Wormsbecker v. Donovan Const. Co.

• Decision Date: 29 March 1956
• Docket Number: No. 36647,36647
• Citation: 247 Minn. 32,76 N.W.2d 643
• Parties: Ralph WORMSBECKER, Respondent, v. DONOVAN CONSTRUCTION CO. of Minnesota, Appellant, and S. J. Krannak, defendant in interpleader, Respondent.
• Court: Minnesota Supreme Court

Page 643

76 N.W.2d 643

247 Minn. 32

Ralph WORMSBECKER, Respondent, v. DONOVAN CONSTRUCTION CO. of Minnesota, Appellant and S. J. Krannak, defendant in interpleader, Respondent.

No. 36647.

Supreme Court of Minnesota.

March 29, 1956.

On Appeal from Taxation of Costs

April 20, 1956.

Rehearing Denied May 15, 1956.

SYLLABUS BY THE COURT.

1. A written contract may be modified subsequent to its execution by the acts and conduct of the parties in the same manner as a contract may be entered into in the first place.

2. Evidence examined and Held that it sufficiently sustains the jury's verdict that the written contract was modified by the acts and conduct of the parties.

3. Where a party to a contract substantially performs it and is prevented from complete performance by the wrongful repudiation of liability under it by the other contracting party, complete performance is excused, and recovery may be had under the terms of the contract.

4. In an action on the contract here involved, defendant was entitled to a jury trial on all issues of fact.

5. Rule 49.01 of Rules of Civil Procedure supersedes M.S.A. § 546.20 and liberalizes the procedure under the former statute by making it discretionary with the court whether to submit a case on a special or general verdict.

6. If a special verdict is used, the parties are entitled to have all issues of fact submitted to the jury unless such submission is waived.

7. The findings of a special verdict are binding on the court.

8. Under Rule 49.01 the parties waive their right to a jury trial as to all issues raised by the pleadings or evidence which the court omits to submit unless, before the jury retires, either party demands its submission to the jury.

9. Where a party attempts to take exception to the court's failure to submit issues theretofore requested before the jury retires and is requested to take such exceptions after the jury retires, with the understanding that it will have the same force and effect as if taken before the jury retires, such exceptions, when taken, are a sufficient compliance with Rule 49.01.

10. Under the record in this case, there was no waiver of submission of the issue of whether a contract originally entered into between the parties was subsequently modified by agreement of the parties.

11. Whether an item representing one and one-half percent of the amount of a mortgage procured in an FHA project constituted a 'commission' within the contemplation of the parties under a contract providing that 'commissions on the loan secured by the sponsoring corporation from the F.H.A.' should go to plaintiff was question for the jury.

Joseph A. Maun, Mandt Torrison and Jerome B. Simon, St. Paul, Bundlie, Kelley, & Maun, St. Paul, for appellant.

William E. MacGregor, Benedict Deinard, Guesmer, Carson, MacGregor & Clifford, Minneapolis, Leonard, Street & Deinard, Minneapolis, of counsel, for respondent.

Loftsgaarden & Loftsgaarden, St. Paul, of counsel, for interpleader respondent.

KNUTSON, Justice.

This is an appeal from a judgment entered pursuant to the findings of the trial court made after a trial partly to a jury and partly to the court.

The facts essential to a determination of the questions decisive of this appeal, viewed in the light most favorable to the verdict and the court's findings, may be stated briefly as follows:

Prior to March 1949 plaintiff had considerable experience in construction work and real estate sales and promotion. He had familiarized himself with the laws, regulations, and procedures relating to the construction of housing projects under the National Housing Act. ¹

Defendant in interpleader, S. J. Krannak, was a friend of plaintiff. He owned a tract of land consisting of nine acres in Ramsey County at the corner of Larpenteur Avenue and Dunlap Street, which was considered by these two men as suitable for a federal housing project. They obtained some preliminary plans, consulted with FHA officials, and began to obtain bids and estimated costs. The proposed project was to consist of 20 apartment buildings. Neither plaintiff nor Krannak had the necessary financial resources to carry out the project. ²

Defendant, Donovan Construction Company, is a Minnesota corporation owned almost entirely by George Donovan and members of his family. Prior to March 1949 the corporation had been engaged in large-scale, industrial construction projects, but it had not engaged in federal housing projects and was not familiar therewith. None of its officers or employees were familiar with this law.

