United Homes v. Wolski
DO NOT CITE. SEE RAP 10.4(h).
Court of Appeals Division I
State of Washington
Opinion Information Sheet
Docket Number: 37714-1-I
Title of Case: United Homes Inc., Res/Cross-App
v.
Jan & Jane Doe Wolski, App/Cross-Res
File Date: 02/02/98
SOURCE OF APPEAL
----------------
Appeal from Superior Court of King County
Docket No: 94-2-01804-3
Judgment or order under review
Date filed: 10/11/95
Judge signing: Hon. James W. Bates Jr
JUDGES
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Authored by Ann L. Ellington
Concurring: Susan R. Agid
Ronald E. Cox
COUNSEL OF RECORD
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Counsel for Appellant(s)
Charles K. Wiggins
Attorney At Law
241 Madison Ave N
Bainbridge Is, WA 98110
Counsel for Respondent(s)
Michael J. Reynolds
Attorney At Law
329 E. Main St.
Auburn, WA 98002-5540
Francois L. Fischer
Weinstein Fischer et al
2101 4th Ave Ste 900
Seattle, WA 98121-2317
William S. Weinstein
Weinstein Fischer et al
2101 4th Ave Ste 900
Seattle, WA 98121-2317
Heath W. Merchen
329 East Main Street
Auburn, WA 98002
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
UNITED HOMES, INC., ) No. 37714-1-I
)
Respondent, ) DIVISION ONE
)
and )
)
RELIABLE HOLDINGS, INC., )
d/b/a RELIABLE SHEET METAL, )
and DELTA PLUMBING & HEATING CO., )
a corporation, )
)
Plaintiffs, )
) UNPUBLISHED OPINION
v. )
)
JAN WOLSKI and JANE DOE WOLSKI, ) FILED:
husband and wife, )
)
Appellants. )
)
and )
)
KEVIN HERGERT and JANE DOE HERGERT, )
husband and wife, and CLINT HERGERT and )
JANE DOE HERGERT, husband and wife, )
)
Third-Party Defendants. )
)
ELLINGTON, J. -- Jan and Jadwiga Wolski (Wolski) contracted with
United Homes, Inc., to build their home. Wolski terminated the contract
midway through the job, and United Homes sued. The trial court found
defects in the framing and foundation drainage, costing about $7,000 to
remedy, but concluded that the defects did not excuse Wolski's performance
under the contract and that he breached the contract by terminating United
Homes. The court awarded United Homes $48,709.47 for damages, $1,300.35
for costs, and $162,135 for attorney fees. We affirm the damage award, but
reverse as to attorney fees.
Facts
United Homes, through its agents Clinton and Kevin Hergert, developed
a residential real estate project in West Seattle called Viewpointe. In
April 1993, Wolski purchased one of the Viewpointe lots from United Homes
for $70,000. Per the purchase and sale agreement, Wolski contracted for
United Homes to build a home on the lot. The parties agreed that the
construction contract was a "fixed price contract" for $218,000. Wolski
then obtained a construction loan from the bank. Wolski paid the first
draw, but did not authorize the second draw. Wolski terminated the
contract on October 29, 1993.
In January 1994, United Homes sued Wolski to compel mediation or
arbitration under the construction contract, or in the alternative, sought
a judgment for the amount of its lien and attorney fees "allowed by law."
Wolski denied breaching the contract, asserted that United Homes breached
the contract by failing to cure construction defects, and raised several
defenses and counterclaims. Wolski also sought attorney fees under the
lien statute, the Consumer Protection Act, and "as reasonable."
United Homes moved to compel arbitration. Wolski opposed arbitration,
asserting that he "never agreed to give up {his} right to {go to} court" if
a dispute arose when he signed the contract. Wolski argued that the
contractual arbitration provision was ambiguous on its face, providing no
basis for the court to compel arbitration. The trial court agreed, and
refused to compel arbitration.
