Opinion
NO. 2012-CA-0511
12-05-2012
GROGAN & SONS, LLC v. JOSEPH KNECHT, ET AL.
Ike Spears SPEARS & SPEARS AND Pedro F. Galeas THE GALEAS LAW CORPORATION COUNSEL FOR PLAINTIFF/APPELLEE Kathryn T.Wiedorn Claudette L. Bienvenu PELLETERI & WIEDORN, L.L.C. COUNSEL FOR DEFENDANT/APPELLANT
APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2007-13066, DIVISION "L-6"
Honorable Kern A. Reese, Judge
Judge Daniel L. Dysart
(Court composed of Chief Judge Charles R. Jones, Judge Dennis R. Bagneris, Sr., Judge Daniel L. Dysart) BAGNERIS, J., CONCURS IN PART AND DISSENTS IN PART Ike Spears
SPEARS & SPEARS
AND
Pedro F. Galeas
THE GALEAS LAW CORPORATION
COUNSEL FOR PLAINTIFF/APPELLEE
Kathryn T.Wiedorn
Claudette L. Bienvenu
PELLETERI & WIEDORN, L.L.C.
COUNSEL FOR DEFENDANT/APPELLANT
AFFIRMED IN PART, AMENDED IN PART, REVERSED IN PART
This appeal concerns a dispute over amounts owed under verbal construction contracts for renovation and other construction work performed in the aftermath of Hurricane Katrina. For the reasons that follow, we affirm in part, amend in part, and reverse in part.
FACTUAL AND PROCEDURAL BACKGROUND:
Defendants-appellants, Joseph Knecht and Jane Knecht (the "Knechts"), own several properties in the Lakeview neighborhood of Orleans Parish. Two of the properties are duplexes located at 6237-39 Catina Street (the "Catina" property) and 200-2 Harrison Avenue (the "Harrison" property), while the third is the Knechts' family home located at 6941 Louisville Street (the "Louisville" property). All of the properties sustained damages in Hurricane Katrina and the Knechts contracted with plaintiff-appellee, Grogan & Sons, LLC ("Grogan"), for the repair of the three properties and the addition of a second floor to the Louisville property. While Mr. Knecht testified that he "pushed" for a contract, unfortunately, there was never a written contract for any of the work and all agreements were made orally. The parties do not dispute that lawful contracts for the work existed; however, they dispute the terms of the contracts.
Patrick Grogan ("Patrick Grogan") and his son, Robert Grogan (collectively sometimes referred to as "the Grogans"), came to the New Orleans area from Illinois shortly after Hurricane Katrina to assist in rebuilding the home of a family friend, Helen Calmes. Patrick Grogan had been in the construction business since 2000, while Robert Grogan began working in construction with his father on a full time basis after Hurricane Katrina. During the course of work on Ms. Calmes' home, the Grogans met the Knechts, who asked if they could help in the renovation of the Catina and Harrison properties. The Grogans agreed to do so and entered into an oral contract for the work. Prior to the conclusion of the work on the Catina/Harrison properties, the Knechts approached Patrick Grogan about the renovation of the Louisville property and the addition of a second floor to the home.
Prior to Katrina, the Knechts had entered into a contract for this addition and some renovations to the Louisville property for which blueprints were drafted; however, because of difficulties in contacting the original contractor, the Knechts sought this work from Grogan. It appears that some work on the addition had started prior to Katrina, the extent of which is unclear from the record.
The parties' testimony was consistent on certain aspects of their oral contracts. On the Catina/Harrison properties, the parties agreed that Patrick Grogan initially quoted a budget of between $110,000 and $120,000 per property and on the Louisville property, the parties agreed to a budget of between $200,000 to $210,000. Mr. Knecht testified that he understood these budgets to encompass the total cost for the projects. Patrick Grogan, on the other hand, testified that their agreement called for the Knechts to pay for labor and materials and, once the projects were complete, the Knechts would be billed for a "builder's fee." This is the fundamental dispute between the parties, and the non-payment of all of the invoices presented by Grogan resulted in the instant lawsuit filed on September 24, 2007.
Grogan admits that, between November 16, 2005 and May 23, 2006, the Knechts paid $135,000 for the work on the Catina/Harrison properties. The Petition alleges that, when the work on these properties was completed, there was an outstanding balance of $156,260.29, for "the labor and services provided by [Grogan]." Grogan then alleges that, on May 16, 2006, the Knechts paid $100,000 on the outstanding balance, and an additional $50,000 was paid on July 14, 2006. For the work on the Catina/Harrison properties, the Petition for Damages alleges a balance owed of $6,260.69. According to the Petition, Grogan's fee was based on a $30.00 per square foot charge (the total square footage for the two properties is 5,128). In his testimony, Patrick Grogan described the fee as "[his] fee for the labor and [his] son's labor of putting these projects back together."
