fees. O n appeal defendant r a i s e s these issues: 1. Was there s u f f i c i e n t evidence t o j u s t i f y the t r i a l c o u r t ' s findings t h a t the sum of $5,400 was necessary t o conform the shower s t a l l s t o the specifications, and the concomitant i s s u e of what method i s t o be used t o measure the damages incurred when an owner must r e p a i r the f a u l t y work of the contractor? 2. Did the evidence j u s t i f y an award of only $1,500 t o re- place and r e p a i r t h e e x i t and entrance roads t o the campground? 3 , Did the t r i a l court e r r i n finding t h a t defendant was not e n t i t l e d t o liquidated damages f o r the 57 day delay i n the project? 4. Did the t r i a l c o u r t ' s award of $7,500 attorney fees c o n s t i t u t e undue hardship i n l i g h t of the other penalties awarded? Issue No. 1 questions whether the evidence j u s t i f i e d the c o u r t ' s findings a s t o the showers. A l l p a r t i e s t o t h i s action recognized t h a t t h e showers did not meet the specifications. The only question before the t r i a l court was whether the showers could be reinforced and brought up t o the contract s p e c i f i c a t i o n s . o r whether they would have t o be removed and replaced by the showers called f o r i n the specifications. The evidence indicates t h a t a t a meeting attended by the con- s u l t i n g engineers, p l a i n t i f f s and defendant's representative, John Konold, it was agreed t h a t p l a i n t i f f s would improve the s t a l l s by putting styrofoam sheeting between them t o make them r i g i d and the wall solid. Following t h a t meeting a l l shower s t a l l s were pulled out, styrofoam sheets were put i n , and the s t a l l s replaced. However, the problem of the shower bases had not arisen a t t h a t point. A s previously noted, there i s evidence of three d i f f e r e n t estimates f o r damages on the showers: (1) the reasonable c o s t t o r e p a i r and provide equal showers; (2) cost of t o t a l replacement of showers; and (3) the difference i n the cost of i n s t a l l i n g the specified shower s t a l l s and the cost of i n s t a l l i n g the shower s t a l l s t h a t were a c t u a l l y i n s t a l l e d . Defendant argues the damages it sustained by p l a i n t i f f s ' f a i l u r e t o complete the contract according t o specifica- tions is computed by the c o s t of correcting and completing the s t a l l s , not the value which the contractor supplied on the contract t o defendant. P l a i n t i f f s argue t h i s Court has not previously ruled on what is the proper measure of damages f o r defective construction. However, i n Mitchell v. Carlson, 132 Mont. 1, 5, 7, 313 P.2d 717, the Court did consider t h e damage question i n a case involving a homeowner's s u i t f o r damages, a s a r e s u l t of a poorly b u i l t home. There the Court looked t o the s t a t u t e defining the measure of damages, section 17-301, R..C.M. 1947, which provides: 11 For the breach of an obligation a r i s i n g from contract, the measure of damages, except where otherwise expressly provided by t h i s code, i s the amount which w i l l compen- s a t e t h e party aggrieved f o r a l l the detriment proximately caused thereby, o r which, i n the ordinary course of things, would be l i k e l y t o r e s u l t therefrom. 11 The Court i n Mitchell i n upholding an instruction given which was a verbatim restatement of section 17-301, R.C.M. 1947, said: "Applying the s t a t u t o r y r u l e of damages t o t h i s case it i s apparent t h a t p l a i n t i f f s w i l l be compensated only f o r the 'detriment proximately caused' by the breach, viz., the cost of making t h e r e p a i r s necessary t o complete t h e house i n accordance with the p a r t i e s ' agreement. 11 In Mitchell the Court c i t e d an Oklahoma case, National Surety Co. v. Board of Education, 62 Okl. 259, 162 P. 1108, where the Oklahoma court interpreted a s t a t u t e similar t o t h a t of Montana and arrived a t the same basis f o r damages. Also i n Mitchell the Court quoted from Montgomery v. Karavas, 45 N.M. 287, 114 P.2d 776,781: 11 I l h e r e the contractor f a i l s t o keep h i s agreement, the measure of the employer's [owner's] damages, whether sought i n an independent action o r by re- coupment or counterclaim, i s always the sum which w i l l put him i n a s good a positiok a s i f the contract had been performed.,If the defect i s remedial from a p r a c t i c a l standpoint, recovery generally w i l l be based on the market price of completing o r correcting the performance, and t h i s w i l l generally be shown by the cost of g e t t i n g work done o r completed by another person. * * * 5 Williston on Contracts, Sec. 1362. "' (Emphasis supplied). P l a i n t i f f s argue t h a t the Court so held i n Mitchell because it was faced with a f a c t s i t u a t i o n t h a t required tearing down construction already i n place, i n f e r r i n g t h a t such an application of the r u l e should apply i n the i n s t a n t case. Such an application cannot be given t o the f a c t s here f o r , by both contract and stipu- l a t i o n , the p a r t i e s agreed t o accept the supervising engineer's decision on a l l questions a s t o acceptable fulfillment of the contract by the contractor. Here, we have opinions a s t o t h e cost of redoing the showers and t h e i r bases t o bring them within t h e contract standards. Those opinion figures varied from $300 per shower by the supervising engineer, t o the c o s t f o r t o t a l replace- ment of $14,886. The t r i a l court found the $300 per shower figure o r a t o t a l of $5,400 would remedy the shower s i t u a t i o n . W e find no e r r o r on t h e p a r t of the t r i a l court. Defendant's issue 2 