Court Opinion

ID: 2729860
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:49:36.148361+00
Date Added: 2024-06-11T09:12:30.590810
License: Public Domain

Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
any court except for the purpose of                          FILED
                                                          Jul 30 2012, 9:22 am
establishing the defense of res judicata,
collateral estoppel, or the law of the
case.                                                             CLERK
                                                                of the supreme court,
                                                                court of appeals and
                                                                       tax court

ATTORNEY FOR APPELLANT:                          ATTORNEY FOR APPELLEE:

DERICK W. STEELE                                 RONALD J. TIRPAK
Raquet & Vandenbosch                             Schenkel Tirpak & Kowalczyk
Kokomo, Indiana                                  Fort Wayne, Indiana

                              IN THE
                    COURT OF APPEALS OF INDIANA

FORTUNE MANAGEMENT, INC.,                        )
                                                 )
       Appellant-Cross Appellee,                 )
                                                 )
              vs.                                )     No. 34A02-1110-CC-1131
                                                 )
DESIGN COLLABORATIVE, INC.,                      )
                                                 )
       Appellee-Cross Appellant,                 )

                    APPEAL FROM THE HOWARD SUPERIOR COURT
                       The Honorable Thomas R. Lett, Special Judge
                            Cause No. 34D01-0506-CC-631

                                       July 30, 2012

               MEMORANDUM DECISION - NOT FOR PUBLICATION

DARDEN, Senior Judge
                              STATEMENT OF THE CASE

       Fortune Management, Inc. (“Fortune”) appeals the trial court’s judgment in favor

of Design Collaborative, Inc. (“Design”). Design cross appeals the trial court’s partial

grant of Fortune’s motion to correct error.

       We affirm in part and reverse in part.

                                         ISSUES

       1.            Whether the trial court erred in determining that Fortune and
                     Design had entered into an enforceable oral contract.

       2.            Whether Fortune and Design entered into a contract
                     modification that absolved Fortune of paying amounts owed
                     pursuant to Design’s performance of the oral contract
                     obligations.

       3.            Whether Design billed for work not authorized by its oral
                     contract with Fortune.

       4.            Whether the trial court erred in determining in part that
                     Design was not entitled to prejudgment interest.

                                          FACTS

       Design is a corporation involved in providing architectural, engineering, design,

and similar services.   Fortune is a corporation involved in real estate development,

management, and marketing.

       In 2002, Fortune contacted Design and asked it to provide design services

pertaining to the conversion of an Anderson, Indiana building into apartment units.

Design provided these services pursuant to a written contract. Toward the end of the

                                                2
project, Fortune asked Design to perform services in a Fortune project to build apartment

units in Lawrenceburg, Indiana (“the Lawrenceburg Project”). Design also provided

architectural, engineering, design, and similar services in a number of other Fortune

projects. Subsequent to the Anderson project, Design provided its services to Fortune

based upon oral contracts.

        With reference to the Lawrenceburg Project, Fortune and Design entered into an

agreement whereby Design would provide architectural, engineering, and design services

that would be billed on an hourly basis. During the course of the project, the focus

changed from the building of apartment units to the construction of townhomes. Design

performed its services on the townhome development pursuant to a negotiated fee of

$70,000.

      During the initial course of the Lawrenceburg Project, Design provided documents

to Fortune pertaining to the design development, schematic design, and construction

document phases of the apartment unit development. Design also provided invoices

based on the agreed hourly rates.

      During the later course of the project, Design provided documents to Fortune

pertaining to the design development, schematic design, and construction document

phases of the townhome development. Design again provided invoices, this time based

on the agreed negotiated fee.

                                           3
       Fortune did not pay any of the Lawrenceburg Project invoices. Indeed, at some

point during the project, Fortune informed Design that it should seek payment from an

organization called Nova Investments, an investor in the project and the owner of land on

which the townhomes would be built. In a June 8, 2004 letter, Design agreed to attempt

collection from Nova partners Holt Hoffman and Matt Golitko, but it did not agree to

release Fortune from responsibility to pay the invoices. Neither Nova, Hoffman, nor

Golitko paid the invoices, and on March 11, 2005, Design filed a complaint against

Fortune. In the complaint, Design alleged that Fortune owed $26,990 plus interest for

services provided pursuant to the original plan to build apartment units and $43,750 plus

interest for services provided pursuant to the later plan to build townhomes. After

Fortune refused to make payment, a bench trial was held. The trial court made the

following pertinent findings of fact:

       That the architectural, engineering, and design services provided by
       Plaintiff to and at the request of Defendant were ordinary, normal and
       customary in the industry.

       That architectural, engineering and design professionals involved in the
       industry would normally expect to be paid for the services provided to
       Defendant by Plaintiff.