It does not appear that the fee for labor was based on an hourly rate for the labor performed; rather, the fee was based on a per square footage rate.
With respect to the Louisville property, the Knects paid Grogan $207,000 between March 10, 2006 and January 30, 2007. At the conclusion of the work, Grogan presented the Knechts with an invoice for $80,784.00, which was noted to be the "Builder's fee," which the Knechts did not pay. Grogan contends that this fee was also based on an amount per square foot; for this property, Grogan indicated the fee to be $22.00 per square foot (the total square footage for the Louisville property is 3,672).
Again, this fee appears to be based on a per square foot rate, rather than an hourly rate for the labor performed.
A bench trial on the merits was held on December 5-6, 2010 and judgment in Grogan's favor was rendered on August 15, 2011. The judgment awarded Grogan $5,634 for the outstanding balance on the Catina/Harrison properties, $50,000 for the Louisville property, which the court deemed to be a "fair and equitable builder's fee," plus legal interest from the date of judicial demand, and attorney's fees incurred and to be incurred in the collection of the judgment. The judgment was unclear as to the amount of the attorney's fees: for the Catina/Harrison properties, the judgment awarded attorney's fees of 20%; it was silent as to the amount for the Louisville property and, in the summation of the judgment, the attorney's fees award was 20%.
The Reasons for Judgment indicate that the Knechts were entitled to a 10% reduction on the outstanding amounts because of certain incomplete items of work.
The Knechts filed a Motion for New Trial on several bases: the testimony and findings were not supported by the evidence; there is no legal basis for an award of attorney's fees; and the 10% reduction of the award needed clarification. Grogan filed a Motion to Tax Costs and to Amend the Judgment. Grogan's Motion argued that the trial court's award for the Louisville property incorrectly reduced the amount of the outstanding invoice by 38%, rather than the 10% noted in the court's Reasons for Judgment.
A hearing was held on November 4, 2011 on the post-trial motions of the parties. On February 16, 2012, the trial court issued 3 judgments, all with written reasons. The first denied the Knechts' Motion for New Trial. The second granted Grogan's Motion to Tax Costs and Amend Judgment, which granted costs of $2,901.35 to Grogan, but denied Grogan's request for an amendment of the judgment. The third, an Amended Judgment, clarified the original judgment, although the award to Grogan was confirmed; it awarded Grogan the total sum of $55,634.60 ($5,634 for the Catina/Harrison properties- which is the total outstanding invoice, less a 10% reduction and $50,000 for the Louisville property), plus judicial interest and attorney's fees of 20%.
The award for costs has not been raised as an issue on appeal.
From this judgment, the Knechts timely took a suspensive appeal. Grogan answered the appeal, seeking to recover the full amount of both of the outstanding invoices, asserting that the judgment and the reasons for judgment provided no basis for a reduction in the award for all properties (the 10% reduction on the Catina/Harrison properties and the $50,000 award for the Louisville property).
SUMMATION OF THE RECORD:
As noted, no party disputes that oral agreements existed between the parties. However, we are presented with the difficult task of assessing the various exhibits and the conflicting testimony in light of the applicable standard of review for breach of contract cases, namely, whether the trial court abused its discretion in its award of damages. See: Tallulah Const., Inc. v. Northeast Louisiana Delta Community Development Corp., 2007-1029, p. 5 (La.App. 4 Cir. 4/23/08), 982 So.2d 225, 229. Like the First Circuit noted in Smith v. Baham, 439 So.2d 1213, 1215 (La. App. 1st Cir. 1993), "[i]t is virtually inconceivable the parties would have entered into a contract of this magnitude without a written agreement as to the rights and obligations between them." The Smith court further recognized the difficulty presented when the trial court "some 3 years after the construction took place, was expected to 'straighten it all out.'" Id. We are faced with the same difficulty here, where the trial took place some 4 to 5 years after the conclusion of the construction work.
The main issue in this appeal, and the issue upon which all other issues in this appeal are founded, is whether the parties agreed to a builder's fee in their oral construction agreements. This issue is clearly a factual issue and one which is determined by the credibility of the witnesses given the lack of any written agreement. In this regard, the trial court found that "Patrick Grogan gave credible testimony as to the existence" of contracts for the work performed. It further found:
The evidence shows that the builder's fee was a pertinent part of said contracts. The evidence shows that the builder's fee for the Catina Street and Harrison Avenue contract was $30.00 per square foot. The evidence shows that the builder's fee for the Louisville Street contract was $22.00 per square foot. The evidence also shows that the Defendant, Joseph Knect, is a sophisticated individual who had the capacity to understand that there would be a builder's fee over and above the money that he spent on sub-contractor labor and building materials.
The trial court noted that "a course of dealing had been established between the parties." It described this course of dealing for all properties as follows: "the Defendants would provide the Plaintiff with money to buy materials and pay subcontractors" and, at the completion of the renovations, "the Plaintiff provided the Defendants with an invoice which showed the amounts paid for materials and subcontractor labor." These invoices showed outstanding balances as to each oral contract.
