Title: SCOTT R. KNIGHT v. TCB CONSTRUCTION AND DESIGN, LLC and CATHERINE PETERSEN, PERSONAL REPRESENTATIVE FOR THE ESTATE OF ERIC S. TURNER

State: wyoming

Issuer: Wyoming Supreme Court

Document:

SCOTT R. KNIGHT v. TCB CONSTRUCTION AND DESIGN, LLC and CATHERINE PETERSEN, PERSONAL REPRESENTATIVE FOR THE ESTATE OF ERIC S. TURNER2011 WY 27Case Number: No. S-10-0173Decided: 02/18/2011NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so correction may be made before final publication in the permanent volume.

OCTOBER 
TERM, A.D. 2010

 
 

SCOTT 
R. KNIGHT,Appellant (Plaintiff),v.TCB CONSTRUCTION AND 
DESIGN, LLC and CATHERINE PETERSEN, PERSONAL REPRESENTATIVE FOR THE ESTATE OF 
ERIC S. TURNER,Appellees (Defendants).

 
 
 
 
Appeal 
from the District Court of Albany 
County

The 
Honorable Jeffrey A. Donnell, Judge 

 
 

Representing 
Appellant:

Jason 
M. Tangeman of Nicholas & Tangeman, LLC, Laramie, 
Wyoming.

 
 

Representing 
Appellees:

Megan 
L. Hayes and Allen Gardzelewski of Corthell and King, P.C., Laramie, 
Wyoming.  Argument by Ms. 
Hayes.

 
 
Before 
KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, 
JJ.

 
 
VOIGT, 
Justice.

 
 
[¶1]      Scott R. Knight 
(Knight) appeals a district court's damages award and findings relating to 
liability arising out of a construction contract between Knight and TCB 
Construction and Design, L.L.C.  We 
affirm.

 
 
ISSUES

 
 
[¶2]      1.    Did the district court err as 
a matter of law when it determined that a second contract superseded the 
first?

 
 
2.    Did the district court err as 
a matter of law in the method it used to calculate damages? 

 
 

FACTS

 
 
[¶3]      On March 7, 
2008, Knight contracted with Deerwood Log Homes, Inc. (Deerwood), in which 
Deerwood was to build a log home for Knight on property located outside of 
Laramie, Wyoming.  A disagreement 
between Deerwood and Knight developed, leading to Deerwood's termination from 
the project and a subsequent settlement 
agreement.

 
 

[¶4]      On August 28, 
2008, Knight entered into a contract (Agreement) with Eric Turner (Turner) to 
finish the construction project.1  Turner had recently moved to Wyoming 
from Colorado and was doing business as TCB Construction and Design.2  The Agreement was a time and materials 
contract, which called for TCB Construction and Design to complete the log home 
project for Knight and in return receive compensation in the amount of time and 
materials, plus 33%.  The Agreement 
aimed for a November 2008 completion date.  
The Agreement was signed by Knight as owner of the property and by Turner 
with the notation of TCB Construction & Design under his signature.3  More will be said below in the 
discussion section about the specific terms of this 
Agreement.

 
 

[¶5]      On September 5, 
2008, Turner organized TCB Construction and Design as a Wyoming limited 
liability company.  We will refer to 
TCB Construction and Design, L.L.C. as TCB Construction, LLC and its non-LLC 
counterpart as TCB Construction and Design. On September, 10, 2008, TCB 
Construction, LLC and Knight entered into a contract called "Addendum to 
Agreement," which provided in part that TCB Construction, LLC would assume and 
complete the log home for Knight.  
The Addendum set the price of completion at $400,000.00, less $80,000.00 
already received.  The Addendum also 
referenced two other separate projects: a Solar and Wind Array (Solar/Wind 
Array) contract for $109,000.00 and a Generator/Pump House/Electrical Building 
(Generator Building) contract for $60,000.00.  The Addendum was signed by Knight, as 
owner of the property, and Turner, with the notation of TCB Construction & 
Design beneath Turner's signature, but the Addendum bore the subheading "TCB 
Construction and Design, LLC" in bold lettering.4  More will be said in the discussion 
section about the Addendum and separate Solar/Wind Array and Generator Building 
contracts.