Following a 16-day trial,1 the trial court determined that the
contract was based on United Homes' standard specifications, plus an
agreement for more brick work and more square feet, and that Wolski agreed
to pay separately for any additional upgrades.
The contract required United Homes to use first quality materials and
workmanship. The quality of the materials was not disputed. As to the
quality of the workmanship, the trial court was persuaded by expert
testimony that the work was first quality, but found that defects in the
framing cost about $7,000 to repair. The court concluded that Wolski
breached the construction agreement by terminating United Homes and failing
to pay for work it performed. The court found him liable for $48,709.47 in
damages.
Both parties sought attorney fees in pretrial briefing: United Homes
sought fees under the contract; Wolski sought fees generally under both
statute and contract. After trial, United Homes again requested attorney
fees under the contract, under the loan agreement, and based on Wolski's
intransigence during trial. Wolski opposed the fee request, asserting that
no statutory basis for such an award existed because the lien claim was
dismissed, and no contractual basis existed for attorney fees after a
trial. Wolski also claimed he was entitled to fees for the defect award,
but made no specific request segregating those fees.
The trial court found that the parties mutually intended the
contract's arbitration and mediation provision to provide for reasonable
attorney fees to the prevailing party in the event of litigation. The
court determined that United Homes was the prevailing party, and awarded
$162,135 in attorney fees.
Analysis
Proof of Damages
Wolski contends that United Homes presented insufficient evidence
under any recognized theory of contract recovery to support the trial
court's damage award.2 In reviewing such a challenge, we bear in mind that
the trier of fact has discretion to award damages within the relevant
evidence. We will not disturb such an award unless it (1) is not supported
by substantial evidence in the record, (2) shocks the conscience, or (3)
appears to have arisen from passion or prejudice. Federal Signal Corp. v.
Safety Factors, Inc., 125 Wn.2d 413, 439, 886 P.2d 172 (1994) (citing Mason
v. Mortgage America, Inc., 114 Wn.2d 842, 850, 792 P.2d 142 (1990)).
Having carefully reviewed the record, we find the evidence adequate to
support the damage award.
Our courts have recognized different methods for calculating contract
damages, including those arising from the injured party's expectation
interest and those attempting to disgorge the breaching party's gain.
Mason, 114 Wn.2d at 849 (damages based upon expectation); Dravo Corp. v. L.
W. Moses Co., 6 Wn. App. 74, 90, 492 P.2d 1058 (1971), review denied, 80
Wn.2d 1010 (1972) (damages based upon restitution); see generally 3 Dan
Dobbs, Dobbs Law of Remedies sec. 12.1(1) (2d Ed. 1993) (discussing
theories of contract damages). Damages from expectation interests attempt
to put the injured party in as good a position as performance would have.
Mason, 114 Wn.2d at 849. Restitution damages attempt to put the injured
party in as good a position as before the contract. Dravo, 6 Wn. App. at
90.
As the party seeking damages, United Homes had the burden of producing
sufficient evidence to support its claim. Modern Builders, Inc. of Tacoma
v. Manke, 27 Wn. App. 86, 95, 615 P.2d 1332, review denied, 94 Wn.2d 1023
(1980). Damages need not be established with mathematical precision, but
they must be supported by competent evidence in the record. Federal
Signal, 125 Wn.2d at 443 (citing Interlake Porsche & Audi, Inc. v. Bucholz,
45 Wn. App. 502, 510, 728 P.2d 597 (1986), review denied, 107 Wn.2d 1022
(1987)); ESCA Corp. v. KPMG Peat Marwick, 86 Wn. App. 628, 639, 939 P.2d
1228 (1997). Such proof exists if the evidence establishes a reasonable
basis for estimating the loss without resorting to speculation or
conjecture. Federal Signal, 125 Wn.2d at 443 (citing Bucholz, 45 Wn. App.
at 510); ESCA, 86 Wn. App. at 639; Sign-O-Lite Signs, Inc. v. DeLaurenti
Florists, Inc., 64 Wn. App. 553, 566, 825 P.2d 714, review denied, 120
Wn.2d 1002 (1992). The amount of evidence sufficient to prove damages
necessarily depends on the circumstances in each case. Jacqueline's Wash.,
Inc. v. Mercantile Stores Co., 80 Wn.2d 784, 786-87, 498 P.2d 870 (1972).