The trial court concluded that the "evidence shows that the Defendant... allowed the Plaintiff... to build his family home... after the Defendant completed the renovation of the Defendant's rental properties," which may have aided the trial court in its determination of the "course of dealing." This conclusion is not supported by the evidence. According to the trial exhibits, the Knects began submitting deposits for the Louisville property work in March, 2006, and Grogan's receipts show that it began purchasing materials for the Louisville property in March, 2006. The evidence further shows that Grogan was still purchasing materials for the Catina/Harrison properties as late as June, 2006. Similarly, the Knechts were making payments for these properties in April and May, 2006, with the last payment made in July, 2006. Clearly, work on the Catina/Harrison properties was not completed when work on the Louisville property began.
The record, as a whole, does not clearly show the manner in which either construction project was billed or paid. On direct exam, Patrick Grogan testified, with respect to billing, that "[a]bout once a month, there was a report generated... as to... how much money Mr. Knecht had given us, the amount of receipts and for materials or labor...." On cross-examination, however, when questioned as to how often he gave the Knechts invoices during the Catina/Harrison project, he testified that "[i]t might have been monthly. It might have been every six weeks...." He later testified that "[w]hen [Mr. Knecht] asked for invoices, [he] would give them to him." Mr. Knecht, on the other hand, testified that, while he received documentation for the first month or two, he received none after that. We believe that the evidence at trial supports Mr. Knecht's testimony.
No actual invoices were submitted at trial which showed the work or payment for the work on either project as they progressed. What was introduced at trial are various "expense reports" which show the costs of the projects, none of which are tied to any particular bill provided to the Knechts or any particular payments made by the Knechts. Not a single expense report introduced in evidence showed purchases in chronological order; rather, the majority of the expense reports show expenses incurred by various facilities or persons in alphabetical order. As such, the reports contain expenses from various time periods and do not show the expenses as they were incurred or paid.
For instance, Grogan's Catina & Harrison Expense Report 1 contains a list of charges for materials which were purchased from November, 2005 through May, 2006. Expense Reports 2 and 3 show materials purchased from November, 2005 through June, 2006. Similarly, Expense Report 4 shows materials purchased from January, 2006 through June, 2006. All of the "expense reports" are undated, cover overlapping periods of time and clearly, do not document the progression of the work or the amounts billed to the Knechts for which the Knechts made payments.
The exhibits, particularly for the Catina/Harrison properties show sloppy bookkeeping on the projects. Having gone through each of the exhibits, we note discrepancies in many of the expense reports. For example, Exhibit 2, the Catina & Harrison Expense Report 1, has no receipts attached for 12 of the last 14 items on the list, totaling $7,778.15.Similarly, we note that some of the expenses are unsupported by any documentation. This same expense report lists $1,800.00 as "clean out." The only documentation of this expense is a piece of notepaper on which is handwritten "clean out." Unlike other expenses for labor, which specifically identify the laborers and payments, this notepaper does not even list to whom this payment was made.
Exhibit 2 also contains 3 invoices reflecting charges by Filadelfo Avila for labor for the Catina/Harrison properties. Two are dated 5/15/06 and each reflects charges of $21,500.00, which is listed in the expense report. Also attached is a 5/10/06 invoice for painting and related work by Filadelfo Avila, reflecting a charge of $22,200, which is not listed in the expense report or any other expense report prepared for the Catina/Harrison properties. On this invoice are handwritten notes, including one of which states "Catina & Harrison." The square footage listed on this invoice does not match the square footage of the Catina/Harrison properties. Thus, this 5/10/06 invoice is unexplained and there no accounting for it, despite its introduction as evidence of the expenses for the Catina/Harrison properties.
We also find perplexing the handwritten notepaper which purportedly shows some of the amounts paid for labor to "Bob" and "DT" in 2006. While the notepaper does not state what the amounts represent, they correspond with the amounts listed in the 1099s for Robert Grogan and Damon Trumpy. What is particularly puzzling is the writer of this list of charges (whose identity is unknown) placed a question mark by each month, which certainly gives the appearance that there is some doubt as to either the amounts being charged for labor or the months in which those labor charges were incurred. In either case, this exhibit does not instill confidence in Grogan's record keeping.
Expense reports 2, 3, and 4 (Exhibits 3-5) also list some expenses which are not documented by the attachments, in the amounts of $207.91, $1,623.38 and$1,856.44, respectively.
The same lack of clarity is found in examining the undated "expense reports" submitted into evidence on the Louisville property. Nine expense reports were introduced at trial and for the sake of brevity, we note that the first expense report shows materials purchased from April, 2006 through February, 2007. The last expense report also reflects materials purchased from April, 2006 through February, 2007. The remaining seven expense reports show materials purchased on various dates during this time period. Like those submitted for the Catina/Harrison properties, these expense reports were clearly not prepared during the course of the projects or regularly submitted to the Knechts for payment as the projects were ongoing.
