#25289-rev & rem-JKK

2010 SD 61

IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA

* * * * KADRMAS, LEE AND JACKSON, INC., a North Dakota Corporation, Plaintiffs and Appellees,

v. MITCH MORRIS a/k/a MITCHEL E. MORRIS, individually and doing business as MORRIS RANCH GROUP, Defendants and Appellants.

* * * *

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA

* * * *

HONORABLE JOHN J. DELANEY Judge

* * * *

RONDA MILLER Attorney for plaintiffs Belle Fourche, South Dakota and appellees.

BRAD A. SCHREIBER Attorney for defendants Pierre, South Dakota and appellants.

* * * *

CONSIDERED ON BRIEFS ON APRIL 26, 2010

OPINION FILED 

### 07/21/10#25289 KONENKAMP, Justice [¶1.] In this breach of contract acti on, plaintiff alleged that defendant failed to pay on two written contracts, but de fendant claimed that he paid a $10,000

retainer on those contracts. Plainti ff responded that the $10,000 payment was on an oral contract that had been completed. The circuit court instructed the jury that

if it found that the oral co ntract existed, “the $10,000 mu st be applied to the claim for work performed under that contract.” Because the court told the jury that it must apply the payment only to the purporte d oral contract, it took from the jury the job of resolving a disputed issue of fact . We reverse and remand for a new trial. Background [¶2.] Mitch Morris sought to develo p some land two miles south of Rapid City, South Dakota. His real estate agen t, Stan Hauck, put Morris in touch with Kadrmas, Lee and Jackson, Inc., a region al engineering and planning firm. Kadrmas began preliminary work in Dece mber 2004. Rodney Senn, an engineer with Kadrmas, sent Stan Hauck a letter indi cating that the cost of the preliminary work would be $12,000. Morris later testif ied that Hauck had no authority to make a binding contract on Morris’s behalf. Th e preliminary work was completed in July 2005. Morris paid Kadrmas $10,000 in Octobe r of that year, and later in the same

month Kadrmas and Morris executed two written contracts. One contract was for the design on extending water services to the land; the other was for the design of the sewer system. [¶3.] Beginning in November 2005, Kadrmas sent Morris invoices for services provided on the design of the water line extension. In February 2006,

Kadrmas sent invoices to Morris for services related to the sewer lines. Theseinvoices were later offered in evidence along with summaries of the hours worked on the Morris project. The charges on these services were: preliminary work

— $9,625.73; water line extension

— $20,136.66; sewer line extension — $7,650.72. [¶4.] At some point, Morris telephoned Kadrmas to say that he was not receiving any invoices. Senn later testif ied that he sat down with Morris and showed him the invoices. Except for the initial $10,000 he paid in October 2005, Morris made no other payments. In Febr uary 2006, Kadrmas stopped work on the project. [¶5.] Kadrmas brought suit against Morri s for breach of contract. At trial, Morris claimed that the $10,000 he paid to Kadrmas was a retainer for the two October 2005 contracts. Kadrmas, on the other hand, claimed that the $10,000 was payment for the preliminary work and that Morris breached the two contracts when he failed to pay on the invoices. Th e jury awarded $27,787.38 in damages to Kadrmas. After trial, the circuit co urt denied Morris’s renewed motion for judgment as a matter of law or in the alte rnative a new trial. He appeals asserting that the court improperly instructed the jury in two respects and that Kadrmas failed to prove its damages. 1 We find only one assert ion of error meritorious. Analysis and Decision

1. We review for abuse of discretion a trial court’s decision to grant or deny a motion for new trial and a renewed moti on for judgment as a matter of law. SDCL 15-6-50(b); SDCL 15-6- 59(a); Duda v. Phatty McGees, Inc., 2008 SD 115, ¶19, 758 NW2d 754, 759-60 (citations omitted). We review the court’s wording and arrangement of jury instructions for an abuse of discretion. Carlson v. Const. Co., 2009 SD 6, ¶6 n1, 761 NW2d 595, 597 n1 (citations omitted). But a court has no discreti on to give incorrect or misleading instructions, and to do so prejudicia lly constitutes reversible error. Id. (citations omitted).[¶6.] At trial, the parties conteste d the purpose of the $10,000 payment. Kadrmas asserted that the payment was fo r preliminary work done before the two contracts were signed. Morris maintained that the $10,000 was a retainer for the two October 2005 contracts; that he made no oral agreement to pay for preliminary work; and that Hauck was not his agen t for the purpose of contracting for preliminary engineering services. [¶7.] On appeal, Morris argues that the circuit court improperly instructed the jury to apply the $10,000 to the prelimin ary contract if it found such contract

