SADDLEWOOD DOWNS v. HOLLAND CORP., INC.

• Decision Date: 29 October 2004
• Docket Number: No. 91,057.,91,057.
• Citation: 33 Kan.App.2d 185,99 P.3d 640
• Parties: SADDLEWOOD DOWNS, L.L.C., Appellant, v. HOLLAND CORPORATION, INC., Appellee.
• Court: Kansas Court of Appeals

33 Kan.App.2d 185

99 P.3d 640

SADDLEWOOD DOWNS, L.L.C., Appellant, v. HOLLAND CORPORATION, INC., Appellee.

No. 91,057.

Court of Appeals of Kansas.

Opinion filed October 29, 2004.

Leslie A. Bailey, of Moore, Hennessy & Freeman, P.C., of Kansas City, Missouri, for the appellant.

Marty T. Jackson, of Wallace, Saunders, Austin, Brown & Enochs, Chtd., of Overland Park, for the appellee.

Before PIERRON, P.J., MARQUARDT, J., and BUKATY, S.J.

PIERRON, J.:

In this construction contract case, Saddlewood Downs, L.L.C., (Saddlewood) appeals the judgment entered in favor of Holland Corporation, Inc. (Holland). Saddlewood argues the trial court erred in finding that Holland was entitled to money for fly ash stabilization work required by the City of Olathe (City) prior to Holland's completion of streets in the Saddlewood Downs subdivision (subdivision). Saddlewood also claims the trial court erred in not finding Holland liable for slander of title for maliciously filing a mechanic's lien. We find the trial court was correct and affirm.

With a few exceptions, the significant facts in this case are undisputed. The central question revolves around Holland's entitlement to money for fly ash stabilization work required by the City. Saddlewood was the owner and developer of the subdivision. Holland's principal business is the construction of asphalt streets as part of new commercial and residential developments.

In March 2000, Holland submitted a bid for the construction of street improvements for the subdivision. Holland was awarded the contract, wherein the parties agreed Holland would "provide all the necessary materials, tools, labor and equipment to construct the [street construction project] in accordance with the approved plans." The contract did not include any line item for fly ash stabilization or mention it directly. The contract also provided that variations of the listed items were not cause for adjustment of the contract, "unless the scope of work [was] changed by written authorization of the Owner." There were two other contracts entered into by Saddlewood and Holland and a third party, Town & Country Manor, L.C., involving street construction on an adjacent development and shared passageways, but those two contracts are not at issue.

There were three written changes made to the contract between Saddlewood and Holland: (1) In May 2000, the parties agreed to an amendment for the addition of sidewalks; (2) in July 2000, the parties agreed to an amendment for the addition of street lights and gas and electric lines; and (3) in March 27, 2001, the parties consented to Saddlewood's agreement to pay interest on late payments.

In June 2000, after Holland had completed the site grading for the street construction, the City determined that additional stabilization of the subgrade material was necessary to pass inspection and the application of fly ash was required. Fly ash is a mining by-product that is applied to, and mixed with, existing expansive subgrade soil to create a subbase for the asphalt pavement that is stable and nonexpansive. There is no dispute that specifications by the City provide that fly ash could be required in order to provide proper stabilization to the soil under the streets. Holland did not include a line item for fly ash stabilization (or its potential) in its bid, nor did it expressly exclude fly ash from the bid.

Upon being notified that fly ash was required, Holland stopped work and Jeff Shoemaker, Holland's vice-president in charge of the subdivision project, contacted the project engineer, David Scott of Green Engineering, advising of the fly ash requirement. Shoemaker sent Scott a proposal of costs associated with the fly ash work and called a meeting with Scott, Don Virgin (principal member of Saddlewood), Crow (a representative of Town & Country), and Jim Green (Green Engineering).

Shoemaker testified that at the meeting, the parties discussed and negotiated the price for fly ash stabilization and Holland agreed to reduce the price per square yard from $4.95 to $4.45. Scott's testimony confirmed the negotiated lower price, but Virgin testified no agreement was reached as to who would pay for the fly ash stabilization work. Following the meeting, Shoemaker sent Green a revised price quote for the fly ash work per the negotiations at the meeting. Shoemaker testified Virgin contacted him by telephone and instructed him to proceed with the fly ash stabilization work and that Saddlewood would pay for the work at the negotiated price. Virgin disputes that he ever said Saddlewood would pay for the fly ash work, that there was never any agreement reached concerning the fly ash issue, and that he had left the meeting with the understanding that once the project was complete they would "hassle over" the problem if Holland requested additional payment. The fly ash was applied in August 2000.

