Goes v. Vogler
| Citation | 937 N.W.2d 190,304 Neb. 848 |
| Decision Date | 17 January 2020 |
| Docket Number | Nos. S-18-1201,S-18-1203.,s. S-18-1201 |
| Parties | Tanner GOES, doing business as Goes Construction, appellee, v. Eric VOGLER and Destini Vogler, husband and wife, appellants. Franklin Drywall, Inc., a Nebraska corporation, appellee, v. Eric Vogler and Destini Vogler, husband and wife, appellants, and FBM Lincoln et al., appellees. |
| Court | Supreme Court of Nebraska |
Damien J. Wright, Omaha, and Natalie M. Hein, of Welch Law Firm, P.C., for appellants.
James B. Luers, Lincoln, of Cada, Cada, Hoffman & Jewson, Lincoln, for appellee Tanner Goes.
Troy J. Bird, of Hoppe Law Firm, L.L.C., for appellee Franklin Drywall, Inc.
Timothy W. Nelsen, of Fankhouser, Nelsen, Werts, Ziskey & Merwin, P.C., L.L.O., Nebraska City, for appellee Shelton Brothers Construction, LLC.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.
The appellants, Eric Vogler and Destini Vogler, contracted with Shelton Brothers Construction, LLC (Shelton), for the construction of a residential home. Shelton and two of its subcontractors, Tanner Goes, doing business as Goes Construction (Goes), and Franklin Drywall, Inc. (Franklin), subsequently filed construction liens and brought contract suits claiming unpaid balances for construction services rendered. Following trial on the consolidated cases, the district court determined that the construction contract between the Voglers and Shelton was a cost-plus agreement, that defects in workmanship were punch list items and not a breach by Shelton, and that the Voglers committed the first material breach of contract and owed damages to the contractor and subcontractors. The Voglers appeal, and we ordered the appeals, S-18-1201 and S-18-1203, consolidated for appeal. On appeal, the Voglers claim, inter alia, that the contract was a fixed-price contract breached by Shelton and that, alternatively, even under a cost-plus contract, Shelton breached a fiduciary duty to provide a full accounting for its bills to the Voglers when it requested draw payments. We affirm with respect to all parties and claims.
After the Voglers’ home was destroyed by fire, they hired Shelton to construct a new home in Nehawka, Nebraska, on the existing foundation. They hired Shelton as their general contractor. After months of negotiating and discussion, the parties entered into a contract in October 2015, memorialized by exhibits 2, 37, and 47 in the record (the contract). Although paragraph 4 of exhibit 47 states that it is a "cost plus contract" with specific fees for overhead, warranty, and profit to Shelton, elsewhere the contract states that "[t]he agreed upon price is $282,000.00." The contract called for an initial payment of $28,000, with progress payments made as monthly draws. Under the contract, Shelton would be able to request a monthly draw, subject to approval by the Voglers, "as needed to pay for materials and services." The payments were to be made within 10 days of the request.
Shelton and its subcontractors began work in October 2015, and as work progressed, various changes were made to the arrangement contemplated by the contract and the scope of work. One arrangement change was the fact that the Voglers and Shelton mutually waived the requirement of written change orders. One scope of work change was that framing for walls was adjusted and the foundation extended by 2 feet—resulting in modifications to the roof trusses and other features. Some of the changes caused spinoff delays and difficulties scheduling subcontractors. The Voglers became concerned with the lack of progress and communication by Shelton.
The Voglers made the initial downpayment and the first two requested draws. Shelton requested a third draw on February 18, 2016, in the amount of $48,972.54. Alleging shoddy workmanship, a fear that Shelton would not finish the project, and a lack of accounting, the Voglers made only a partial payment on one of the draws requested by Shelton. The district court found that only $19,875.40 was paid on the third draw and that the payments were "as late as March 13, 2016."
The Voglers contend that when making its draw requests, Shelton attached some, but not all, of the invoices from subcontractors and suppliers, and the Voglers expressed concern as to how their money was being spent. In February 2016, Eric Vogler emailed Shelton requesting an accounting for the initial $28,000 downpayment. Shelton did not provide itemizations or documentation of expenses to the Voglers’ satisfaction. The Voglers’ payments did not equal the draw requests, and Shelton terminated the contract. The Voglers hired another contractor to finish the home, and Shelton, Franklin, and Goes all filed construction liens with varying technical success. The three moved to foreclose upon the liens and asserted contract claims. Two consolidated cases encompassing all parties and claims proceeded to trial.
