Freeman & Co. v. Bolt, 23938
| Decision Date | 11 August 1998 |
| Docket Number | No. 23938,23938 |
| Parties | FREEMAN & CO., an Idaho corporation, Plaintiff, v. Al BOLT, d/b/a Bolt Construction, an individual, Defendant-Appellant-Cross Respondent and Jack C. Kulm and Jennifer Kulm, husband and wife; and All Persons in Possession or Claiming any Right to Possession, Defendants-Respondents-Cross Appellants. Jack C. KULM and Jennifer Kulm, husband and wife, Counterclaimants-Cross Defendants-Respondents-Cross Appellants, v. Alvin BOLT, dba Bolt Construction, an individual, Counterdefendant-Cross Claimant-Appellant-Cross Respondent. Alvin BOLT dba Bolt Construction Company, Plaintiff-Appellant-Cross Respondent, v. Jack C. KULM and Jennifer Kulm, husband and wife, and Freeman & Co., Incorporated, an Idaho corporation, Defendants-Respondents-Cross Appellants. |
| Court | Idaho Court of Appeals |
Lloyd J. Webb, Curtis Webb; Coleman, Ritchie & Robertson, Twin Falls, for appellant-cross respondent. Lloyd J. Webb argued.
Stephan, Kvanvig, Greenwood, Stone & Trainor, Twin Falls, for respondents-cross appellants. Laird B. Stone argued.
Bolt Construction Company (Bolt) appeals from the district court's decision on a bench trial regarding disputes over a residence which Bolt built for Jack and Jennifer Kulm. The parties disagreed over how to properly calculate and prove "cost" for a "cost plus" contract and whether the charges levied for certain "extra" and "additional" work were correct. Each party prevailed on some of their respective claims, but the district court concluded that the Kulms were the overall prevailing party and awarded them a significant percentage of their attorney fees.
We affirm the decision of the district court, with one minor exception regarding a concession made by the Kulms.
In March of 1994, Al Bolt (dba Bolt) entered into a written contract with Jack and Jennifer Kulm for the construction of a residence in rural Jerome County. The contract provided, in relevant part:
Bolt Construction hereby agrees to furnish all the material and perform all the labor necessary for the completion of:
[Home as per plans provided by the Kulms]
All material is guaranteed to be as specified, and the above work to be performed in accordance with the drawings and specifications submitted for above work and completed in a substantial workmanlike manner for the sum of:
Two Hundred Twenty Five Thousand Dollars ($225,000.00)
....
Any additional work required by owner shall be at cost plus 10% unless other arrangements are made prior to the start of such work. Any alteration or deviation from above specifications required by owner involving extra costs will become an extra charge over and above the estimate at the rate of cost plus 15%. Owner to carry fire, tornado, wind, storm and other necessary insurance upon above work. Workmen's compensation and public liability insurance on above work to be taken out by Bolt Construction.
The residence was built, but many problems arose. The Kulms claimed that Bolt did not fulfill the terms of the contract: specifically, that Bolt did not properly perform some of the work, that problems were not cured, and that materials were improperly used.
Furthermore, the contract specified that "additional" work would be billed to the Kulms at "cost" plus 10 percent, and "extra" work would be billed at "cost" plus 15 percent. Nowhere in the contract are the terms "additional," "extra," and "cost" defined, and the parties never held any pre-contract discussion to define or clarify the meaning of these terms. The primary disagreement focused on how to define "cost," that is, which items are properly chargeable by a general contractor in computing its "cost" for a "cost plus" contract.
There was also a claim regarding Freeman & Company, Inc., one of Bolt's subcontractors who installed the dryvit system on the Kulms' house. The Kulms allege that Bolt never fully paid Freeman, and that the Kulms are entitled to reimbursement from Bolt for money they paid to Freeman in settlement of the claim.
Bolt, on the other hand, disputes many of the district court's determinations regarding monetary compensation for specific jobs and alleges that the court erred in its disposition of Bolt's claims regarding these numerous projects. Bolt also argues that the court erred in awarding the Kulms damages for various construction items on their counterclaim.