 
 
[¶6]      In early December 
2008, the relationship between Knight and TCB Construction, LLC had soured and 
Knight terminated TCB Construction, LLC from the project.  Knight hired S&J Log Construction to 
complete the project.  Shortly 
thereafter, Knight filed a lawsuit against TCB Construction, LLC and Turner, 
individually, alleging numerous causes of action, including fraud, breach of 
contract, breach of the implied covenant of good faith and fair dealing, breach 
of implied warranty, and unjust enrichment.  Following a bench trial, the district 
court issued a decision letter and judgment, making the following general 
conclusions: (1) the Addendum superseded the Agreement, with the newly formed 
TCB Construction, LLC as the party responsible for completion of the 
construction project; (2) the Addendum converted the Agreement for constructing 
the log home from a time and materials, plus 33%, contract, to a flat fee 
contract in the amount of $400,000.00, less the $80,000.00 already paid; (3) TCB 
Construction, LLC breached the contract by failing to complete the construction 
project by the November deadline; (4) TCB Construction, LLC owed Knight damages 
in the amount of $31,850.37 for its breach; and (5) Turner was not personally 
liable for the damages, because TCB Construction, LLC had organized as an LLC in 
Wyoming prior to entering into the Addendum.  Knight filed a timely notice of 
appeal.

 
 
DISCUSSION

 
 
Did 
the district court err as a matter of law when it determined that a second 
contract superseded the first?

 
 
[¶7]      The resolution of 
this issue requires this Court to interpret the Agreement and Addendum to 
determine what contract was in effect.  
We have repeatedly held that interpreting contracts is a question of law, 
which we review de novo.  See, e.g., Terris v. Kimmel, 2010 WY 
110, ¶ 7, 236 P.3d 1022, 1025 (Wyo. 2010).

 
 
The 
primary focus is on determining the intent of the parties to the contract.  The initial question is whether the 
language of the contract is clear and unambiguous.  If it is, then the trial court 
determines the parties' intent from the contract language 
alone.  It does not consider 
extrinsic evidence, although it may consider the context in which the contract was written, including the subject matter, the purpose 
of the contract, and the circumstances surrounding its 
making, all to help ascertain what the parties intended when they made the contract.  
The trial court then enforces the contract in 
accordance with the plain meaning its language would be given by a reasonable 
person.  All of these 
issues---deciding whether a contract is unambiguous, 
determining the parties' intent from the unambiguous language, and enforcing the 
contract in accordance with its plain meaning---involve 
questions of law for the trial court.  
When we undertake de novo review of the trial court's conclusions of law, we 
follow the same familiar path.  
See Double Eagle Petroleum & Mining Corp. v. Questar Exploration 
& Production Co., 2003 WY 139, ¶¶ 7-8, 78 P.3d 679, 681-82 (Wyo. 2003), 
and cases cited therein.

 
 

Id. 
(quoting Horse Creek Conservation Dist. v. State ex rel. Wyo. Attorney 
Gen., 
2009 WY 143, ¶ 25, 221 P.3d 306, 315 (Wyo. 
2009)).

 
 
[¶8]      Knight argues 
that the district court erred when it determined that the Addendum superseded 
the Agreement thereby relieving Turner of personal liability.  We disagree with Knight and hold that 
the Addendum controlled and ultimately relieved Turner and his successor estate 
of liability.

 
 
[¶9]      "Generally, 
contracts---even fully executed ones---can be cancelled or rescinded by the 
mutual consent of the parties."  29 
Samuel Williston, Treatise on the Law of 
Contracts § 73:15, at 49 (Richard A. Lord ed., 4th ed. 2003).  "Rescission generally must be exercised 
in toto and is applied to the contract in its entirety with the result that what 
has been done is wholly undone and no contract provisions remain in force to 
bind either of the parties."  Id.  The intent to rescind a contract does 
not need to be express or in writing, but can be inferred from the conduct of 
the parties and the surrounding circumstances.  See Roussalis v. Wyo. Med. Ctr., 4 P.3d 209, 249 (Wyo. 2000); 29 Williston, supra.