       That the architectural, engineering and design services provided to
       Defendant by Plaintiff were necessary for the furtherance of the apartment
       development project and the town home development project.

       That as a result of providing architectural, engineering and design services
       to Defendant relating to the apartment structures and town home structures,
       Plaintiff expended time and effort.

                                            4
      That as a result of obtaining the architectural, engineering and design
      services relating to the apartment structures and town house structures,
      Defendant furthered its development project, benefitting therefrom.

(App. 322-23).

      The trial court made the following pertinent conclusions of law:

      Plaintiff, Design Collaborative, Inc., and Defendant, Fortune Management,
      Inc., entered into a contract relating to the design and development of
      apartments and town houses.

      ****

      Plaintiff provided invoices to Defendant for the architectural, engineering,
      design and associated services itemizing the amounts due for the
      architectural, engineering, design and associated services provided to
      Defendant by Plaintiff. This was in accordance with the terms and
      conditions of the contract between the parties.

      The Defendant did not object to the invoices so provided.

      The amount invoiced by Plaintiff to Defendant for the architectural,
      engineering, design and associated services was according to the contract of
      the parties and was fair and reasonable under industry standards.

      The contract between Plaintiff and Defendant was silent as to the
      entitlement to interest upon unpaid amounts. Where an agreement of the
      parties thereto is silent as to the entitlement to interest, the statutes of
      Indiana provide therefore.

      Defendant failed to make payment of the amounts due and invoiced for the
      architectural, engineering, design and associated services provided to
      Defendant by Plaintiff and therefore breached the contract between Plaintiff
      and Defendant.

(App. 323-24).

                                           5
       The trial court entered judgment in favor of Design for $26,990.00 in damages and

$13,687.47 in prejudgment interest in relation to the apartment unit development and

$43,750.00 in damages and $22,229.70 in prejudgment interest in relation to the

townhome development.

       Fortune filed a motion to correct error alleging, among other things, that the award

of prejudgment interest was erroneous. The trial court granted the motion as to the

prejudgment award involving the damages for the apartment unit development.

                                        DECISION

       As noted above, the trial court issued detailed factual findings and conclusions of

law. Indiana Trial Rule 52(A) provides that when the trial court issues such findings and

a corresponding judgment, “the court on appeal shall not set aside the findings or

judgment unless clearly erroneous, and due regard shall be given to the opportunity of the

trial court to judge the credibility of witnesses.” Factual findings are clearly erroneous if

there is no evidence or reasonable inference from the evidence to support the findings,

and we review only the evidence and reasonable inferences therefrom that are favorable

to the judgment without reweighing the evidence or reassessing the credibility of the

witnesses. Argonaut Ins. Co. v. Jones, 953 N.E.2d 608, 614 (Ind. Ct. App. 2011), trans.

denied. “We owe no deference to the trial court, however, on matters of law, reviewing

these de novo.” Id.

                                             6
1.      Existence of Contract

        The existence of a contract is established by the evidence of an offer, acceptance,

consideration, and a manifestation of mutual assent. Troutwine Estates Dev. Co. v.

Comsub Design & Eng’g, Inc., 854 N.E.2d 890, 897 (Ind. Ct. App. 2006), trans. denied.

To enter into an oral contract, the parties must agree to all essential terms of the contract.

Wallem v. CLS Indus., Inc., 725 N.E.2d 880, 883 (Ind. Ct. App. 2000). Whether a set of

facts establishes a contract is a question of law. Kelly v. Levandoski, 825 N.E.2d 850,

857 (Ind. Ct. App. 2005), trans. denied. However, determination of the terms of an oral

contract is a matter for a trier of fact. Thomas J. Henderson, Inc. v. Leibowitz, 490

N.E.2d 396, 399 (Ind. Ct. App. 1986). Findings are clearly erroneous only if the record

contains no facts to support them, whether directly or by inference. Family Video Movie

Club, Inc. v. Home Folks, Inc., 827 N.E.2d 582, 585 (Ind. Ct. App. 2005).

        Here, Fortune does not contend that there is insufficient evidence to establish

offer, acceptance, and consideration. It does, however, claim that there is no oral contract

because there was no meeting of the minds regarding the timing of the completion

phases.1

        Our review of the transcript discloses that Kevin Scully, an architect and principal

for Design, testified that he met with Fortune representative Bill Ritter at the beginning of

the Lawrenceburg Project, and they agreed that Design would proceed through the
1
 Fortune also argues that there was no meeting of the minds on the issue of prejudgment interest. However, Fortune
makes no argument to establish that prejudgment interest is an essential term of the contract.