The case began with a complaint filed by Freeman, who brought an action for payment against both Bolt and Kulm as well as a lien against the Kulm property; the Kulms then filed a cross-claim against Bolt alleging that Bolt was responsible for holding them harmless for any damages resulting from Freeman's mechanic's lien. The Kulms withheld money from the contract price with Bolt based on credits to which the Kulms claimed they were entitled. Bolt then filed suit against the Kulms, and the Kulms counterclaimed. The Kulms further sought an offset for alleged defects in Bolt's performance of the contract. Ultimately, the Freeman claim was settled and he was dropped from the case by agreement of the parties.
The trial was conducted in two phases. 1 The first phase of trial (which concerned mostly Bolt's claims) began on June 27, 1996, and lasted two days. The district court then filed its "Order on Court Trial." In response to the parties' subsequent motions, the district court also issued an "Order on Motion to Reconsider and Amend Findings of Fact."
The second phase of the trial began on December 11, 1996, and also lasted two days. The court then filed an "Order on Second Phase of Court Trial: Findings of Fact, Conclusions of Law." Again, in response to motions by the parties, the court issued an "Order on Motions for Reconsideration; Amend Findings of Fact, Conclusions of Law; and Amend Judgment on Phase II of Court Trial." In all, the district court prepared four separate decisions, comprising 162 pages, each meticulously detailed, containing an exhaustive item by item analysis. The net result of this marathon litigation, after offsets and credits, left the Kulms with a $9,856.85 judgment, together with costs and 75 percent of their attorneys fees.
Bolt appealed and the Kulms filed a notice of cross-appeal.
According to the terms of the contract, Bolt was entitled to charge the Kulms his "cost" plus 10 percent for "additional" work and "cost" plus 15 percent for "extra" work. Bolt computed an hourly rate to charge for any work done in accordance with these "cost plus" provisions. Bolt provided an itemized breakdown of direct and indirect costs which were all included in calculating how much to charge for each hour per worker as Bolt's "cost." For every hour worked by a laborer, foreman or welder, Bolt charged the following items to arrive at his "cost." 2
Therefore, with regard to "additional"or "extra" work done by a laborer who was paid an hourly wage of $10.00, Bolt billed the Kulms $19.39 an hour, plus 10 percent or 15 percent, respectively. The same items and percentage ratios were charged for work done by welders and foremen, although the actual amount was changed according to the hourly wage.
The district court found that the term "cost" was not defined in the contract, that there was clearly no meeting of the minds as to the parties' definition of "cost," that the term was reasonably subject to more than one interpretation, and that the term did not have a settled legal meaning in Idaho. Thus, the term "cost" as used in the subject contract was ambiguous and would be construed against the contract's author, Bolt. The court interpreted the term "cost" to include only direct costs, or those costs directly associated with the performance of the contract, and excluded additional indirect or overhead costs. 3
The legal meaning and effect of contract terms are questions of law which we review freely. Holscher v. James, 124 Idaho 443, 447, 860 P.2d 646, 650 (1993). It is undisputed that the contract was prepared by Bolt and thus any ambiguities may be construed against the drafting party. Haener v. Ada County Highway Dist., 108 Idaho 170, 173, 697 P.2d 1184, 1187 (1985). Additionally, the term "cost" as used in a "cost-plus" contract with respect to the inclusion of overhead (indirect) costs does not have a settled legal meaning in Idaho. 4 As this is an issue of first impression, we will examine the law in other jurisdictions.
We think the better reasoned approach is taken by those cases which follow the majority position regarding the calculation of "cost." The general rule in "cost plus" construction contracts is that overhead is not included within the term "costs" unless the contract so specifies. 17A AM. JUR.2d Contracts § 508 (1991 & Supp.1998). This general rule is further delineated in 13 AM. JUR.2d Building and Construction Contracts § 20 (1964 & Supp.1998), as follows:
Under a "cost plus" contract the contractor is entitled to recover his costs plus the agreed percentage. A question arises under these contracts as to what is included in the costs. It has been held that the contractor is not entitled, in addition to the percentage called for in the contract, to charge for his general or overhead expenses, such as salaries, telephone service and office supplies, for his own time in superintending the work, for carfare for laborers, for the cost of extra work not called for by the original contract and commissions thereon, or for the cost of doing over the work which was not properly done. On the other hand, he is entitled to charge for materials and supplies furnished, for the wages of workmen, for the salaries of superintendents, and for accident and indemnity insurance.
The cases cited by Bolt notwithstanding, most courts which have addressed this issue have...
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