 
 
[¶10]   Whether Turner's estate is liable 
to Knight under the terms of the first Agreement depends on whether the parties 
intended to rescind that contract.  
It is clear that Turner's intent was to rescind the earlier Agreement, to 
which he individually was a party, and enter into the Addendum on behalf of the 
newly organized TCB Construction, LLC.  
The record demonstrates that Turner was actively trying to organize TCB 
Construction, LLC in the days immediately following entering into the 
Agreement.  Jeanene Johnson, TCB 
Construction, LLC's bookkeeper and secretary, testified that Turner wanted to 
organize TCB Construction, LLC before he started any work on Knight's 
project.  Turner successfully 
organized TCB Construction, LLC on September 5, 2008, only eight days after 
entering into the Agreement and five days before entering into the 
Addendum.  Turner's intent was 
obviously to organize TCB Construction, LLC in order to have liability 
protection.

 
 
[¶11]   The record also indicates that 
Knight knew about the organization of the newly formed LLC and creating the 
Addendum was partially his idea.  
Jeanene Johnson testified that Turner and Knight both wanted to enter 
into the Addendum and that Knight knew TCB Construction, LLC had been organized 
at the time of entering into the Addendum.  
Furthermore, the heading on the Addendum reads "TCB Construction and 
Design, LLC" in bold print.

 
 

[¶12]   Additionally, the parties' intent 
to rescind the Agreement is evidenced by the fact that they materially changed 
the terms of the Agreement when they entered into the Addendum.  The Agreement called for Turner to 
construct a house for Knight.  The 
Agreement set forth the compensation that Turner was to receive as a "time and 
materials" contract, whereby Turner would be compensated for his time and 
materials, plus 33%.  The Addendum, 
however, changed the compensation with regard to the construction of the house 
from a "time and materials" contract, plus 33%, to a flat rate fee of "$400,000.00 less 80,000.00 already 
received."  (Emphasis in 
original.)  In addition to changing 
materially the terms of the Agreement, the parties were also changed.  Knight and Turner, d/b/a TCB 
Construction and Design, were parties to the Agreement, whereas Knight and TCB 
Construction, LLC were parties to the Addendum.  Turner was acting on behalf of TCB 
Construction, LLC when the Addendum was made; he was not personally a 
party.  The parties' conduct, 
including organizing TCB Construction, LLC, materially changing the terms of the 
contract, and changing the parties, demonstrates that the parties intended to 
rescind the Agreement, thus leaving the Addendum to control.  Consequently, because the Agreement was 
rescinded, and Turner was not a party to the Addendum, Turner is not personally 
liable for any damages resulting from the breach of the Addendum and the 
district court did not err in finding the same.5

 
 
[¶13]   Knight argues that the Addendum 
contains a clause that evidences the parties' intent to have the Agreement 
remain operative and controlling.  
The clause in the Addendum upon which Knight relies states, "The 
provisions defined in the first page of the Agreement between Mr. Scott Knight and TCB Construction and Design, LLC are 
maintained and considered binding."  
(Emphasis in original.)  We 
have said the following regarding contract clauses that reference other 
documents: "It is a common and necessary practice, however, for contracts to 
refer to and obtain meaning from other documents.  A contract may refer elsewhere for full 
understanding of its terms, just as it may adopt another document by 
reference."  Pribble v. State Farm Mut. Auto. Ins. 
Co., 933 P.2d 1108, 1113 (Wyo. 1997).  Furthermore, it has been said 
that:

 
 
So 
long as the contract makes clear reference to the document and describes it in 
such terms that its identity may be ascertained beyond doubt, the parties to a contract may 
incorporate contractual terms by reference to a separate, noncontemporaneous document, including a separate 
agreement to which they are not parties, and including a separate document 
which is unsigned.  It is not 
necessary to refer to or incorporate the entire document; if the parties so 
desire, they may incorporate a portion of the document. . . 
.

 
 
Where 
a writing refers to another document, that other document, or the portion to 
which reference is made, becomes constructively a part of the writing, and in 
that respect the two form a single instrument.  The incorporated matter is to be 
interpreted as part of the writing.

