Med Plus Properties v. Colcock Const. Group, Inc.

• Decision Date: 27 August 1993
• Parties: MED PLUS PROPERTIES, et al. v. COLCOCK CONSTRUCTION GROUP, INC. 1911415.
• Court: Alabama Supreme Court

Page 370

628 So.2d 370

MED PLUS PROPERTIES, et al. v. COLCOCK CONSTRUCTION GROUP, INC.

1911415.

Supreme Court of Alabama.

Aug. 27, 1993.

Gary L. Jester of Jester & Jenkins, Florence, for appellants.

Rodney B. Slusher, Florence, for appellee.

ALMON, Justice.

The defendants, Med-Plus Properties, a general partnership, and its two general partners, Dr. Charles B. Ferguson and Dr. Charles M. McGahey, appeal from a $125,000 judgment entered on a jury verdict in favor of the plaintiff, Colcock Construction Group, Inc. (hereinafter "CCG"). CCG, a general contractor, brought this action against the defendants (hereinafter collectively "Med-Plus"), alleging that they "wrongfully terminated" a contract to build a medical clinic in Colbert County, Alabama. Med-Plus raises three issues: (1) Whether the construction contract was illegal and therefore unenforceable on the basis that CCG violated § 34-8-6, Alabama Code 1975, by allowing an unlicensed general contractor to "superintend" construction of the clinic; (2) Whether the trial court erred in admitting CCG's estimates of the cost of completion under the construction contract; (3) Whether the trial court erred in directing a verdict in favor of CCG on Med-Plus's counterclaim alleging fraud.

On September 11, 1990, Dr. Ferguson and Dr. McGahey entered into a contract with Phillips Development Company to build a medical clinic. Ronald C. Phillips, a real estate developer and sole shareholder of Phillips Development Company, was a long-time friend and associate of Dr. Ferguson and Dr. McGahey. Phillips had helped them build two other clinics located in Florence and Decatur, Alabama. Under the terms of their September 11, 1990, agreement, Med-Plus and Phillips Development Company agreed to build a third clinic in Colbert County, Alabama, for $461,009. In addition to fixing the contract price, the agreement also specified the scope of the construction work and a schedule for the disbursement of these funds to Phillips Development Company after completion of certain stages of the construction.

Phillips began to hire subcontractors and to arrange for the purchase of materials. To pour the slab, Phillips had to have the City of Muscle Shoals inspect the site and issue a building permit. To issue this permit, however, the City of Muscle Shoals required proof that the general contractor on the project was duly licensed. Because Phillips Development Company was not a licensed contractor, Phillips contacted CCG, which was then under a contract with Phillips to prepare architectural plans for the clinic. CCG was a licensed general contractor, whose officers and principal shareholders were two brothers, Jones Colcock and Miles Colcock. From the negotiations between Phillips, Jones Colcock, and Miles Colcock emerged an oral agreement whose purpose and terms were the subject of much contradictory testimony at trial.

According to Phillips, in exchange for a $10,000 fee Jones and Miles Colcock agreed that CCG would let Phillips use CCG's general contractor's license to build the clinic. Phillips also testified that under the terms of this oral agreement, CCG would assist Phillips in selecting and hiring subcontractors and would itself be allowed to perform whatever subcontracting work it was qualified to perform so long as its bid was as low as or lower than any other received by Phillips for the same work. Phillips also testified that CCG was only to be the nominal general contractor and that it was he who was to actually manage and control the construction project. According to Phillips, this authority included not only the hiring of subcontractors but also the paying of the costs of the project; he said CCG was to be a mere conduit for funds disbursed by the bank financing the project. Phillips's testimony was generally corroborated by the testimony of Dr. Ferguson and several subcontractors who worked on the project.

The testimony of Miles and Jones Colcock presented a very different picture of the oral agreement between Phillips and CCG. According to Miles Colcock, Phillips approached him in mid-September to inquire whether CCG would sell him its general contractor's license. Miles and Jones Colcock both testified that they refused to sell CCG's license. Finally, after subsequent negotiations, they said, Phillips offered to arrange a contract between CCG and Med-Plus in exchange for a $78,000 "finder's fee." According to Miles Colcock, under this arrangement, CCG was to be the general contractor and have complete authority, while Phillips was to be Med-Plus's agent on the project. Also, CCG was to hire and pay subcontractors and suppliers from funds disbursed under the contract.

