Case Title: Storts v. Eby Construction Co.

Citation: 217 Kan. 34, 535 P.2d 908

Docket Number: 47,553

State: kansas

Court: Kansas Supreme Court

Date: 1975-05-10T00:00:00Z

Document:
217 Kan. 34 (1975)
535 P.2d 908
JAY C. STORTS, Appellant,
v.
MARTIN K. EBY CONSTRUCTION COMPANY, Appellee.
No. 47,553

Supreme Court of Kansas.
Opinion filed May 10, 1975.
John P. Woolf, of Martin, Pringle, Schell and Fair, of Wichita, argued the cause, and J. Taylor Neuschwander, of the same firm was with him on the brief for the appellant.
Jerry G. Elliott, of Foulston, Siefkin, Powers and Eberhardt, of Wichita, argued the cause, and Mikel L. Stout, of the same firm was with him on the brief for the appellee.
The opinion of the court was delivered by
HARMAN, C.:
This is an appeal from summary judgment denying an employee of a subcontractor the right to maintain a tort action against the general contractor for personal injury on the basis the employee's exclusive remedy was under the workmen's compensation act pursuant to K.S.A. 44-503 (a). The primary issue is whether a contract existed between the general contractor and the subcontractor at the time of the plaintiff's injury.
*35 Plaintiff Jay C. Storts, an employee of Kendall, Inc., was severely injured on June 12, 1970, when the wall of a storm sewer excavation collapsed on him. Plaintiff was provided workmen's compensation and medical aid by Kendall and its insurance carrier. He instituted this action to recover damages allegedly caused by the negligence of the general contractor, Martin K. Eby Construction Company.
Garvey Center, Inc. was the developer of an area in downtown Wichita known as the Kiva project, which included a high rise motel, a theater, a parking garage and three office buildings. Eby had previously been the general contractor for Garvey in constructing the garage. On January 16, 1970, after conferences between the two, Garvey notified Eby it had been selected as the general contractor to work with the architects further to develop the project and a construction contract. The agreement was to be a negotiated contract project wherein the construction company worked with the architect during design phases prior to a formal written contract between Garvey and Eby. The arrangement was to be a cost plus contract with a maximum guaranteed cost (not to exceed a certain amount).
On February 18, 1970, Eby sent a letter to Kendall inviting a proposal for mechanical work (air-conditioning, heating, ventilating and plumbing) to be done on the Kiva project. The letter stated the work would be done on a maximum guaranteed price basis with Kendall to compute the maximum cost for the complete job when the mechanical drawings were available; Kendall was requested to propose the percentage above cost for which it would do the work; upon completion of the job if the cost plus percentage figure was less than the maximum guaranteed price the lesser amount would be paid.
Kendall replied by letter February 23, 1970, in which it proposed to do the work on phase one of the project for cost plus 12% and on phase two for cost plus 15%. Kendall pointed out it had been the mechanical contractor on two of the Garvey buildings in the project.
By letter dated March 3, 1970, Eby accepted Kendall's proposal to do the mechanical work. The letter further stated: "The award was made based on your proposal dated February 23, 1970, with one exception. The job will be awarded on a maximum guaranteed cost basis, and not a true cost plus job."
On March 12, 1970, Kendall sent a letter to Eby which detailed how Kendall would compute its cost. The letter concluded with *36 this: "Thank you for the opportunity of working with you on this project."
Meanwhile, there had been oral discussions between Eby and Kendall officials as to excavation work necessary in connection with Kendall's part of the project  Eby was to do this with its own backhoe and operator.
On April 23, 1970, Garvey authorized Eby to commence construction on May 1, 1970; however, the formal written contract between them was not signed until late in December, 1970. In the middle part of May, 1970, Kendall entered the site and commenced its work on the project.
On June 15, 1970, after Kendall received its copy of the plans and specifications, it submitted a maximum cost figure on the project of $419,016. Although excavation was not specifically mentioned this figure included the cost of excavation necessary in connection with Kendall's portion of the work.
The formal written subcontract between Eby and Kendall, prepared by the former, was dated June 10, 1970. On that date Eby, in accord with its custom, mailed two unsigned copies of the contract to Kendall. This contract specifically provided Eby was to furnish the labor and equipment for machine excavation and backfill. The contract price, by reason of this work by Eby, was stated as $5,576.00 less than the afore-mentioned figure, or $413,440. Kendall signed the two copies of the subcontract and returned them to Eby by letter of transmittal dated June 15, 1970. The contracts were then signed by Eby.