Here, the damage award was calculated by valuing United Homes' work
and materials at $154,215, subtracting the first draw payment of $85,742
and Wolski's direct payments to subcontractors of $12,124, and subtracting
the costs to cure the framing and drainage defects of $7,639.63. This
calculation was taken almost directly from United Homes' damage summary.
Kevin Hergert presented the damage summary at trial, explaining that
United Homes sought damages based upon the work it performed, calculated as
the "fixed" contract price of $218,000 plus the price of extras Wolski
requested, less the cost of completion.3 He explained that the cost of
completion figure was derived by subtracting the draw requests and profit
figures from the fixed price plus extras. He admitted that the initial
cost breakdown, the draw requests, and the profit figures were estimates
and would vary based upon the actual costs at the time of construction.
United Homes also presented testimony from expert Terry Eggert to
support the damage calculation. Eggert's projections were based on the
estimated costs used for the draw requests discussed above, and show the
difference between the estimated costs under United Homes' original
specifications and the actual costs to complete under new specifications
requested by Wolski.
Bank loan officer May Wan explained the bank's general practice of
inspecting a construction site before approving a draw request, and assumed
that an inspector did so here. This suggests that the first draw request,
which the bank approved, reflected actual costs, although the second
request does not benefit from this inference since Wolski never authorized
payment.
Wolski challenges the trial court's reliance on United Homes' cost
estimates. While such evidence is not ideal, the exhibit evidence was
extensive and confusing. Hundreds of exhibits were offered; the record
often is unclear as to the meaning of testimony about exhibits. We
conclude that the estimate evidence was consistent with the total project
price and with the percentage of progress at the time of termination. The
record suggests that the subsequent contractor's actual costs for non-
modified items was very close to Hergert's original estimates for United
Homes' work. Under the facts and circumstances here, we cannot say the
trial court's reliance upon estimates was an abuse of discretion, and we
find the trial court's ruling on damages is adequately supported by the
record.
Remedy for Defective Work
Wolski contends that after finding he spent $7,639.63 to cure United
Homes' defective work, the court should have awarded him "that part of
completing construction in excess of the contract price." We disagree.
Paragraph 7 of the construction contract specifically provides the
remedy for correcting defects, stating that if a contractor fails to cure
defects after being given notice and the opportunity to do so, the owner
may cure the defects and deduct the cost from the payment to the contractor
or be reimbursed directly for the costs. This is precisely the remedy
afforded Wolski by the trial court.
Here, the trial court's undisputed findings indicate that (1) the
contract was based upon United Homes' standard specifications, (2) United
Homes' materials and workmanship were "first quality," even though some
repair was needed, (3) the actual cost for another contractor to make the
repairs was $7,639.63, and (4) United Homes made no material factual
misrepresentations to Wolski. Other undisputed findings indicate that
Wolski's requested design changes delayed completion and increased costs,
that Wolski agreed to pay the extra costs for those changes, and that the
cost for the completed house included the cost of higher quality materials
than those in the original specifications.
These findings indicate that any defect in United Homes' performance
was not a proximate cause of the additional cost to Wolski, beyond the
costs to cure. The trial court's conclusion that Wolski breached the
contract by terminating United Homes necessarily implies a finding that
United Homes' defective performance was not a material breach justifying
termination. See Bailie Communications, Ltd. v. Trend Bus. Sys., 53 Wn.
