Opinion
No. 106,989.
2012-11-2
WOLFERT LANDSCAPING COMPANY, L.L.C., Appellee, v. LRM INDUSTRIES, INC. and Federal Insurance Company, Appellants.
Appeal from Douglas District Court; Michael J. Malone, Judge. Christopher F. Burger, of Stevens & Brand, L.L.P., of Lawrence, for appellants. Bruce W. Beye, of Overland Park, for appellee.
Appeal from Douglas District Court; Michael J. Malone, Judge.
Christopher F. Burger, of Stevens & Brand, L.L.P., of Lawrence, for appellants. Bruce W. Beye, of Overland Park, for appellee.
Before BRUNS, P.J., PIERRON and MARQUARDT, JJ.
MEMORANDUM OPINION
PER CURIAM.
LRM Industries, Inc. (LRM) entered into a contract to build a parking facility at the University of Kansas (KU). Subsequently, Wolfert Landscaping Company, L.L.C. (Wolfert) entered into a subcontract with LRM to perform landscape work to enhance the visual image of the parking facility. Because LRM believed Wolfert had materially breached the subcontract, LRM removed Wolfert as subcontractor and replaced it with another landscape company. As a result, Wolfert sued LRM in an attempt to recover the remaining funds it believed were due under the subcontract and to recover for approved extra work on the project. In response, LRM filed a counterclaim against Wolfert seeking to recover damages for breach of contract and to recover attorney fees under the subcontract.
Following a bench trial, the district court found that Wolfert had substantially breached the terms of the subcontract. But the district court did not award LRM any damages as a result of the breach, and it denied LRM's request for attorney fees. Moreover, the district court denied Wolfert's breach of contract claim against LRM. Nevertheless, the district court entered judgment in favor of Wolfert and against LRM under a quantum meruit theory. The district court also awarded Wolfert a judgment for extra work that was approved by LRM.
On appeal, LRM contends that the district court erred in not awarding it damages for Wolfert's breach of the subcontract and in not awarding attorney fees. LRM also contends that the district court erred by applying quantum meruit in a case where the obligations of the parties were set forth in an express contract. For the reasons set forth in this opinion, we conclude that the judgment of the district court should be affirmed in part and reversed in part.
Facts
On February 8, 2006, LRM entered into a contract with KU to serve as general contractor for a construction project described as the West Campus Park and Ride Lot. Thereafter, on February 17, 2006, Wolfert signed a subcontract with LRM to provide labor and materials for the project's landscaping and irrigation work. The deadline for the first phase of Wolfert's work on the project was August 1, 2006, with the entire project to be finished by October 30, 2006. But because Wolfert needed additional time to complete its work, LRM extended the deadline on several occasions.
Because of Wolfert's “ ‘failure to perform under the contract within the time available,” ‘ LRM removed Wolfert as the landscaping subcontractor on August 20, 2007. As of that date, LRM had paid Wolfert $256,136.22, with the last payment to Wolfert having been made on January 6, 2007. Subsequently, LRM paid Lawrence Landscape, Inc. (LLI) $68,437 to complete the landscaping and irrigation work on the project.
On November 30, 2007, Wolfert filed a petition against LRM in Johnson County District Court. The petition also named Federal Insurance Company, which served as the surety on the parking facility project. In the petition, Wolfert asserted claims for breach of contract and quantum meruit against LRM. In response, LRM filed an answer and counterclaim. In the counterclaim, LRM asserted claims for breach of contract and indemnification against Wolfert.
On March 8, 2008, the case was transferred to the Douglas County District Court. After completion of discovery, a final pretrial conference was held and a pretrial order was entered by the district court. Specifically, the pretrial order identified Wolfert's claims against LRM to be “for breach of contract in wrongfully terminating Plaintiff.” Moreover, the pretrial order stated that it “shall supersede the pleadings and control the future course of this action unless modified to prevent substantial injustice.” It is undisputed that the pretrial order was never modified and that neither party requested modification.
The district court held a 5–day bench trial at which it heard the testimony of eight witnesses. The witnesses included Wolfert's principal, Henry J. Wolfert, and LRM's president, Stephen E. Glass. Additionally, more than 90 exhibits were admitted into evidence. There was no mention of quantum meruit at trial or in the proposed findings of fact and conclusions of law submitted by the parties following trial. On September 11, 2011, the district court entered a 14–page memorandum decision, which included findings of fact and conclusions of law.
