Crone v. Amado

• Decision Date: 07 February 1950
• Docket Number: No. 5073,5073
• Citation: 69 Ariz. 389,214 P.2d 518
• Parties: CRONE et ux. v. AMADO.
• Court: Arizona Supreme Court

Page 518

214 P.2d 518

69 Ariz. 389

CRONE et ux. v. AMADO.

No. 5073.

Supreme Court of Arizona.

Feb. 7, 1950.

Richard H. Chambers, of Tucson, attorney for appellants.

Martin S. Rogers, of Tucson, attorney for appellee.

LA PRADE, Chief Justice.

This is an appeal from a money judgment for labor and materials and fixing a lien. In August, 1946, appellants Mr. and Mrs. Crone (defendants below), owners of the El Rancho Corono Guest Ranch, located approximately 12 miles from Tucson, made arrangements with Voight Realty Company to procure a person who would loan $25,000 on the property to be used to take up two mortgages totaling $8,700, the balance to be left with the realtor and expended through him toward a proposed addition to their then existing main building. Prior to these loan arrangements, appellants had engaged an architect to draw plans and specifications and supervise the construction. The architect had recommended a building contractor, Hector C. Amado, appellee (plaintiff). On August 28th, the Crones and Amado met in the realtor's office and signed a 'Memorandum of Agreement' prepared by the realtor, and two days later this agreement was signed by the mortgagee referred to therein. The agreement was entitled:

'Memorandum of Agreement

'Specifications and Payment Plan'

Then followed a description of the property, specifications indicating generally the character of the new structure, referring to overall dimensions, number of rooms, room sizes, construction material, etc., and, quoting from the contract, it was provided that

'Mortgagee, through his agents, the Voight Realty Company, 603 East 6th Street, Tucson, Arizona, agrees to furnish the total sum of $25,000.00 to mortgagors and contractor as follows:

'$8700.00 upon the execution and delivery of said realty mortgage, out of which sum the existing first and second mortgages shall be paid in full and out of which sum all expenses in connection with the placing of said mortgage shall be paid;

'The remaining balance of said $25,000.00 shall be paid to the contractor, with the approval of Frederick Eastman, supervising architect, the approval of mortgagors and the approval of the mortgagee and his agents, Voight Realty Company, as follows:

'Monies are to be paid to materialmen and laborers as bills are submitted by the contractor, not oftener than once each week to Voight Realty Company. Ten per centum (10%) over and above each weekly or other bill for material and labor shall be paid direct to the contractor.

'Except that the sum of $1650.00 shall be withheld by the mortgagee through his agents, Voight Realty Company, until the said building is completed and ready for occupancy.

'All specifications not specifically mentioned herein shall be covered by formal specifications to be drawn by Frederick Eastman, supervising architect, and nothing herein shall be interpreted so as to interfere with said architect's specifications. Plans and specifications now extant and to be made by Frederick Eastman shall be and are hereby made a part of this agreement, which agreement shall be binding upon the heirs, executors, administrators and assigns of all parties hereto.'

Plaintiff began the construction of the building on September 3, 1946, and worked until December 14th, at which time it was estimated that the building was about two thirds finished, and that it would probably take $7,000 to complete it. On this date all funds in the hands of the realtor, who had been paying Amado's claims weekly, were exhausted, and Amado left the job and presented his statement for moneys due on the contract for materials and labor. Later defendants asserted that the contract was a fixed-price contract, and that plaintiff was obligated to build the building for $16,300 (being the sum available from the $25,000 loan after paying off existing mortgages in the sum of $8,700). Amado's position was that it was a cost-plus contract and had been so treated by the parties from the beginning.

Plaintiff's evidence was to the effect that at the time the Memorandum of Agreement was signed no plans or specifications had been exhibited to him, though the contract recited that the work was to be done 'in accordance with plans and specifications now existing and to be drawn * * *' (Emp.sup.); and that he had been engaged in the work two days before any plans were produced.

There was introduced in evidence a pamphlet containing 22 large pages of single-spaced, typed specifications which plaintiff testified first came into his possession two and one half months after construction began. Shortly after the job was commenced plaintiff received a blueprint of the floor plan, and later during the construction received a second blue-print of the floor plan. It was then discovered that the ground to be covered by the bedroom wing was more than nine feet higher than the opposite corner and the work had to be accomplished by making a nine-foot excavation. The terrain was so uneven that in some places the foundations were eight feet in height above the ground; the finished floors were on three levels; and it was necessary to build a concrete tunnel under the building to care for flood waters.

That the parties were proceeding on a cost-plus basis was demonstrated by evidence that defendants during the progress of the building constructed a ramada close to the new addition, and in this construction used sand, cement, and materials that plaintiff had secured for the contract construction; that at the insistence of Mr. Crone defendant hired a carpenter not desired by him; that on December 6th when defendant presented his weekly statement there were insufficient funds to pay his bill; that he threatened to quit but at the request of the realtor who said that he was working on a new loan, he continued to work; that the next week there were still no funds, which precipitated his leaving the job; that before leaving the job Mr. Crone telephoned him and informed him that he was trying to refinance and requested him to stay on; that he met with all the interested parties at which time it was agreed that it would take approximately $7500 to complete the job, and that there was then due plaintiff some $2600.

All of plaintiff's weekly claims for laborers on the job, materials, mileage, and hauling were submitted on separate memorandums, checked by the architect, and then typed by the architect's secretary into formal statements which were approved by the architect and presented to the realty company for payment.

The architect testified that at the time the Memorandum of Agreement was signed there was in existence a revised preliminary plan, not drawn to scale, and referring to it said, 'They are simply a basis of study, a basis of discussions for the working drawings to be prepared'; that the working drawings were prepared after the work was commenced, and were changed from day to day as work progressed; that he approved Amado's weekly accounts, including 'his ten percent cost plus,' upon the express instructions of Mr. Crone; that Crone at no time told him that he was proceeding on a fixed-price contract; and 'A. There was never at any time any agreement as to what the total cost of the building would be.

'Q. Did he tell you that he had $25,000.00 available for the building?

'A. He hold me he had $25,000.00 with which to incur the cost of the building, plus the furnishings of the building, plus the interior furnishings.' (Emphasis supplied);

that during the progress of the building he had discussions with Mr. Crone with reference to the high cost of materials, and that it was agreed between them to reduce room sizes, etc., which he did; that he often discussed with Mr. Crone the difficulty of obtaining building materials, the O.P.A. price regulations, etc.

'I told him under the fluctuating prices of O.P.A. that no estimate could be made other than a very approximate estimate of any cost because prices were rising suddenly; that a building would cost what the selling price was on the market at that time, and no overall cost of the building could be given under any circumstances. Not only did I say that in August, but I advised him not to build frequently during construction.'

Plaintiff testified that at the time the memorandum was executed Mr. Crone questioned his right to wages for himself plus a ten percent supervision fee but after counseling with the realtor agreed to it. Soon after the construction began Mr. Crone insisted that the charges for hauling were excessive. With reference to this situation the architect testified that Mr. Crone asked him in the presence of Mr. Amado if he considered the transportation costs excessive; that Mr. Amado said if Mr. Crone was not satisfied with his cost of hauling he could hire somebody else to do it; that Mr. Crone made no response and did not direct him to thereafter disapprove the hauling and mileage charges, and that he continued to approve them.

Plaintiff's complaint was on the theory that the contract was oral except as to plans and specifications and his fee, and that the plans and specifications were thereafter orally modified from time to time as necessity arose and the work progressed.

Defendants by answer set up the defense that the Memorandum of Agreement was the building contract; that it should be interpreted as a fixed-price contract from...