Smart Constr. & Remodeling v. Suchy
| Docket Number | A22-1524 |
| Decision Date | 28 August 2023 |
| Parties | Smart Construction & Remodeling, Inc., Appellant, v. Dean Suchy, Respondent. |
| Court | Minnesota Court of Appeals |
This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).
Hennepin County District Court File No. 27-CV-19-20086
Edward E. Beckmann, Beckmann Law Firm, LLC, Bloomington, Minnesota (for appellant)
Courtney J. Ernston, North Star Law Group, PLLC, St. Paul Minnesota (for respondent)
Considered and decided by Slieter, Presiding Judge; Larkin, Judge; and Hooten, Judge. [*]
Appellant construction company challenges the district court's ruling that a liquidated-damages clause in its contract with respondent homeowner was unenforceable and that appellant was not entitled to equitable relief. Respondent homeowner challenges the district court's determination that the parties entered into a valid contract. We affirm.
Appellant Smart Construction &Remodeling, Inc. (Smart) is a business that provides repair and remodeling services to residential properties. Respondent Dean Suchy is a homeowner whose home was damaged in a storm. In 2018, Suchy contacted Smart regarding the possibility of Smart repairing the storm damage to his home. Pavel Pilich is Smart's owner, and he was Suchy's primary contact at Smart.
On May 2, 2018, Pilich presented Suchy with a document labeled "CONTRACT," which concerned the proposed repairs to Suchy's storm-damaged home. Pilich asked Suchy to sign the document and to initial certain statements in the document. Suchy signed and initialed the document as requested. Although Suchy read the statements that he initialed, he did not read the entire document.
The six-page document stated that Smart would use its "best efforts" to work with Suchy's insurance company to obtain "maximum approval" and coverage for work identified in a "scope of work" section. The terms in the document did not obligate Suchy or Smart "in any way" unless payment for damages was approved by the insurance company. The scope of work was identified as repair or replacement of the home's roof, gutters, siding, fascia, wrap, and deck, and a shed's roof, siding, fascia, and doors. The document stated that if the insurance company approved repairs at an amount acceptable to Smart, then Smart would perform "all work approved" by the insurance company. The document also stated that the insurance company's "final agreed report" would "constitute the summary of the work to be performed."
The document contained the following liquidated-damages clause:
Customer's cancellation, of this Contract after the rescission period, if any or Customer's failure to make available the work premises may result in breach of contract, remedied by Customer paying to [Smart], an amount equal to 30% of the contract or Insurance Company's Allocated amount plus cost of all materials as a reasonable amount of agreed damages, which are uncertain due to costs of storage, rescheduling and other undeterminable costs, which the parties agree to liquidate in advance of any dispute.
When Suchy signed the document, the insurance-approval process for claims related to Suchy's storm-damaged home had not begun. Suchy believed the document identified items that Smart would submit to Suchy's insurer for claim approval and that it authorized Smart to contact and work with the insurer in an effort to finalize Suchy's insurance claim.
In June 2018, Suchy's insurance company issued a scope-of-loss statement totaling $42,074.77 for repairs.[1] Smart conducted a detailed inspection of the damage to the home and used software to generate diagrams of the home's impacted areas. On August 2, 2018, Smart submitted a scope-of-loss statement to Suchy's insurer that contained additional areas of damage and estimated repairs and replacements totaling $115,509.96. Suchy's insurer did not accept Smart's estimate. Around December 2018, Smart provided a second estimate to Suchy's insurer. The price for repairs was lowered to $109,482.32 based primarily on reductions in expected costs to complete the work.
Each estimate assumed that Smart would serve as the general contractor and use subcontractors to complete the proposed work. The December 2018 estimate identified $89,441.86 for the costs for labor and materials to complete the work, plus $1,793.14 for reimbursements for sales tax, totaling $91,235. Smart's estimate added approximately 10% of this amount ($9,123.66) for payment of its overhead and another approximately 10% ($9,123.66) for payment of its profit for the total replacement cost value estimate of $109,482.32.