In orders filed on November 26, 2018, the district court found that the Voglers withheld payment because of their concerns about the quality of the work, that the project would not be completed for the price stated in the contract, and that the work would not be completed on time. The district court stated that "[t]he justification for the Voglers’ failure to make timely payments hinges on their assertions that the parties had a fixed-price contract and that the contract required written change orders." The district court concluded that the contract was not ambiguous and that it was for a cost-plus contract price, not a fixed cost contract price. Although the parties did not sign written change orders regarding changes to the project, the district court found that the parties’ mutual conduct amounted to a waiver of the provisions in the contract requiring written change orders. The court determined that any deficiencies in the quality of the work were punch list items, which would have been cured in the ordinary course of completion of the work, and therefore were not a breach of contract by Shelton. Accordingly, the district court found that the Voglers’ suspension of payment constituted a breach of contract.
Although FBM Lincoln was served, it did not enter an appearance or assert an interest in the real estate, and the district court found any interest of FBM Lincoln in the real estate would not be recognized.
In case No. S-18-1201, the district court entered judgment against the Voglers in the amount of $64,603.42, wherein Goes was awarded $26,678 and Shelton received the remainder. In the consolidated case, case No. S-18-1203, the trial court found that Franklin’s lien was tardy and unenforceable pursuant to Neb. Rev. Stat. § 52-140 (Reissue 2010) ; however, the district court repeated its award against the Voglers and in favor of Shelton, but allocated $15,000 of Shelton’s award to Franklin based on Franklin’s successful breach of contract claim against Shelton. The Voglers appeal.
On appeal, the Voglers assert, restated, that the district court erred when it (1) characterized the contract as a cost-plus contract, (2) found that the Voglers committed the first material breach of the contract with Shelton, and (3) awarded damages to Shelton, Franklin, and Goes.
An action to foreclose a construction lien is one grounded in equity.
Robison v. Madsen , 246 Neb. 22, 516 N.W.2d 594 (1994). In an appeal of an equity action, an appellate court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, where credible evidence is in conflict on a material issue of fact, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another. Id.
A suit for damages arising from breach of a contract presents an action at law. Bloedorn Lumber Co. v. Nielson , 300 Neb. 722, 915 N.W.2d 786 (2018).
The district court and parties have treated this case essentially as one arising from breach of contract. And although the record shows construction liens were filed, we believe the appropriate framework is predominantly a contract action and review the matter accordingly. See Tilt-Up Concrete v. Star City/Federal , 261 Neb. 64, 621 N.W.2d 502 (2001). With respect to breach, the central issue is whether the Voglers breached the contract first by failing to make draw payments to Shelton or whether Shelton breached the contract first under various theories advanced by the Voglers. Based on the language of the contract and the evidence at trial, we affirm the orders of the district court which found that the Voglers breached the contract, dismissed the Voglers’ cross-claims, and entered money judgments in favor of Shelton, Franklin, and Goes.
On appeal, the Voglers contend that the district court erred when it concluded that the agreement was a cost-plus contract rather than a fixed-price contract. They argue, in the alternative, that even assuming the agreement was a cost-plus contract, Shelton breached its duty to provide information to the Voglers regarding the project cost and budget. They also argue that they are a "[p]rotected party" under Neb. Rev. Stat. § 52-129 (Reissue 2010) and that Shelton, and by extension Franklin, can only recover the difference between the prime contract price and the amount the Voglers had already paid.
The Parties Executed a Cost-Plus Contract.
The Voglers’ first claim on appeal is that the district court erred when it characterized the contract as a cost-plus contract. Referring to language in paragraph 4 of the contract, which stated that "[t]he agreed upon price is $282,000.00," the Voglers maintain that the parties intended that the price of the house was fixed and limited to $282,000. We conclude the district court did not err when it concluded that the agreement was a cost-plus contract, and we reject this assignment of error.
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