We note some confusion as to the attachments for many of the exhibits on the Louisville property as well. For example, Louisville Expense Report 2 shows an invoice and charges for the labor of Erley Souza in the amount of $14,813.00. The checks written to Mr. Souza and attached as supporting documentation, however, total $12,637.00, not $14,813.00.
Similarly, Louisville Expense Report 5, Exhibit 11, contains unexplained partial copies of three bank statements from September 20, 2006 through December 30, 2006. It shows ATM withdrawals/purchases at various home improvement stores. While some of the ATM purchases are linked to Expense Report 5, the vast majority do not appear on the report. Nor do these other purchases appear on any of the Catina/Harrison expense reports. Clearly, these partial bank statements reflect that, during this time period, Grogan was making purchases for construction projects other than those related to this litigation.
We also note that Expense Report 2 contains a check made payable to Filadelfo Avila, dated October 17, 2006, which contains the memo "Louisville & French." Perhaps these ATM charges were made for property located on French Street; however, as there was no explanation at trial, we are left to speculate on this.
As such, the record reflects a very loose and unstructured course of dealings between the parties. The Knechts simply made payments to Grogan during the course of construction. As Patrick Grogan testified:
Mr. Knecht would... write a check, and that would be deposited, or there would be a wire transfer, whichever, however it was done. And then we would start operating off of that deposit. And when that deposit started getting down closer towards the end - And then I would tell Mr. Knecht that we were starting to run low on funds. And he would say that: Was it time to re-up or give more? And to get the project finished, I would tell him yes. And then he would resupply or either wire transfer more cash or a check, whichever he preferred.It does not appear that Grogan provided the Knechts with periodic progress reports or copies of expenses incurred or paid as the construction projects progressed. In fact, when questioned about the final invoice given to Mr. Knecht, entered into evidence as Exhibit 6, Patrick Grogan testified that this invoice "was the only invoice [he] gave [Mr. Knecht]."
While it is clear that the parties entered into oral agreements to reconstruct the properties, the record reflects that there was no real agreement at the inception as to what Grogan would charge for its work. In that regard, Patrick Grogan was questioned about how he was paid at the conclusion of the Catina/Harrison projects. He responded that he "put the total square footage of $57 a square foot. And what I did was I took the total and then the amount of what was paid and then what I thought was a fair and equitable price for Robert and myself to be paid -and I believe[d] that was in the neighborhood of $30 a square foot." (Emphasis added). He later confirmed that his fee was determined after the conclusion of the job: "So I sat and figured that, you know, what I thought was a fair and equitable price for the work that Robert and I had done for the six months, seven months of the project... And that's what I come up with, the $30 a square foot."
We find it highly implausible that the Knechts would have entered into an agreement whereby Grogan's fee would be determined at a later date and would be left solely to Patrick Grogan's discretion.
DISCUSSION:
As a general rule, "[w]here the factfinder's conclusions are based on determinations regarding credibility of the witnesses, the manifest error standard demands great deference to the trier of fact, because only the trier of fact can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding and belief in what is said." Orleans Sheet Metal Works & Roofing, Inc. v. Rabito, 2004-0359, pp. 3-4 (La.App. 4 Cir. 8/17/05), 916 So.2d 1143, 1146 , citing Rosell v. ESCO, 549 So.2d 840, 844 (La.1989). However, where documents or objective evidence so contradict a witness's story, or the story itself is so internally inconsistent or implausible on its face, that a reasonable fact finder would not credit the witness's story, the court of appeal may well find manifest error or clear wrongness even in a finding purportedly based upon a credibility determination. Harbor Const. Co., Inc. v. Board of Sup 'rs of Louisiana State University and Agr. Mechanical College, 2010-1663, p. 2 (La. App. 4 Cir. 5/12/11), 69 So.3d 498, 500, citing Rosell, supra, at 844-845.
In the instant matter, we find a number of matters which calls Mr. Grogan's credibility into question. First, as noted above (footnote 6), the bank statements from October-December, 2006 reflect many charges at home improvement stores (Lowe's, Home Depot, and others) which are unrelated to the Catina/Harrison and Louisville properties. Some of those charges are substantial. We note, for example, an October 16, 2006 purchase at Home Depot in the amount of $3,381.93, another Home Depot purchase on November 9, 2006 for $2,852.53, and another Home Depot purchase on December 14, 2006 for $1,970.00. None of these charges appear in any of the exhibits introduced at trial. Clearly, these charges reflect work on projects other than those involved in this litigation, although the affidavits of Patrick and Robert Grogan both attest to their each working 6-7 days a week, 65-70 hours a week from April 1, 2006 through February, 2007.
We list these purchases by example, only. There are too many other purchases noted in these bank statements that are not related to the projects to detail here.
