Title: Frost Const. Co. v. Lobo, Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Frost Const. Co. v. Lobo, Inc.1998 WY 6951 P.2d 390Case Number: 97-32Decided: 01/16/1998Supreme Court of Wyoming

                                  

FROST CONSTRUCTION COMPANY, Appellant 
(Plaintiff),

v.

LOBO, INC., a Wyoming corporation; and Carr 
Construction Co., Inc., a Wyoming corporation, Appellees 
(Defendants).

 

Appeal from The District Court, 
Natrona County, Dan Spangler, J.

 

Joseph E. Darrah and S. 
Joseph Darrah of Darrah & Darrah, P.C., Powell, for 
Appellant.

David B. Hooper of Hooper 
Law Offices, P.C., Riverton; and Tom A. Glassberg of Hooper Law Offices, P.C., 
Teton Village, for Appellees.

 

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN and 
LEHMAN, JJ.

 

MACY, 
Justice.

 

[¶1] Appellant Frost 
Construction Company appeals from the order which dismissed its complaint and 
granted a judgment in favor of Appellees Lobo, Inc. and Carr Construction Co., 
Inc. (the contractors) on their counterclaim.

 

[¶2] We 
affirm.

 

ISSUES

 

[¶3] Frost Construction 
presents a number of issues for our review:

 

          
A. Was there an unconditional acceptance of the essential terms of the 
quote sufficient to form a contract?

 

          
B. Was it error for the lower court to find a contract when the parties 
both agree that no contract was formed?

 

          
C. Alternatively, did the lower court err in failing to consider custom 
and trade usage when it found a formal contract to exist?

 

          
D. Did the lower court violate appellant's due process rights when it 
held appellee[s] would not be required to prove the liability elements of 
promissory estoppel?

 

          
E. Did the lower court err in excluding evidence of mitigation of damages 
and lack of reliance?

 

FACTS

 

[¶4] The contractors formed 
a joint venture to bid on the highway construction project between Buffalo and 
Gillette, which the Wyoming Department of Transportation (WYDOT) let in May of 
1993. During the early morning hours of May 13, 1993, prior to the bid letting, 
Frost Construction delivered a complete eight-page proposal to the contractors 
for the paving work. The written proposal contained all the exact quantities 
specified by WYDOT for all the paving.

 

[¶5] Frost Construction's 
proposal was the lowest offer that the contractors received, and they relied 
upon this proposal in their bid to WYDOT. A week later, WYDOT awarded the job to 
the contractors, and on May 22, 1993, the contractors received their contract 
from WYDOT. On the same day, the contractors issued a subcontract to Frost 
Construction. The subcontract incorporated all the prices, quantities, terms, 
and conditions contained in Frost Construction's eight-page proposal. The 
subcontract was a "Standard Sub-contract Agreement" which had been published by 
Associated General Contractors of Wyoming, Inc. This was the subcontract form 
which was customarily used in the Wyoming highway construction industry and was 
the exact contract form which Frost Construction expected the contractors to 
use.

 

[¶6] On February 18, 1994, 
approximately nine months after the bid letting, Frost Construction sent a 
letter to the contractors which stated the following:

 

Our original quotation stipulated the project had to 
be ready for the commencement of surfacing operations by May 1, 1994 and that we 
would necessarily be able to proceed uninterrupted by other operations (other 
than traffic switch-over) to accommodate our completion by July 1, 
1994.

 

Obviously, our quoted prices were based on these 
conditions in addition to the exclusion of the off-project work to further 
ensure our timely demobilization.

 

Inasmuch that this was the only period available to 
us, our proposal is not valid except under these 
circumstances.

 

On February 23, 1994, the 
contractors responded to Frost Construction's letter in the following 
manner:

 

While in the future we would greatly appreciate your 
placing any conditions or constraints on your quotation, we have every 
expectation of being able to meet your scheduling requirements. Please return 
your signed subcontract promptly so that the submittal process will not cause 
delay.

 

On March 4, 1994, Frost 
Construction sent a new subcontract to the contractors which differed from the 
original subcontract in various respects. First, the new subcontract deleted 
substantial quantities for "off-project" work which were included in Frost 
Construction's proposal and in the original subcontract. Second, the new 
subcontract proposed to impose liability upon the contractors for consequential 
damages for any delays to Frost Construction's work regardless of whether or not 
such delays were caused by the contractors.

