Opinion
No. C9-02-1933.
Filed June 10, 2003.
Appeal from the Cass County District Court, File No. C401584.
Stephen M. Baker, (for respondent)
Carl C. Drahos, Drahos, Young Kieson, P.A., (for appellants)
Considered and decided by Harten, Presiding Judge, Stoneburner, Judge, and Minge, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In this dispute about the value of extras added to a bid for a residential construction project, appellants Marty C. Brown and Rachel Brown challenge the judgment awarding $16,047 to respondent Beard Construction, Inc. Because the district court erroneously calculated the cost of materials for extras, we reverse and remand for a recalculation that clearly separates the costs of extras from the cost of materials originally in the bid.
FACTS
Appellants Marty C. Brown and Rachel Brown, who live in California, accepted a bid from respondent Beard Construction, Inc., to build a home in Cass County, Minnesota. The bid was based, in part, on the $50,071.37 bid of Walker Building Center (WBC) to supply lumber. Beard determined the final bid amount of $186,846 by adding 80% of the total cost of materials to that total cost, in order to account for labor, overhead, and profit. Beard did not use WBC for lumber, however, and bought lumber from Leech Lake Lumber, which submitted a higher bid.
The parties did not have a written contract other than Beard's bid, which provided that alterations or deviations from Browns' specifications would be extras. The parties had no agreement about how the value of extras would be calculated. At some point during construction, Beard stopped keeping track of labor and materials for extras.
When Beard left the project, Browns had paid Beard $169,776.95. Browns completed the project and paid $61,757 directly to suppliers for items included in Beard's bid. Beard sued Browns claiming he was owed $72,971.31 for the bid and extras. Browns counterclaimed, asserting that Beard failed to complete the contract resulting in additional costs in excess of $50,000. At the first trial in this matter, Marty Brown, who is a contractor, testified about the value of materials and labor for extras. Brown's analysis determined the cost of materials from actual invoices and added that figure to the number of hours he estimated each item would take multiplied by $25 (the rate Beard testified he paid per hour for labor). Brown also added an amount for reasonable profit.
Beard also asserted that he was entitled to a mechanic's lien, but that claim was rejected by the district court and is not part of this appeal.
Based primarily on the evidence presented by Browns, the district court found that the value of the extras was $32,088.49. The district court found that Browns failed to prove that Beard was dilatory or that they incurred any additional costs not related to extras that they had requested, and awarded Beard $32,088.49 plus costs and disbursements.
Browns moved for amended conclusions of law, arguing that the district court erred in applying its findings of fact to the conclusions of law by failing to credit Browns with the $61,757 that Browns had paid directly to subcontractors. Browns asserted that under the district court's findings of fact, the district court should have added the bid ($186,846) to the cost of extras ($32,088.49) to obtain a total of $218,934.49 for the project, and then should have subtracted the $61,757 paid by Browns to subcontractors and the $169,776.95 paid by Browns to Beard, ($218,934.49 — $61,757.00 = $157,177.49 — $169,776.95 = $12,599.46) resulting in a conclusion that Browns had overpaid Beard $12,599.46.
The district court denied the motion for amended conclusions of law, but sua sponte concluded that it had erred in its calculation of the value of extras. When the parties rejected the opportunity to accept the original verdict, the court vacated the judgment and set the matter for a new trial.
After the second trial, the district court calculated the value of extras by subtracting WBC's bid for lumber from the total cost of lumber delivered by Leech Lake Lumber, made an adjustment for increased costs and returned items and concluded that the cost of materials for additional extras was $30,611. The court then multiplied this cost by 80% to determine that Beard's cost of labor and reasonable profit for the additional extras was $24,489. ($30,611.13 x .80 = $24,488.90.) The district court then added $5,635 (representing the value of extras that the parties agreed on) to the cost of labor, material, and profit for the additional extras to arrive at $60,735 as the total value all extras. ($5,635 + $30,611.13 + $24,489 = $60,735.13). The district court then added the total value of all extras to the bid price to calculate the total cost of the project as $247,581, and subtracted amounts Brown paid to Beard and subcontractors ($169,776.95 + $61,757 = $231,533.95) to arrive at an award to Beard of $16,047, plus costs and disbursements. ($247,581 — $231,533.95 = $16,047.05.) This appeal followed.
Browns assert that the evidence does not support the district court's finding that the total cost of materials delivered by Leech Lake Lumber was $85,838 and that Beard's testimony established that the correct total was $83,686. During oral arguments, Beard suggested that the difference might stem from the cost of returned materials. But the district court subtracted that sum separately. On remand, the district court must use the correct figure for the total cost of materials delivered. If the $85,838 figure is the correct sum, we recommend the district court clearly explain what items make up this figure.
DECISION
"The construction and effect of a contract are questions of law for the court * * *." Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). Questions of law are reviewed de novo. Lefto v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn. 1998). Determining what constitutes extras not originally contemplated in a construction bid, and determining the reasonable charges for such extras are questions of fact. See New Ulm Bldg. Center, Inc., v. Studtmann, 302 Minn. 14, 225 N.W.2d 4, 6 (1974).