 
 
11 
Williston, supra § 30:25, at 
233-34.

 
 
[¶14]   The purpose of the clause upon 
which Knight relies when considered in connection with both contracts and the 
parties' conduct, was to incorporate into the Addendum by reference the 
provisions pertaining to the construction of the house that were listed in the 
Agreement.  Clearly it was not the 
parties' intent to incorporate the entire Agreement by reference, because they 
materially changed some of the terms, including the contract price.  Incorporating by reference some of the 
provisions of the Agreement does not change the fact that the parties had 
rescinded the Agreement when they entered into the Addendum.  Incorporating by reference some of the 
provisions from that Agreement was done as a matter of convenience, but that act 
alone did not make the Agreement, as a whole, operative 
again.

 
 
[¶15]   Knight also argues that the 
district court was bound by a pre-trial summary judgment ruling in which the 
district court refused to grant Knight summary judgment on the issue of 
liability.  Specifically, Knight 
argues that by finding, at the conclusion of the trial, that the Addendum 
controlled and thus TCB Construction, LLC was liable for any damages and not 
Turner, individually, the district court contradicted its earlier summary 
judgment ruling and should be bound by that earlier ruling.  Knight relies on the law of the case 
doctrine to support his argument that the district court was bound by its 
summary judgment ruling.  The law of 
the case doctrine provides that "a court's decision 
on an issue of law made at one stage of a case becomes a binding precedent to be 
followed in successive stages of the same litigation."  Triton Coal Co. v. Husman, Inc., 846 P.2d 664, 667 (Wyo. 1993).  The 
fatal flaw in Knight's reasoning is that the district court never made a final 
determination at the summary judgment stage as to Turner's personal 
liability.  In denying Turner's 
summary judgment motion, the district court determined that at the time the 
Agreement was made, TCB Construction and Design had not been organized as an 
LLC, and, consequently, under Wyoming statutes Turner was not shielded from 
liability arising from the Agreement.  
However, the district court also noted that "[t]he effect of [the] 
Addendum is not at issue here, and no determination concerning the same is 
intended by the Court."  It is clear 
that what the district court was considering at the summary judgment stage was 
whether factual issues existed that could give rise to Turner's personal 
liability, without considering the effect of the Addendum.  As noted above, the district court 
ultimately made the correct determination of liability at the end of the trial 
after it had considered evidence relating to the subsequent Addendum.  Accordingly, we find that the law of the 
case doctrine does not apply in this situation and the district court was not 
bound by the initial summary judgment ruling.  The district court did not err in 
finding that the Addendum controlled and that only TCB Construction, LLC was 
liable for damages for breach of 
contract.

 
 
Did 
the district court err as a matter of law in themethod it used to calculate 
damages?

 
 
[¶16]   Knight argues that the district 
court employed the wrong methodology to determine the amount of damages, which 
resulted in a windfall for TCB Construction, LLC.  The issue of whether the district court 
employed the proper methodology or legal standard to calculate the damages award 
is an issue of law, which we review de 
novo.  Cross v. Berg Lumber Co., 7 P.3d 922, 
931 (Wyo. 2000).  However, assuming 
that the district court applied the appropriate methodology to calculate 
damages, the district court's damages calculation is a question of fact, which 
we review for clear error.  Velasquez v. Chamberlain, 2009 WY 80, ¶ 
27, 209 P.3d 888, 895 (Wyo. 2009).  
In that regard, we have said the 
following:

 
 
This 
Court applies a clearly erroneous standard when reviewing findings of fact made 
by the district court after a bench trial.  
A finding is clearly erroneous when, even though substantial evidence 
supports it, the reviewing court is left with the definite and firm conviction 
that a mistake was made.

 
 
We 
do not substitute ourselves for the trial court as a finder of facts; instead, 
we defer to the trial court's findings unless they are unsupported by the record 
or erroneous as a matter of law.  
Although the factual findings of a trial court are not entitled to the 
limited review afforded a jury verdict, the findings are presumptively 
correct.

 
 
This 
Court may examine all of the properly admissible evidence in the record, but we 
do not reweigh the evidence.  Due 
regard is given to the opportunity of the trial judge to assess the credibility 
of the witnesses.  We accept the 
prevailing party's evidence as true and give to that evidence every favorable 
inference which may fairly and reasonably be drawn from it.  Findings may not be set aside because we 
would have reached a different result.

