Gundersons, Inc. v. Tull, 82CA1274

Decision Date23 November 1983
Docket NumberNo. 82CA1274,82CA1274
Citation678 P.2d 1061
PartiesGUNDERSONS, INC., a South Dakota Corporation, Plaintiff-Appellant, v. James H. TULL, H.D., "Hersch" McGraw, Thomas M. Peck, Joseph Coyte, Albert R. Oesterle, Gerald D. Kraus, Alfred D. Peck, Willard E. Morley, Gordon Adler, Donald W. Mullison, The Parker-Cordova Partnership, Court Square Investment Company, Ptarmigan Investment Company, a Colorado General Partnership and Ptarmigan Investment Company, a Colorado Limited Partnership, Defendants-Appellees. . I
CourtColorado Court of Appeals

Holland & Hart, Wiley E. Mayne, Scott S. Barker, Denver, for plaintiff-appellant.

Fischer & Wilmarth, Steven G. Francis, Fort Collins, for defendants-appellees.

BERMAN, Judge.

In an action alleging breach of contract by defendant, Ptarmigan Investment Company, the plaintiff, Gundersons, Inc., a golf course construction company authorized to do business in the State of Colorado, appeals the trial court's denial of an award for lost profits and other out-of-pocket expenses and mitigation damages. We reverse.

On July 26, 1979, defendant Ptarmigan Investment Company, a partnership, accepted plaintiff's bid to build a golf course for Ptarmigan. Plaintiff began work on the golf course on August 6, 1979. On August 30, 1979, the parties executed a document called "Standard Form of Agreement Between Owner and Contractor." On August 28, 1979, Gun Barrel Mortgage Company agreed to finance the construction of the golf course. However, defendant never obtained the financing necessary to complete the course. The trial court held that the contract between plaintiff and defendant came into existence on August 30, 1979.

Plaintiff continued on-site work on the golf course through November of 1979, when bad weather forced cessation of most of the work. At that time approximately one-third of the work had been completed.

In accord with the terms of the written agreement, plaintiff received monthly payments for its work completed through the end of November 1979, less a 10% retainage withheld by Ptarmigan. Because of Ptarmigan's inability as of March 15, 1980, to pay for the completion of the golf course, plaintiff ceased work.

Thereafter, plaintiff brought this action for breach of contract, seeking the profits it would have made had it been allowed to complete the golf course under the contract. The trial court concluded that Ptarmigan breached the contract and that plaintiff was entitled to damages as shown by the evidence, but that the evidence did "not meet the burden of proof required" to recover lost profits on the two-thirds of the contract remaining unperformed by plaintiff. Accordingly, it awarded no damages beyond the 10% retainage for the work that had been performed.

I.

Plaintiff's first argument on appeal is that the trial court erred in failing to award lost profits to plaintiff and in denying the admission of certain evidence documenting plaintiff's lost profits. We hold, based on the testimony in the record, that the trial court erred in failing to award plaintiff lost profits. Therefore, we need not address the issue of the propriety of the trial court's rejection of various other forms of proof of plaintiff's lost profits.

In Comfort Homes, Inc. v. Peterson, 37 Colo.App. 516, 549 P.2d 1087 (1976), this court set forth the formula for computing lost profits in an action for breach of a construction contract:

"The amount of ... damages has been described as ... the contract price less (1) any payments made by the owners on the contract, and (2) what it would have cost the builder if it had completed the [project] in accordance with the contract."

In the instant case, the contract price and the amount paid were not in question. The contract price was $1,294,129. At the time of the breach, plaintiff had been paid $391,544 under the contract.