During the course of construction, Holland delivered several invoices to Saddlewood in support of periodic progress payments. Shoemaker testified that invoices as early as September 2000 included a specific line item under change orders for the fly ash stabilization work. Saddlewood never objected to any of the invoices on the basis that costs for fly ash were included in the project cost. After Saddlewood fell behind in its payments, the parties negotiated the third written amendment previously mentioned concerning Saddlewood's agreement to pay interest.

Upon Saddlewood's refusal to pay the additionally billed sums, on November 29, 2001, Holland filed a mechanic's lien against the Saddlewood property in the amount of $75,312.82. The lien stated that materials and services were last furnished on July 29, 2001, exactly 4 months prior to filing the lien. On December 11, 2001, Holland filed an amended mechanic's lien against the Saddlewood property stating the materials and services were last furnished on October 24, 2001.

Gary Gassen, Holland's treasurer and signatory on both mechanics' liens testified that no work occurred on the project on July 29, 2001, because that date was a Sunday. He said the error occurred as a result of the ending of the pay period on July 29, 2001, and Holland employees had clocked work on the Saddlewood project sometime during the days of the prior week. He said he filed the amended mechanic's lien shortly thereafter because Holland employees still registered time on the project through October 24, 2001.

Despite Holland's mechanic's lien, on December 4, 2001, Saddlewood filed a petition for money had and received alleging overpayment to Holland in the amount of $82,156.50. During the summer of 2002, Saddlewood arranged to sell the subject property. In order to clear title for the sale, Saddlewood paid Holland the amount of the mechanic's lien out of the proceeds of the sale. However, Saddlewood reserved the right to challenge Holland's mechanic's lien. On December 4, 2002, Saddlewood filed an amended petition adding a claim of slander of title.

The trial court conducted a bench trial in the matter. The court granted judgment in favor of Holland. The court found the fly ash stabilization work was not part of the original contract and that it constituted extra work by Holland for which it was entitled to compensation. The court stated that although there was no written authorization for the fly ash stabilization, Saddlewood's actions or inactions constituted an authorization for the extra work and a waiver of the requirement in the original contract that extra work required written authorization. Holland also reasonably relied on Saddlewood's actions or inactions to its detriment in performing the fly ash stabilization work.

The trial court rejected Saddlewood's claim for slander of title. After not making a specific finding on the technical validity of the mechanic's lien, the trial court stated the weight of the evidence demonstrated that the mechanic's lien was not maliciously filed. Alternatively, the court concluded Saddlewood could not demonstrate any damages as a result of the lien.

Saddlewood appeals.

Saddlewood first argues the trial court erred in finding that Holland was entitled to money for fly ash stabilization work as an addition to the construction contract.

Our standard of review is a mixed one because we must review findings of fact, conclusions of law, and the interpretation of a written contract. The function of an appellate court is to determine whether the trial court's findings of fact are supported by substantial competent evidence and whether the findings are sufficient to support the trial court's conclusions of law. Substantial evidence is that which possesses both relevance and substance and which furnishes a substantial basis of fact from which the issues can be reasonably resolved. U.S.D. No. 233 v. Kansas Ass'n of American Educators, 275 Kan. 313, 318, 64 P.3d 372 (2003). An appellate court's review of conclusions of law is unlimited. Nicholas v. Nicholas, 277 Kan. 171, 177, 83 P.3d 214 (2004). "The interpretation and legal effect of written instruments are matters of law, and an appellate court exercises unlimited review. Regardless of the construction given a written contract by the trial court, an appellate court may construe a written contract and determine its legal effect. [Citation omitted.]" Unrau v. Kidron Bethel Retirement Services, Inc., 271 Kan. 743, 763, 27 P.3d 1 (2001).

Saddlewood states it was undisputed that the written contract incorporated the plans for the project which in turn incorporated the City specifications requiring fly ash if necessary. Saddlewood argues the record is devoid of any evidence that Holland advised Saddlewood that its contract price excluded fly ash stabilization. Saddlewood recognizes that no specific line item existed in the contract for fly ash but claims it is common knowledge that items exist in a construction contract which are "subsidiary" items that are not stated but are required....