J. E. Hathman, Inc. v. Sigma Alpha Epsilon Club

• Decision Date: 12 March 1973
• Docket Number: No. 55718,55718
• Parties: J.E. HATHMAN, INC., a Missouri corporation, Appellant, v. SIGMA ALPHA EPSILON CLUB of Columbia, Missouri, a Missouri corporation, and E. Paul Smith, Trustee, St. Louis Federal Savings and Loan Association, Respondants.
• Court: Missouri Supreme Court

Page 261

491 S.W.2d 261

J.E. HATHMAN, INC., a Missouri corporation, Appellant, v. SIGMA ALPHA EPSILON CLUB of Columbia, Missouri, a Missouri corporation, and E. Paul Smith, Trustee, St. Louis Federal Savings and Loan Association, Respondants.

No. 55718.

Supreme Court of Missouri, En Banc.

March 12, 1973.

Scott O. Wright, Brown, Wright & Willbrand, Columbia, for appellant.

Terence C. Porter, Columbia, for respondents; Porter & Cleaveland, Columbia, of counsel.

FINCH, Chief Justice.

Plaintiff contractor brought suit to enforce a mechanic's lien for labor and materials furnished pursuant to a written contract for reconstruction of the Sigma Alpha Epsilon fraternity house at Columbia, Missouri. Plaintiff's position was that the contract between the parties was an unambiguous contract whereby the contractor was to be paid cost of labor, materials and other construction expenses (with certain specified exceptions) plus 6% of the cost of construction. Plaintiff's total claim was for $413,276.97. It had received payments of $269,692.98 and sought a lien for an additional $143,583.99.

On the theory that the contract was ambiguous and to support a counterclaim seeking reformation of the contract, defendant Sigma Alpha Epsilon (SAE) offered, and the trial court admitted, evidence to show that the maximum guaranteed cost of the job was $300,000.00 plus a fee of 6% thereof, or a total of $318,000.00. The trial court made findings wherein he held that the contract provided for a maximum of $318,000.00 and entered judgment establishing a lien for $48,307.02, the difference between $318,000.00 and payments previously made. Plaintiff then appealed. We reverse and remand with directions.

We have jurisdiction on the basis of the amount involved, this appeal having been lodged here prior to January 1, 1972. Mo. Const. Art. V, § 31.

An opinion was written in division affirming the judgment of the trial court, but a dissenting opinion was filed and the case was transferred to the court en banc. Following reargument, the divisional opinion was not adopted and the case was reasigned.

The basic issue for decision is whether or not the written contract was an unambiguous cost plus fee contract. The applicable rules of law are stated in Kalen v Steele, 341 S.W.2d 343, 346 (Mo.App. 1960):

'The cardinal rule in the e interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention. Where there is no ambiguity in the contract the intention of the parties is to be gathered from it and it alone, and it becomes the duty of the court and not the jury to state its clear meaning. McFarland v. Gillioz, 327 Mo. 690, 37 S.W.2d 911; National Corporation v. Allan, MoApp., 280 S.W.2d 428(3). A court will not resort to construction where the intent of the parties is expressed in clear and unambiguous language for there is nothing to construe. Mickelberry's Food Products Co. v. Haeussermann, Mo.Sup., 247 S.W.2d 731(5). It is only where the contract is ambiguous and not clear that resort to extrinsic evidence is proper to resolve the ambiguity. See 17 C.J.S. Contracts § 321, p. 749; 12 Am.Jur., Contracts, Section 229, page 753.

A contract is not rendered ambiguous by the fact that the parties do not agree upon the proper construction to be given it. Mickelberry's Food Products Co. v. Haeussermann, supra, 247 S.W.2d 731(6). A contract is ambiguous only when it is reasonably susceptible of different constructions. In determining whether or not there is such an ambiguity as calls for construction, the whole instrument must be considered. Writings made a part of the contract by annexation or reference are to be considered in determining whether or not it is ambiguous.

Presumptively, the intent of the parties to a contract is expressed by the natural and ordinary meaning of the language referable to it. Even seeming contradictions must be harmonized away if that be reasonably possible. State Mutual Life Assur. Co. of Worchester v. Dischinger, Mo.Sup., 263 S.W.2d 394(5); Mathews v. Modern Woodmen of America, 236 Mo. 326, 139 S.W. 151, 155.'