Similarly, introduced into evidence were numerous checks dated from June-August, 2006written by Grogan which reference "218 Clark St." Patrick Grogan explained that he allowed his subcontractors to work on other jobs when he did not need them and that they requested payment from him as "the checks would never bounce." A Mr. Hamide would pay him for these workers and he would turn around and pay the workers. This explanation seems nonsensical. Curiously, the checks written by Mr. Grogan total $21,256.44, while those written toPatrick Grogan from Mr. Hamide total $16,500.
We also find troubling the fact that two checks introduced at trial were clearly altered from their original state (which was not noticed by counsel for the Knechts until after trial). A November 4, 2006 check in the amount of $900, written to "Evelyn Lorenzano," included in Exhibit 9 (Louisville Expense Report 3), has "Louisville" written in its memo section (clearly written over something else). The original check reflects "518 French St" in the memo section. A second check, dated June 28, 2006 in the amount of $2,500 written to "Jaime Rendon," included in Exhibit 11 (Louisville Expense Report 5), has "Louisville final" written in the memo section (also clearly written over something else). The original check, however, states "French St final."
Grogan's explanation for the alterations of these checks is simply that "the contractor to whom the check was written to worked on two different job sites. Therefore, there was a change in the memo line for the checks." Grogan then speculated that this could have been the reason for the trial court's "reduction in the amount awarded."
At the hearing on the Motion for New Trial, counsel for Grogan glossed over the issue of the check alteration, again simply suggesting to the trial court that the reduction in the judgment "more than compensated the defendant" for the two altered checks.
While, as Grogan points out, these two checks make up a "grand total of $3,400.00," it is not the amount of the checks that is troubling. These checks were introduced as evidence of the expenses incurred for the projects at issue in this litigation, not for any other purpose, including payment to workers for different jobs. The record does not establish when the checks were altered, but clearly, they were altered at some time between the dates on which they were negotiated (as originally written) and the time of trial, when they were submitted as evidence in this case. It is the alteration of the checks used at trial which suggests impropriety on Grogan's part and therefore casts doubt as to his credibility and the reliability of other evidence submitted at trial.
In addition, we note that 6 checks were written to Filadelfo Avila from March to May, 2006, copies of which are contained in Exhibit 2 (Catina & Harrison Expense Report 2). On four of these checks, the memo section notations "Catina and Harrison" were clearly written after the fact (as is evidenced by the non-photocopied nature of the notations on the copies introduced at trial). When those after-the-fact notations were made is unknown, although again, they were made at some point between the time that the checks were written and the time of trial, calling into question which work was paid by these checks.
These checks were written on the account of Patrick D. Grogan and Nanette M. Grogan and are not contained in the bank records in the Knechts' exhibit book.
Perhaps more importantly, there are serious credibility issues concerning Patrick Grogan's income reporting on his tax returns. Grogan's tax returns reflect $626,000 in gross receipts for 2006. However, in his personal tax return, Patrick Grogan reported wages of only $2,849. On cross-examination, Patrick Grogan admitted that he had more income than $2849 in 2006. And, as was brought out by Christin McGhee, accepted by the trial court as an accounting expert, Patrick Grogan's personal banking records show transfers from Grogan's account to his (and his wife's) personal accounts totaling $45,854 and $91,775 (together totaling $137,629) during 2006. Patrick Grogan had no adequate explanation for these discrepancies at trial. Grogan's gross receipts minus the payments made by the Knechts in 2006 would indicate Grogan had income from other construction projects which would contradict Patrick Grogan's testimony that he and his son had dedicated 65-70 hours per week on the Knechts' projects.
The record reflects that the Knechts paid Grogan the total sum of $480,000 in 2006; the source of the other $146,000 of Grogan's gross receipts is unknown, although we note several checks from Lillian and Peter Knecht to Patrick Grogan which were written from October to December, 2006 and which were contemporaneously deposited in Grogan's account.
While we find these credibility issues to be problematic, there is no dispute as to certain fundamental facts in this case, and particularly, that oral agreements existed between the parties for the work. Grogan clearly performed construction services for which it is entitled to be paid. Our difficult task is to determine whether the trial court's award for the services and work in this case is clearly wrong or supported by the record.
Our jurisprudence recognizes three basic types of construction contracts: lump sum contracts; cost plus percentage of the cost contracts (percentage contracts); and cost plus a fixed fee contract. Schiro Del-Bianco Enterprises, Inc. v. NSL, Inc., 1999-1237, p. 4 (La.App. 4 Cir. 5/24/00), 765 So.2d 1087, 1089-1090, citing, M. Carbine Restoration, Ltd. v. Sutherlin, 544 So.2d 455 (La.App. 4 Cir.1989); Joe Bonura, Inc. v. Hiern, 419 So.2d 25 (La.App. 4 Cir.1982); Standard Oil Co. of Louisiana v. Fontenot, 198 La. 644, 4 So.2d 634 (1941). "In a percentage contract, or cost plus percentage of the cost contract, the owner reimburses the contractor for the costs of the material and labor while paying the contractor a percentage of the total cost of the project for his profit or gain." Id.