Miles Colcock prepared a written agreement, almost identical to the one entered into by Med-Plus and Phillips Development Company. After signing this agreement, Phillips and Jones Colcock took it to Dr. Ferguson for his signature. On September 25, 1990, Phillips and Jones Colcock met Dr. Ferguson at his clinic in Decatur, Alabama. The meeting was brief, lasting no longer than 10 minutes, and several times during it Dr. Ferguson left the office to attend to patients.

At this meeting, it was explained to Dr. Ferguson that there had been a "hold up" in the progress of the construction project and that he would have to sign "this piece of paper" to obtain a building permit. Because the contract presented to him looked like the one that he, Dr. McGahey, and Phillips had signed on September 11, 1990, Dr. Ferguson signed it without reading its terms. The two-page document signed by Dr. Ferguson stated in the opening lines of its first paragraph:

"This is a contract between CCG, Inc. and Med Plus Properties to construct a building and site improvements described in the drawings prepared by Miles Colcock, AIA, and Donald Phillips, ASLA."

(Emphasis added.) Dr. Ferguson testified at trial that he would not have signed the contract had he known it was anything other than a formality to obtain a building permit. Dr. Ferguson also testified that it was his understanding that Phillips was going to be the general contractor on the project.

Although the testimony concerning the substance of the representations made to Dr. Ferguson is generally undisputed, the testimony concerning who made these representations to Dr. Ferguson is not. Although Dr. Ferguson stated in his trial testimony what he understood after the meeting the agreement to be, he did not say what, if any representations, were made by Jones Colcock. According to Phillips, however, Jones Colcock did make representations to Dr. Ferguson:

"Q. Would you please detail for the jury exactly what, to the best of your recollection, what was said between Jones and Dr. Ferguson?

"A. When I arrived I explained to Charlie [Dr. Ferguson]--Jones didn't say anything. I explained to Charlie, 'Charlie, to get a building permit we need to use and will be working with Jones Colcock who has an Alabama general contractor's license and I'm paying him a fee for doing this. It has absolutely nothing to do with the price of this project or your involvement or doesn't have anything to do with anything. It is simply a piece of paper that he says he needs.' Jones confirmed that. He said, 'Dr. Ferguson, it's just a piece of paper to get a building permit. We've got a little hang up down here with the city and they want to see something on paper.'

"Q. All right. Now, when you say Jones confirmed that did he say exactly what you just said?

"A. Pretty much exactly what I said. He confirmed everything I said."

Not long after the signing of the contract between Med-Plus and CCG, conflicts arose between CCG and Phillips as both sought to control the project. At first, there were no problems because most of the work on the project during the initial stage involved only CCG. This work consisted of preparing the foundation and pouring the slab. After this first stage was completed, CCG received from the financing bank the first installment payment of $92,200, of which $66,781 was paid to Phillips.

The second stage of the project consisted of exterior framing, roofing, exterior sheathing, and final "rough-in" plumbing, electrical, and heating and cooling work. During this stage of the project, the conflict between CCG and Phillips became acute. Without CCG's knowledge or consent, Phillips began hiring and paying subcontractors and suppliers directly. CCG attempted to assert control over Phillips and the project, but its efforts proved unavailing. Instead of being paid to CCG, as the first installment had been, the second installment of $161,353 was paid to Med-Plus and it was subsequently transferred to Phillips. After several failed attempts by CCG and Med-Plus to reach a solution, Med-Plus terminated the contract with CCG on November 27, 1990.

On May 8, 1991, CCG brought an action alleging breach of contract. Med-Plus answered with a general denial and asserted the affirmative defenses of novation, mistake, waiver, and excused performance. Med-Plus also included a counterclaim seeking damages from CCG for negligent construction. The parties amended these pleadings numerous times during the course of the circuit court proceeding. Relevant here, however, are amendments to Med-Plus's answer raising the affirmative defense of illegality and adding a counterclaim alleging fraud against CCG. At trial the circuit court granted CCG's motion for a directed verdict on the counterclaim alleging fraud and instructed the jury on CCG's claim alleging wrongful termination of contract and the affirmative defense of illegality. After entering a judgment for $125,000 on the jury's verdict in favor of CCG, the trial court denied Med-Plus's post-judgment motions for JNOV or new trial.

The first issue raised by Med-Plus is whether, with regard to its affirmative defense of illegality, the trial court erred in denying its motion for JNOV on the ground of insufficiency of the evidence in...