Scott Co. of California v. MK-Ferguson Co.

• Decision Date: 21 November 1991
• Docket Number: MK-FERGUSON,No. 90CA1100,90CA1100
• Citation: 832 P.2d 1000
• Parties: SCOTT COMPANY OF CALIFORNIA, Plaintiff-Appellee and Cross-Appellant, v.COMPANY and Anheuser-Busch, Inc., Defendants-Appellants and Cross-Appellees. . IV
• Court: Colorado Court of Appeals

Page 1000

832 P.2d 1000

SCOTT COMPANY OF CALIFORNIA, Plaintiff-Appellee and Cross-Appellant, v. MK-FERGUSON COMPANY and Anheuser-Busch, Inc. Defendants-Appellants and Cross-Appellees.

No. 90CA1100.

Colorado Court of Appeals Div. IV.

Nov. 21, 1991.

Rehearing Denied Jan. 16, 1992.

Certiorari Denied June 29, 1992.

Fairfield and Woods, P.C., Daniel R. Frost and John M. Tanner, Denver, for plaintiff-appellee and cross-appellant.

Gorsuch, Kirgis, Campbell, Walker and Grover, James A. Jablonski and Gary L. Brown, Denver, for defendants-appellants and cross-appellees.

Opinion by Judge MARQUEZ.

Defendants, MK-Ferguson Company and Anheuser-Busch, Inc., appeal from a judgment entered on jury verdicts in favor of plaintiff, Scott Company of California, on its claims of breach of contract, goods sold and delivered and services rendered, promissory estoppel, negligence, and negligent misrepresentation. Plaintiff cross-appeals from the court's dismissal of its punitive damage claim. We reverse and remand for a new trial.

Plaintiff, a mechanical subcontractor, entered into two contracts with defendant MK-Ferguson Company, the general contractor, for the performance of process piping work for a brewery being constructed by defendants and owner Anheuser-Busch in Fort Collins, Colorado.

According to plaintiff, after beginning work on the project, it encountered a number of problems including frequent and significant changes in drawings from which it was to work and final drawings that were of extremely poor quality and contained significant errors. Plaintiff further contends that, as a result of these problems, it was unable to fabricate off the job site, that hundreds of extra welds were required, that it fell substantially behind schedule, that it was required to accelerate and add more employees, supervision, and equipment to meet the scheduled completion date, and that the scope of its undertaking was significantly changed.

Although plaintiff completed its work and was paid approximately $5.5 million, including some additional compensation, but not including retainage, defendants denied plaintiff's claim for further compensation.

Plaintiff eventually brought suit alleging a variety of claims. However, only its claims of breach of contract, promissory estoppel, services performed and goods sold and delivered, negligence, and negligent misrepresentation, went to the jury. Plaintiff sought to recover retainage due under the two contracts, additional compensation under the changes clause of the contracts, and other damages it alleged were caused by certain breaches of the contracts by MK-Ferguson. It also sought the same damages under the remaining claims.

The jury returned verdicts in favor of plaintiff on all claims and assessed $1,525,283 in damages. While the damages awarded were apparently for the breach of contract, services performed and goods sold and delivered, and promissory estoppel claims, the verdict form did not specify to which claims the damages were allocated. No further damages were awarded pursuant to the negligence claims.

I.

Defendants now argue that the court erred in allowing plaintiff to pursue claims on the basis of breach of contract and also to pursue claims under theories of constructive or quasi-contract, promissory estoppel, negligence, and negligent misrepresentation. We agree.

Plaintiff's claim for goods sold and delivered and services rendered is essentially an implied contract, quantum meruit claim. If an express contract exists and an asserted implied contract is alleged to co-exist and relate to the same subject matter, there can be no implied contract between the parties because the provisions of the express contract supersede those of the implied contract; however, this rule does not apply if the implied agreement is based upon the conduct of the parties subsequent to, and not covered by, the terms of the express contract. Schuck Corp. v. Sorkowitz, 686 P.2d 1366 (Colo.App.1984); see In re Estate of Murphy, 110 Colo. 304, 134 P.2d 199 (1943).

Quantum meruit is an appropriate basis for recovery when substantial changes occur which are not covered by the contract and are not within the contemplation of the parties and the effect of such changes is to require extra work or to cause substantial loss to the contractor. Hensel Phelps Construction Co. v. King County, 57 Wash.App. 170, 787 P.2d 58 (1990).

Whether a subcontractor can recover under a quantum meruit or unjust enrichment theory in a case such as this is a mixed question of law and fact. Hensel Phelps Construction Co. v. King County, supra.