In the spring of 1949, plaintiff and Krannak approached the Donovans with the object in mind of interesting them, as a joint venture, in the construction of a housing project on the land owned by Krannak, to be known as the Rosegarden project. The Donovans did become interested, but in the meantime plaintiff and Krannak were having difficulty with certain zoning laws which would not permit construction on Krannak's property. They thereupon obtained an option on an adjoining tract of land, known as the Gottfried property. Defendant was not interested in going into the deal as a joint venture but did become interested in the possibility of making money on federal housing projects and of having plaintiff work with the corporation as an employee on such projects. As a result of negotiations, plaintiff and defendant, on April 4, 1949, entered into a written contract which reads as follows:

'An Agreement made this 4th day of April, 1949 between the Denovan Construction Company of St. Paul, Minnesota, a Minnesota Corporation, hereinafter called the 'Company', of the one part, and Ralph Wormsbecker of Minneapolis, Minnesota, hereinafter called 'Manager', (of a Housing Project) of the other part, wherein it is agreed as follows:

'(1) The Company will employ the Manager for the period of time necessary to complete the original contemplated Housing Project and thereafter until this Agreement shall be terminated by either party giving the other thirty days' notice in writing of such intended termination.

'(2) During the continuation of this Agreement the Manager shall devote the whole of his time during the business hours of the Company, and shall use his best endeavors to promote the interests and welfare of the Company.

'(3) The Manager shall exercise and carry out all such powers and duties, and shall observe all such directions and restrictions as the Board of Directors or Executive Committee may from time to time confer or impose upon him. The Manager may negotiate trade contracts on behalf of the Company in the ordinary way of business, subject to approval of the Executive Committee.

'(4) The Manager shall be entitled by way of remunerations for his services to a salary of $500.00 per month, and also a commission of 5% On the net profits before income taxes of the Company in the Housing Project.

'This Agreement is made in contemplation that a sponsoring corporation will make application to the F.H.A. for a loan to build a Housing Project of some twenty (20) units to be situated north of Larpenteur Avenue and east of Hamlin in Ramsey County. This sponsoring corporation, if successful in receiving loan from the F.H.A., will award the contract of building such Housing Project to the Donovan Construction Company. The stock in the sponsoring corporation will be held 10% By Mr. Ralph Wormsbecker and the 90% By the Donovan Interest. Any commissions on the loan secured by the sponsoring corporation from the F.H.A. will be awarded to the Real Estate Agency with which Mr. Wormsbecker is affiliated.

'Donovan Construction Company,

'By: George Donovan.

'Ralph W. Wormsbecker.

'M. C. Hoogesteger.'

Immediately after the execution of this agreement, George Donovan told plaintiff to go out and secure more jobs. Trouble developed in getting necessary sewer and water connections on the Gottfried property. Plaintiff thereafter drove around the Twin Cities looking for other suitable sites, and, with the Donovans, he looked at several such sites. About April 17, 1949, plaintiff learned of the site to be known later as Meadowbrook Manor, which had been considered by other parties for such a project and later abandoned. About two weeks later, on April 28 or 29, he drove out and looked at the project and reported to George Donovan. On May 1 he went to the Federal Housing Administration and obtained further information on this piece of land. On May 7, defendant executed an earnest money contract offering $40,000 for the proposed site. The owner rejected this offer. On June 10 plaintiff submitted a new offer in the amount of $55,000 for the land required for the housing project and additional land, which offer was accepted.

In the meantime plaintiff had met with village authorities respecting zoning and the procuring of water and sewer connections. He had induced defendant to retain the services of an architectural firm and had continued to work on the Meadowbrook and other projects. Speed was essential, since the National Housing Act was about to expire on June 30, 1949. ³ On May 18 plaintiff reported to defendant that he had secured preliminary approval of three sites, namely, Rosegarden, Ford, and Meadowbrook sites. It is needless to relate all the details following, but it is sufficient to say that the Meadowbrook project eventually was completed and the Rosegarden project abandoned.

Under the National Housing Act, it was necessary to have a so-called 'sponsoring corporation' created for the express purpose of engaging in the business of constructing and operating such housing unit and particularly for the purpose of holding legal title thereto. In compliance with this provision, defendant, in November 1949, caused Meadowbrook Manor, Inc., to be incorporated under the laws of Minnesota. Nine hundred ninety-five shares of the capital stock were issued to members of the Donovan family and later transferred to defendant. Five shares of preferred stock...