Bailey-Allen Co., Inc. v. Kurzet

• Citation: 876 P.2d 421
• Decision Date: 31 May 1994
• Docket Number: BAILEY-ALLEN,No. 930178-CA,930178-CA
• Parties: COMPANY, INC., Plaintiff and Appellee, v. Stanley M. KURZET, an individual; Stanley M. Kurzet and Anne L. Kurzet, as trustees for the Kurzet Family Trust; The Kurzet Family Trust; and John Does 1 through 10, Defendants and Appellants.
• Court: Court of Appeals of Utah

Page 421

876 P.2d 421

BAILEY-ALLEN COMPANY, INC., Plaintiff and Appellee, v. Stanley M. KURZET, an individual; Stanley M. Kurzet and Anne L. Kurzet, as trustees for the Kurzet Family Trust; The Kurzet Family Trust; and John Does 1 through 10 Defendants and Appellants.

No. 930178-CA.

Court of Appeals of Utah.

May 31, 1994.

Spencer E. Austin (argued), William J. Evans, Parsons, Behle & Latimer, Salt Lake City, for appellants.

Bruce J. Nelson (argued), Allen Nelson Rasmussen & Christensen, Salt Lake City, for appellee.

Before BILLINGS, P.J., and DAVIS and ORME, JJ.

OPINION

BILLINGS, Presiding Judge:

Stanley Kurzet, Anne Kurzet, and the Kurzet Family Trust appeal from a district court order awarding Bailey-Allen Company, Inc., damages, prejudgment interest, and postjudgment interest under a construction contract and denying the Kurzets' request for attorney fees on their successful summary judgment motion. We reverse and remand.

FACTS

In July 1990, Stanley Kurzet and Bailey-Allen Company, Inc. entered into a contract for the construction of the Kurzets' home. The agreement, which Mr. Kurzet drafted, provides in relevant portion:

This Agreement covers all of the understandings existing between BAILEY-ALLEN (Contractor) and STANLEY KURZET (Owner) for the construction of a residence on LOT # 4 of the EVERGREEN development at DEER VALLEY, PARK CITY, UTAH.

The Contractor is retained by Owner on a cost plus fixed fee basis. Costs shall be billed monthly and payment shall be made within ten days of receipt of billing. The fee fixed for this contract is set at $100,000 for the residence as depicted in the drawings plus a maximum of $50,000 in directed additional work, if any. Any directed additional work in excess of an aggregate cost of $50,000 will result in additional fees based on 7% of the cost of such additional work.

....

Both Contractor and Owner stipulate that this contract cannot be changed except and unless in writing, bearing the date and signatures of both parties.

....

The Owner's review authority notwithstanding, the Contractor is fully responsible to Owner for the performance of subcontractors. Accordingly, costs occasioned by the failure of a subcontractor to perform shall not be assessable to Owner.

The Contractor shall carry insurance specifically providing for saving Owner harmless from any action arising due to the injury of a worker even if an employ[ee] of a subcontractor or supplier who is not properly or adequately insured. Contractor shall, within 10 days of the date of this agreement furnish a Certificate of Insurance prepared by the Carrier or its Authorized Agent. The Certificate shall specifically state the purpose and limits of the policy and these shall show that the work to be performed under this contract is covered.

....

Contractor takes note that Owner is concerned about the quality of workmanship and materials and that this concern stems from prior experience with a local contractor and ownership of several condominiums at the Pinnacle development. Owner will not make unreasonable demands, however, slovenly workmanship and/or substandard materials will neither be accepted [n]or paid for by Owner. Owner considers that the fees he pays to Contractor are specifically for his expertise in selecting and supervising workers so as to avoid unacceptable and substandard workmanship and/or the use of substandard quality materials.

The agreement is silent regarding remedies in the event of a breach by either party.

Ten days after the contract was signed, Mr. Kurzet requested the required certificate of insurance, but never received it. Bailey-Allen later admitted that its policy had expired nearly two years earlier. In October 1990, Mr. Kurzet terminated Bailey-Allen's services, based on its failure to provide proof of insurance and Mr. Kurzet's dissatisfaction with Bailey-Allen's attention to the project. At the time of the termination, the work under the contract was approximately 10% complete, with the house framed and the roof partially finished.

Bailey-Allen filed a complaint against the Kurzets in December 1990, alleging breach of contract, mechanics' lien, unjust enrichment, and failure to obtain a construction bond. The trial court subsequently granted the Kurzets' motion for partial summary judgment on the latter three causes of action, reserving the breach of contract claim for trial to the bench. At the trial on the breach of contract claim, the court reinstated sua sponte the unjust enrichment claim and granted a continuance for the parties to present their evidence thereupon.

