R. J. Marco Construction, Inc. v. SAMS Enterprises, No. A04-1433 (MN 6/7/2005)
| Decision Date | 07 June 2005 |
| Docket Number | No. A04-1433.,A04-1433. |
| Parties | R. J. Marco Construction, Inc., Respondent, v. SAMS Enterprises, LLC, et al., Appellants. SAMS Enterprises, LLC, et al., Third Party Plaintiffs, v. John Oliver & Associates, Inc., et al., Third Party Defendants. |
| Court | Minnesota Supreme Court |
Appeal from the Hennepin County District Court, File No. LN 02-011121.
Valdis A. Silins, Stephenson & Sanford, PLC, (for appellants).
Ronald H. Groth, Groth Law Firm, Ltd., (for respondent).
Considered and decided by Randall, Presiding Judge; Minge, Judge; and Wright, Judge.
UNPUBLISHED OPINION
Respondent prevailed against appellants in a lawsuit seeking, among other claims, foreclosure on a mechanics' lien. Appellants assert that the district court erred by (1) denying an extension of a deadline for impleader of third parties; (2) denying a jury trial on appellants' counterclaims; (3) disregarding the parties' purported course of dealing with respect to modifications of the contract; (4) ruling that appellants waived the right to written modifications of the contract; (5) awarding excessive damages; and (6) failing to make adequate findings as to the contract. On notice of review, respondent asserts that the district court erred by failing to award a mechanics' lien for the value of architectural services that it paid for. We affirm.
SAMS Enterprises (SAMS) is the owner of an improved parcel of commercial real estate in Plymouth (the property). SAMS's controlling owner and executive officer, Mark Senn, sought certain interior and exterior improvements to the property.1 Senn contacted Reginald Plowman and solicited a bid for the project in February 2001. Plowman and his partner, James Lee, control and operate respondent R. J. Marco Construction (Marco). Marco submitted a preliminary bid of $1.6 million for the project, which was accepted in April 2001.
Marco commenced construction in early May but did not immediately finalize an agreement due to action by SAMS to secure financing and by Marco to solicit bids from its subcontractors. On August 17, 2001, the parties entered into a written contract, which was backdated to March 29, 2001. The contract is captioned as an agreement "where the basis of payment is a [stipulated sum]." The plans for the project were incorporated in the form of drawings that detailed interior and exterior improvements to the property. The contract also incorporated conditions that, in relevant part, required the parties jointly to approve in writing modifications to the existing plans.
Four tenants were slated to occupy the property on completion of the project. The first-floor tenant was the Community Bank of Plymouth (bank); the second floor tenants were Christopher T. Sasik, DDS, Inc. (Sasik), Artelle Designs, Inc. (Artelle), and Orthodontics Dental Care (Orthodontics). According to the lease between the bank and SAMS, the bank would contribute $210,000 to SAMS for interior improvements. The leases for Sasik, Artelle, and Orthodontics required SAMS to contribute allowances of $38,000, $42,000, and $27,939 respectively for interior improvements. These amounts were accounted for in the contract price Marco received for the project.
Commencing in October 2001, Marco submitted bids to the bank, Sasik, and Artelle to complete the improvements to their spaces. When Marco completed these improvements in early 2002, it issued invoices to those tenants, who in turn paid to SAMS the difference between the cost of the improvements and the improvement allowances.
From June to December 2001, Marco performed approximately 29 additional improvements, or "extras," that purportedly were not incorporated into the parties' contract. The parties did not execute any written modifications to the contract. Senn denied authorizing any extras, but according to his written notes, the parties contemplated at least $75,000 to $135,000 in extras.
Marco sued SAMS on July 2, 2002, demanding foreclosure on a mechanics' lien and alleging claims for breach of contract and unjust enrichment. Marco sought to recover approximately $ 300,000 for the extras and tenant improvements, asserting that payment for these items was not controlled by the contract. Marco also claimed that SAMS had a balance due of approximately $ 200,000 against the existing contract.
