Knight v. Tcb Constr.

• Decision Date: 18 February 2011
• Docket Number: No. S–10–0173.,S–10–0173.
• Citation: 248 P.3d 178,2011 WY 27
• Parties: Scott R. KNIGHT, Appellant (Plaintiff),v.TCB CONSTRUCTION AND DESIGN, LLC and Catherine Petersen, Personal Representative for the Estate of Eric S. Turner, Appellees (Defendants).
• Court: Wyoming Supreme Court

248 P.3d 178

2011 WY 27

Scott R. KNIGHT, Appellant (Plaintiff),

v.TCB CONSTRUCTION AND DESIGN, LLC and Catherine Petersen, Personal Representative for the Estate of Eric S. Turner, Appellees (Defendants).

No. S–10–0173.

Supreme Court of Wyoming.

Feb. 18, 2011.

Representing Appellant: Jason M. Tangeman of Nicholas & Tangeman, LLC, Laramie, Wyoming.Representing Appellees: Megan L. Hayes and Allen Gardzelewski of Corthell and King, P.C., Laramie, Wyoming. Argument by Ms. Hayes.Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.VOIGT, Justice.

[¶ 1] Scott R. Knight (Knight) appeals a district court's damages award and findings relating to liability arising out of a construction contract between Knight and TCB Construction and Design, L.L.C. We affirm.

ISSUES

[¶ 2] 1. Did the district court err as a matter of law when it determined that a second contract superseded the first?

2. Did the district court err as a matter of law in the method it used to calculate damages?

FACTS

[¶ 3] On March 7, 2008, Knight contracted with Deerwood Log Homes, Inc. (Deerwood), in which Deerwood was to build a log home for Knight on property located outside of Laramie, Wyoming. A disagreement between Deerwood and Knight developed, leading to Deerwood's termination from the project and a subsequent settlement agreement.

[¶ 4] On August 28, 2008, Knight entered into a contract (Agreement) with Eric Turner (Turner) to finish the construction project.¹ Turner had recently moved to Wyoming from Colorado and was doing business as TCB Construction and Design.² The Agreement was a time and materials contract, which called for TCB Construction and Design to complete the log home project for Knight and in return receive compensation in the amount of time and materials, plus 33%. The Agreement aimed for a November 2008 completion date. The Agreement was signed by Knight as owner of the property and by Turner with the notation of TCB Construction & Design under his signature.³ More will be said below in the discussion section about the specific terms of this Agreement.

[¶ 5] On September 5, 2008, Turner organized TCB Construction and Design as a Wyoming limited liability company. We will refer to TCB Construction and Design, L.L.C. as TCB Construction, LLC and its non-LLC counterpart as TCB Construction and Design. On September, 10, 2008, TCB Construction, LLC and Knight entered into a contract called “Addendum to Agreement,” which provided in part that TCB Construction, LLC would assume and complete the log home for Knight. The Addendum set the price of completion at $400,000.00, less $80,000.00 already received. The Addendum also referenced two other separate projects: a Solar and Wind Array (Solar/Wind Array) contract for $109,000.00 and a Generator/Pump House/Electrical Building (Generator Building) contract for $60,000.00. The Addendum was signed by Knight, as owner of the property, and Turner, with the notation of TCB Construction & Design beneath Turner's signature, but the Addendum bore the subheading “TCB Construction and Design, LLC” in bold lettering.⁴ More will be said in the discussion section about the Addendum and separate Solar/Wind Array and Generator Building contracts.

[¶ 6] In early December 2008, the relationship between Knight and TCB Construction, LLC had soured and Knight terminated TCB Construction, LLC from the project. Knight hired S & J Log Construction to complete the project. Shortly thereafter, Knight filed a lawsuit against TCB Construction, LLC and Turner, individually, alleging numerous causes of action, including fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of implied warranty, and unjust enrichment. Following a bench trial, the district court issued a decision letter and judgment, making the following general conclusions: (1) the Addendum superseded the Agreement, with the newly formed TCB Construction, LLC as the party responsible for completion of the construction project; (2) the Addendum converted the Agreement for constructing the log home from a time and materials, plus 33%, contract, to a flat fee contract in the amount of $400,000.00, less the $80,000.00 already paid; (3) TCB Construction, LLC breached the contract by failing to complete the construction project by the November deadline; (4) TCB Construction, LLC owed Knight damages in the amount of $31,850.37 for its breach; and (5) Turner was not personally liable for the damages, because TCB Construction, LLC had organized as an LLC in Wyoming prior to entering into the Addendum. Knight filed a timely notice of appeal.

