KEY WEST v. HOLM II

• Citation: 185 Or.App. 182,59 P.3d 1280
• Parties: STATE of Oregon, for the use and benefit of KEY WEST RETAINING SYSTEMS, INC., an Oregon corporation, Appellant, v. HOLM II, INC., an Oregon corporation; and United States Fidelity and Guaranty Company, a Maryland corporation, Respondents. Holm II, Inc., an Oregon corporation; and United States Fidelity and Guaranty Company, a Maryland corporation, Third-Party Plaintiffs, v. Harold Hilfiker and William Hilfiker, dba Hilfiker Retaining Walls, Third-Party Defendants.
• Decision Date: 27 November 2002
• Court: Court of Appeals of Oregon

59 P.3d 1280

185 Or.App. 182

STATE of Oregon, for the use and benefit of KEY WEST RETAINING SYSTEMS, INC., an Oregon corporation, Appellant, v. HOLM II, INC., an Oregon corporation; and United States Fidelity and Guaranty Company, a Maryland corporation, Respondents.

Holm II, Inc., an Oregon corporation; and United States Fidelity and Guaranty Company, a Maryland corporation, Third-Party Plaintiffs, v. Harold Hilfiker and William Hilfiker, dba Hilfiker Retaining Walls, Third-Party Defendants.

99CV0145; A111705.

Court of Appeals of Oregon.

Argued and Submitted August 8, 2002.

Decided November 27, 2002.

Wayne Mackeson, Portland, argued the cause for appellant. With him on the briefs was Dennis M. Odman.

Joseph A. Yazbeck, Portland, argued the cause for respondents. With him on the brief were Lance B. Erz, The Dalles, and Yazbeck & Hanson, L.L.C.

Before HASELTON, Presiding Judge, and LINDER and WOLLHEIM, Judges.

WOLLHEIM, J.

This action arises out of a contract to widen Highway 101 where it follows Brush Creek in the Humbug Mountain Canyon. Plaintiff Key West Retaining Systems, Inc. (Key West) was a subcontractor to Holm II, Inc. (Holm II), the general contractor. Key West brought this action when Holm II refused to pay the amount due under the subcontract. Holm II's answer alleged setoffs and counterclaims against Key West. The trial court ruled that Key West was entitled to payment on the subcontract but that Holm II was entitled to back charges for personnel and materials, as well as flagging charges and liquidated damages. The trial court determined that Holm II was the prevailing party and awarded it attorney fees and costs. Key West appeals.

Key West makes four assignments of error. First, it assigns error to the trial court's holding that an oral contract existed between the parties. The trial court reasoned that Marvin Wyatt, owner of Key West, and Dennis Holm, vice president of Holm II, had agreed to do whatever was necessary to get the job done and that Holm offered Holm II's materials and personnel to Key West at cost. Key West argues that the purported contract was not sufficiently definite and that Key West did not accept it. In the alternative, Key West argues that, to the extent that an oral contract was formed, it did not permit recovery of either the $11,000.00 in liquidated damages or the $33,265.98 in flagging charges.

Second, Key West assigns error to the trial court's rulings designating Holm II as the prevailing party and awarding it costs, disbursements, and attorney fees. Similarly, in its third assignment of error, Key West argues that the trial court erred in denying Key West's request that it be designated as the prevailing party and that it be awarded its costs, disbursements, and attorney fees. Finally, Key West assigns error to the trial court's ruling that it was entitled to prejudgment interest on the amount owed by Holm II to Key West beginning on May 25, 2000. Key West argues that it was entitled to prejudgment interest on that amount as of January 4, 1999, when Holm II first issued a check to Key West.

The contract to widen Highway 101 was awarded by the Oregon Department of Transportation (ODOT) to Holm II in early August 1998; work was expected to begin in early September 1998. The project was difficult, because on one side of the work site was a one-lane highway used for traffic, and on the other side was a creek that had been temporarily narrowed. Holm II and ODOT wanted to ensure that the project was finished before winter; thus, their contract provided that the operation of equipment in the active creek bed must cease on October 31, 1998. If the in-stream work was not completed by that time, Holm II would be liable to ODOT for liquidated damages. Additionally, while certain work was being done, the normally two-lane roadway would have only one operating lane and flagging to redirect traffic would be required. The contract had a provision that allowed for payment for flagging until November 7, 1998, but if the work was not finished to a point where the road could be opened by November 7, Holm II would have to pay the additional flagging costs.