 
 

Id. 
at ¶ 14, at 891 (quoting Estate of 
Jedrzejewski ex rel. Severn v. Bierma, 2008 WY 151, ¶ 9, 197 P.3d 1254, 1256 
(Wyo. 2008)) (internal citations omitted).

 
 
[¶17]   We have stated that the "legal 
remedy for a breach of contract is the award of damages designed to place the 
plaintiff in the same position in which he would have been had the contract been 
fully performed, less proper deductions."  
Winter v. Pleasant, 2010 WY 4, 
¶ 25, 222 P.3d 828, 838 (Wyo. 2010) (quoting Dewey v. Wentland, 2002 WY 2, ¶ 52, 
38 P.3d 402, 420-21 (Wyo. 2002)).  
"The plaintiff has the burden of producing sufficient 
evidence to prove his damages.  Damages must be proven with a reasonable 
degree of certainty, and a court may not resort to speculation or conjecture in 
determining the proper amount to award.'"  
Capshaw v. Schieck, 2002 WY 
54, ¶ 10, 44 P.3d 47, 52 (Wyo. 2002) (quoting Sannerud v. Brantz, 879 P.2d 341, 345 
(Wyo. 1994)) (internal citations omitted).

 
 

[¶18]   The district court determined that 
the Addendum controlled, which Addendum changed the parties' agreement from a 
time and materials project to a flat fee of $400,000.00 for construction of the 
home, $109,000.00 for construction of the Solar/Wind Array, and $60,000.00 for 
construction of the Generator Building, for a total of $569,000.00.  The district court determined Knight's 
damages in the following manner: $587,860.37 (total amount paid by Knight to TCB 
Construction, LLC)6 
- $569,000.00 (contract price) = $18,860.37 (amount overpaid) + $10,000.00 
(amount paid by Knight to another contractor to fix the roof) + $2,990.00 
(amount paid by Knight to another contractor to correct wiring problems) = 
$31,850.37 (total damages).

 
 
[¶19]   Interestingly, Knight concedes in 
his brief that the district court's damages calculation "may be a proper 
methodology for calculating damages in a breach of contract/unfinished 
construction case."  Nevertheless, 
Knight takes exception with the district court's damages calculation and implies 
that this is a novel damages case which the district court failed to identify 
appropriately.  Knight argues, as he 
did in the district court, that the measure of damages should be whatever money 
was left in TCB Construction, LLC's bank account, which happened to be 
$100,957.24, rather than a calculation of the actual damages proved to have been 
suffered by Knight.  Frankly, we see 
no authority for application of this novel damages 
calculation.

 
 
[¶20]   As noted above, the "legal remedy 
for a breach of contract is the award of damages designed to place the plaintiff 
in the same position in which he would have been had the contract been fully 
performed, less proper deductions."  
Winter, 2010 WY 4, ¶ 25, 
222 P.3d  at 838 (quoting Dewey, 2002 
WY 2, ¶ 52, 38 P.3d at 420-21)).  
The methodology employed by the district court to calculate damages 
comported with the above-stated law and accurately reflected Knight's provable 
damages.  The district court 
calculated damages by determining the contract price, awarded the difference 
between the contract price and the amount overpaid, and awarded additional 
damages for the completion of the portions of the project that Knight could 
prove were part of the original contract and were not completed by TCB 
Construction, LLC (i.e., the roof and wiring).  See supra ¶ 
18.

 
 
[¶21]   As the plaintiff, Knight shouldered 
the burden to prove his damages.  Capshaw, 2002 WY 54, ¶ 10, 44 P.3d  at 
52.  Consequently, it was incumbent 
upon Knight to introduce sufficient evidence to prove those damages.  Wagon Wheel Village, Inc. v. Harris, 993 P.2d 323, 325 (Wyo. 1999).  The 
trial transcript and the district court's decision letter evidence the 
difficulties that Knight had trying to meet his burden.  In large part this was due to the fact 
that subsequent to terminating TCB Construction, LLC, Knight hired S&J Log 
Construction to finish the construction.  
However, S&J Log Construction was not hired simply to finish the work 
that TCB Construction, LLC had not completed, but instead was hired to finish 
that work and do additional work.  
The district court's findings relating to the evidence that Knight 
presented to prove his damages illuminate the problems created by expanding the 
scope of the construction project when Knight hired S&J Log Construction: 

 
 
However, 
based upon the evidence presented at trial, the Court finds that Knight failed 
to prove these damages by preponderance of the evidence.  Specifically, Knight did not establish 
what work [S]&J Log Construction performed that TCB Construction had failed 
to perform.  More importantly, 
Knight did not establish the value of the work that [S]&J Log Construction 
performed in TCB Construction's stead.

