Building Structures, Inc. v. Young

• Decision Date: 28 February 1995
• Citation: 883 P.2d 1308,131 Or.App. 88
• Parties: BUILDING STRUCTURES, INC., an Oregon corporation, Appellant-Cross-Respondent, v. Gary C. YOUNG, Melody Young, and Young Equipment Sales Co., Inc., an Oregon corporation, Respondents-Cross-Appellants. 90-9-141; CA A71758. *
• Court: Oregon Court of Appeals

Page 1308

883 P.2d 1308

131 Or.App. 88

BUILDING STRUCTURES, INC., an Oregon corporation, Appellant-Cross-Respondent, v. Gary C. YOUNG, Melody Young, and Young Equipment Sales Co., Inc., an Oregon corporation, Respondents-Cross-Appellants.

90-9-141; CA A71758.

Court of Appeals of Oregon,

In Banc ^*.

Argued and Submitted Nov. 5, 1993.

Resubmitted In Banc Sept. 7, 1994.

Decided Oct. 26, 1994.

Review Allowed Feb. 28, 1995.

W. Theodore Guthrie, Portland, argued the cause for appellant-cross-respondent. With him on the briefs was Paul J. Rask.

James P. Molloy, Portland, argued the cause for respondents-cross-appellants. With him on the briefs were Rick T. Haselton and Lindsay, Hart, Neil & Weigler.

LANDAU, Judge.

Plaintiff Building Structures, Inc. (BSI) brought this action seeking damages arising out of the construction of a commercial structure. The claims included breach of contract, quantum meruit and fraud. A jury found for BSI on the breach of contract and fraud claims, ¹ and the trial court granted defendants' motion for a new trial on the fraud claim. We reverse on BSI's appeal and affirm on defendants' cross-appeal.

Defendants Gary Young (Young) and Melody Young are principals of defendant Young Equipment Sales Co., Inc. (Young Equipment), a company engaged in the manufacture and sale of semi-trailer units. BSI had been in nonresidential construction for 17 years, building projects on a design-built or negotiated basis in which project specifications determined the costs. Typically, BSI consults with its customers in order to balance the design specifications against cost.

In early 1990, defendants contacted BSI regarding construction of a new building. On March 28, Young met with Larry and Jeff Smith of BSI. They discussed whether BSI's services could be used to meet Young Equipment's needs. The Smiths indicated that they would be interested in the project only if they could do both the design and construction. They told Young that they were only interested in negotiating, not bidding on, the project, and they explained how they would generate the cost figure. The parties signed a one-page "Agreement" which provides, in its entirety:

"The purpose of this agreement is to establish the use of Building Structures, Inc., (BSI) by Gary Young, for construction of Young Equipment and/or other related sitework to be located at Sandy, Oregon.

"Building Structures is to act as Project Manager/General Contractor and will retain the architect and engineers and coordinate the design services and obtain all permits. At the time of actual construction, a contract based on maximum not-to-exceed costs will be negotiated. Any monies paid to BSI under this agreement will be included in the construction contract and credited to owner's account.

"Gary Young will compensate Building Structures based on actual cost, not including taxes, plus ten percent for general overhead, plus five percent for fee. Payments will be made on a monthly progress basis. Any applicable taxes will be paid by owner in addition to the above."

The agreement was signed and BSI made preliminary drawings. In early May, Young and the Smiths negotiated over the price and scope of the projected construction. On June 15, BSI presented a "construction estimate printout" based on revisions and deletions from the original design. Young objected to the price of $245,126. BSI did not know that Young had been in touch with other contractors, one of whom had quoted a price of $200,000.

On May 24, at the design review meeting, Young introduced BSI as the project builders. The City of Sandy approved BSI's design, and, after the meeting, BSI told Young that it would proceed with the construction drawings and request building permits. Young agreed. On June 25, defendants entered into a contract with another business for the construction of the building. Young told BSI about that contract after BSI personnel discovered the other builder working at the site. The completed building was substantially the same as the one designed by BSI.

BSI then brought this action, asserting that defendants had wanted BSI to perform only preliminary design work on the project and, although representing otherwise, had never intended to have BSI construct the building. Defendants admitted liability under the quantum meruit theory for the value of the design work, but denied liability for breach of contract and fraud. The jury returned a verdict for BSI on the breach of contract claim and awarded damages of $23,450. The jury also found defendants liable for fraud and returned a verdict form reading:

"What is the amount of [BSI's] damages as a result of defendants' fraud?