App. 77, 81, 765 P.2d 339 (1988), review denied, 113 Wn.2d 1025 (1989)
(material breach by one party gives other party right to withhold further
performance). While the issue was significantly disputed at trial, the
court's conclusion is supported by substantial evidence. Wolski complains
that the trial court "should have made a finding on this issue but never
did so." But an absent finding is construed against the party with the
burden of proof on the issue. See Golberg v. Sanglier, 96 Wn.2d 874, 880,
639 P.2d 1347, 647 P.2d 489 (1982). We affirm the trial court's denial of
damages to Wolski for the additional costs to complete the house.
Attorney Fees
On appeal, Wolski argues that the trial court erred in (1) not
awarding him attorney fees incurred to cure the construction defects as
allowed under contract paragraph 7,4 and (2) awarding United Homes attorney
fees under contract paragraph 13,5 which is not a general fee provision and
which only provides for fees arising from three specific enforcement
actions after arbitration. We agree on both issues.
Our courts have held that an award of attorney fees is mandatory when
called for by a contractual provision. Singleton v. Frost, 108 Wn. 2d 723,
727-29, 742 P.2d 1224 (1987). It is undisputed that contract paragraph 7
provides for attorney fees incurred in curing defects. Paragraph 13
provides for fees for three actions relating to arbitration: compelling
arbitration, defending an arbitration award, or enforcing an arbitration
award. It makes no mention of fees for trial. Here, the court considered
extrinsic evidence and essentially reformed the contract to provide for
fees for all litigation purposes. This was error.
Under the context rule for contract interpretation, our courts
ascertain the parties' intent by considering extrinsic evidence to
understand the contract's terms, but such evidence cannot be used to show
an intent independent of the contract. In the Matter of the Marriage of
Schweitzer, 132 Wn.2d 318, 326-27, 937 P.2d 1062 (1997) (citing Berg v.
Hudesman, 115 Wn.2d 657, 669, 801 P.2d 222 (1990) (additional citation
omitted)). Absent some evidence of fraud, accident, or mutual mistake,
parol evidence cannot be used to add to, modify, or contradict the terms of
a written contract. Schweitzer, 132 Wn.2d at 327 (citing Berg, 115 Wn.2d
at 669) (additional citation omitted)).
United Homes seems to argue that the extrinsic evidence was admissible
to show mutual mistake. United Homes contends that the extrinsic evidence
explained the undisputed ambiguity in paragraph 13,6 thus equating the
ambiguity with a mutual mistake. A mutual mistake exists when the parties
had an identical intent at contract formation, but failed to express that
intent in the contract. See Snyder v. Peterson, 62 Wn. App. 522, 527-28,
814 P.2d 1204 (1991).
Here, the trial court recognized the ambiguity in contract paragraph
13 and, after considering extrinsic evidence, concluded that the parties
intended to provide for attorney fees to the prevailing party following
litigation in any forum. Clinton Hergert testified that United Homes
intended the contract to provide for attorney fees in the event of
litigation and that Wolski was told he would be responsible for attorney
fees in the event of arbitration, trial, or a lien on the property. On
cross examination, Wolski acknowledged his earlier deposition testimony
that he understood the contract's mediation and arbitration provision.
When asked in deposition if he knew that attorney fees would have to be
paid even if no mediation or arbitration occurred, Wolski said yes.
Wolski's counsel objected, asserting that "{i}t is not an issue in the case
anymore." Since the parties were in litigation, not in arbitration, and
Wolski was presumably incurring attorney fees, this testimony does not
clearly indicate that both parties originally mutually intended for
contract paragraph 13 to provide for attorney fees after trial.
The extrinsic evidence available here fails to establish a mutual
mistake. The trial court erred by reforming the contract and adding a
provision for attorney fees after trial. Without this reformation,
paragraph 13 can only be interpreted to provide for attorney fees after
certain actions arising from arbitration, not litigation. No other basis
exists in the contract for this fee award. We therefore reverse the award
of attorney fees to United Homes.