While neither party focused on the nature of the contracts, it is clear from the record that the Knechts maintain they were lump sum contracts, the amount of which was established at the outset (between $110,000 to $120,000 apiece for the Catina/Harrison properties and between $200,000 and $210,000 for the Louisville property). Grogan, too, has not specifically addressed the nature of the contracts, although the record demonstrates its position that the contracts are like cost plus percentage contracts. Neither party takes the position that the contracts were cost plus a fixed fee.
The trial court did not specifically make reference to the type of contracts at issue, but it is clear that it implicitly found the contracts to be cost plus percentage contracts. Based on the record before us, we find no error in this finding. The Knechts clearly paid more than $110,000 to $120,000 per property for the Catina/Harrison work. In fact, the amount they paid was $285,000 or $48,000 more than the high end of the proposed range for these properties. Thus, they did not merely pay a lump sum to which they agreed at the outset. Rather, the amount ultimately paid indicates that the contracts were cost plus percentage-type contracts. Because the Knechts paid most of the final invoice for the work without dispute, we find that the Knechts accepted the terms of the final invoice for the Catina/Harrison properties (despite the lack of clarity in that invoice).
Mr. Knecht testified that he did not pay the $6,262 shown on the final invoice because of incomplete work. He further testified that he would pay the remainder of the invoice once the work was completed.
We now turn to the amounts paid and allegedly owed on the Catina/Harrison projects and note accounting discrepancies in Grogan's own exhibits. According to our calculations, the 4 expense reports (for labor and materials) for these projects add up to $136,189.69, as reflected on page 2 of Exhibit 1. However, page 1 of Exhibit 1 (which appears to be the final calculation for these projects) lists the price for materials and labor to be $136,035. Applying the deposits made by the Knechts to this final invoice, the remaining amount would be $7,296.00, rather than $6,260. As Grogan has not raised this as an issue, and has always maintained that this latter amount is owed, we accept this as the outstanding amount and find that the discrepancy inures to the Knechts' benefit.
We note that, of this $136,189.69, the amounts charged for labor total $23,393.97; the remaining $112,795.72 represents materials.
We can make no sense of the final invoice or why a deduction is made for the price of materials and labor - the invoice seems to be charging $57.00 per square foot while, at the same time, accounts for the costs of materials and labor. It is therefore unclear whether the intent was to charge $57 per square foot or the cost of labor/materials, plus a construction fee (or profit). Nor does the record have an adequate explanation on the accounting for this final invoice. In his testimony, Patrick Grogan explained that the "[p]rice for all materials and labor" reflected on the final invoice was "all the money that was spent for the project, all the receipts, cabinets, everything entirely on that project, and then the price for - the labor price for Robert and myself for doing the project."
There is yet more confusion as to the price per square foot, as Patrick Grogan also testified that he charged $30 per square foot as a "builder's fee." Given that this $30 per square foot is nowhere mentioned on either the invoice or the breakdown of costs/deposits, we must assume that the $57 per square foot includes the "builder's fee."
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The actual expense reports, however, include a total of $16,163.97 paid to Robert Grogan for his labor (which is documented in his tax return, although we note yet another discrepancy - the amounts paid to Robert Grogan for his labor total $34,616.47, while his 1099 form for 2006 lists his wages at $32,732.00). There is no mention on this invoice of the labor costs for Patrick Grogan and his tax returns do not substantiate the amount he was paid for his labor, (again, his personal tax return for 2006 lists his total wage income to be $2,849.00 despite his that he and his son performed 95% of the labor for the Catina/Harrison projects).
This leaves the issue of the unaccounted balance of $156,106.31 (the final invoice of $292,296 minus $136,189.69, the amount of materials and labor). It cannot seriously be argued that this amount represents profit to Grogan, as the profit would exceed the actual costs incurred, an untenable result. Because there is no accounting for Patrick Grogan's labor on this project in the record, we find the more reasonable conclusion is that this unexplained balance includes both his labor (as he testified that he and Robert Grogan performed 95% of the work) and profit on the projects. We have no way of ascertaining the value of Patrick Grogan's labor or determining the proper amount of profit. Accordingly, the only reasonable conclusion is to base the overall cost of the projects on an amount per square footage, as Grogan apparently did. The trial court awarded Grogan the sum of $5,634 for the Catina/Harrison projects, which included a reduction in the overall outstanding balance by 10%, based on the incomplete work. While the record does not establish the value of the unfinished work, Mr. Knecht estimated that it is less than $1000. Thus, even if the trial court had no basis for the 10% reduction, Mr. Knecht does not seriously dispute the amount owed and we affirm the award of $5,634 for the Catina/Harrison projects.