"Answer $ -0- (General Damages)

"Answer $51,550.00 (Punitive Damages)"

Neither party objected and the jury was dismissed. Judgment was entered and defendants filed timely motions for judgment notwithstanding the verdict and for a new trial on both claims. The trial court denied the motions as to the breach of contract claim. It also denied the motion for judgment notwithstanding the verdict on the fraud claim but allowed the motion for a new trial on the fraud claim. The trial court held that, as a matter of law, the award of punitive damages was erroneous, because the jury failed to award compensatory damages. The court entered an amended judgment. ²

BSI assigns error to the grant of defendants' motion for a new trial on the fraud claim. The parties recognize that punitive damages are not recoverable in the absence of proof of actual damages. Crouter v. United Adjusters, Inc., 259 Or. 348, 364, 485 P.2d 1208 (1971). BSI contends, however, that the rule does not apply here, because defendants waived any objection to the verdict by failing to challenge it before the jury was discharged. BSI argues that case law shows that the aggrieved party must object to any irregularity or ambiguity of a verdict before it is received. See Fischer v. Howard, 201 Or. 426, 463-64, 271 P.2d 1059 (1954); Marquam Investment Corp. v. Myers, 35 Or.App. 23, 27, 581 P.2d 545, rev. den. 284 Or. 341 (1978). BSI contends that defendants were the aggrieved party and that a timely objection here would have allowed the jury to correct the verdict.

Defendants argue that, although generally an aggrieved party must object to a defective verdict before it is received, in this case it is plaintiff who was the aggrieved party. Accordingly, they conclude, they waived nothing when they stood mute as the jury returned the defective verdict.

The general rule, as stated in Mullins v. Rowe et ux, 222 Or. 519, 524, 353 P.2d 861 (1960), is:

"(1) The time to object to a defective verdict, if it is defective, is while the jury is still on hand so that the trial court can resubmit the matter with proper instructions.

"(2) An objection not taken when the verdict is returned into court is waived.

"(3) The only correct procedure to follow is to resubmit the matter to the same jury."

In Smith v. J.C. Penney Co., 269 Or. 643, 525 P.2d 1299 (1974), the Supreme Court applied that rule to facts not entirely dissimilar to those in this case. The jury returned a verdict for the plaintiff that was internally inconsistent. The defendant said nothing until after the jury was dismissed. The defendant then moved for judgment n.o.v., on the ground that the jury verdict was inconsistent, that is to say, legally insufficient. The Supreme Court said that

"if no objection is raised to a faulty verdict at the time it is returned, a party is foreclosed from subsequently attacking the verdict." 269 Or. at 653, 525 P.2d 1299.

Similarly, in Marquam Investment Corp. v. Myers, supra, the jury returned an inconsistent verdict in favor of the plaintiff, to which the defendant entered no objection. When the defendant attempted to obtain a new trial on the basis of that defect in the verdict, we said:

"The time to correct the verdict was when the jury was still present and the court could resubmit the question for determination. Allowing a patently inconsistent verdict to stand and then, after the jury is discharged, seek to take advantage of the inconsistency is impermissible." 35 Or.App. at 28, 581 P.2d 545. (Citation omitted.)

In this case, defendants allowed a patently defective verdict to stand. Then, after the jury was discharged, they sought to take advantage of the defect. As in Smith and Marquam, that sort of "laying in the weeds" is impermissible.

Defendants do not address the applicability of Mullins, Smith and Marquam. They merely argue that, because the verdict was defective, as a matter of law, it was up to BSI--not defendants--to object. Defendants' failure to come to grips with Mullins, Smith and Marquam, however, is fatal to their argument. In Smith, for example, as in this case, the verdict was defective as a matter of law, and still the Supreme Court said that it was up to the defendant to object or be foreclosed from subsequently attacking the verdict. There simply is no basis for concluding that defendants in this case should be treated differently than the Supreme Court treated the defendant standing in the same predicament in Smith.

Defendants argue that an alternate basis for affirming the trial court's grant of a new trial is BSI's failure to prove its fraud claim. They argue that BSI failed to prove that, at the time Young executed the agreement, defendants did not intend to honor their obligations under the agreement. We disagree. There was evidence from which the jury could conclude that defendants did not intend to be bound by the agreement, which provided that BSI would construct the building. That evidence included Young's testimony that he did not want BSI to manage the entire project or to act as general contractor. The trial court erred in granting a new trial and failing to enter judgment on the verdict.

Defendants cross-appeal, assigning error to the court's denial of their motions for a directed verdict on the breach of...