In its answer, SAMS challenged Marco's characterization of the extras and tenant improvements, asserting that these items were included in the contract. SAMS also brought counterclaims for negligence, breach of contract, breach of express and implied warranties, and determination of adverse claims. SAMS demanded a jury trial on its counterclaims, which the district court denied and proceeded with a bench trial.
SAMS's defense at trial related to the effect of the parties' course of dealing with stipulated-sum contracts. Based on prior dealings in four other projects, Senn testified that the parties used a system of "pluses and minuses" in which they offset costs over the stipulated sum by making reductions elsewhere in the project. Thus, Senn asserted, the extras and tenant improvements were contemplated by the contract. Senn characterized this system as a "not-to-exceed contract" in which the entire project was to be completed for less than the stipulated sum. But Senn admitted that, because none of the parties' previous projects had cost overruns, there was no evidence that the parties had made such offsets.
The district court observed that, on direct examination, Senn delayed his response to questions about documents he was given to read. When the district court inquired about this conduct, Senn admitted that he had difficulty reading. The district court later inferred that, in the course of conducting business, Senn relied on his memory instead of reading documents.
Marco challenged Senn's description of the parties' course of dealing. Marco offered a note, made by Senn during the project, which referred to "extras." Based on this note and other testimony, Marco asserted that Senn knew of extras that were not contemplated by the contract and that the parties never negotiated project reductions to offset added costs. Marco also tendered the testimony of two experts, John Russo and Thomas Deans, on the customary effect of a stipulated-sum contract. Both testified that a stipulated-sum contract specifies work to be performed by the builder for a certain price. Should the cost of the work exceed that price, the builder bears the added cost. But if the cost of the work is less than the specified price, the builder retains the additional profit. In a stipulated-sum contract, the price does not account for extra improvements or work beyond the amount of tenant improvement allowances.
The district court concluded that the contract contemplated only the improvement allowances. Any additional work entitled Marco to further compensation. In support of this ruling, the district court observed that the tenants bid separately on these projects and that they paid SAMS for the cost difference between the improvements and the allowance. Finding that the contract required extras and tenant improvements to be treated as modifications to the contract, the district court held that SAMS waived any requirement that contract modifications be executed in writing. The district court also found that Senn preferred oral modifications because he had difficulty reading. The district court concluded that SAMS agreed to the extras and that the parties' written contract did not govern the amount owed for these items. Holding that Marco was entitled to recover the balance due on the contract plus the reasonable value of the extras, the district court entered judgment for Marco in the amount of $464,266 and awarded a mechanics' lien against the property in the amount of $445,042.
SAMS moved for amended findings or a new trial. In support of the motion, SAMS asserted, in relevant part, that the district court improperly assessed the parties' prior course of dealing because this conduct evinced the parties' intent to enter a not-to-exceed contract. SAMS also challenged the amount of damages, claiming in part that the contract price was so excessive as to indicate a mistake.
The district court denied the motion for a new trial. In its amended findings, the district court rejected SAMS's assertion that the parties' prior course of dealing established that they entered a not-to-exceed contract, noting that, although Senn knew of the additional costs, the parties never considered offsets that would reduce the cost of the project. The district court also found that the damages award was justified. This appeal followed.
SAMS first asserts that the district court erred in denying an extension of the deadline for impleader of third parties. Had such an extension been granted, SAMS claims it would have initiated an action against Amcon Construction (Amcon), the original architect for the project, and John Oliver & Associates, Inc. (Oliver), which handled engineering during the project.
Our review of the record establishes that SAMS impleaded Oliver as a third-party defendant before the impleader deadline. Because it was unable to file a timely affidavit of expert review in accordance with Minn. Stat. § 544.42, subd. 2(1) (2004), SAMS voluntarily dismissed the claim. SAMS then sued Amcon and Oliver in a separate action. In December 2003, the parties to this action reached a settlement, dismissing with prejudice the claims against Amcon and Oliver.
A dismissal with prejudice is a final determination on the merits that cannot be set aside absent fraud, collusion, or mistake. Butkovich v. O'Leary, 303 Minn. 535, 536, 225 N.W.2d 847, 848 (1975). When a dismissal with prejudice is entered with the consent of the parties, neither party may...
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