                                                        7
regular architectural phases to determine the advisability of building the apartment units.

The parties agreed that Design would be paid on an hourly basis.

       When Fortune changed its emphasis to building townhomes, Scully met with

Fortune President, Scott Pitcher, and they negotiated a fixed fee amount for the various

phases. Scully testified that Pitcher told him that “the project was on a very fast track and

we had to move very quickly to get the project done . . . . There was a deadline that was

in September [2004] I believe for an appointment with the bond bank.” (Tr. 92). In order

to be ready for the meeting with the bank, Design was required to

       [C]ompletely design the project so that meant go through the whole
       planning phase of understanding what it was we were going to put on the
       site, how many, how many we could fit, and then do all the architectural
       drawings, construction drawings, engineering detailing, and so forth that is
       required to construct the project and get it approved through the State of
       Indiana.

(Tr. 93).

       As the trier of fact, the trial court possessed the discretion to determine the terms

of the contract. In exercising its discretion, the trial court found Scully’s evidence

sufficient to show the timing agreed by the parties, evidence that was bolstered by trade

usage and course of dealing. Also, in exercising its discretion, the trial court found

Scully’s testimony more credible than any evidence presented by Fortune.

       We find as a matter of law that the set of facts presented to the trial court is

sufficient to establish that the parties were operating under a valid oral contract. In short,

the trial court’s finding is not clearly erroneous.
                                               8
2.     Existence of a Modification

       On June 8, 2004, after Fortune had failed to pay Design any of the hourly or

established fees due under the oral contract, Design sent a letter that summarized

discussions between Fortune and Design on a number of mutual projects. Fortune argues

that the letter was a settlement offer to modify Fortune’s obligation to pay the fees for the

Lawrenceburg Project and to pass that obligation to Hoffman and Golitko. The letter was

signed by both parties.

       A contract modification is a contract separate from the original contract. Hamlin

v. Steward, 622 N.E.2d 535, 539 (Ind. Ct. App. 1993). Courts interpret such contracts

using ordinary contract principles. Bailey v. Mann, 895 N.E.2d 1215, 1217 (Ind. 2008).

Thus, the goal of courts in interpreting the contract is to ascertain and give effect to the

parties’ intent. Johnson v. Johnson, 920 N.E.2d 253, 256 (Ind. 2010). Rules of contract

construction and extrinsic evidence may be employed in giving effect to the parties’

reasonable expectations. Id. When a contract’s terms are ambiguous or uncertain, and its

interpretation requires extrinsic evidence, its construction is a matter for the fact finder.

Id.   A contract is ambiguous when its language is “susceptible to more than one

interpretation and reasonably intelligent persons would honestly differ as to its meaning.”

Mid-States Gen. & Mech. Contracting Corp. v. Goodland, 811 N.E.2d 425, 431 (Ind. Ct.

App. 2004).

                                             9
Here, the letter provided in pertinent part:

Thank you for taking the time to meet with us on 2/24/04 to discuss our
past due invoices to [Fortune]. As we indicated, we feel it is always best to
meet in person to work out any potential issues and to ultimately maintain a
professional working relationship. We still consider [Fortune] a good
client, enjoy the work you do and hope that we can continue to do work
together.

This letter is to confirm the results of our meeting with you at your
Kokomo office and subsequent conversations with [a Fortune
representative], and we would ask you to review this letter and confirm
these discussions.

****

Project 2003.0056 Apartment Complex
Total of invoices of $26,990.00, which is to be paid directly by Holt
Hoffman and Matt Golitko. [Design] will try and pursue obtaining
payment from Holt and Matt on this invoice. We were concerned that the
only way they would pay us is for them to work directly with us on the
project and [Fortune] was OK with us working directly (as [Fortune] has a
signed contract that he can fall back on to recover his fees). [Fortune] felt
we should try to mitigate our damages with them to get payment.

Design will try our best to obtain payment from Holt Hoffman and Matt
Golitko on this invoice. In the event [Design] cannot obtain direct payment
from Holt Hoffman and Matt Golitko on the invoices, [Design] would like
to be included with [Fortune] (both as plaintiffs) on legal action in court to
collect payment. [Fortune] indicated that you had a contract with them to
develop the property and [Design] should be included as part of this
development.

****

Project 2003.0087 Town-homes Project
Total of invoices is $43,750.00, which is to be paid directly by Holt
Hoffman and Matt Golitko. [Design] will try and pursue obtaining
payment from Holt and Matt on this invoice per the same note as on the
Apartment project #2003.0056 above.
                                      10
       ****

       As we discussed, [Fortune] is a good client and we will work with you
       during this difficult time. We want to maintain communication with you
       and if you have any questions feel free to contact [Scully] or myself
       [Design principal, Terrance Wagner]. Thanks again for meeting with us . . .
       . Good luck with your land sale.

