Bunkers v. Jacobson

Decision Date06 November 2002
Docket Number No. 22021., No. 21965
Citation653 N.W.2d 732,2002 SD 135
PartiesGeorge BUNKERS and Gwen Bunkers d/b/a George Bunkers Construction, Plaintiffs and Appellants, v. Gary JACOBSON and Diane Jacobson, Defendants and Appellees. and George Bunkers and Gwen Bunkers d/b/a George Bunkers Construction, Third Party Plaintiffs and Appellants, v. Naatjes Concrete, Inc. and D.L. Johnson and Gordon Johnson d/b/a Johnson Drywall, Third Party Defendants.
CourtSouth Dakota Supreme Court

Timothy A. Clausen of Klass, Stoick, Mugan, Villone, Phillips, Orzechowski, Clausen & Lapeirre, Sioux City, IA, Kristi Holm of Davenport, Evans, Hurwitz & Smith, Sioux Falls, SD, for plaintiffs and appellants and third-party plaintiffs and appellants.

Jeffrey J. Koerselman and Gary P. Thimsen of Woods, Fuller, Shultz & Smith, Sioux Falls, SD, for defendants and appellees.

TRANDAHL, Circuit Judge.

[¶ 1.] George and Gwen Bunkers, doing business as George Bunkers Construction (Bunkers Construction), appeal the trial court's decision awarding damages in favor of Gary and Diane Jacobson (Jacobson) in a cost-plus contract dispute. By notice of review, Jacobson asserts that the trial court erred in failing to award prejudgment interest on a counterclaim. We affirm in part, reverse in part and remand.


[¶ 2.] Bunkers Construction initiated suit against Jacobson for profit and overhead due and owing under a residential construction contract. Jacobson counterclaimed for breach of contract and negligent construction. Bunkers Construction subsequently filed a third party complaint for indemnification and contribution from several subcontractors including Naatjes Concrete, Inc. The Bunkers Construction claim and the Jacobson counterclaim were bifurcated.

[¶ 3.] By agreement of all parties, the Bunkers Construction claim was submitted on stipulated facts. The counterclaim, however, was tried before the court. In its judgment, the trial court dismissed the Bunkers Construction claim in its entirety and awarded $64,834.93 in damages to Jacobson on the counterclaim. Further, the court found that Bunkers Construction could recover $8,026.68 on its third-party claim against Naatjes Concrete, Inc1. The trial court also denied Jacobson's request for prejudgment interest. Bunkers Construction appealed and Jacobson filed a notice of review.


[¶ 4.] This dispute revolves around a contract for the construction of a home in the Prairie Tree Addition of Sioux Falls, South Dakota. In 1991, Jacobson decided to build a new home in Sioux Falls. Bids were solicited with the assistance of Gary Stanley, an architect hired by Jacobson. Eventually, Bunkers Construction was hired to construct the home and the parties entered into a cost-plus contract.2 George Bunkers is a long-time residential contractor in the Sioux Falls area. The Bunkers lived immediately next door to Jacobson's lot. George Bunkers had his office there and his sole construction trailer was on the Jacobson property.

[¶ 5.] Pertinent parts of the contract are important in this dispute. The contract provided for compensation to Bunkers Construction as follows:

17. CONTRACT SUM. The Contract Sum shall be the actual cost of all labor, materials, permits and equipment on site and employed in the construction as of the date of payment, plus 3% overhead, 6% profit on the first $300,000.00; 5% profit on any amounts over $300,000.00.

Further, under costs to be reimbursed, the contract defined the "cost of work" as "costs necessarily incurred by the Contractor in the proper performance of the Work."

[¶ 6.] The contract also allowed the owner, Jacobson, to purchase material as follows:

18. PURCHASE OF MATERIALS—DISCOUNTS, REBATES AND REFUNDS. Owner may at his option purchase directly any of the materials or supplies necessary in the construction of the residence. No percentage mark-up on appliances, electric switch gear, light fixtures, window treatments and carpeting.

[¶ 7.] Moreover, the contract required Bunkers Construction to build the house according to architectural plans. Specifically, the contract stated:

2. WORK. The Work will be completed in accordance with the Construction Drawings and Plans made by Randall Stanley Architects. . . . The Plans are incorporated in this contract. The Owner will provide Contractor with all architects' drawings and explanations as required to indicate the work to be done. The Contractor will follow these drawings as interpreted by the Architect.
* * *
21. CONTRACT DOCUMENTS. All plans, drawings, specifications, change orders and other documents prepared by Architect shall become a part of this Contract.
* * *
23. PLANS AND SPECIFICATIONS. Contractor agrees to follow the specifications, plans and drawings and that the work will be successfully executed in accordance with them, without any additional or extra work other than such as is necessarily implied, or to be inferred from the specifications, plans and drawings, upon a fair and liberal construction.