The Louisville property is more problematic, although we note that Grogan's record keeping on this project improved. Exhibit 6 consists of two pages, the first of which is an invoice with a second page detailing the expenses and the advance deposits. The invoice shows a price per square foot of $56.48 (totaling $207,400), which is also the amount paid by the Knechts. It then contains another charge of $22.00 per square foot for "Builder's fee" of $80,674. Patrick Grogan testified that the work on this property was intended to be handled in the same way as the Catina/Harrison properties: "I'd put the house back together. [The Knechts] would supply the money like [they] did with Catina and Harrison. And then at the end... I would be paid for our labor and for putting the house back together."
The invoices for the two projects, however, are very different. The Catina/Harrison property invoices make no mention of a "builder's fee" or any other similar fee. The first and only reference to a "builder's fee" is on the Louisville property invoice.
Of the total documented costs for the project (labor and materials), we note that the nine expense reports for the Louisville property reflect labor charges of $128,625.09 (of which $8,062.53 is listed as both labor and material costs with Unique Floors), which represents 62% of the actual, hard costs of the project. Of this amount, $18,452.50 was paid to Robert Grogan. Like the Catina/Harrison projects, there is nothing shown as being paid to Patrick Grogan for his labor. Again, Patrick Grogan's tax returns provide no information as to his wages, although he testified that he and his son provided 55-65% of the labor.
We recognize that Grogan called John Crawford, an expert in engineering and general contracting, who testified that he reviewed Patrick and Robert Grogan's affidavits regarding the number of hours they worked on the Louisville project. He estimated that the value of their labor was between $95,000 and $104,000 for Robert Grogan and $138,000 and $151,000 for Patrick Grogan. We further recognize that the trial court's reasons for judgment took that estimate into consideration. However, the record does not reflect that Grogan based its fees on an hourly rate for either Patrick or Robert Grogan's labor. Accordingly, Mr. Crawford's estimation provides little guidance in this matter. Furthermore, the invoices for the Louisville property clearly do not include any amount for Patrick Grogan's labor and reflect charges of $18,452.50 for Robert Grogan's labor. Given that it is clear what Grogan actually charged for Robert Grogan's labor, Mr. Crawford's estimation of the value of his labor is likewise of no consequence.
We agree with the Knechts that the affidavits submitted as to the hours spent on the projects are inaccurate. As noted above, the exhibits reflect that Grogan was, indeed, working on other projects during the course of the Louisville property renovation, which the affidavits state was completed in February, 2007. Evidence that other work was taking place during this time period include: (1) the October 19, 2006 check from Lillian and Peter Knecht to Grogan in the amount of $25,000 (2) a November 28, 2006 check from Lillian and Peter Knecht to Grogan in the amount of $40,000, and (3) a December 15, 2006 check from Lillian and Peter Knecht to Grogan in the amount of $25,000.
Finally, we note that the Knechts introduced into evidence receipts for materials they purchased for the Louisville property, which total $60,479.60 (one photocopied receipt, numbered 10, is completely illegible and is therefore not included in this total). There is no credit reflected in Grogan's invoice for this amount. Curiously, the cost of materials purchased by the Knechts is only $16,000 less than the cost of materials Grogan purchased. Combined, the cost of materials for the Louisville property was $136,583.52 and, when added to the labor charges, the actual cost of the Louisville construction project was $265,208.61.
Like the Catina/Harrison properties, for the Louisville property, Grogan charged an amount per square foot - $56.48 - "For repair and remodel of existing structure and addition of 2nd level according to architectural blueprints" and $22.00 per square foot for "Builder's fee." Together, this amounts to $78.48 per square foot, or $288,178.56. Because the Knechts purchased almost half of the materials for the property, we believe it reasonable to amend the trial court's award to $22,969.95, the amount per square foot ($288,178.56) less the actual cost of the project ($265,208.61).
ATTORNEY'S FEES AWARD
In its Amended Judgment, the trial court awarded Grogan attorney's fees of 20% of the judgment. The Knechts maintain that the trial court's award of attorney's fees has no legal basis. Grogan submits that attorney's fees are available in suits on open accounts, citing Frey Plumbing Co., Inc. v. Foster, 2007-1091 (La. 2/26/08), 996 So.2d 969. The trial court's reasons for judgment are silent as to whether the transactions between the parties amount to an open account.
The right to attorney's fees in suits on open accounts is found in La. R.S. 9:2871, which provides, in pertinent part as follows:
A. When any person fails to pay an open account within thirty days after the claimant sends written demand therefor correctly setting forth the amount owed, that person shall be liable to the claimant for reasonable attorney fees for the prosecution and collection of such claim when judgment on the claim is rendered in favor of the claimant. Citation and service of a petition shall be deemed written demand for the purpose of this Section. If the claimant and his attorney have expressly agreed that the debtor shall be liable for the claimant's attorney fees in a fixed or determinable amount, the claimant is entitled to that amount when judgment on the claim is rendered in favor of the claimant. Receipt of written demand by the person is not required.
