Harris v. IES Associates, Inc.

Decision Date17 April 2003
Docket NumberNo. 20010563-CA.,20010563-CA.
Citation2003 UT App 112,69 P.3d 297
PartiesJohn J. HARRIS, M.D., Appellee, v. IES ASSOCIATES, INC., Appellant.
CourtUtah Court of Appeals

Brian W. Steffensen, Steffensen Law Office, Salt Lake City, for Appellant.

Kristin M. Cappel, Seattle, Washington; and Elizabeth M. Peck, Salt Lake City, for Appellee.



DAVIS, Judge.

¶ 1 IES Associates, Inc. (IES) appeals from an amended judgment denying its breach of contract claim, an order dismissing its counterclaim for breach of a modified contract, and postjudgment orders denying its motion to quash subpoenas and overruling objections in postjudgment proceedings.


¶ 2 In late 1995, John Harris (Harris) contacted IES, a Utah corporation, about a home automation system2 for a home being constructed for him in North Carolina. Harris began working with an IES employee, Jeff Nichols (Nichols), on the system design.

¶ 3 On January 25, 1996, Harris and IES entered into a written contract. Under the contract, IES agreed to design, purchase equipment for, install, and program a home automation system including heating and air conditioning, lighting, security, intranet, audio and video, and phone subsystems. In return, Harris agreed to pay $45,805. The contract required all modifications to be written and to be "executed" by both parties. Although Harris supplied a schematic for the home, Nichols created no design documentation. Contrary to Nichols's custom, he did not conduct an on-site inspection before entering into the contract.

¶ 4 When the contract was executed, Harris paid a down payment. Thereafter, he made monthly prepayments. At the end of November 1996, Harris's prepayments totaled $33,850.

¶ 5 On November 16, 1996, Nichols conducted an on-site inspection to prepare for installation of the system under the contract. At trial, Harris testified that upon Nichols's arrival at the site, Nichols represented that the system the contract provided for would not be capable of performing the functions Harris desired and that there was not enough equipment. Harris further testified that he did not request changes or modifications to the system he originally requested.

¶ 6 After about thirty minutes at the site, Harris and Nichols went to Harris's apartment where they spent approximately ten hours designing a home automation system, going room-by-room and subsystem-by-subsystem. Nichols asked questions about what Harris wanted. Using his laptop, Nichols created a document (the proposal) listing equipment by subsystem. Under the proposal, the estimated system cost was $106,600 plus programming costs. Nichols's trial testimony indicated that the proposal included system control changes and added "more areas" and "more rooms." The proposal also included changes in the quality or quantity of equipment in the subsystems.3 The proposal was not signed by Harris or Nichols.

¶ 7 Thereafter, Harris sent a letter, dated November 17, 1996, to IES. In relevant part, the letter provides: "I have enclose[d] a list of additions/deletions. Please revise bid reflecting this [and] reflecting discount on [C]restron equip[ment], then send me [an] update bid and we'll be good to go." A list of additions, deletions, and items to "discuss/add" accompanied the letter.4 There is no record evidence that IES responded as Harris requested in this letter.

¶ 8 On or about November 27, 1996, Harris sent IES a check for $2,500. Harris then sent a letter, dated December 12, 1996, to IES, noting that he had "pour[ed] over the last bid as [they] had expanded the scope of the project." The letter further noted that Nichols "found some discontinued Crestron touch screens and was to make arrangements for acquiring [them]. [Harris] initially agreed, but later found out that they [were] DOS based screens and w[ould] probably not be compatible with future products." Therefore, Harris requested that IES "cancel the order to purchase those discontinued video-touch screens," noted that "they" would "consider the new screens when they are available," and requested "written confirmation that this order [was] cancelled." (Emphasis omitted.) In response, IES faxed a letter indicating that the Crestron touch screen order had been cancelled. The letter further indicated that "[t]here [would] need to be follow up with [Nichols] on the new touch screens."

¶ 9 In a letter dated December 16, 1996, Harris asked IES for an accounting. The accounting IES submitted in reply indicated that almost half of Harris's prepayments had been spent, largely on "wire and fin" and on forty-three hours of labor at $50 per hour, a phone for Harris, and Nichols's airfare.5 However, IES business records indicated that under $2,500 had been spent on Harris's system.