existed. 2 Kadrmas claims that Morris failed to object to this instruction, and

(continued . . .) 2. On page three of the instructions, the court charged the jury on the burden of proof: One asserting a claim must prove that claim by the greater convincing force of the evidence . If the evidence is evenly balanced so that you conclude that neither party has produced the greater convincing force, then you must find against the party who has the burden of proof. In this case, the Corporation has the burden of proving: a. As to the preliminary contract that the parties created either an express or an implied contract. If that contract exists, the $10,000 must be applied to the claim for work performed under that contract

. b. That Mr. Morris had a contractual obligation to pay the Corporation for work it had perf ormed pursuant to each of the written contracts; and

c. That he breached those contra cts by failing and refusing to do so; and d. The damages which were incurre d as a result of that breach. Mr. Morris has the burden of proving that the Corporation has not performed the work or services which entitled it to all or some of the payments the Corporation claims are due and owing under the contract.therefore, waived the issue. From our review of the record, however, Morris sufficiently objected to preserve the issue. [¶8.] At the time of settling jury in structions, the court did not have its prepared instructions. Rather, the cour t and parties were reviewing Kadrmas’s proposed instructions. Morris objected to two instructions that related to the written contracts and alleged oral contract. The court responded,

It seems to me that I would instruct that there are three contracts at issue. There is a question of a contract for preliminary work. And there are two written contracts. As to the contract for preliminary work, the instruction relevant to quantum meruit may apply. As to contracts two and three, the written contracts - - I mean, by its terms that instruct ion would only apply to that. Because if I talk to the jury, I would say that there is one oral contract alleged and two written ones. The written contracts are admitted; and there is a dispute over the existence of the oral contract. In either event, there is $10,000 that has been paid and admitted and that needs to be deducted from the damages you find, if any, on behalf of the plaintiff. I think I need an instruction to that end of some so rt. So that’s basically what I am inclined to do. As part of his objection, Morris’s counsel argued, “So the only issue, I think, is whether or not the $10,000 applies to those [two written] contracts or not and we don’t need to discuss the validity or inva lidity of a prior agreement. So I would object to both of these on that basis. And simply an instruction either the jury thinks the $10,000 gets applied or it doesn’t get applied.”

__________________ (. . . continued) (Emphasis added.)[¶9.] After listening to the parties’ arguments, the court recessed to draft its own jury instructions. Upon reconvening, counsel for Morris objected to page three of the court’s instructions: “I think the issue is much simpler than that. . . . I think the jury can be instructed that there wa s $10,000 that has been paid and they can be instructed that it’s either been paid for the work that was performed beforehand or it was paid for the work that was performed under th e two contracts.” The court denied Morris’s objection. 3 [¶10.] It is undisputed that Morris argu ed that the $10,000 applied to the two

written contracts and that Kadrmas maintained that the $10,000 applied to a previously completed oral agreement for pre liminary work. There is also no dispute that the jury was left to determine if such a preliminary contract existed. When the court then instructed the jury that it wa s required to apply the $10,000 paid to such preliminary agreement, the court took aw ay from the jury the question whether Morris proved that the $10,000 applied to the two written contracts. Certainly, the

3. There was a latent ambiguity in th e court’s instructions. In the last instruction, the court reminded the ju ry: “Remember in reaching a damage figure that Mr. Morris has paid and th e Corporation has received the sum of $10,000.” Neither side suggests ho w this should be resolved.jury could have found that a prelimin ary agreement existed, that Kadrmas performed under that agreement free of charge, and that the $10,000 was paid as a retainer on services to be provided under the two written contracts. Therefore, it was error for the court to instruct the jury that if it found a preliminary contract to exist it must apply the $10,000 to that contra ct. Morris wa s prejudiced by this error as the jury was not free to apply the $10,000 where it deemed warranted. Morris is

entitled to a new trial. [¶11.] Reversed and remanded. [¶12.] GILBERTSON, Chief Justice, and ZINTER, MEIERHENRY, and SEVERSON, Justices, concur.