In the memorandum decision, the district court first addressed LRM's counterclaim, finding that “KU set forth some specific landscaping conditions in its contract with [LRM] and thus in [Wolfert's] subcontract with [LRM].” The district court also found that Wolfert's actions—or lack thereof—“were not technical but substantial breaches of the contract.” (Emphasis added.) Accordingly, the district court found that LRM “had justifiable reasons to replace [Wolfert].”
Notwithstanding, the district court awarded no damages to LRM for Wolfert's breach of the subcontract, nor did it award LRM any attorney fees incurred as a result of defending the lawsuit or prosecuting the counterclaim. Moreover, the district court found that LRM had failed to mitigate its damages. Specifically, the district court concluded that there was “no persuasive argument [presented] to find [LRM] incurred additional overhead costs.” Hence, the district court awarded no administrative costs to LRM relating to the replacement of Wolfert as subcontractor on the parking facility project.
Although the district court denied Wolfert's breach of contract claim and did not find that LRM breached the subcontract, it found that Wolfert was entitled to recover $13,730 plus interest for approved extra work not included in the subcontract. The district court further found that Wolfert had “proven it is entitled to a quantum meruit award ... for the reasonable value of the labor and materials provided to [LRM].” The district court then calculated the quantum meruit award to be in the amount of $41,139.58. Thus, the total judgment entered against LRM and in favor of Wolfert was $54,869.58, plus prejudgment interest to be paid on the $13,730 beginning on August 20, 2007.
Analysis
Quantum Meruit
On appeal, LRM contends the district court erroneously awarded damages to Wolfert under a quantum meruit theory. Specifically, LRM argues that the district court should not have entertained a quantum meruit claim because it was not contained in the pretrial order. LRM also argues that a claim for quantum meruit was barred because there was an express contract covering the respective obligations of the parties to one another. We agree.
K.S.A. 60–216(e) states that the pretrial order shall control the subsequent course of the action unless modified by the district court to prevent manifest injustice. “It is generally accepted that a pretrial order which specifies the issues to be tried, supersedes and replaces the pleadings.” Herrell v. Maddux, 217 Kan. 192, Syl. ¶ 2, 535 P.2d 935 (1975). Accordingly, it is the pretrial order that controls the claims and defenses on which a case will be decided. See Halley v. Barnabe, 271 Kan. 652, 656–57, 24 P.3d 140 (2001).
“The purpose of the pretrial conference ... is to eliminate the element of surprise from trials and to simplify the issues and procedure by full disclosure to all parties of the anticipated evidence, and factual and legal issues....” McCain Foods USA, Inc. v. Central Processors, Inc., 275 Kan. 1, 18, 61 P.3d 68 (2002). When there has been no modification of the pretrial order, it is binding on the parties. See Wenrich v. Employers Mut. Ins. Co., 35 Kan.App.2d 582, 590–91, 132 P.3d 790 (2006); see also Brown v. Hardin, 197 Kan. 517, 519, 419 P.2d 912 (1966) (“Orders entered at pretrial conference have the full force of other orders of court and they control the subsequent course of the action, unless modified at the trial to prevent manifest injustice.”). Thus, “[a]n issue or claim for relief that is not contained in the pretrial order should not be entertained by the trial court.” McCain, 275 Kan. at 19.
Here, Wolfert initially asserted a claim of quantum meruit in its petition, but this claim was not preserved at the pretrial conference or in the pretrial order. Furthermore, neither party requested modification of the pretrial order. Consequently, because the pretrial order was never modified, the parties proceeded to trial on the belief that Wolfert was seeking relief on a breach of contract claim—not on a quantum meruit claim. In fact, when proposed findings of fact and conclusions of law were submitted following the trial, neither party mentioned quantum meruit.
It appears that the district court inserted the theory of quantum meruit back into the case in an attempt to find an equitable solution to the parties' differences. Nevertheless, we find that quantum meruit should not have been considered by the district court because the claim was not preserved in the pretrial order. Because the case was tried on a breach of contract theory, quantum meruit could not form the basis for recovery.
Of course, had Wolfert moved to amend the pretrial order to include a quantum meruit claim and had the district court granted the motion upon a showing of manifest injustice, our conclusion would be different. But Wolfert never even made an attempt to amend the pretrial order or to show manifest injustice. Thus, we find that having tried the case on a breach of contract theory and having never sought to amend the pretrial order, Wolfert waived its claim for quantum meruit.