 

[¶7] The contractors 
rejected the new subcontract. They informed Frost Construction by letter on 
March 11, 1994, that there was no reason to believe that Frost Construction's 
scheduling requirements could not be met, but they insisted that the terms of 
the initial proposal be adhered to and that, if Frost Construction did not 
return the original subcontract agreement properly executed by March 18, 1994, 
they would have no choice but to replace Frost Construction as the paving 
subcontractor. On March 21, 1994, when they had not received an executed 
subcontract, the contractors faxed a letter to Frost Construction, notifying it 
that they could wait no longer to get the paving portion of the job under 
subcontract and that, therefore, they were going to subcontract the work to 
another paving contractor. The contractors then subcontracted the paving work to 
another paving company and informed Frost Construction that they had done so, 
adding that they had mitigated their damages as much as possible and would look 
to Frost Construction to cover the difference.

 

[¶8] Frost Construction 
filed a complaint, alleging that the contractors breached their oral contract 
which contained the condition precedent that it would be able to commence paving 
by May 1, 1994, in order to complete its portion of the contract no later than 
June 30, 1994, when it was committed to start a different project. The 
contractors counterclaimed, invoking the original subcontract's provisions, for 
a breach by Frost Construction of its contractual obligation to hold the owner 
and the contractor harmless from all loss, cost, and expense resulting either 
directly or indirectly from its failure to faithfully carry out any provision of 
the subcontract. The contractors alleged that, due to Frost Construction's 
wrongful actions and breach of their agreement, they were forced to replace 
Frost Construction with another paving subcontractor, thereby suffering 
damages.

 

[¶9] At the close of Frost 
Construction's case in chief, the contractors moved for a judgment as a matter 
of law pursuant to W.R.C.P. 52(c). The trial court granted their motion, finding 
that Frost Construction's written proposal was an offer which was accepted by 
the contractors by virtue of the delivery of the subcontract form to Frost 
Construction. The trial court ruled that the subcontract incorporated all the 
terms of Frost Construction's offer and that, upon the acceptance of this offer, 
a contract was formed between the parties. The trial court also determined that 
the contractors were entitled to recover on their counterclaim for Frost 
Construction's breach of the contract. The trial court found that, due to Frost 
Construction's refusal to perform under the contract, the contractors were 
damaged in the amount of $90,818.25, the actual cost to the contractors minus 
the amount that Frost Construction would have completed the project for under 
the contract. Frost Construction appeals from the trial court's findings of 
fact, conclusions of law, and judgment.

 

DISCUSSION

 

A. Existence of a Contract

 

[¶10] In Frost 
Construction's first claim of error, it contends that the contractors did not 
unconditionally accept the essential terms of its proposal and that, therefore, 
a contract was not formed. More particularly, Frost Construction claims that, 
when the contractors forwarded the form subcontract, without including the 
scheduling conditions and bonding costs that it maintains were communicated 
orally, they tendered a counteroffer which was not accepted by Frost 
Construction. The contractors argue that the subcontract incorporated all the 
prices, terms, quantities, and conditions of Frost Construction's proposal which 
made it a mirror-image acceptance of the written offer.

 

¶11] Whether a contract has 
been formed is a question of fact. Wyoming Sawmills, Inc. v. Morris, 756 P.2d 774, 775 (Wyo. 1988).  This Court 
presumes that the trial court's findings of fact are correct and will not 
disturb those findings on appeal unless they are inconsistent with the evidence, 
clearly erroneous, or contrary to the great weight of the evidence. Narans v. 
Paulsen, 803 P.2d 358, 360 (Wyo. 1990). The question is not whether we would 
have reached the same result but is whether sufficient evidence supported the 
trial court's conclusion. Id.

 

[¶12] The basic elements of 
a contract are offer, acceptance, and consideration. McCormick v. McCormick, 926 P.2d 360, 362 (Wyo. 1996). "When these elements have been established, `courts 
conclude that there has been a meeting of the minds and an enforceable contract 
exists.'" Id. (quoting Idaho Migrant Council, Inc. v. Warila, 890 P.2d 39, 41 
(Wyo. 1995)).

 

[¶13] Whether a contract has 
been formed depends upon the parties' intent. Wyoming Sawmills, Inc., 756 P.2d  
at 775.

 

"An 
agreement to make a written contract where the terms are mutually understood and 
agreed on in all respects is as binding as the written contract would be if it 
had been executed." Robert W. Anderson House[w]recking and Excavating, Inc. v. 
Board of Trustees, School District No. 25, Fremont County, Wyoming, Wyo., 681 P.2d 1326, 1331 (1984).