Findings of fact * * * shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.
On appeal, a trial court's findings of fact are given great deference, and shall not be set aside unless clearly erroneous. * * * If there is reasonable evidence to support the trial court's findings of fact, a reviewing court should not disturb those findings.
Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (citations omitted). In general, when a motion for a new trial was not made in the court below, the only questions for appellate review are whether the evidence sustains the findings of fact and whether the findings sustain the conclusions of law and the judgment. Novack v. Northwest Airlines, Inc., 525 N.W.2d 592, 596 (Minn.App. 1995).
Browns challenge the method used by the district court to determine the value of extras and assert that the record does not support several of the district court's findings of fact. The general rule in construction contracts is that
where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be * * * entitled to additional compensation where the job is more costly or difficult than anticipated.
D. H. Blattner Sons, Inc. v. Firemen's Ins. Co. of Newark New Jersey, 535 N.W.2d 671, 675 (Minn.App. 1995) (quotation omitted), review denied (Minn. Oct. 18, 1995). And, typically, a contractor is due the reasonable value of any extras. See New Ulm Bldg. Ctr. Inc., 225 N.W.2d at 6 (indicating court should determine whether charges for extras are reasonable). But there is no specific formula to determine what constitutes reasonable value.
Browns argue that the district court should have determined the cost of extras by applying the formula used in Zontelli Sons, Inc. v. City of Nashwauk, 373 N.W.2d 744 (Minn. 1985) (calculating value of extras by adding 15% to actual cost of labor and materials). But there is no authority for the proposition that when the parties have failed to agree on the method of computing charges for extras, or when the method agreed upon is inadequate as a matter of law, that the formula used in Zontelli and advocated by Browns, must apply. In fact, the formula used in Zontelli was taken from a specific contract provision in that case. Id.
Browns argue that the district court, when determining the cost of materials for the extras, wrongly shifted to Browns the increase in cost that resulted from Beard's decision to use Leech Lake Lumber rather that WBC as the lumber supplier. We agree. Beard's bid of $186,846 was based on WBC's $50,071.37 bid for materials that included an $8,000 cabinet allowance. Leech Lake Lumber's bid was $4,797.43 higher than WBC's bid and did not include a cabinet allowance. By using WBC's bid to calculate the cost of materials for the extras, the district court, without explanation, shifted the $12,797.43 difference in the bids, which should have been Beard's responsibility, to the cost of materials for extras, which was Browns' responsibility. This method of calculation failed to hold Beard to bid price for materials called for in the original bid. Because a general contractor is bound by his bid, the district court erred by shifting the burden of the higher cost of materials in the original bid to Browns.
Browns also complain that the district court wrongly shifted the risk of price increases on the originally bid-for materials to Brown. It appears that the district court attempted to keep this risk with Beard by deducting $3,000 for price increases, but both parties agree that nothing in the record supports this figure or explains why the district court made this adjustment. On remand, the district court must determine if there were price increases on the bid-for materials and ensure that Beard retains the responsibility for those increases that were caused by Beard's failure to lock in the lumber bid.
Browns also argue that the district court erred as a matter of law by determining labor costs and profit associated with the extras by multiplying material costs by 80% rather than by multiplying the hours of labor needed for each extra by Beard's rate of $25 per hour. But Beard testified that he determined labor costs and profit for the original bid by multiplying the cost of materials by 80%. And the district court looks first to the agreement of the parties to determine what calculation most appropriately carries out their intent. Zontelli, 373 N.W.2d at 752.
The issue on appeal is not whether Browns' formula is valid or more reasonable than the district court's formula, but whether the district court's formula produces a value that is so unreasonable that it is clearly erroneous. See e.g., Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn.App. 2000) (stating that fact that record could support findings other than those made by district court does not render district court's findings clearly erroneous). Browns' method of calculating the reasonable value of extras in the first trial was a valid method. But the district court's method is not rendered unreasonable just because Brown's proposed method is also reasonable. On appeal, Browns have demonstrated that use of 80% of material costs to calculate labor and profit can result in extremely high profit on individual extras, such as windows, where the material cost is very high but the labor involved is minimal. But Browns accepted Beard's bid as reasonable. Use of the same method to calculate labor and profit for the extras does not, therefore, appear to be unreasonable. We conclude that the district court did not abuse its discretion in the method of calculating Beard's labor for the extras, but the formula must be applied to a corrected computation of the cost of materials that does not shift to Brown any increases from the bid price that should have been Beard's responsibility.
Browns also argue that the district court's computations resulted in Browns absorbing the cost for missing materials: items allegedly delivered to the building site and not returned to Leech Lake Lumber or used in the building. But the district court did not make any findings that there were such materials, and on the record before us we cannot conclude that the lack of such a finding is clearly erroneous. The district court may, in its discretion, reopen the record for additional evidence if it determines that such evidence is necessary to separate cost of materials for extras from the cost of materials called for in the original bid.