¶ 10 Towards the end of December, Harris sent IES a letter in which he falsely claimed that he could not afford the system and sought to recover the prepayments he had made with adjustments for reasonable efforts and materials purchased by IES. Harris then sent another letter providing that he was "probably going to have to cancel [the] contract" and proposing a settlement.

¶ 11 After the parties were unable to come to an agreement, Harris filed this action in March 1997. In his complaint, Harris alleged that IES had, inter alia, breached the contract, and he sought recovery of his prepayments. IES counterclaimed alleging, inter alia, breach of contract, that the proposal modified the contract, and breach of the modified contract. IES sought lost profits and compensation for materials purchased and services provided.

¶ 12 Prior to trial, Harris sought to depose, under rule 30(b)(6) of the Utah Rules of Civil Procedure, IES's designated corporate representative. Harris sent three deposition notices indicating that he intended to depose the representative in regard to, inter alia, document authenticity and IES records maintained and/or prepared in the course of its regularly conducted business activities. During the deposition, IES's counsel objected to, inter alia, questions about the representative's status at IES and involvement in production of the documents requested in Harris's First Set of Interrogatories and Request for Production of Documents. IES's counsel maintained the questions were outside the scope of the deposition notices. About thirty minutes into the deposition, IES's counsel made an oral motion for a protective order and instructed the representative not to answer questions about his status and involvement in document production. In response, Harris's counsel unsuccessfully attempted to contact the trial court, then ended the deposition. Thereafter, Harris filed a motion to compel the representative's testimony and for sanctions. Following a hearing, the trial court found that the questions asked by Harris's counsel were within the scope of the deposition notices and concluded that although IES's counsel could object on the record, instructing the representative not to answer was improper. The court further found that the conduct of IES's counsel "effectively nullified" the deposition. The trial court therefore imposed sanctions under rule 37(a)(4) of the Utah Rules of Civil Procedure.

¶ 13 A bench trial was held in March and August 2000. Among Harris's trial witnesses was an expert in home automation systems. On cross-examination, Harris's expert testified that the system provided for in the contract would function as Harris's trial testimony indicated he desired. However, the expert's testimony also indicated that he was unaware of what Harris and Nichols had discussed and that the heating and air conditioning system would not work.

¶ 14 At the close of IES's case, Harris moved for a directed verdict on IES's counterclaim. The trial court dismissed, under rule 41 of the Utah Rules of Civil Procedure, IES's counterclaim that Harris breached the contract as modified by the proposal. The trial court concluded that the evidence, in particular the proposal and subsequent correspondence between the parties, did not establish a modification of the original contract. The court found that while the parties planned to put a system together, they had not come to an agreement as to scope or pricing.

¶ 15 On September 27, 2000, the trial court entered a signed memorandum decision denying both parties' breach of contract claims. On June 5, 2001, the court entered an amended judgment ruling that although neither party had pleaded the theory, the parties mutually abandoned the contract on November 16, 1996. The trial court based its ruling on findings that: both parties were of the opinion that the original contract would not be adequate to meet Harris's needs and desires; the contract was not capable of meeting Harris's needs once IES was fully aware of Harris's needs; both parties, through their actions and words, indicated that the contract would have to be expanded to perform as Harris desired and accepted that a new agreement would be necessary and they acted accordingly; IES agreed that it could not install a home automation system as needed or desired by Harris under the original contract; on November 16, 1996, Harris and Nichols spent a substantial number of hours attempting to create a substitute agreement; the parties did not reach a substitute agreement although they engaged in further written and oral communications in regard to a new agreement; Harris acquiesced in IES's abandonment of the contract by agreeing and participating in attempts to reach a new agreement; and when a new agreement could not be reached, Harris sought partial return of his prepayments, with some equitable adjustments.

¶ 16 Having determined that the parties mutually abandoned the contract, the trial court restored the parties to their precontractual status, awarding Harris his prepayments less reasonable expenses and costs— specifically the phone purchased by IES for Harris—incurred by IES up...

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