As to Wolski's claim for fees incurred to cure defects, it is
undisputed that Wolski prevailed on the issue. Wolski did not segregate
his fee request, but his post-trial response to United Homes' fee request
asserted his right to a fee award based upon the court's conclusion that he
incurred costs to cure defects. Wolski was thus entitled to attorney fees
arising from his claim for the costs to cure defects, and the trial court
erred in denying such fees. Further, we grant Wolski's request for fees on
appeal arising from this issue only.
Affirmed in part, reversed in part, and remanded for calculation of
attorney fees, at trial and on appeal, arising from the award for the cost
of curing defects.
WE CONCUR:
1 The length of trial far exceeded the parties' time estimates, in part
because the trial court was forced to referee constant minor disputes
between the parties and their counsel.
2 Wolski also challenges the conclusion that any breach actually occurred.
But unchallenged findings establish that Wolski and United Homes had a
contract, that United Homes' work met contract standards, that Wolski
refused to authorize the second draw request, and that Wolski terminated
the contract. These unchallenged findings support the court's conclusion
that Wolski's termination of United Homes was unjustified and constituted a
breach.
3 In briefing to this court, United Homes cites exhibits to support its
damage calculation, but some of those exhibits were not admitted into
evidence below and United Homes does not argue that the court erred by not
admitting them. We do not consider exhibits that were not admitted into
the record before the trial court. Dioxin/Organochlorine Ctr. v.
Department of Ecology, 119 Wn.2d 761, 771, 837 P.2d 1007 (1992).
4 Paragraph 7 provides:
Correction of Defects. Contractor shall employ only first-quality
materials and workmanship and the Work shall be generally done in
accordance with the best prevailing practices and with reference thereto.
In the event that any work fails to conform to the requirements of the
Contract, it shall be corrected by Contractor immediately on its discovery;
the Contractor further provides the Owner with a one (1) year warranty
following completion of the Contract, equivalent to the first year warranty
provided under the N.A.H.B. Home Owner's Warranty (H.O.W.) program. Claims
for warranty work to be made in writing directly to Contractor.
If deviations, defects, or deficiencies in the Work are not remedied to the
satisfaction of Owner within a reasonable time specified by Owner, or if
Contractor shall fail or neglect to perform any of {the} obligations
covered by any provisions of the Contract Documents properly or in a good
and workmanlike manner, then Owner, after 10 days written notice to
Contractor, without prejudice to any other right or remedy, may correct any
such deviation, deficiency, or defect to himself, and Contractor agrees to
reimburse Owner for the entire cost thereof either by way of deduction from
any payment then or thereafter to be made to Contractor, or by payment of
the invoice of Owner therefor, such costs to include labor, materials,
value of time spent by Owner, attorney's fees, and other incidental and
consequential costs and damages.
5 Paragraph 13 of the contract states:
Mediation and Arbitration: In the event of a claim or dispute or other
matter in question between the parties to this Contract arising out of or
relating to this Contract, or breach thereof, the parties agree to
participate in three hours of mediation in accordance with the Mediation
Procedures of WASHINGTON ARBITRATION SERVICES. The arbitrator's decision
shall be final and binding and judgment may be entered thereon. In the
event a party fails to proceed with the arbitration, or unsuccessfully
challenges the arbitrator's award, or fails to comply with the arbitrator's
award, the other party is entitled to costs of suit including a reasonable
attorney's fee for having to compel arbitration or defend or enforce the
award.
6 Wolski is estopped from asserting that the provision is not ambiguous
because he relied on that argument to prevent arbitration. See Meyers Way
Dev. Ltd. Partnership v. University Sav. Bank, 80 Wn. App. 655, 676 n.18,
910 P.2d 1308, review denied, 130 Wn.2d 1015 (1996) (party estopped from
asserting one position to court in one proceeding and then taking an
inconsistent position in subsequent proceeding).