 

"In 
general, the principle is well settled that where the parties to a contract 
intend that it shall be closed and consummated prior to the formal signing of a 
written draft, the terms having been mutually understood and agreed upon, the 
parties will be bound by the contract actually made, although it be not reduced 
to writing; but, on the other hand, if the parties do not intend to close the 
contract until it shall be fully expressed in a written instrument properly 
attested, then there will be no complete contract until the agreement shall be 
put into writing and signed." Summers v. Mutual Life Ins. Co., 12 Wyo. 369, 75 P. 937, 943 (1904).

 

756 P.2d  at 776. "An 
unconditional, timely acceptance of an offer, properly communicated to the 
offeror, constitutes a meeting of the minds of the parties and establishes a 
contract." 756 P.2d  at 775.

 

[¶14] The parol evidence 
rule prevents extrinsic evidence from being used to contradict, subtract from, 
add to, or vary the terms of an unambiguous contract. Ames v. Sundance State 
Bank, 850 P.2d 607, 609 (Wyo. 1993). If an agreement is in writing and its terms 
are clear and unambiguous, we will determine the parties' intent by analyzing 
the agreement without resorting to extrinsic evidence.  Svalina v. Split Rock Land and Cattle 
Company, 816 P.2d 878, 881 (Wyo. 1991). An ambiguity is not created by the 
subsequent disagreement of the parties regarding the contract's meaning. Id. 

 

[¶15] After considering the 
record in this case in accordance with our standard of review, we conclude that 
sufficient evidence supported the trial court's specific findings and its 
determination that a contract had been formed. Frost Construction delivered an 
eight-page proposal to the contractors the night before the bid letting. The 
document was clearly entitled "PROPOSAL" and included Frost Construction's name 
and address and all the unit prices and total prices for the paving work. The 
proposal stated that it was for WYDOT's Project IM-90-2(95)64, the 
Buffalo/Gillette project, and Frost Construction's vice-president testified that 
the proposal was Frost Construction's proposal to the contractors. Once the 
contractors knew that they had successfully bid the project, they issued a 
subcontract to Frost Construction. The subcontract was the standard subcontract 
form that Frost Construction admitted it expected to use. It incorporated all 
the prices, terms, quantities, and conditions of the eight-page proposal. The 
evidence established that the parties had reached a meeting of the minds at the 
bid letting and that they intended to enter into a subcontract agreement. The 
written subcontract was simply a memorialization of the oral agreement. Frost 
Construction has not demonstrated an ambiguity in the language of the contract. 
We, therefore, will not consider extrinsic evidence regarding oral 
conditions.

 

B. No Agreement That a Contract Was Not 
Formed

 

[¶16] Frost Construction 
asserts that it was error for the trial court to find that a contract existed 
when both parties stipulated that no contract had been formed. The contractors 
deny that they ever stipulated that no contract had ever been 
created.

 

[¶17] Frost Construction 
relies upon the mutuality of assent requirement to a valid contract in making 
this contention. Mutual assent between contracting parties is necessary for the 
formation of a contract. Raymond v. Steen, 882 P.2d 852, 856 (Wyo. 
1994).

 

[¶18] In their motion for a 
judgment as a matter of law, the contractors referred to Frost Construction's 
contention that a contract had not been formed between the parties. At that 
point in time, the contractors had not presented their case in chief. In their 
answer and counterclaim, the contractors alleged a breach-of-contract action. 
Furthermore, the contractors argued in their trial memorandum that they would 
argue that a contract did exist between the parties given the fact that a valid 
offer and acceptance had transpired. We conclude that the trial court based its 
decision that all the elements of contract formation existed upon sufficient 
evidence and decline to alter that decision.

 

C. Custom and Trade Usage 
Evidence

 

[¶19] Frost Construction 
contends that the trial court failed to consider custom and trade usage in its 
determination that a contract was formed. Specifically, it maintains that 
overwhelming, unrefuted evidence indicated that oral conditions regarding 
scheduling are common and to be expected.

 

[¶20] Express contract terms 
control over industry usage. Smithco Engineering, Inc. v. International 
Fabricators, Inc., 775 P.2d 1011, 1016 (Wyo. 1989). The trial court found "that 
the parties did have a discussion on the matter of scheduling and that is 
embodied in the proposed subcontract in the language that the subcontractor was 
to work with the contractor to achieve the earliest possible completion of the 
project." The trial court properly refused to resort to custom and trade usage 
on this issue because the contract contained express language regarding the 
scheduling of the paving work.

 

D. Due Process Rights

 

[¶21] Frost Construction 
breaks up its due process claim of error into two parts. It initially contends 
that the trial court violated its due process rights by granting the 
contractors' W.R.C.P. 52(c) motion because it had presented a prima facie case 
for a promissory estoppel cause of action. Next, Frost Construction asserts that 
its due process rights were violated when the trial court improperly granted a 
judgment in favor of the contractors' counterclaim without requiring the 
contractors to put on evidence in support of a promissory estoppel claim and 
without allowing Frost Construction to assert affirmative defenses against a 
promissory estoppel claim.