As to the cost of completion component, plaintiff's exhibit regarding its profitability on the Ptarmigan project as of the date of termination was ruled inadmissible. Nevertheless, the president of plaintiff's corporation was allowed to testify, based on 18 successful years in the golf course construction business, as well as on the actual rate of profit plaintiff made on the Ptarmigan project for the work that was completed up to November 29, 1979, that the cost to complete the Ptarmigan project would have been approximately $600,000. Plaintiff's president further testified that costs on the first half of golf course construction projects are normally higher than costs on the second half because of the mobilization and start-up costs. The correlative of that opinion is that profits on the second half of golf course construction projects are as high or higher than profits on the first half. When this estimated cost to complete and the payments already received are subtracted from the contract price, as the Comfort Homes formula requires, the result is a lost profits figure of $302,585.

Defendant claims that the cost to complete figure is too uncertain to be the basis of an award for lost profits. Defendant states that the amount of the expected net profit must be shown with reasonable certainty and may not be speculative, remote, or imaginary. We agree with this articulation of the standard of proof in a lost profits case, Lee v. Durango Music, 144 Colo. 270, 355 P.2d 1083 (1960); see also Power Equipment Co. v. Fulton, 32 Colo.App. 430, 513 P.2d 234 (1973), but hold that, as a matter of law, plaintiff has met this burden.

Defendant cites C. McCormick, Damages § 165 at 644 (1935) for the proposition that the burden of proof as to the issue of cost of completion cannot be adequately met "by merely placing the builder or his superintendent on the stand to get his lump sum opinion or estimate, [rather] ... the estimate should include detailed figures as to the costs of the different materials and operations ...." Here, the plaintiff did not merely give a lump sum opinion; rather, the plaintiff met the above burden by providing a specific itemization of the cost of doing each task which remained to be done at the time of the breach in order to complete the golf course.

Plaintiff's president broke the project down into various components (e.g., green construction, cart path construction, etc.) and testified as to the separate cost to complete each part, based on the quotes for cost of materials used by plaintiff in preparing its bid on the Ptarmigan project. This testimony projected the cost to complete the contract to be $609,923, leaving a lost profit margin of $292,662 or 34% of the contract price for the remaining work. This figure is fairly consistent not only with the corporate president's lost profits figure based on profitability on the Ptarmigan project prior to the breach, but also with his testimony that he originally bid the job based on 35% above cost.

"Uncertainty as to the amount of damages is not an obstacle to recovery." General Insurance Co. of America v. City of Colorado Springs, 638 P.2d 752 (Colo.1981). Here, the evidence established, and the trial court held, that there was a contract and that the defendant had breached it. Even if the plaintiff had failed to establish substantial damages, the trial court was not justified in withholding all damages, since the defendant's breach in itself entitled the plaintiff to at least nominal damages. Comfort Homes, Inc., supra.

Therefore, the trial court committed reversible error in failing to award plaintiff its lost profits. As a fact finder, it was incumbent upon the trial court to select the cost of completion figure it concluded had been better established by the evidence in order to arrive at the amount of plaintiff's lost profits. A reasonable basis for calculating the damages resulting from the breach was provided by the evidence. See Comfort Homes, Inc., ...

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    ...of Appeals in Tull expressly characterized the costs relating to the equipment leases as “consequential damages.” Gundersons, Inc. v. Tull, 678 P.2d 1061, 1064 (Colo.App.1983). It is not clear whether the Supreme Court's reference to “direct costs of completing a contract” was intended to c......
  • Banning v. Prester
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    ...effects of another's wrong, may recover for such expense as one of the items of damage for the wrong. See Gundersons, Inc. v. Tull, 678 P.2d 1061, 1065 (Colo.App.1983)aff'd in part and rev'd in part,709 P.2d 940 (Colo.1985); McCormick, § 42. ¶ 16 Because there is no common law or other auth......
  • Banning v. Prester
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    • Colorado Court of Appeals
    • December 27, 2012
    ...effects of another's wrong, may recover for such expense as one of the items of damage for the wrong. See Gundersons, Inc. v. Tull, 678 P.2d 1061, 1065 (Colo. App. 1983) aff'd in part and rev'd in part, 709 P.2d 940 (Colo. 1985); McCormick, § 42. ¶16 Because there is no common law or other ......
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