On February 14, 1965, the fraternity house was heavily damaged by fire, a portion of the building having been totally destroyed. SAE immediately hired plaintiff to do the demolition, salvage and clearing. Shortly thereafter it employed the architectural firm of Marshall & Brown to prepare plans and specifications for rebuilding the house and without taking bids arranged with plaintiff to do the reconstruction work. SAE proceeded at once with actual reconstruction, even though final plans and specifications and a contract had not been prepared, because it wanted to reoccupy the house as quickly as possible. Plans and drawings were prepared and submitted throughout the period of construction. Ultimately, in November, 1965 a written contract (dated April 1, 1965) was prepared by the architect and presented by SAE to plaintiff for signature. The job was completed in August, 1966.

The contract was on a printed form which recited at the outset that it was issued by the American Institute of Architects (AIA) 'for use when the cost of the work plus a fee forms the basis of payment.' It provided that the contractor was to provide all labor and materials and to do all things necessary to complete construction of the house according to plans, specifications and changes listed.

Article 2 authorized the owner to make changes, issue additional instructions, require additional work or omission of work previously ordered, and contained the additional provision that 'Maximum cost of the work will be adjusted in accordance with changes ordered.'

Article 3 specified the contractor's duties and imposed the obligation on it to complete the work 'in the most expeditious and economical manner consistent with the interests of the Owner.'

,Article 3A was typed in the contract as an additional Article, and subparagraph (a) thereof provided as follows: 'Estimated maximum cost of this work is Three Hundred Thousand Dollars and no cents ($300,000.00).'

Article 4 provided that in consideration for its performance, contractor was to be paid '6% of cost of construction.'

Under Article 5 the owner agreed 'to reimburse the Contractor in current funds all costs necessarily incurred for the proper execution of the work and paid by the Contractor, such costs to include the following items, and to be at rates not higher than the standard paid in the locality of the work except with prior consent of the Owner:' The Article then spelled out in considerable detail items included, consisting of such items as labor, certain salaries, materials, permit fees, losses and expenses not compensated by insurance which were not due to fault or neglect of the contractor, sub-contracts, premiums on bonds and insurance, rentals of certain equipment, including transportation thereof, cost of hand tools consumed in the prosecution of the work, and certain other expenses.

Article 6 listed certain costs for which the contractor was not to be reimbursed Subsequent Articles contained various provisions not pertinent to the issue here presented.

It is abundantly clear that the printed provisions in the AIA form provided for an unambiguous contract wherein the contractor would receive reimbursement of costs of construction plus a fee for its services. The heading of the printed contract and the words 'Agreement between Contractor and Owner Cost Plus Fee Basis,' appearing at the bottom of each page, so indicate. Article 5 details specific types of costs for which the contractor is entitled to reimbursement, and in said Article the owner agrees to reimburse the contractor for all costs of specified kinds necessarily incurred in execution of the work. The types of expenses for which there is not to be reimbursement are specified in Article 6. The contractor's compensation for performing the work is covered in Article 4 wherein it is provided that the contractor is to be paid a fee of 6% of construction costs. None of these printed provisions disclose any ambiguity as to the kind of contract created by the execution of such form or the basis on which the contractor was to be paid. SAE makes no contrary claim as to these printed provisions. Rather, it says only that the contract is ambiguous by reason of the addition of Article 3A, which was typed on the second page of the contract, and by the addition of a typed sentence at the end of Article 2. SAE's brief states its position as follows:

'The provision that creates the confusion is found in Article 3A which reads as follows:

'Article 3A. (a) Estimated maximum cost of this work is Three Hundred Thousand Dollars and no cents ($300,000.00).

(b) It is hereby mutually agreed that the Contractor shall complete all work so that the Owner can have useful occupancy for housing and feeding of fraternity members on or before January 15, 1966.'

In addition, Article 2. Changes in the Work provides in part:

'Maximum cost of the work will be adjusted in accordance with changes ordered."

The foregoing additions, it is argued by SAE, make the whole contract ambiguous.

The key words in Article 3A are 'Estimated maximum cost.' Webster's Third New International Dictionary defines 'estimate' as 'a statement of the often approximate amount for which certain work will be done by one who undertakes it.' It also includes the definition, 'to arrive at an often accurate but usu. only approximate statement of the cost of (a job to be done) (2): to arrive at a sometimes only tentative price for which one is willing to undertake (a job to be done).'

The term 'estimate' has been considered in decisions in this state. For example, in Gratz v. City of Kirkwood, 165 Mo.App. 196, 145 S.W. 870, 874 (1912), the court said: '* * * An estimate does not pretend to be based on absolute calculations but is exactly what the word means, an estimate. To make an estimate, ordinarily means 'to calculate...