 

[¶22] In requiring due 
process in civil litigation, we have said:

 

"Due process of law includes notice and an 
opportunity to be heard. That notice and the opportunity to be heard are 
unquestionably incidental to affording due process of law. Due process of law is 
guaranteed to a party who has a legitimate property interest at stake under the 
Fourteenth Amendment of the Constitution of the United States and Article 1, 
Section 6 of the Constitution of the State of Wyoming."

 

Loghry v. Loghry, 920 P.2d 664, 668 (Wyo. 1996) (quoting Barker Brothers, Inc. v. Barker-Taylor, 823 P.2d 1204, 1208 (Wyo. 1992) (footnote omitted)) (citations 
omitted).

 

[¶23] W.R.C.P. 52(c) 
provides in pertinent part:

 

(c) Judgment on Partial Findings. If during a trial 
without a jury a party has been fully heard on an issue and the court finds 
against the party on that issue, the court may enter judgment as a matter of law 
against that party with respect to a claim or defense that cannot under the 
controlling law be maintained or defeated without a favorable finding on that 
issue, or the court may decline to render any judgment until the close of all 
the evidence.

 

When we review a trial 
court's decision to grant a judgment as a matter of law, we must take the 
unsuccessful party's evidence as being true and give it all favorable and 
reasonable inferences. Garaman, Inc. v. Williams, 912 P.2d 1121, 1123 (Wyo. 
1996); Mountain View/Evergreen Improvement and Service District v. Casper 
Concrete Company, 912 P.2d 529, 531 (Wyo. 1996); Kaiser v. Farnsworth Drilling 
Co., Inc., 851 P.2d 1292, 1295 (Wyo. 1993).

 

[¶24] Having sustained the 
trial court's conclusion that a contract existed between the parties earlier in 
this opinion, we will examine the current issue in that context. The trial court 
granted the contractors' motion, finding "that there is [no] substantial 
evidence to support the essential elements of the plaintiff's cause of action." 
It also made the following findings of fact and conclusions of 
law:

 

A) The written quote . . . submitted by Plaintiff to 
Defendants was an offer which was accepted by Defendants on or about May 23, 
1993, when Defendants submitted a standard subcontract form to Plaintiff after 
Defendants had been awarded a contract on Defendants' proposal to the Wyoming 
Department of Transportation which incorporated the

          
terms of Plaintiff's offer.

 

B) Upon acceptance of Plaintiff's offer a contract 
was formed between the parties which was soon thereafter modified at the request 
of the Plaintiff to the extent that Defendants were to supply the "oil" and 
related asphalt products.

 

C) In March, 1994, Plaintiff refused to perform the 
paving work it had agreed with Defendants to complete and Defendants were then 
required to find another paving contractor to perform the work Plaintiff had 
agreed to complete.

 

D) As the direct result of Plaintiff failing to 
perform its paving agreement with Defendants, Defendants were damaged in the sum 
of $90,818.25 which represents the additional cost to Defendants to get the 
paving work completed that Plaintiff had agreed to perform but then refused to 
do.

 

The Court concludes as a matter of law that 
Defendants are entitled to recover $90,818.25 on their Counterclaim plus their 
costs of action incurred herein from Plaintiff by reason of the Plaintiff's 
breach of contract. Plaintiff's Complaint should be dismissed with 
prejudice.

 

[¶25] Frost Construction's 
complaint alleged that the parties entered into an oral agreement which 
contained an express condition precedent that Frost Construction would be able 
to commence work by May 1, 1994, and that the contractors breached the 
agreement. Since Frost Construction did not plead a promissory estoppel cause of 
action, it is difficult to understand why it claims that its due process rights 
were violated when the trial court did not consider its evidence regarding 
promissory estoppel. The evidence, even when viewed in the light most favorable 
to Frost Construction, establishes the existence of a contract. Recovery under 
the promissory estoppel theory is not a matter of contract but, instead, is 
predicated on the promisee's change in position, to his detriment, as a 
consequence of the promise made. Romberger v. VFW Post 1881, 918 P.2d 993, 995 
(Wyo. 1996). Since promissory estoppel applies only if a contract does not 
exist, a promissory estoppel argument in this case, where the evidence 
demonstrates the existence of a contract, is incongruous.