We pause briefly to note that even if Wolfert had not waived its quantum meruit claim, it was not entitled to recover under this equitable theory because an express or special contract controlled the relationship between the parties. Clearly, “[r]ecovery for payment under the terms of a contract and recovery for quantum meruit are mutually exclusive legal concepts.” Midwest Asphalt Coating v. Chelsea Plaza Homes 45 Kan.App.2d 119, Syl. ¶ 5, 243 P.3d 1106 (2010). Accordingly, quantum meruit is not available when an express contract addresses the obligations of the parties. See Fusion, Inc. v. Nebraska Aluminum Castings, Inc., 934 F.Supp. 1270, 1275 (D.Kan.1996); Phillips v. Noland, No. 103,254, 2011 WL 1376980, at *3 (Kan.App.2011) (unpublished opinion) (Kan.App .2011); Diagnostic Imaging Center, P.A. v. Waddell, No. 102, 430, 2010 WL 2217588, at *7 (Kan.App.2010) (unpublished opinion).
Here, it is undisputed that a comprehensive subcontract existed between LRM and Wolfert that explicitly set out detailed terms regarding the obligations of the parties, including—but not limited to—the plans and specifications for the landscaping work to be performed, the maintenance of the landscaping work, the definition of substantial completion, and the procedure for the resolution of disputes between the parties regarding substantial completion. The subcontract also explicitly addressed the process to be followed to obtain approval for extra work and to obtain extensions of time for completion. Thus, we find that it would be inappropriate as a matter of law to allow Wolfert to avoid the result of its failure to meet the terms of the subcontract under the guise of quantum meruit. See Valley, Inc. v. Ward Parkway Bld Co., 3 Kan.App.2d 131, 133–34, 590 P.2d 1100(1979).
We, therefore, reverse the judgment of the district court to the extent that it was based on a theory of quantum meruit.
Approved Extra Work
In addition to its breach of contract claim, which was denied by the district court, Wolfert preserved a claim in the pretrial order for approved extra work in the amount of $33,894.95. After considering the evidence presented at trial, the district court found that Wolfert had indeed performed approved extra work on the parking facility project before it was dismissed by LRM. This included $9,000 for additional seeding, $4,580 for an irrigation change from drip to spray, and $800 for computer-aided design. After deducting $650 for a plant size change, the district court determined that LRM owed Wolfert $13,730 for approved extra work, plus interest from August 20, 2007.
To the extent the damage awards implicate the district court's factual findings, we review the findings to determine if substantial competent evidence supported them. See Source Direct, Inc. v. Mantell, 19 Kan.App.2d 399, 408–11, 870 P.2d 686 (1994). From our review of the conflicting evidence in the record, we find that there was substantial evidence presented to support the district court's damage award for the approved extra work performed by Wolfert prior to its dismissal from the project. Accordingly, we will not substitute our judgment for that of the district court.
We, therefore, affirm the district court's award of damages to Wolfert for approved extra work in the amount of $13,730 plus interest from August 20, 2007.
LRM's Counterclaim
LRM contends that the district court erred in ruling on its counterclaim. Although the district court found that Wolfert substantially breached certain terms and conditions of the subcontract, it found that LRM had not proven that it suffered damage as a result of the breach. When reviewing a negative finding, we will not disturb the district court's decision absent proof of an arbitrary disregard of undisputed evidence or proof of some extrinsic consideration such as bias, passion, or prejudice. See General Building Contr., LLC v. Board of Shawnee County Comm'rs, 275 Kan. 525, 541, 66 P.3d 873 (2003).
As a general rule, when a party establishes a material breach of contract it is entitled to nominal damages at a minimum. See Freeto Construction Co. v. American Hoist & Derrick Co., 203 Kan. 741, 747, 457 P.2d 1 (1969). In the present case, it is unclear whether the district court intended to find a material breach of the subcontract when it found that Wolfert's actions or inactions “were not technical but substantial breaches of the contract.” Regardless, an award of actual damages arising from a breach of contract must be proven with sufficient certainty to justify the award. See State ex rel Stovall v. Reliance Ins. Co., 278 Kan. 777, 789, 107 P.3d 1219 (2005) (“A party is not entitled to recover damages ‘not the proximate result of the breach of contract and those which are remote, contingent, and speculative in character.” ’).