Meanwhile plaintiff's injury occurred on June 12, 1970. The ditch in question had been dug June 9th by Eby's backhoe operator using Eby's backhoe. The next day pipe was run into it and inspected and backfilling had been commenced. The ditch had not been shored. On June 12th while the workers were waiting for another load of sand for backfill plaintiff asked his foreman if he should repair a gasket that looked out of place on the pipe in the ditch. The foreman said it was okay the way it was but plaintiff could suit himself. Plaintiff entered the ditch and it collapsed upon him. Plaintiff had been in the same ditch earlier that day.
This action was instituted by the filing of plaintiff's petition alleging that at a time when no contract existed between Eby and his employer Kendall he was injured by Eby's negligence in failing to shore the ditch and in failing to warn him of the dangerous conditions. *37 In the alternative he alleged that if a contract existed between the two contractors then Eby was Kendall's subcontractor as to the excavation work.
Eby's answer, among other things, denied the nonexistence of a contract and asserted exclusivity of the workmen's compensation act. After the taking of depositions to which were attached the writings already referred to and entry of a pretrial conference order which included certain stipulations Eby filed a motion for summary judgment upon three grounds: The exclusivity of the remedy of workmen's compensation, that there was no evidence of Eby's negligence and plaintiff was guilty of contributory negligence as a matter of law. This motion was twice argued to the trial court. The court sustained the motion upon the first ground but made no ruling as to either of the negligence questions. The court found that on the date of the accident a contract existed between Garvey and Eby and a subcontract existed between Eby and Kendall; that Eby was not a subcontractor of Kendall. It ruled that the provisions of the workmen's compensation act barred plaintiff's tort action. Plaintiff has appealed from the summary judgment.
Appellant Storts contends that prior to the accident on June 12, 1970, appellee Eby and his employer Kendall had not entered into a binding contract and did not do so until appellee formally signed the written contract on June 15, 1970. He concedes now, and did so also at trial level, that K.S.A. 44-503 (a) bars tort actions by employees of subcontractors against the prime contractor and, where this is the case, the employee's exclusive remedy is a claim for workmen's compensation, citing Watson v. Dickey Clay Mfg. Co., 202 Kan. 366, 450 P.2d 10. He also concedes now as he did at trial that if a contract existed between the two his primary theory for recovery herein has no merit. Appellant further contends the issue as to when appellee and Kendall entered into a binding contract was a disputed fact question, thus rendition of summary judgment was premature. The two contentions may be considered together.
First we note the parties agreed at pretrial conference that all discovery necessary for determination of the liability issue had been completed and further that appellee could file a motion for summary judgment prior to trial. The question now is whether the trial court properly determined the relationship of the parties as a matter of law.
*38 The general rule is that in order for parties to form a binding contract there must be a meeting of the minds as to the essential terms of the contract (Weil & Associates v. Urban Renewal Agency, 206 Kan. 405, 479 P.2d 875). Appellant argues that prior to the date of the accident the parties were still negotiating and had not reached a meeting of the minds. We have already summarized the correspondence between the two contractors: The invitation to bid, Kendall's response and appellee's acceptance letter of March 3, 1970. This latter stated:
Pointing out that an acceptance must be unconditional and not impose new terms, and relying on the language emphasized above, appellant says the March 3rd letter of acceptance varied the terms offered. We cannot agree. The portion upon which appellant relies merely repeated appellee's letter of February 18, 1970, in which it was stated the job would be awarded on a maximum guaranteed cost basis. No new terms were introduced or imposed. The statement "with one exception" was inappropriate and inaccurate because no exception in fact existed nor could any have been understood. Subsequently, on March 12, 1970, Kendall sent appellee its letter detailing how it computed its costs and closing with an expression of thanks for being accepted for the job.