Also, promissory estoppel is applicable only in the absence of an otherwise enforceable contract. Gilmore v. Ute City Mortgage Co., 660 F.Supp. 437 (D.Colo.1986). The alternative remedy of promissory estoppel is never reached when there has been mutual agreement by the parties on all essential terms of a contract. Vigoda v. Denver Urban Renewal Authority, 646 P.2d 900 (Colo.1982).

Further, as a general rule, no cause of action lies in tort when purely economic damage, with no physical injury to property or persons, is caused by negligent breach of a contractual duty. Jardel Enterprises, Inc. v. Triconsultants, Inc., 770 P.2d 1301 (Colo.App.1988).

Interpretation of a written contract and whether such a contract is ambiguous are questions of law for the court, Pepcol Manufacturing Co. v. Denver Union Corp., 687 P.2d 1310 (Colo.1984), and the reviewing court is not bound by the trial court's findings or conclusions as to those issues. Barnes v. Van Schaack Mortgage, 787 P.2d 207 (Colo.App.1990).

The first step in the analysis is for the trial court to decide whether the contract contains any ambiguity from which a trier of fact could reasonably find that the damages or changed conditions were contingencies not contemplated by the parties. If, by looking within the four corners of the document, the court can determine that the written contract unambiguously contemplates the changes or disruptions experienced by the complaining party, no issue of fact exists and the claims, other then those based on the express contract, must be dismissed. If, on the other hand, the provisions are ambiguous, issues of fact would exist, and the resolution of the question would be for the trier of fact. Hensel Phelps Construction Co. v. King County, supra.

The focus of the inquiry should be whether the types of changes were covered by the contract, not the degree of variation in job conditions from what was originally relied upon in the bid. Hensel Phelps Construction Co. v. King County, supra.

Plaintiff's Third Amended Complaint alleged a claim for breach of an oral contract based on allegations, contained in the breach of contract claim, that defendants' agents and representatives assured plaintiff that it would be adequately compensated for all costs incurred as a result of defendants' acceleration of the work and that such acceleration was absolutely necessary to keep the project on schedule.

Plaintiff alternatively alleged claims for unjust enrichment and for services performed and goods sold and delivered based on labor, materials, and other effort expended by plaintiff under the oral contract. Plaintiff also alleged a claim in the alternative for promissory estoppel on grounds that defendants' assurances that plaintiff would be adequately compensated for all costs incurred as a result of the acceleration induced action on the part of plaintiff.

In addition, plaintiff asserted a claim for negligence based on the same allegations in the breach of contract claim and a claim for negligent misrepresentation based on the alleged erroneous and inaccurate information received pertaining to the drawings.

The court eventually dismissed the oral contract and unjust enrichment claims. Plaintiff does not appeal the dismissal of the oral contract claim and has apparently confined its cross-appeal to the trial court's failure to allow plaintiff's claim for punitive damages to be submitted to the jury.

Here, plaintiff does not contend that there were no enforceable express contracts. Therefore, the question is whether substantial changes occurred that were not covered by the contracts and were not within the contemplation of the parties, see Schuck Corp. v. Sorkowitz, supra; Hensel Phelps Construction Co. v. King County, supra, and whether defendants breached duties that were not contractual duties. See Jardel Enterprises, Inc. v. Triconsultants, Inc., supra.

However, we find no ambiguity in the terms of the contracts sufficient to make the question one for the jury. Specifically, plaintiff claims that it was forced to make changes in the scope of its work and to accelerate its performance, thus resulting in uncompensated labor and other cost overruns, upon defendants' assurance that plaintiff would be adequately compensated. These allegations involve contingencies clearly covered by the subcontracts.

Paragraph 4 of the subcontracts, "Measurements" provides that:

Constructor shall not scale drawings for working dimensions. Constructor shall verify in the field all reference measurements or other dimensions designated to be field verified before ordering materials or doing work.

Paragraph 5 of the subcontracts, "Omissions," provides in part:

Anything mentioned in the specifications and not indicated on the drawings, or indicated on the drawings and not mentioned in the specifications, shall be done as if indicated or mentioned in both. Further, anything customarily necessary for proper completion of the work shall be furnished and installed although not shown on the drawings or mentioned in the specifications.

Paragraph 6 of the subcontracts, "Discrepancies," states:

Errors, conflicts, ambiguities, or inconsistencies in the drawings, specifications or other documents shall be immediately brought to Ferguson's attention. Constructor shall not proceed with the work in question until Ferguson...