Mabey v. Kay Peterson Const. Co., Inc., 18338
| Decision Date | 24 April 1984 |
| Docket Number | No. 18338,18338 |
| Citation | 682 P.2d 287 |
| Parties | Thomas C. MABEY and Louise S. Mabey, his wife, Plaintiffs and Respondents, v. KAY PETERSON CONSTRUCTION COMPANY, INC., a Utah corporation, Defendant and Appellant. WASATCH CABINET COMPANY, INC., a Utah corporation, Plaintiff and Respondent, v. KAY PETERSON CONSTRUCTION COMPANY, INC., a Utah corporation, et al., Defendant and Appellant. |
| Court | Utah Supreme Court |
W. Walden Lloyd, Salt Lake City, for defendant and appellant.
George S. Diumenti, Bountiful, for plaintiffs and respondents.
Defendant Kay Peterson Construction Company appeals from an adverse judgment contending (1) it was error to award any damages to the plaintiffs, and (2) defendant was awarded an insufficient amount on its counterclaim after the court reformed the contract between the parties.
Plaintiffs Thomas C. Mabey and Louise S. Mabey, his wife, purchased a "spec" house from the defendant construction company. Mr. Mabey, an engineer, had participated in its construction, as well as in the development of other houses built by the construction company. The Mabeys had expressed an interest in this particular house in its early stages of construction and had told Kay Peterson, the construction company's president, that if the price were right, they might consider buying it for themselves. On or about March 20, 1980, when the house was about 95% completed, plaintiffs asked Peterson to give them a breakdown of the cost of construction so that they could decide whether to purchase it. At about the same time, plaintiffs also paid for certain concrete used in the construction, for which defendant gave them a receipt. The receipt acknowledged payment from plaintiffs of $1,182.56, recited that the total estimated cost of the lot and dwelling to that date was $134,068.40, and that the payment was to be applied toward the purchase but would be reimbursed to plaintiffs in the event defendant did not sell the house to them. With that information in hand, Mr. Mabey prepared an Earnest Money Receipt and Offer to Purchase (hereafter the contract) which contained the following language:
The purchase price is based on all costs relative to the construction of the dwelling as per plans and specifications plus an $8,500 seller's profit. However, the total cost shall be based on the projected cost estimate, Exhibit A, attached and hereby made a part of this agreement, and in no event shall said total cost exceed $136,000 unless agreed upon in writing by both buyer and seller.
A breakdown of construction items totaling $134,068.40 was subsequently supplied by defendant. Both parties agreed to round that sum off to $136,000 as a buffer after defendant represented that some incidental costs of completion had not been accounted for.
Knowing that the cost of the house and lot would exceed the amount of any mortgage loan that they could obtain, plaintiffs had made arrangements with third parties to purchase the lot for them as part of a separate transaction. The construction company consented to that arrangement and $27,000 for the lot was paid to it directly by the third party. An $18,500 check drawn against the defendant's construction loan had been paid to the titleholder of the lot to release the lot to the construction company. $500 of that amount was estimated accrued interest. In attaching the list of construction costs (Exhibit A) to the contract, Mr. Mabey noticed a $9,000 item for "lot payoff" on the list. He inquired of Peterson whether another item on the list identified as "loan disbursement to date" in the amount of $77,565 included the other $18,000 that had already been paid for the lot. He was told that it did. Based on that information and because the $9,000 item had also been erroneously included in the cost total, the amount of $136,000 in the contract was reduced by $27,000 and initialed by both parties to read $109,000, inasmuch as the contract was to exclude the cost of the lot.
After payment of the $109,000 purchase price by the plaintiffs (primarily by a mortgage loan), the construction company discovered that the $77,565 item did not include the $18,000 which it had paid on the lot and so notified plaintiffs. Plaintiffs refused to adjust the price. The construction company responded by refusing to pay outstanding amounts to subcontractors, who in turn placed mechanic's liens against plaintiffs' house and began legal action to foreclose them.
