Mularz v. Greater Park City Co., 78-1969

• Decision Date: 12 June 1980
• Docket Number: No. 78-1969,78-1969
• Parties: Theodore L. MULARZ, Plaintiff-Appellant, v. GREATER PARK CITY COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 139

623 F.2d 139

Theodore L. MULARZ, Plaintiff-Appellant, v. GREATER PARK CITY COMPANY, Defendant-Appellee.

No. 78-1969.

United States Court of Appeals, Tenth Circuit.

Argued May 9, 1980.

Decided June 12, 1980.

Arnold Alperstein, Lakewood, Colo. (Donald W. Alperstein, Lakewood, Colo., with him, on brief), for plaintiff-appellant.

F. S. Prince, Jr., of Prince, Yeates & Geldzahler, Salt Lake City, Utah (Donald J. Winder, Salt Lake City, Utah, with him, on brief), for defendant-appellee.

Before BARRETT, DOYLE and LOGAN, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

This appeal is on behalf of Mularz, the plaintiff in the court below, seeking review and reversal of a judgment in favor of the defendant, Greater Park City Co. The cause was tried and appealed previously. On that occasion the plaintiff prevailed on summary judgment. Our decision was that the court had erred in so disposing of it. The case was remanded for trial. Although the facts are succinctly set forth in our prior opinion, Mularz v. Greater Park City Co., No. 77-1040 (10th Cir., June 19, 1978), we here briefly recount them in the light of present issues.

The object of the suit is recovery of the unpaid portion of an architect's fee. Mularz, the architect, had entered into a contract with Park City, a Utah corporation, which contract required rendition of architectural services to Park City in connection with a proposed 160-unit condominium development. Mularz prepared the employment contract. He followed a standard form agreement of the American Institute of Architects. He modified that form by striking out several parts.

Under the contract, Park City agreed to pay Mularz a total of $125,000.00. In return he was to render basic services. The contract contained a definition of the term "basic services." It recognized and defined five stages or phases: schematic design, design development, construction documents, bidding or negotiation, and construction supervision. Park City paid a total of $100,000.00 and hence the action is for the $25,000.00 balance.

The contract set up a schedule for the payment of the fee. Upon the completion of the third construction documents phase, the total payments were to be 80% of the total; at the completion of the bidding and negotiations phase, the total payments were to be completed. Park City abandoned the project before completion of the contract, and this factor is the source of the controversy.

The problem before us arises by reason of the fact that the project was never completed; financing was not obtained by Park City. In October 1973, Park City gave notice to Mularz that the project was on the shelf.

The ultimate question is whether Mularz completely fulfilled his obligations under the contract. In the original action, the trial court in effect ruled that Mularz had fully performed and was entitled to the $25,000.00. An alternative basis for the court's decision was that Park City had violated the contract by not providing written notice of suspension or abandonment and that even if Mularz had not fulfilled his obligations, his failure to do so was excused by Park City's breach. Park City appealed, and the essence of this court's prior ruling was that Park City had effectively terminated the contract by a letter which was written on March 6, 1975. This in effect notified Mularz that continuation of the project had to await improvement in the economic climate; that if the circumstances changed, the project would be able to go ahead.

In the prior appeal we recognized that there was an unresolved factual question and that was to what extent Mularz had fully performed the fourth, bidding and negotiation, phase. To determine that issue the cause was remanded.

In the pretrial order that was filed following remand, the issues of fact were:

1. Whether the agreement of the parties was that the plaintiff was to receive $125,000 for the work which he had actually performed.

2. Whether there was some bidding and negotiation phase activity which was required in order to get the full fee.

3. If any bidding and negotiation activity was required, how much did he perform?

A contested issue of law was whether parol evidence was admissible.

The trial court's ruling this time around was that the contract was ambiguous considering the broad range of possibilities of what could be required of the architect under the bidding and negotiation phase, and therefore as a consequence of the ambiguousness of the contract, parol evidence was necessary. This consisted of written correspondence between the parties as well as the contract and other documents, together with the testimony of two witnesses: Mularz and, on behalf of Park City, another architect, Ted Warr of Park City, Utah.