DISCUSSION

Did the district court err as a matter of law when it determined that a second contract superseded the first?

[¶ 7] The resolution of this issue requires this Court to interpret the Agreement and Addendum to determine what contract was in effect. We have repeatedly held that interpreting contracts is a question of law, which we review de novo. See, e.g., Terris v. Kimmel, 2010 WY 110, ¶ 7, 236 P.3d 1022, 1025 (Wyo.2010).

The primary focus is on determining the intent of the parties to the contract. The initial question is whether the language of the contract is clear and unambiguous. If it is, then the trial court determines the parties' intent from the contract language alone. It does not consider extrinsic evidence, although it may consider the context in which the contract was written, including the subject matter, the purpose of the contract, and the circumstances surrounding its making, all to help ascertain what the parties intended when they made the contract. The trial court then enforces the contract in accordance with the plain meaning its language would be given by a reasonable person. All of these issues—deciding whether a contract is unambiguous, determining the parties' intent from the unambiguous language, and enforcing the contract in accordance with its plain meaning—involve questions of law for the trial court. When we undertake de novo review of the trial court's conclusions of law, we follow the same familiar path. See Double Eagle Petroleum & Mining Corp. v. Questar Exploration & Production Co., 2003 WY 139, ¶¶ 7–8, 78 P.3d 679, 681–82 (Wyo.2003), and cases cited therein.

Id. (quoting Horse Creek Conservation Dist. v. State ex rel. Wyo. Attorney Gen., 2009 WY 143, ¶ 25, 221 P.3d 306, 315 (Wyo.2009)).

[¶ 8] Knight argues that the district court erred when it determined that the Addendum superseded the Agreement thereby relieving Turner of personal liability. We disagree with Knight and hold that the Addendum controlled and ultimately relieved Turner and his successor estate of liability.

[¶ 9] “Generally, contracts—even fully executed ones—can be cancelled or rescinded by the mutual consent of the parties.” 29 Samuel Williston, Treatise on the Law of Contracts § 73:15, at 49 (Richard A. Lord ed., 4th ed. 2003). “Rescission generally must be exercised in toto and is applied to the contract in its entirety with the result that what has been done is wholly undone and no contract provisions remain in force to bind either of the parties.” Id. The intent to rescind a contract does not need to be express or in writing, but can be inferred from the conduct of the parties and the surrounding circumstances. See Roussalis v. Wyo. Med. Ctr., 4 P.3d 209, 249 (Wyo.2000); 29 Williston, supra.

[¶ 10] Whether Turner's estate is liable to Knight under the terms of the first Agreement depends on whether the parties intended to rescind that contract. It is clear that Turner's intent was to rescind the earlier Agreement, to which he individually was a party, and enter into the Addendum on behalf of the newly organized TCB Construction, LLC. The record demonstrates that Turner was actively trying to organize TCB Construction, LLC in the days immediately following entering into the Agreement. Jeanene Johnson, TCB Construction, LLC's bookkeeper and secretary, testified that Turner wanted to organize TCB Construction, LLC before he started any work on Knight's project. Turner successfully organized TCB Construction, LLC on September 5, 2008, only eight days after entering into the Agreement and five days before entering into the Addendum. Turner's intent was obviously to organize TCB Construction, LLC in order to have liability protection.

[¶ 11] The record also indicates that Knight knew about the organization of the newly formed LLC and creating the Addendum was partially his idea. Jeanene Johnson testified that Turner and Knight both wanted to enter into the Addendum and that Knight knew TCB Construction, LLC had been organized at the time of entering into the Addendum. Furthermore, the heading on the Addendum reads “TCB Construction and Design, LLC” in bold print.

[¶ 12] Additionally, the parties' intent to rescind the Agreement is evidenced by the fact that they materially changed the terms of the Agreement when they entered into the Addendum. The Agreement called for Turner to construct a house for Knight. The Agreement set forth the compensation that Turner was to receive as a “time and materials” contract, whereby Turner would be compensated for his time and materials, plus 33%. The Addendum, however, changed the compensation with regard to the construction of the house from a “time and materials” contract, plus 33%, to a flat rate fee of “$400,000.00 less 80,000.00 already received.” (Emphasis in original.) In addition to changing materially the terms of the Agreement, the parties were also changed. Knight and Turner, d/b/a TCB Construction and Design, were parties to the Agreement, whereas Knight and TCB Construction, LLC were parties to the Addendum. Turner was acting on behalf of TCB Construction, LLC when the Addendum was made; he was not personally a party. The parties' conduct, including organizing TCB Construction, LLC, materially changing the terms of the contract, and changing the parties, demonstrates that the parties intended to...