After hearing the evidence, the court determined "that the subject contract was ambiguous and incomplete as drafted and that the Court has a responsibility to add to it." The court further concluded that Bailey-Allen's failure to provide evidence of insurance and its lack of supervision of the project were material breaches of the contract that justified the termination. The court determined the Kurzets had not breached the contract.

The trial court then concluded that Bailey-Allen was entitled to recover under its unjust enrichment theory and went on to consider the amount of damages due, concluding that "the most logical basis [was] the percentage of defendants' residence that was completed during the period plaintiff was on the job." Accordingly, the court awarded Bailey-Allen $15,500 "in quantum meruit/unjust enrichment, based on the contract between plaintiff and defendants, $10,000 representing 1/10 of the contract price for services in completing 1/10 of the construction, and $5,500 for services involving negotiations for the purchase of lumber." Bailey-Allen was held liable to the Kurzets for $1800 in costs for repairing Bailey-Allen's faulty construction of a retaining wall, for $2000 for repairing its faulty construction of concrete steps, and for $559 in costs for unnecessary materials.

The court entered judgment for Bailey-Allen in the amount of $11,141, representing its damages offset by the amounts owed to the Kurzets. The court awarded Bailey-Allen prejudgment interest and postjudgment interest from and after April 17, 1992, the date the trial court granted Bailey-Allen's motion to compel findings of fact and conclusions of law. The court dismissed the Kurzets' counterclaims and denied their claim for attorney fees and costs associated with their successful motion for partial summary judgment on the mechanics' lien and construction bond claims.

The Kurzets appeal, claiming the trial court erred in: (1) awarding Bailey-Allen damages under the contract or in quantum meruit; (2) awarding prejudgment interest; (3) awarding postjudgment interest from the date it granted Bailey-Allen's motion to compel findings of facts and conclusions of law, rather than from the date the judgment was entered; and (4) denying their claim for attorney fees and costs on their successful partial summary judgment motion under the mechanics' lien and construction bond statutes.

I. DAMAGE AWARD

The trial court awarded Bailey-Allen $15,500 in damages "in quantum meruit/unjust enrichment, based on the contract between the parties." ¹ Whether the court's theory of recovery was proper raises a question of law, which this court reviews for correctness. Van Dyke v. Chappell, 818 P.2d 1023, 1024 (Utah 1991). We are also mindful that we may affirm a trial court's decision on any proper ground. Mel Trimble Real Estate v. Monte Vista Ranch, Inc., 758 P.2d 451, 456 (Utah App.), cert. denied, 769 P.2d 819 (Utah 1988); accord Buehner Block Co. v. UWC Assoc., 752 P.2d 892, 895 (Utah 1988). Therefore, we can affirm the award if we find any proper basis to support it.

A. Recovery Under the Contract

We first look at the written contract to determine whether its terms justify the damage award. In evaluating the contract, this court must first ascertain whether the contract was integrated and second whether it was ambiguous. Ron Case Roofing & Asphalt Paving, Inc. v. Blomquist, 773 P.2d 1382, 1385 (Utah 1989). Neither party argued that the contract was not integrated, and it expressly states that it was the entire understanding of the parties and could not be changed except in writing. Regarding ambiguity, however, the contract provided no guidance relevant to the proper remedy for breach. As such, the contract was ambiguous or, more accurately, silent as to the intent of the parties regarding remedies in case of breach. Furthermore, no extrinsic evidence shed light on what remedies the parties intended in the event of a breach.

In the absence of any express contract provision or extrinsic evidence of intent, we look to a rule set forth in an early supreme court case for guidance in our analysis: "In an action upon the contract [the contractor] cannot recover unless and until he [or she] shows that he [or she] has, substantially at least, complied with its provisions." Ryan v. Curlew Irrigation & Reservoir Co., 36 Utah 382, 391, 104 P. 218, 221 (1909) (emphasis added); see also Reliance Ins. v. Utah Dept. of Transp., 858 P.2d 1363, 1370 (Utah 1993) (discussing doctrine of substantial completion, but holding it inapplicable on facts of case). Professor Corbin states this rule as follows: "[W]hen a contract has been made for an agreed exchange of two performances, one of which is to be rendered first, the rendition of this one substantially in full is a constructive condition precedent to the duty of the other party to render his [or her] part of the exchange." 3A Arthur L. Corbin, Corbin on Contracts § 700, at 309 (1960).

However, "[i]f the defective performance, though less than 'substantial' has conferred benefits on the defendant in excess of his [or her] injury, he [or she] may be under a quasi-contractual duty to pay that excess." Id. § 700, at 310. Thus,

[a] contractor whose breach is such that he [or she] has rendered less than "substantial performance" has no right to the contract price; he [or she...