Around January 2019, Smart agreed with Suchy's insurance provider to complete the work described in the December 2018 estimate for a total price of $100,000. On June 27, 2019, Suchy contacted Smart and informed Smart that he did not want Smart to work on his home. Thus, Smart did not perform any repairs to the home, and Smart did not hire any subcontractors or purchase any materials for the anticipated repairs to Suchy's home.
Smart demanded that Suchy pay Smart $30,000 as liquidated damages, and Suchy refused to do so. Smart sued Suchy for breach of contract. Smart's complaint described the contract as an insurance-proceeds contract: Smart would perform repairs to the home and "[t]he scope of the repairs" would be "decided" and "funded" by Suchy's insurance company, "except for Suchy's deductible." Smart's complaint alleged that Suchy's insurer would not have agreed to pay $100,000 for Suchy's storm-damage repairs but for Smart's efforts to explain the scope of the project.
Smart limited its request for breach-of-contract damages to liquidated damages. Smart did not claim actual-expectation damages as an alternative remedy under the contract. Instead, Smart asserted three equitable claims as alternative grounds for relief:
promissory estoppel, unjust enrichment, and quantum meruit. Finally, Smart requested attorney fees under the "contract."
Suchy took the position that the parties had not entered into a contract.[2] Suchy also asserted that the liquidated-damages provision imposed a penalty in violation of public policy and that the clause was unenforceable. The parties stipulated that the enforceability of the liquidated-damages provision was an issue to be determined by the district court based on evidence produced at trial and facts determined by a jury. The parties also stipulated that Smart's claim for attorney fees would be submitted to the district court for determination.
The matter proceeded to a jury trial, at which the jury was asked to determine whether Smart and Suchy had entered into a contract. The jury heard testimony from Pilich and Suchy, and numerous exhibits were admitted into evidence. Additionally, the parties stipulated to certain general, underlying facts.
The jury returned a special verdict form indicating that there was a contract between Smart and Suchy, that Suchy breached the contract, and that Smart was therefore entitled to $30,000 in liquidated damages. The jury also provided advisory findings regarding Smart's promissory-estoppel claim. The jury found that Suchy made an enforceable promise to Smart, that Smart reasonably relied on that promise, and that Smart suffered loss or disadvantage in the amount of $20,000.
Suchy moved for judgment notwithstanding the verdict on Smart's breach-of-contract claim. Suchy asserted that the evidence did not support the jury's finding that the parties had formed a contract.
On July 27, 2022, the district court issued an order concluding that there was sufficient evidence to support the jury's findings that a contract had been formed and that Suchy breached the contract. But the district court concluded that the liquidated-damages clause was unenforceable because it constituted a penalty and violated public policy. The court found that Smart had "declined to produce evidence to support that it had a reasonable expectation to earn more than the 10% profit and 10% overhead stated in the insurance estimates." The court noted that when Pilich was asked at trial whether Smart could expect to receive more than the amounts identified for profit and overhead in Smart's bid, he refused to answer because he considered the information "confidential." The court determined that Smart's damages were "known amounts" and "not difficult to calculate," and that Smart's liquidated damages were not related to "potential actual harm or recoverable damages for a breach." The district court noted that Smart had sought only liquidated damages under the contract, and not compensatory damages.
As to Smart's equitable claims, the district court declined to adopt the jury's advisory findings. The district court concluded that the existence of a contract precluded equitable relief and that Smart also was not entitled to equitable relief on the merits. Finally, the district court concluded that Smart was not entitled to attorney fees under the contract. The district court dismissed Smart's claims with prejudice.
Smart appealed. Suchy filed a notice of related appeal, challenging the district court's conclusion that the evidence supported the jury findings of a contract and breach. This court determined that the notice of related appeal did not create a cross-appeal and stated that Suchy could raise that issue in his respondent's brief.
Suchy contends that the district court erred by denying his motion for judgment notwithstanding the verdict, arguing that the document that he signed did not create a contract. He asserts that the purported contract contained "no price, no scope of work, or other requisite contract clauses." We begin with that issue.[3]
When a district court considers a ...
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