Key West is a specialty contractor that does road work and has experience installing retaining walls. After the contract was awarded to Holm II, Key West submitted a bid and ultimately entered into a subcontract with Holm II to supply and install the retaining walls for the project.

On August 25, 1998, a preconstruction conference was held. Although Key West had not yet entered into an agreement with Holm II, Key West's employee Andrew Ferchland was present at the conference. At the preconstruction conference, a schedule was available to all attendees that indicated that the paving on the project was expected to be completed by October 31, 1998, and that all work under the contract was to be completed no later than November 15, 1998.

On September 1, 1998, Key West entered into a subcontract with Holm II to supply and install retaining walls for the project. Also in September 1998, Holm spoke with Jerry Voelker, an officer of Key West. Holm told Voelker that Holm II would help Key West however it could and that personnel and materials were available to Key West at a fair price.

The work got off to a slow start, in part because Key West did not pick up its retaining wall materials and deliver them to the job site. In fact, Holm II picked up and delivered the materials for Key West. Additionally, Key West was overbooked and had not inspected the job site before it bid on the subcontract. Although the materials were delivered to the work site on October 8, 1998, Key West did not begin work until 1:30 p.m. on October 12, 1998. After seeing the job site and realizing the type of project it was dealing with, Key West sent Holm II a letter indicating its intent to walk away from the project unless certain aspects of the project were modified.

Due to those difficulties and before work commenced, Holm met with Wyatt in early October. At that meeting, Holm and Wyatt agreed to do whatever was necessary to complete the project in a time-efficient manner. When asked about his meeting with Wyatt, Holm testified that he did not mention his earlier conversation with Voelker to Wyatt because he was afraid that Wyatt would back out of the subcontract. After Key West and Holm II began work, Holm II assisted Key West with both personnel and materials to ensure that the work was completed as efficiently as possible.

Although lighting was available to allow Key West and Holm II to work at night, Key West did not work in the evenings and usually left for the day while Holm II continued working. When asked about the hours his crew worked, Wyatt testified that he would not allow his crew to work more than 12 hours per day. Furthermore, Key West was not on the job every day.

Key West's understanding was that the in-stream work had to be completed by October 31, 1998, and Key West was finished with its duties and out of the stream bed by October 29, 1998. However, Holm II expected Key West to be finished with its work earlier because Holm II had other jobs, such as paving, that could not begin until the in-stream work was completed. Thus, when Key West left the job site, Holm II still had work to complete. The work was not completed on time, and Holm II was liable for 11 days of liquidated damages under its contract with ODOT. Holm II was also assessed flagging charges from November 7 until approximately November 19.

On January 4, 1999, Holm II sent Key West a check for $113,712.30, but later stopped payment. On January 6, 1999, Holm II sent Key West a pay voucher in the amount of $24,533.82 that subtracted both the amount of the January 4 check and the back charges and offsets Holm II claimed it was owed. Key West then commenced this action, arguing that it was entitled to full payment under the subcontract. Holm II counterclaimed that it was entitled to back charges for personnel and materials and that Key West delayed the project so that Holm II was entitled to $11,000.00 in liquidated damages and $33,265.98 in flagging charges.

The case was tried to the court. The trial court concluded that, although Key West was entitled to the full amount owed to it under the subcontract, an oral contract existed between Key West and Holm II and, under the oral contract, Key West owed Holm II back charges for the personnel and materials provided by Holm II. The trial court also found that Key West caused delays in the project so that Holm II was entitled, under the subcontract, to reimbursement from Key West for any delay-related charges assessed to Holm II, including the liquidated damages and flagging fees.¹ In its "clarification for judgment" letter, the trial court noted that it found Holm II to be the prevailing party in the action, and, in its amended money judgment, the trial court accordingly awarded Holm II its attorney fees and costs pursuant to ORCP 68. Finally, the trial court denied Key West's request for prejudgment interest on the amount owed to it beginning January 4, 1999, when Holm II issued Key West its check.

Key West first assigns error to the trial court's ruling that an oral contract was formed during the meeting between Holm and Wyatt. Whether a contract existed is a question of law. We review the trial court's findings of fact for any evidence and its legal determinations for errors of law. Illingworth v. Bushong, 297 Or. 675, 694, 688 P.2d 379 (1984).

Key West argues that there was insufficient evidence to support the trial court's conclusion that an oral contract existed. Key West claims that, during the meeting between Holm and Wyatt, back charges were not discussed and both Holm and Wyatt agreed that they would not enter into any change orders. Key West also argues that the discussions were not sufficiently definite to constitute an oral contract. We agree with the trial court that the parties entered into an oral...