 

[¶26] Frost Construction 
contends throughout its brief that the agreement contained a condition precedent 
that the contractors would have the project ready for Frost Construction to 
begin work on May 1, 1994, and that the contractors breached that condition. The 
assertion that the nonperformance of a condition precedent constitutes a breach 
of the agreement is incorrect. A breach of contract is the nonperformance of 
some duty created by a promise. 3A ARTHUR L. CORBIN, CORBIN ON CONTRACTS § 634 
at 33 (1960).  A condition precedent 
should not be described as broken. Id. "The condition merely does not exist or 
does not occur. If the condition consists of action by some person, it may 
properly be said not to be performed; but such non-performance is not a breach 
of contract unless he promised to render the performance - to perform the 
condition." Id. The trial court correctly dismissed Frost Construction's 
complaint because the evidence did not support its breach of contract claim, the 
only claim alleged in the complaint.

 

[¶27] We turn next to Frost 
Construction's argument that its due process rights were violated because the 
contractors were awarded a judgment without being required to prove the elements 
of promissory estoppel and because Frost Construction was not allowed to assert 
affirmative defenses to a promissory estoppel claim. This argument misinterprets 
the trial court's findings of facts and conclusions of law. The trial court 
based its judgment upon the cause of action in the counterclaim - a breach of 
contract allegation.  Therefore, 
Frost Construction's arguments regarding the contractors' failure to prove the 
elements of promissory estoppel and Frost Construction's inability to assert 
affirmative defenses to a promissory estoppel claim are 
inconsequential.

 

[¶28] Frost Construction 
does not direct us to any place in the record which would indicate that it was 
prevented from fully presenting its evidence. It appears that Frost Construction 
was afforded adequate notice and opportunity to be heard at a meaningful time 
and in a meaningful manner. Since the case was decided under traditional 
contract theory, Frost Construction's due process rights were not violated by 
the fact that the trial court did not consider or require evidence of promissory 
estoppel.

 

E. Damages

 

[¶29] Frost Construction 
contends that the trial court improperly utilized the "total-cost method" in 
determining the damages that were awarded to the contractors on their 
counterclaim.

 

[¶30] The proper measure of 
damages is the amount of the contractor's extra costs directly attributable to 
the . . . breach[]. Obviously, the preferable method for calculating such losses 
would be to itemize and total the cost of each piece of equipment or material 
and each man hour necessitated by the unanticipated conditions encountered in 
performing the contract. Such exactness is not always possible or 
necessary.

 

[¶31] The total-cost method 
of computing recovery, while generally disfavored by the courts, is permissible 
where the breach or unexpected conditions pervade substantial areas of 
performance. The United States Court of Claims in WRB Corporation v. The United 
States, 183 Ct.Cl. 409, 1968 WL 9146 (1968), set out the requirements for use of 
the total-cost method to prove damages:

 

". . . The acceptability of the method hinges on 
proof that (1) the nature of the particular losses make[s] it impossible or 
highly impracticable to determine them with a reasonable degree of accuracy; (2) 
the plaintiff's bid or estimate was realistic; (3) its actual costs were 
reasonable; and (4) it was not responsible for the added expenses. . . ." 183 
Ct.Cl. at 426.

 

State Highway Commission of 
Wyoming v. Brasel & Sims Construction Co., Inc., 688 P.2d 871, 877-78 (Wyo. 
1984) (citations omitted).

 

[¶32] In the case at bar, 
Frost Construction's breach pervaded its entire obligation under the contract. 
The trial court's utilization of the total-cost method, therefore, was 
appropriate.

 

[¶33] Frost Construction 
asserts that the contractors failed to satisfy the third and fourth requirements 
of the WRB Corporation1 test.  Proven actual costs in contract claim 
cases are presumed reasonable, and the burden was on Frost Construction to rebut 
this presumption with evidence that the costs were unreasonable. Brasel & 
Sims Construction Co., Inc., 688 P.2d  at 879. The contractors introduced the 
schedule of actual quantities determined by WYDOT when the project was completed 
to prove what its paving costs would have been if Frost Construction had 
performed its contract. It then subtracted the amount Frost Construction would 
have completed the project for had it performed under the contract. Regarding 
Frost Construction's contention that the contractors failed to satisfy the 
fourth element under the WRB Corporation test, we just say that Frost 
Construction has failed to adequately enlighten us as to how the  contractors were responsible for added 
expenses.

 

CONCLUSION

 

[¶34] The trial court did 
not commit reversible error by granting the contractors' motion for a judgment 
as a matter of law. Neither did it err when it ruled in favor of the contractors 
on their counterclaim and awarded them damages.

 

[¶35] 
Affirmed.

 

          

FOOTNOTES

1WRB 
Corporation v. United States, 183 Ct.Cl. 409 (1968).