(Fortune’s Ex. D).

       As noted above, Fortune reads the letter as a modification of its original contract

that transfers the payment of the apartment unit and townhome invoices from Fortune to

Hoffman and Golitko. Design, on the other hand, reads the letter as a continuing effort

to obtain payment. Given Fortune’s interpretation of the letter and the conspicuous lack

of any language purporting to release Fortune from its obligations in the event that

Hoffman and Golitko refused to pay, we find as a matter of law that the letter is

ambiguous. Accordingly, we look to extrinsic evidence to ascertain the parties’ intent.

       Scully testified that discussions with Fortune, which had closed the Lawrenceburg

Project and had failed to make payments on Design’s invoices, disclosed that Hoffman

and Golitko, as representatives of Nova, had expressed interest in taking over and

completing the project. Scully also testified that the letter memorialized an attempt to

“try and pursue the project with [Nova] to get paid for the work that we had done. And

so this was an attempt to take the project to [Nova] to see if they could get financing and

make the project proceed or help.” (Tr. 164). Wagner, a Design principal, testified that

the letter to Fortune was to obtain payment “from any source from which it might be

                                            11
available.” (Tr. 241). Wagner also testified that “if I would have been told to go to the

Pope I would have probably gone to the Pope to try and get payment if he would have

paid it, if he would have been involved in it in any way.” Id. Wagner further testified

that at the time the letter was written, Design was “still looking for payment . . . directly

from [Fortune].” (Tr. 249).

       While the trial court did not make a specific finding regarding the effect of the

June 8, 2004 letter, its judgment in favor of Design shows that the court did not believe

that the letter relieved Fortune of the duty to pay its debts. After reviewing the transcript,

we also do not believe that the letter relieved Fortune of its duty to pay the Lawrenceburg

Project debts.

3.     Mitigation of Damages

       Fortune argues that Design neglected to mitigate its damages when it proceeded to

create construction documents prior to completion of the prior two stages of the

townhome project.

       In general, a non-breaching party has a duty to exercise reasonable diligence to

mitigate damages suffered as a result of a breach of contract. Four Seasons Mfg., Inc. v.

1001 Coliseum, LLC, 870 N.E.2d 494, 507 (Ind. Ct. App. 2007). The breaching party has

the burden to prove that the non-breaching party has not used reasonable diligence to

mitigate its damages. Id.

                                             12
       The oral contract between Design and Fortune required the townhome project to

move as expeditiously as possible.          Design proceeded to move expeditiously, not

knowing that a breach was going to occur. Fortune has failed to prove that mitigation

was necessary under the circumstances.

4.     Prejudgment Interest

       As a cross-appeal, Design raises the issue of whether the trial court erred in

granting Fortune’s motion to correct error. The trial court concluded that its original

judgment incorrectly added prejudgment interest on the damages awarded to Design on

the apartment unit phase of the contract.

       Prejudgment interest may be recovered as additional damages when necessary to

fully compensate an injured party for its loss. Cincinnati Ins. Co. v. BACT Holdings,

Inc., 723 N.E.2d 436, 440 (Ind. Ct. App. 2000), trans. denied. Prejudgment interest is

awarded where “the damages are ascertainable in accordance with fixed rules of evidence

and accepted standards of valuation at the time the damages accrued.” Id. At 441. After

it has been determined that a party is liable for damages, prejudgment interest is

appropriate only when a “simple mathematical computation” is required. Id. However, it

has been allowed even where some degree of judgment must be used to measure

damages. Id. Prejudgment interest is awarded to fully compensate an injured party for

the lost use of money. Id. It is computed from the time the principal amount was

                                              13
demanded or due and is allowable at the permissible statutory rate when no contractual

provision specifies the interest rate. Id.

       Here, the trial court merely multiplied the undisputed number of hours by the

undisputed hourly rate to arrive at the damage award. The addition of prejudgment

interest is allowed where this simple mathematical computation was used.

                                       CONCLUSION

       The trial court did not err in finding that an oral contract existed between Design

and Fortune and that damages were awardable for breach of that contract. In addition,

the trial court did not err in giving no weight to the June 8, 2004 letter as a modification

of Fortune’s obligations under the oral contract. Furthermore, the trial court did not err in

concluding that Fortune could not prevail on the mitigation of damages issue.

       The trial court did err, however, in granting the motion to correct error.

Accordingly, we remand with instructions that the trial court vacate its judgment on the

motion to correct error and restore its original judgment.

       Affirmed in part and reversed in part.

NAJAM, J., and RILEY, J., concur.

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