This Court noted that, in the Frey Plumbing case, "the Louisiana Supreme Court rejected prior multi-factor tests in determining what constitutes an 'open account' for the purpose of obtaining attorney's fees under the statute, and held that an 'open account' is clearly defined by the statute itself...The Court held that the statute, which in Subsection D defines an open account, 'must be applied as written.'" Fleet Intermodal Services, LLC v. St. Bernard Port, Harbor and Terminal Dist., 2010-1485, pp. 14-15 (La. App. 4 Cir. 2/23/11), 60 So.3d 85, 94. (Footnote omitted).
The Frey Plumbing case indicated that "there is no requirement that there must be one or more transactions between the parties, nor is there any requirement that the parties must anticipate future transactions. To the extent the prior case law has imposed any requirements which are inconsistent with the clear language of La. R.S. 9:2781(D), those cases are overruled." 2007-1091, p. 6 (La. 2/26/08), 996 So.2d 969, 972. The court did not explicitly state that an open account existed in that case as between the homeowner and the plumbing company which performed work for her; rather, it reversed the summary judgment in the homeowner's favor, remanding the case to the trial court for further proceedings.
The statute provides that an "open account" includes any account for which a part or all of the balance is past due, whether or not the account reflects one or more transactions and whether or not at the time of contracting the parties expected future transactions. "Open account" shall include debts incurred for professional services, including but not limited to legal and medical services." La. R.S. 9:2781(D). We do not interpret the statute or the Frey Plumbing case to suggest that all unpaid debts or unpaid "accounts" are open accounts. In fact, our Louisiana Supreme court has cautioned that the open account statute must be construed "strictly ... because the award of attorney fees is exceptional and penal in nature." Frank L. Beier Radio, Inc. v. Black Gold Marine, Inc., 449 So.2d 1014, 1015 (La.1984).
Historically, construction contracts have not been viewed as "open accounts." An open account necessarily involves an underlying agreement between the parties on which the debt is based. Signlite, Inc. v. Northshore Service Center, Inc., 2005-2444, p. 5 (La. App. 1 Cir. 2/9/07), 959 So.2d 904, 907. We agree with the Signlite court's explanation:
Certainly, an open account is a contract, but our jurisprudence has made a distinction between open accounts and conventional obligations. A contract is significantly different from an open account. A "contract" is an agreement by two or more parties
whereby obligations are created, modified, or extinguished, thereby establishing a concurrence in understanding the terms. An "open account," however, is an account in which a line of credit is running and is open to future modification because of expectations of prospective business dealings, and services are recurrently granted over a period of time.
Id. at p. 5, 959 So. 2d 907-908, citing, Shreveport Electric Co., Inc. v. Oasis Pool Service, Inc., 38,766 and 38,876, p. 8 (La.App. 2 Cir. 9/29/04) 889 So.2d 274, 279 and Tyler v. Haynes, 99-1921, p. 5 (La.App. 3 Cir. 5/3/00), 760 So.2d 559, 563. See also, Shreveport Elec. Co., Inc. v. Oasis Pool Service, Inc., 38,776, p. 8 (La.App. 2 Cir. 9/29/04), 889 So.2d 274, 279, which noted:
A contract is significantly different from an open account. Louisiana Civil Code Article 1906 defines contract as an agreement by two or more parties whereby obligations are created, modified, or extinguished. An open account is an account in which a line of credit is running and is open to future modification because of expectations of prospective business dealings. Services are recurrently granted over a period of time. A contract, however, is an agreement between two or more parties in which an offer is made by one of the parties and acceptance is made by the other party, thereby establishing a concurrence in understanding the terms.
Open account were further explained in Mid-South Analytical Labs, Inc. v. Jones, Odom, Spruill & Davis, LLP, 40,089, p. 9 (La.App. 2 Cir. 9/23/05), 912 So.2d 101, 107, writ denied, 2005-2487 (La. 4/17/06), 926 So.2d 513:
...[O]pen accounts ordinarily contemplate a series of transactions between the parties over an indefinite future period. The total cost, unlike a contract, is generally left open or undetermined, although the rate for specific services may be fixed, such as an hourly rate. Finally, the service provider generally requests that the vendee or client keep current on charges through regular billing, and usually sends monthly invoices.
In the instant matter, we find that the oral contracts at issue are conventional construction contracts and not open accounts. Accordingly, Grogan is not entitled to attorney's fees and the trial court's award for same is reversed.
CONCLUSION
Based on the foregoing, we affirm the trial court's award of $5,634 for the Catina/Harrison projects, we amend the trial court's award on the Louisville project to $22,969.95, and we reverse the trial court's award of attorney's fees.
AFFIRMED IN PART, AMENDED IN PART, REVERSED IN PART