questions the award of $4500 t o replace and r e p a i r the e x i t and entrance roads. Both p a r t i e s argue t h e court was i n e r r o r i n s e t t l i n g on t h e figure of $$500. Defendant alleges the figure i s a r b i t r a r y . P l a i n t i f f s a l l e g e (1) there is nothing i n the record t o support an award i n excess of $1,000 and, (2) because the engineering firm, i n preparing the f i n a l progress r e p o r t , deducted $640 from the contract price a s a r e s u l t of the unsatisfactory e x i t road, t h a t no damages should be awarded f o r the r e p a i r of the e x i t road. Not so! Olmstead t e s t i f i e d there was a one year warranty on the road; t h a t it was improperly sealed and coated; and, t h a t p l a i n t i f f s were warned the road might have t o be redone. He further t e s t i f i e d the e x i t road would need resurfacing and estimated the e x i t road would cost about $1,000 t o resurface and the e n t i r e area would c o s t about $7,000 t o resurface. Although Olmstead could not say whether the entrance road needed resurfacing a t t h a t time, John Konold t e s t i f i e d t o the deterioration of both the entrance and e x i t roads. While the record does not reveal why the d i s t r i c t court decided t o award t h e sum of $1,500 f o r t h e r e p a i r of the roads, i t was within t h e range of - t h e evidence offered. The f a c t t h a t $640 was deducted from the contract price would merely r e s u l t i n an o f f s e t from any damages suffered by defendant. It would not preclude it from damages. W e find no error. ~ e f e n d a n t ' s issue 3 questions t h e t r i a l court's denial of liquidated damages t o defendant f o r the 57 day delay. The contract provided f o r liquidated damages a t the r a t e of $100 per day f o r general construction; $100 per day f o r t h e building contract. The t r i a l court found the delay, i f any, was contributed t o by defendant o r waived by defendant. W e agree. B & L Painting M o n t . Co., Inc. v. United Pacific Ins. Co., , 527 P.2d 554, 31 %.Rep. 868. Were, the contractee caused a s u b s t a n t i a l part of the delay i n the building and i n the progress of the work. Without any agreement f o r an extens:ion of time t o o f f s e t the delay, the time fixed i n the contract and any provisions f o r liquidated damages based thereon are abrogated leaving t h e contractor responsible only t o complete t h e work within a reasonable time. B & L Painting Co., Inc. v. United Pacific Ins. Co., supra; A'nno. 152 A.L.R. 1349, 1359; Figgins v. Stevenson, 163 Mont. 425, 517 P.2d 735, 30 St-Rep. 1201. W e note here, f o r correction by the t r i a l court, t h a t an e r r o r was made i n estimating i n t e r e s t due. The contract, Section 7.06, provides : "INTEREST ON UNPAID PROGRESS ESTIMATES: Should the Owner f a i l t o pay a Progress Estimate within t h i r t y (30) days from the date of the preparation by the Engineer, and should he f a i l t o inform the Engineer and the Contractor i n writing of h i s reasons f o r withholding payment, the Owner s h a l l pay t h e Contractor i n t e r e s t on the amount of t h e Progress Estimate a t the r a t e of s i x per cent (6%) per annum u n t i l payment i s made. 11 Progress estimate No. 4 covering the period of August 20 t o November 11, 1971, directed the owner (defendant) t o pay $49,064.45. It has never been paid. The t r i a l court f a i l e d t o compute i n t e r e s t from November 11, 1971 t o the date of f i l i n g t h e complaint on September 8 , 1972. A n additional sum of $2,605.12 i s due and owing. Clifton, Applegate & Toole v. Big Lake Drain D i s t . No. 1, 82 Mont. 312, 267 P. 207. Further, the judgment should be increased $350 f o r the c o s t of a water valve, allowed by t h e t r i a l court i n its finding of f a c t No. 21. While not provided f o r i n t h e specifications, i t was put i n by agreement of the p a r t i e s and t h e contractor should be r e i m - bursed. ~ e f e n d a n t ' s issue 4 concerns the payment of attorney fees. The t r i a l court awarded p l a i n t i f f s $7,500 f o r attorney fees and defendant objects t o the amount, alleging it was wrongfully awarded. W e find no error. A senior member of the Gallatin County Bar t e s t i f i e d t h a t fees f o r such a case should be from $15,000 t o $27,000. The t r i a l c o u r t ' s figure of $7,500, o r approximately ten percent, i s most c e r t a i n l y proper i n view of the problems which arose. A n additional f e e f o r t h i s appeal i s allowed i n the amount of $1,000. The cause is remanded t o the d i s t r i c t court f o r entry of judgment i n accordance herewith. L. W e Concur: / * > ' L ---h---------C------------------- Chief J u s t i c e ................................. Justices. M r . Justice Gene B. Daly concurring i n part and dissenting i n part: I concur generally with the majority opinion but cannot agree with the damage award discussed under issue 2 t o replace and repair the e x i t and entrance roadways. The contractor surfaced the road- way a f t e r being warned by the engineer i n charge that it was not ready for surfacing. The contractor was informed he might have t o come back and repair the road. The f u l l burden of t h i s road r e s t s on the road contractor under these circumstances. The deduction on estimate #5 made by the engineers f o r s e a l o i l and cover aggregate is not significant a s it pertains t o reconstruc- tion of the road and does not cover t h a t damage figure due the owner f o r the e x i t portion, much l e s s the entrance. There i s testimony that both e x i t and entrance roads need attention due t o deteriora- tion and the e n t i r e job would cost $7,000. Under the circumstances the $1,500 award i s error. -- 5 " ' ----- --- Justice.