The basic goal in awarding contract damages is to put the nonbreaching party in the position it would have been in had the breach never occurred, without allowing that party a windfall. See Stovall, 278 Kan. at 789. Although LRM argues that it did not receive a windfall, the district court determined, based on the evidence presented at trial, that the total amount of LRM's payments to Wolfert and to the landscaping company that replaced Wolfert on the project was less than the amount that would have been due under the contract.
In reaching its conclusion regarding the award of damages, the district court adopted Wolfert's position that the total amount of the subcontract was $340,574.05. The district court then found that LRM had paid $256,136.22 to Wolfert and $68,437 to LLI—for a total of $324,573.22—to have the landscaping and irrigation work completed. Moreover, the district court found that the evidence presented at trial showed that LRM had failed to mitigate its replacement or administrative costs.
On appeal, we must review the evidence relating to a particular issue in the light most favorable to the prevailing party. See Smith v. Massey–Ferguson, Inc., 256 Kan. 90, 115–16, 883 P.2d 1120 (1994). In the present case, Wolfert was the prevailing party on the issue of damages. As such, viewing the record in the light most favorable to Wolfert, we find that the conclusions reached by the district court regarding damages were supported by substantial evidence. Likewise, we find that that the district court did not arbitrarily disregard undisputed evidence. Similarly, we find that the district court's decision regarding damages was not based on bias, passion, or prejudice.
We, therefore, affirm the district court's decision not to award damages to LRM as a result of Wolfert's breach of the subcontract.
Attorney Fees
Finally, LRM contends that the district court abused its discretion by denying its request for attorney fees under the terms of the subcontract. Specifically, the subcontract provides that Wolfert was responsible to indemnify and hold LRM and KU harmless for “ ‘attorneys' fees suffered or incurred on account of any breach of the ... contract.” (Emphasis added.) Also, we note that LRM has filed a motion for attorney fees and costs associated with this appeal under Supreme Court Rule 7.07 (2011 Kan. Ct. R. Annot. 64). We will first address the district court's denial of LRM's request for attorney fees and then address the question of whether LRM should be awarded attorney fees on appeal.
We review the district court's decision under an abuse of discretion standard. See State ex rel Slusher v. City of Leavenworth, 285 Kan. 438, 450, 172 P.3d 1154 (2007). The district court is an expert in the area of attorney fees and can draw on its own knowledge and experience making decisions regarding attorney fees. See Johnson v. Westhoff Sand Co., 281 Kan. 930, 940, 135 P.3d 1127 (2006). Although an appellate court is also an expert in the area of attorney fees, we do not substitute our judgment for that of the district court unless its decision was not supported by substantial competent evidence. See In re Marriage of Burton, 29 Kan.App.2d 449, 454, 28 P.3d 427,rev. denied 272 Kan. 1418 (2001).
As indicated above, the district court reasonably concluded, based on the evidence presented at trial that LRM had failed to establish that it was entitled to recover monetary damages for Wolfert's breach of the subcontract. Hence, we find that it was also reasonable for the district court to conclude that LRM had not “suffered or incurred [attorney fees] on account of” Wolfert's breach. Likewise, we find that the district court's refusal to award attorney fees was reasonable in light of the fact that LRM failed to pay Wolfert for approved extra work performed on the project prior to August 20, 2007.
Turning to LRM's motion for attorney fees on appeal, we note that Supreme Court Rule 7.07(b) (2011 Kan. Ct. R. Annot. 64) permits an appellate court to “award attorney fees for services on appeal in any case in which the trial court had [that] authority.” By virtue of the language of the subcontract entered into by the parties, the district court had such authority and, in turn, we may also entertain a fee request. Although LRM has prevailed on the issue of quantum meruit in this appeal, it has not prevailed on its claim for damages and attorney fees. Moreover, we have affirmed Wolfert's judgment against LRM for approved extra work performed prior to August 20, 2007. Accordingly, LRM has only received part of the relief it requested on appeal and, under these circumstances, we find that it would be appropriate for each party to pay its own attorney fees.
We, therefore, affirm the district court's decision not to award attorney fees, and we deny LRM's application for attorney fees on appeal.
Affirmed in part and reversed in part.