Jacobson never provided any official specifications or drawings. The only drawing available to Bunkers Construction was one marked "Not For Construction."3

[¶ 8.] Bunkers Construction began building the house in July 1991 and problems began to surface. During the course of construction, Jacobson purchased certain items for the house. It was the purchase of these items that initiated this dispute. Bunkers Construction claims that, because of the express terms of the contract, it is owed profit and overhead along with reimbursement for the cost of the excise tax on the "owner-purchased" items. Jacobson disputes this.

[¶ 9.] The construction of the home was essentially completed in July 1992. Jacobson claims that Bunkers Construction breached the contract because of defective work performed. The defects can be classified into three main areas: roofing, water problems and drywall. Despite complaints to Bunkers Construction and some attempts by Bunkers to repair these problems, they persisted. Jacobson then hired other contractors to attempt to correct the problems. Jacobson is also asking for prejudgment interest.

[¶ 10.] Whether Bunkers Construction is entitled to profit and overhead on owner-purchased items under the contract.
Whether Bunkers Construction is entitled to recover excise tax already paid on owner-purchased items.
Whether Bunkers Construction is responsible for damages resulting from certain defects on the house.
Whether Jacobson is entitled to prejudgment interest.

[¶ 11.] Interpretation and construction of a contract is reviewed de novo. Mahan v. Avera St. Luke's, 2001 SD 9, ¶ 15, 621 N.W.2d 150, 154. The claim of Bunkers Construction was submitted to the trial court by stipulated facts. When evidence is offered by way of stipulated facts, "we are free to determine the facts as if presented here for the first time unaided by any deference to the trial court." Muhlenkort v. Union County Land Trust, 530 N.W.2d 658, 660 (S.D. 1995) (citations omitted).

[¶ 12.] Jacobson's counterclaim was tried before the court. A trial court's findings of fact are reviewed under the clearly erroneous standard. Arnold Murray Constr., L.L.C. v. Hicks, 2001 SD 7, ¶ 6, 621 N.W.2d 171, 174. In applying the clearly erroneous standard, this Court's function is not to decide factual issues de novo. The question is not whether this Court would have made the same findings that the trial court did, but whether on the entire evidence this Court is left with a definite and firm conviction that a mistake has been made. People in Interest of H.M., 474 N.W.2d 267, 269 (S.D.1991); Maryhouse, Inc. v. Hamilton, 473 N.W.2d 472, 474 (S.D.1991). Due regard shall be given to the opportunity the trial court had to judge the credibility of witnesses. State By and Through DOT v. Garvin, 456 N.W.2d 779, 781 (S.D.1990); Masek v. Masek, 89 S.D. 62, 66, 228 N.W.2d 334, 336 (1975); Century 21 Associated Realty v. Hoffman, 503 N.W.2d 861, 864 (S.D.1993). This Court overturns a trial court's conclusions of law only when the trial court erred as a matter of law. Dougherty v. Dougherty, 482 N.W.2d 320, 322 (S.D.1992); Jankord v. Jankord, 368 N.W.2d 571, 572 (S.D.1985).


[¶ 13.] Bunkers Construction is entitled to profit and overhead on owner-purchased items under the contract.

[¶ 14.] The parties dispute whether Bunkers Construction is entitled to profit and overhead on items specifically purchased by Jacobson. Bunkers Construction asserts that the contract explicitly allows for profit and overhead to be charged on owner-purchased items. Specifically, it claims that when construing Paragraphs 17 and 18 of the contract together, it is entitled to overhead and profit on all items except those specifically enumerated in Paragraph 18. The owner-purchased items Bunkers Construction is seeking compensation for are not listed as an exclusion in Paragraph 18.4 [¶ 15.] It is well settled that "`in determining the proper interpretation of a contract the court must seek to ascertain and give effect to the intention of the parties.'" Read v. McKennan Hosp., 2000 SD 66, ¶ 23, 610 N.W.2d 782, 786 (quoting Malcolm v. Malcolm, 365 N.W.2d 863, 865 (S.D.1985)). Accord Kimball Investment Land, Ltd. v. Chmela, 2000 SD 6, ¶ 14, 604 N.W.2d 289, 293

. The Court ascribes to contract terms "`their plain and ordinary meaning.'" Harms v. Northland Ford Dealers, 1999 SD 143, ¶ 12, 602 N.W.2d 58, 61 (quoting Economic Aero Club, Inc. v. Avemco Ins. Co., 540 N.W.2d 644, 645 (S.D.1995)). "`The court is to enforce and give effect to the unambiguous language and terms of the contract[.]'" Kimball Investment Land, Ltd.,

2000 SD 6 at ¶ 10, 604 N.W.2d at 292 (quoting Campion v. Parkview Apartments, 1999 SD 10, ¶ 25, 588 N.W.2d 897, 902). Accord Cotton v. Manning, 1999 SD 128, ¶ 15, 600 N.W.2d 585, 588. Whether the language of a contract is ambiguous is a question of law....

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