Court Opinion

ID: 9771237
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:37:28.811592+00
Date Added: 2024-06-11T07:31:27.261438
License: Public Domain

HECHT, Justice,
dissenting.
Northdale Construction Company contracted to build an apartment complex for Sage Street Associates for a maximum price of $13,585,000. Northdale contends that it was also promised an additional fee of $760,-000, but Sage Street argues that that fee was included in the maximum price, and the contract between the parties is ambiguous on the point. Disputes between the two entities resulted in Sage Street’s terminating North-dale before the project was completed, and this litigation ensued. The jury found that Sage Street breached the contract by terminating Northdale. Based upon this finding, Northdale is entitled to recover damages equal to amounts due and unpaid for work performed plus the profit it would have made under the contract had it been allowed to finish the job, which the jury found to be $2,491,110.
As the Court acknowledges, the evidence in this case is such that the jury verdict cannot be sustained unless two facts are true. One is that Northdale could have completed the project for approximately the maximum contract price. The other is that the parties intended by the ambiguous language of their contract for the $760,000 fee to be paid in addition to that maximum price. Ante at 446 n. 14. The first fact was not proved, and the second was not pleaded. To affirm the judgment for Northdale, the Court holds that Northdale was not required to prove the cost of completion, and that the issue of the parties’ intent was tried by consent. I disagree with both these holdings and therefore dissent.
The Court concedes that if the contract in this case had involved a fixed price, North-dale would have the burden of proving the cost of completion as one element essential to its damages calculation. If the cost of completion exceeded the fixed price, any profit *448would be diminished or altogether eliminated. On the other hand, if the contract required payment of all costs plus a profit, proof of the cost to complete would not be necessary as long as the contractor sought damages only for work fully performed. Proof of costs incurred would be sufficient to calculate damages, and the cost to complete would be irrelevant. If the contractor also sought damages for work he would have performed had he been allowed to complete the contract, then he must prove what that additional work would have cost in order to determine what “plus” he would have been entitled to. This burden could not be placed on the owner. If neither party put on evidence, what damages would the contractor recover? Damages in that situation could not be recovered without proof of the cost to complete. In sum, if cost to complete is relevant, the contractor must prove it.
The Court concludes that the contract in this ease is more like a cost-plus contract than a fixed-price contract, and that Sage Street had the burden of proving the cost to complete. The inherent conflict between these conclusions proves both wrong. If the contract here were more like a cost-plus contract, proof of the cost to complete would not be Sage Street’s burden, but would simply not exist. There is no need to prove the cost to complete a cost-plus contract if the claim is for damages for work already done. In this case, it is undisputed, and undisputa-ble, that damages cannot be calculated without knowing whether Northdale could have completed construction of the project for less than the maximum price in the contract, increased by any other expenses it was entitled to be paid. Given that the cost to complete must be proved, who has the burden to do so? There is no basis in law or logic for shifting this burden to the defendant. There is certainly no basis for treating a maximum-price contract like this one any differently than a fixed-price contract, in these circumstances.
The Court states:
We hold that, where the owner is responsible for the contractor’s incomplete performance under a cost-plus contract, proof that the cost ceiling would have been met is not part of the contractor’s prima facie case. Since this is in the nature of a claimed credit to which the owner must prove his entitlement, Northdale’s failure to offer evidence of completion cost does not bar recovery.
Ante at 443. With all due respect, this is nonsense. In a cost-plus contract there is no cost ceiling to prove because none exists. That is the very nature of a cost-plus contract. If there is a cost ceiling, as there is in this case, then the contract is either fixed-price or maximum-price, and the effect is the same: damages cannot be computed unless it is known whether the ceiling would have been met. In both situations the burden is, and ought to be, on the plaintiff to prove the fact as an element of damages.
Sage Street offered evidence that the cost to complete the project was over $2.8 million. If that evidence were believed, Northdale would not be entitled to any damages. Northdale was obliged to prove what the cost to complete was, and because it failed to do so, the verdict cannot be sustained.
The second fact necessary to support the verdict is also missing. The Court correctly holds that the contract here is ambiguous on the issue of whether the $760,000 fee was included in the maximum price. Neither party pleaded ambiguity. However, the Court concludes that the issue was tried by consent. The Court acknowledges that an issue is not tried by consent if testimony relevant to that issue is also relevant to other issues raised by the pleadings. The only evidence the Court cites as relevant only to the unpleaded issue is the testimony of an expert witness, James Gribble. The Court states that Gribble interpreted the contract to call for an additional $760,000 fee. This is wrong. Gribble did not interpret the contract, nor was he competent to do so; rather, he assumed that the fee was additional. Specifically, he testified as follows:
Q. Mr. Gribble, did you make an assumption about how the two contracts worked together from the point of view of whether or not there is a cap on costs and that sort of thing?
A. Yes, sir.
*449Q. And what were your assumptions, and how do the contracts — how did you assume the contracts work?
A. That the contracts are a guaranteed maximum price for Northdale’s work, as defined in the contracts with a cap of $13,585,000 plus any modifications done in accordance with the contract, plus a profit of $760,000.
An expert’s assumption is not evidence of the parties’ intent.
There was nothing in the evidence or argument adduced at trial to put Sage Street on notice that Northdale claimed the contract was ambiguous or that the issue of he parties’ intent was to be submitted to the jury. The nature of the $760,000 fee — the second fact essential to the verdict — was not properly determined at trial.
Inasmuch as the evidence is legally insufficient to support the jury verdict, the judgments of the lower courts should be reversed and judgment rendered for Sage Street. I would not reach the interest issue addressed by the Court.
CORNYN, J., joins in this dissenting opinion.