Appellee and Kendall agree that, at the latest, they had on March 12th entered into a contract and all the evidence so indicates. Appellee's vice-president and project manager testified:
Kendall's corporate secretary and engineer testified first as to the formal signed contract dated June 15, 1970, then as follows:
"A. Yes.
"A. Yes.
"Q. Will you tell us what it is?
..............
..............
"A. Yes, I think so.
"A. Yes.
..............
"A. You mean did we plan on 
"Q. Your people  physically doing the work?
"A. Oh, no.
..............
..............
What about the matter of the change in figures due to the excavation work to be done by appellee? From the very beginning it *40 appears clear that appellee rather than Kendall was going to do this and it was so understood between them. The reason was explained by the deposition testimony: Kendall owned no backhoes and if it were going to do excavating it would have to rent one and include that charge and an operator's wages in its cost; Kendall would be entitled to a percentage add-on for this; appellee owned about fifty backhoes or pieces of excavating equipment; it was going to be required to keep a backhoe on the job site during construction in any event for which daily rental would be charged and paid for by Garvey in the total cost; this backhoe would not be used all the time but the rental would go on the same and it could easily be spared for excavation in connection with Kendall's mechanical work; under union agreement the backhoe operator could not be used for other types of work and if he were sent home for part of a day a full day's wages would still have to be paid; appellee would not profit from having another backhoe and backhoe operator on the job (the job site was crowded as it was) and it was in Garvey's interest from a cost standpoint that appellee do the excavating with the equipment already there; hence, appellee retained the excavation work and it was never contemplated otherwise between appellee and Kendall.
It seems clear the parties concluded they had entered into a binding contract with the specific maximum guaranteed cost to be submitted when the plans and specifications became available. In 1 Corbin on Contracts, § 29, it is stated:
This principle was adopted in Phillips & Easton Supply Co., Inc. v. Eleanor International, Inc., 212 Kan. 730, 512 P.2d 379, in which we also held the fact that parties contemplate the subsequent execution of a formal instrument as evidence of their agreement does not necessarily imply they have not already bound themselves to a definite and enforceable contract.
On March 12th Kendall explained how it figured its cost basis. All that remained was for Kendall to determine the materials needed when the plans and specifications were made available and compute the maximum cost. Kendall actually began work on the project in the middle of May and had done a considerable amount prior to appellant's accident. As appellee points out this is not *41 without significance as a factor indicating the parties were contractually bound prior to June 12th. In Corbin, supra, it is stated:
Following receipt of the plans and specifications Kendall submitted its maximum cost on June 5, 1970. Although this figure included the cost of excavation the parties had understood from the beginning that upon appellee doing the excavating that cost would be deducted from Kendall's submitted maximum cost. Upon the undisputed facts before the trial court it properly concluded as a matter of law that all essentials had been agreed upon and appellee and Kendall intended to and did in fact enter into a binding contract prior to June 12, 1970. Rendition of summary judgment was proper.
We turn now to appellant's alternate theory of recovery  that if it be held a contract existed between appellee and Kendall, that agreement was such that Kendall became the general or prime contractor while appellee became the subcontractor, and appellant as an employee of the general contractor can maintain a tort action against appellee as the subcontractor. He says in his brief:
Appellant's argument further is that the purpose of 44-503 (a) is to insure workmen's compensation to the injured workman and where workmen's compensation has in fact been paid, as here, the statute is satisfied and its operation should not be extended beyond that purpose to abrogate his right to a common law action. He would have appellee wearing two hats  one as general contractor and the other as sub-subcontractor on the same contract. The facts *42 here do not admit such an alternative. There was only one contract. Much of that which has already been said is applicable. The parties simply never contemplated or intended a sub-subcontract. Kendall was never awarded the excavation work and it could not subcontract out something appellee had retained for itself.
The judgment is affirmed.
APPROVED BY THE COURT.
FROMME, J., not participating.