Construction Contracting & Management, Inc. v. McConnell, 18359

• Decision Date: 09 July 1991
• Docket Number: No. 18359,18359
• Citation: 112 N.M. 371,815 P.2d 1161,1991 NMSC 66
• Parties: CONSTRUCTION CONTRACTING & MANAGEMENT, INC., Plaintiff-Appellee, v. Ron McCONNELL and Don Pattison, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 1161

815 P.2d 1161

112 N.M. 371

CONSTRUCTION CONTRACTING & MANAGEMENT, INC. Plaintiff-Appellee, v. Ron McCONNELL and Don Pattison, Defendants-Appellants.

No. 18359.

Supreme Court of New Mexico.

July 9, 1991.

[112 NM 372] James T. Roach, Janet Santillanes, Albuquerque, for defendants-appellants.

Richard Addis, Albuquerque, for plaintiff-appellee.

OPINION

MONTGOMERY, Justice.

In this case we resolve an issue expressly left undecided in Louis Lyster General Contractor, Inc. v. City of Las Vegas, 83 N.M. 138, 146, 489 P.2d 646, 654 (1971): whether a contractor who abandons or repudiates a construction contract before completion of the project may be held liable for liquidated damages for the delay in completion. In addition, we review the instructions by which this breach-of-contract case was submitted to the trial jury and decide that the trial court erroneously submitted issues of liability when it had previously ruled, correctly, that liability was established as a matter of law. Because we remand for a new trial on the issue of damages, we also decide issues concerning the contractor's liability for punitive damages and concerning the admissibility of certain evidence offered for impeachment purposes.

I.

On August 8, 1986, defendants/counterclaimants Ron McConnell and Don Pattison, the owners of a tract of land on Tramway Boulevard in Albuquerque, New Mexico, entered into a contract with plaintiff/counterdefendant Construction, Contracting & Management, Inc. (CCM), to build a restaurant on the site for $361,000. William Pinson, an employee of CCM, negotiated the contract, which was signed by the two owners and C.J. Mead, the president of CCM. Shortly thereafter, Pinson left CCM's employment. When Pinson's replacement reviewed the contract and concluded it would be unprofitable, CCM informed McConnell and Pattison on September 16, 1986, that CCM wanted $75,000 more than the contract price. The owners refused this request and demanded that CCM perform under the terms of the written contract. After completing preliminary site preparation, CCM halted work on the project and filed suit to rescind the contract. In response, McConnell and Pattison filed a counterclaim for breach of contract.

On the first day of trial in November 1988, the court granted summary judgment to McConnell and Pattison on the issue of CCM's liability for breach of contract. However, the issue was nevertheless submitted to the jury, which returned a verdict in favor of CCM in the amount of $13,451.33 for site preparation and in favor McConnell and Pattison on their counterclaim in the amount of $11,000 as damages for CCM's breach. The trial court granted McConnell and Pattison's motion to set aside the verdict in favor of CCM, but denied their motion for additur or a new trial and entered judgment against CCM for $11,000 on the counterclaim. McConnell and Pattison appeal, asserting six points of error and contending that because the jury was confused by the court's assertedly erroneous instructions, the damages awarded were inadequate.

We agree with the general contention that following the trial court's grant of summary judgment on the issue of breach of contract, the remaining issue for the jury was the nature and extent of the damages to which McConnell and Pattison were entitled under the terms of their contract with CCM.¹ Within that general framework, we address each of the six points.

II.

A.

The owners first argue that the court below erred in refusing to direct a verdict on the issue of liability, because the construction contract was clear and unambiguous and was breached by CCM. The court denied the motion on the theory that Article 2 of the contract was ambiguous.

Article 2, entitled "The Work," reads as follows:

The Contractor shall perform all the Work required by the Contract Documents for

The construction of the Wold [sic] Plum Restaurant, per plans and specifications from Lawrence Garcia and Associates and specifications from J.E. Kuykendall.

All equipment and fixtures per plans and specifications on the above referenced project as agreed upon, and specifically including Roof tile and installation, Carpeting as per owner's specification, stained glass, mini-blinds, turning lamps, cabinets, stainless steel hoods, shelves, corners and door guards, Tiffany lamps and Lampost, site lighting, clear hemlock paneling, 2 fire hydrants and all necessary pro-rata charges, water meter, etc. Owner only to pay for those fixtures and furniture not mentioned in specifications. [Emphasis added.]