Plaintiffs then commenced the instant suit against the construction company for breach of contract and warranty. The construction company counterclaimed for $11,037.47 it claimed due under an alleged oral agreement. The foreclosure action of the lienholders was consolidated for trial with the instant action. Plaintiffs compromised and paid the claims of the lienholders for $9,737 and caused the foreclosure action to be dismissed. The case went to bench trial on the claims of the plaintiffs and defendant. The court found that the construction company had erred in its preparation of Exhibit A, which resulted in a loss to it of $11,037.47, and that neither of the parties was aware of the mistake. Judgment for that amount was awarded defendant. It also found that plaintiffs had suffered $9,737 in damages as a result of the lien settlement. It awarded plaintiffs judgment for that amount plus $5,400 to remedy certain defective construction, and costs and attorney fees in the sum of $2,560.
The construction company appeals, citing three errors: (1) the trial court granted it an insufficient amount as remedy for reformation of contract for mutual mistake; (2) the trial court erred in awarding plaintiffs damages for lien payments, together with interest and attorney fees incurred; and (3) evidence adduced by plaintiffs was insufficient to prove damages in the sum of $5,400 for defective construction. We address those issues in that sequence.
In its counterclaim, the construction company alleged that the total cost of construction of the house plus the lot was $159,037.47, that the plaintiffs had paid $148,000 (including the amount paid to the lienholders and the $27,000 for the lot), leaving $11,037.47 unpaid. The trial court awarded judgment for that amount. Testimony adduced at trial centered around Exhibits 4 through 14, constituting the Contractor's Authorization for Payment sheets together with attached invoices, which approximated the sum of $77,565 in loan disbursements. These were offered in support of the claim that that sum did not include the $18,000 paid on the lot.
The construction company contends that the trial court should have awarded it $18,000 after it ruled that there had been a mutual mistake of fact. We are at a loss to understand the fundament for that ruling. Mutual mistake is an affirmative defense as it raises matters outside the plaintiffs' prima facie case, and the failure to assert it is a waiver of that defense. Utah R.Civ.P. 8(c), 12(h); Phillips v. JCM Development Corp., Utah, 666 P.2d 876 (1983). Mutual mistake was not raised as a defense nor was it made a claim by the construction company in its counterclaim. Rule 9(b) requires that in all averments of mistake, the circumstances constituting mistake shall be stated with particularity. Battistone v. American Land & Development Co., Utah, 607 P.2d 837 (1980); Neeley v. Kelsch, Utah, 600 P.2d 979 (1979). It is true that when issues not raised by the pleadings are tried by express or implied consent they shall be treated in all respects as if they had been raised in the pleadings. Rule 15(b); Poulsen v. Poulsen, Utah, 672 P.2d 97 (1983), General Insurance Co. of America v. Carnicero Dynasty Corp., Utah, 545 P.2d 502 (1976); Holdaway v. Hall, 29 Utah 2d 77, 505 P.2d 295 (1973). Furthermore, Rule 15(b) allows the trial court to grant leave to amend pleadings to conform to the evidence. Poulsen v. Poulsen supra. No such motion was made during trial. In his opening statement, counsel for the defense presented reformation of contract for lack of integration as his theory of the case under which defendant would claim additional sums under an alleged oral contract. During testimony, counsel for plaintiffs objected to the admission of any evidence tending to vary the terms of the written contract. Nothing before us indicates that mutual mistake was relied upon in closing argument so that issue was never before the court.
Nonetheless, Utah R.Civ.P. 54(c)(1) directs that every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party had not demanded such relief in his pleadings. In consonance with that rule, it would have been proper for the court to have reformed the contract if a mutual mistake of fact had been established by clear and convincing evidence. Neeley v. Kelch, supra; Hatch v. Bastian, Utah, 567 P.2d 1100 (1977), citing Ingram v. Forrer, Utah, 563 P.2d 181 (1977).
The relevant findings of fact in favor of defendant read as follows:
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