Mularz testified that he understood that the $125,000 was a fixed fee and that since Park City had its own architects, no service was required of him during the last two phases. He said that he intended to make himself available for the project at the bidding and negotiation phase so as to handle questions that might arise from bidding contractors by telephone. Mularz gave special, reproducible copies of his plans to Park City's staff whereby they could reproduce as many sets of blueprints for bidding and negotiation purposes without the need for contacting him. At no time was Mularz ever called by Park City's staff to perform any services connected with bidding and negotiation. Mularz also testified, and Warr as well, that a wide variety of services could be required during the period in question and that there was no established practice as to what the specific services would be; that this varied with the particular client, the architect, and the size and complexity of the project.

Warr's testimony was that the final phase would require about 5% of the total architect's services; that it could be less if the bidding and negotiation work was completed mostly by the project owner.

Mularz testified that it was his understanding that the final 20% of his fee, the amount disputed in the action, would be deferred until the making of the financing arrangements. ¹ A letter of Mularz, dated March 14, 1973, expressed this.

In the trial court's ruling from the bench, it was said:

In my judgment, considering all of the evidence including the later correspondence, which I don't find to be inconsistent with this determination as to what is the contract, is that the parties agreed that the services which would be contractually required of Mr. Mularz as the architect would be only the first three phases, that there was no contractual obligation for him to do anything with respect to negotiation and bids or construction supervision, but that it was also agreed that twenty percent of the basic fee for the first three phases would not be paid until the negotiation and bids phase was completed.

The final holding was that the bidding and negotiation phase, although primarily within the control of the defendant, was a condition precedent to Park City's obligation to pay the remaining 20% under the contract. The court determined that Park City was given an option to proceed or not proceed with the bidding and negotiation phase since it had the power to suspend the contract. The court ruled that Mularz accepted this risk and that Park City's payment obligation never came to pass.

The crucial issue in the case is whether the trial court erred in its holdings, first, that Mularz was not obligated to perform services during the bidding and negotiation phase of the contract, but, second, that Park City's completion of the bidding and negotiation phase was, as a matter of law, a condition precedent to Park City's having to pay Mularz the remaining 20% of his fee.

Was the fulfillment of the bidding and negotiation stage of the contract a condition precedent?

Where the intention or meaning of a contract is in question as to whether it should be construed as a covenant, or, in the alternative, a condition precedent, the tendency of the courts is to construe it as a covenant or a promise rather than a condition unless it is plain that a condition precedent was intended. See Charles Ilfeld Co. v. Taylor, 156 Colo. 204, 397 P.2d 748, 750-51 (1964); Restatement of Contracts §§ 260-61 (1932); 5 Williston on Contracts § 665 (3d ed. 1961). ²

The Colorado Supreme Court reached the same conclusion in Charles Ilfeld Co. v. Taylor, supra, 397 P.2d at 750-51. The court there said:

A stipulation in a contract may be a condition or promise, depending on the intention of the parties. An intent to create a condition in a contract must appear expressly or by clear implication. . . . (citations omitted).

In cases of doubt as to the intention of the parties, courts resolve the doubt in favor of an interpretation making the engagement a promise rather than a condition . . . (citations omitted). And such rule of construction is founded on a policy of avoiding, if possible, forfeitures. Violations of conditions usually cause forfeitures, whereas breaches of contract can be compensated by damages . . . (citations omitted). To frown upon forfeitures is part of the judicial policy of this state, too. Reliance Life Ins. Co. v. Wolverton, 88 Colo. 353, 296 P. 793.

Considering that Park City's witness, Mr. Warr, testified that the value of an architect's services in the bidding and negotiation phase amounted to less than 5% of the total value, where, as here, the architect was to act in a consulting capacity only, if the 20% balance of Mularz's fee could be withheld, it would constitute a forfeiture which is not a desirable result, particularly where the contract is ambiguous.

The test for distinguishing promises from conditions calls for inquiry as to whose words undertake the performance of the act. Are they the words of the person who is doing the act? If so, the words are interpreted, unless a contrary intent is plain, as a promise by that person to perform that act...