 
 
Knight 
admits in his brief that "it was incredibly difficult to tie the [S&J Log 
Construction] invoices to any specific portion of the project that remained to 
be completed by [TCB Construction, LLC]."  
It appears that Knight is requesting this Court to do exactly what the 
district court was unwilling to do: relieve Knight of the burden of proving his 
damages with reasonable certainty.  
We will not resort to speculation in determining damages.  Capshaw, 2002 WY 54, ¶ 10, 44 P.3d  at 
52.  The district court awarded 
Knight damages in the amount that he could prove: $31,850.37.  Consequently, we find that the district 
court did not err in the methodology or legal standard used to calculate 
damages, nor did it abuse its discretion in calculating the amount of damages 
ultimately awarded based on the evidence 
presented.

 
 
[¶22]   Knight also argues that the 
district court's damages calculation was incorrect because the district court 
should have calculated the Solar/Wind Array and Generator Building contracts 
separately from the Addendum contract price governing the construction of the 
home, because they were all separate contracts.  Knight alleges that he paid $110,990.00 
for the Solar/Wind Array, which had an estimated cost of $109,000.00, and that 
TCB Construction, LLC's accounting records "are undisputed and show that, at the 
time [TCB Construction, LLC was] terminated from the project, $35,990.00 of the 
work [on the Solar/Wind Array] remained unfinished."  Similarly, Knight argues that with 
regard to the Generator Building, Knight paid $68,082.74 toward the estimated 
cost of $60,000.00, and TCB Construction, LLC's accounting records reveal that 
$36,263.10 relating to the Generator Building remained in TCB Construction, 
LLC's accounts at the time they were terminated from the job.  Knight's argument is flawed.  To calculate the amounts mentioned 
above, Knight relies on TCB Construction, LLC's accounting ledgers, which only 
indicate the amount of money that was paid by Knight to TCB Construction, LLC 
for the completion of these projects, less any amounts that TCB Construction, 
LLC had paid for subcontractors, materials, or for its own time.  The balances in those ledgers tell us 
nothing, however, about the actual damages suffered by Knight.  Simply stated, the "amount left over" in 
one's bank account is not the proper calculation of damages.  We cannot say that the district court 
erred in calculating damages.

 
 
CONCLUSION

 
 
[¶23]   The district court correctly held 
that the Addendum superseded the Agreement, because the record supports the 
conclusion that the parties intended to rescind the Agreement.  Consequently, Turner and his successor 
estate were relieved of liability arising out of TCB Construction, LLC's breach 
of the Addendum.  The district court 
used the appropriate method to calculate damages, and it did not abuse its 
discretion in the amount of damages awarded as the damages award accurately 
reflected Knight's proven damages.

 
 

[¶24]   Affirmed.

 
 
FOOTNOTES

 
 

1Turner died shortly after the underlying action was commenced.  Turner's estate was then substituted as 
a party.  Accordingly, any reference 
to Turner individually also refers to Turner's 
estate.

 
 

2At the time that the parties entered into the Agreement, TCB Construction 
and Design had been organized as a limited liability company in the State of 
Colorado, but was not a registered company in 
Wyoming.

 
 

3The Agreement was also signed by Brad Lightsey who worked for 
Turner.

 
 

4Brad Lightsey also signed 
the Addendum.

 
 

5The district court's decision letter notes that Knight presented no 
evidence at trial to support piercing the LLC's veil, and Knight makes no such 
argument on appeal.

 
 

6This amount was calculated based on Knight's exhibits, which exhibits 
evidenced Knight's payments to TCB Construction, LLC.  The total amount paid by Knight was 
actually $597,860.37, but Knight received a $10,000.00 reimbursement, bringing 
the total amount paid to $587,860.37.