This provision contained various alterations--various words deleted and other words substituted in a larger typeface; but all alterations had been made before the contract was signed by the parties. There is no suggestion that the contract was altered in any way after it was signed by Mead on behalf of CCM.

McConnell and Pattison argue that Article 2 clearly states that the contractor, CCM, was to provide the listed items as part of the contract price. Pinson, who negotiated the contract on behalf of CCM, also testified it was his understanding that the listed items were included in the contract price. In contrast, CCM adduced evidence that it understood the article to mean that CCM would purchase the items, then be reimbursed at cost plus 10 percent--treating the listed items, in effect, as change orders. After hearing testimony by both parties, the court concluded that the article was ambiguous and denied the motion for a directed verdict on that basis.

The question whether particular contract language is ambiguous is, of course, a question of law. Young v. Thomas, 93 N.M. 677, 679, 604 P.2d 370, 372 (1979). Absent a finding that the language is reasonably and fairly susceptible of different constructions, no ambiguity will be found. Levenson v. Mobley, 106 N.M. 399, 401, 744 P.2d 174, 176 (1987). Moreover, as we have repeatedly observed, "The mere fact that the parties are in disagreement on construction to be given to the contract does not necessarily establish an ambiguity." Id.; see Vickers v. North Am. Land Devs. Inc., 94 N.M. 65, 68, 607 P.2d 603, 606 (1980).

Despite the parties' current disagreement on the issue of whether the contractor or the owner was to bear the cost of the items listed in Article 2 of the contract, we conclude that the article is not ambiguous. We disagree with CCM's argument that the phrase "as agreed upon" indicates that the listed items constituted possible change orders to be determined in the future. Not only does the plain language indicate that the listed items were to be provided by the contractor as specifically included within the scope of "the Work" in the contract; many of the items listed in Article 2 are reiterated in Addendum # 1, which was incorporated into the contract before it was signed by the parties.

Because the court below had previously granted partial summary judgment on the issue of liability for breach of contract (thereby determining that a valid contract existed and had been breached), we conclude that, since the contract was unambiguous, the court erred in not granting the owners' motion for a directed verdict as to liability. See Archuleta v. Pina, 86 N.M. 94, 95, 519 P.2d 1175, 1176 (1974) (trial court has no discretion on directed verdict rulings). Consequently, the only issue that should have reached the jury on McConnell and Pattison's counterclaim was the extent of damages to which they were entitled as a result of CCM's breach.

B.

Closely related to the first issue is the owners' second contention: that the trial court erred in not informing the jury that summary judgment had been granted on the issue of liability. As indicated above, we agree that the issue of CCM's liability for breach of contract should not have been submitted to the jury. It presented a false issue, which may well have confused the jury. See State ex rel. State Highway Comm'n v. Atchison, T. & S.F. Ry., 76 N.M. 587, 589, 417 P.2d 68, 70 (1966) (error to instruct on a false issue).

Instruction No. 5 was the "statement of the issues" instruction. See SCRA 1986, 13-301 et seq.² It submitted to the jury the questions whether CCM had agreed to build the restaurant for $361,000, whether the terms of the contract required CCM to provide the items specifically included in Article 2 of the contract, and whether CCM's breach of contract damaged McConnell and Pattison. By instructing the jury that CCM denied these claims and that the burden was on McConnell and Pattison to prove them, the court left the jury to determine whether there was an agreement to build the restaurant for $361,000, whether the contract covered the specific items (which we have held it did), and whether there was a breach which damaged McConnell and Pattison. The last part of the instruction told the jury that CCM claimed it had learned that there was a substantial difference of opinion as to what was required in performance of the contract and that CCM proceeded no further because the parties could not arrive at an agreement on the contract's meaning. This effectively submitted to the jury the question whether there was a breach in light of the parties' differing positions on the meaning of the contract (which we have held was unambiguous).

Other instructions reinforced the erroneous impression that the jury was to determine whether a breach had occurred, even though the court determined this issue at the outset of the trial and was clearly correct, given that CCM had repudiated the contract on September 16, 1986. Instruction No. 6 informed the jury what was meant by "burden of proof" on breach of contract.³ Instruction No. 11 stated that a party has breached a contract if it has failed properly to fulfill its duty under the contract. Instruction No. 12 told the jury what to do if the contract was ambiguous, which we have ruled it was not. Instruction Nos. 16 and 24 were the standard uniform instructions telling the...