Spraungel Construction, Inc., Plaintiff, R & S Heating and Air Conditioning, Inc., Respondent, vs. West Bloomington Motel, Inc., a South Dakota corporation, Appellant, Vanman Companies Architects and Builders, Respondent, Olympic Pools, Inc., Respondent, State Street Bank and Trust Co., et al., Defendants.

Spraungel Construction, Inc., Plaintiff, R & S Heating and Air Conditioning, Inc., Respondent, vs. West Bloomington Motel, Inc., a South Dakota corporation, Appellant, Vanman Companies Architects and Builders, Respondent, Olympic Pools, Inc., Respondent, State Street Bank and Trust Co., et al., Defendants. A04-1140, Court of Appeals Unpublished, April 12, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1140

 

Spraungel Construction, Inc.,

Plaintiff,

 

R & S Heating and Air Conditioning, Inc.,

Respondent,

 

vs.

 

West Bloomington Motel, Inc.,

a South Dakota corporation,

Appellant,

 

Vanman Companies Architects and Builders,

Respondent,

 

Olympic Pools, Inc.,

Respondent,

 

State Street Bank and Trust Co., et al.,

Defendants.

 

Filed April 12, 2005

Affirmed

Kalitowski, Judge

 

Hennepin County District Court

File Nos. 02-5987, 02-008881

 

James J. Kretsch, Jr., Curtin & Rasley, P.A., 8500 Normandale Lake Boulevard, Suite 960, Minneapolis, MN 55437 (for respondent R & S Heating & Air Conditioning)

 

Mary G. Dobbins, Mary G. Dobbins & Associates, 7400 Metro Boulevard, Suite 100, Edina, MN 55439 (for appellant West Bloomington Motel)

 

 

Gregory T. Spalj, Theresa A. Peterson, Fabyanske, Westra & Hart, P.A., 800 LaSalle Avenue, Suite 1900, Minneapolis, MN 55402 (for respondent Vanman Companies Architects & Builders)

 

Curtis D. Smith, Moss & Barnett, 4800 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402-4129 (for respondent Olympic Pools)

 

            Considered and decided by Kalitowski, Presiding Judge; Peterson, Judge; and Crippen, Judge.*

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

            Appellant West Bloomington Motel, Inc. challenges the district court's decision in favor of respondents Vanman Companies Architects and Builders, Olympic Pools, Inc., and R & S Heating & Air Conditioning, Inc.  Appellant argues that the district court (1) relied on oral evidence contradicting the terms of a written contract in violation of the parol evidence rule; (2) made findings not supported by the evidence; and (3) abused its discretion in its award of attorney fees.  We affirm. 

D E C I S I O N

            In the summer of 2000, West Bloomington Motel, Inc. (WBM) began the process of changing its franchise from a Days Inn Motel to a Country Inn and Suites.  In October 2000, WBM and respondent Vanman Companies Architects and Builders (Vanman) entered into the Part 1 Agreement, under which Vanman was the architect and general contractor for the conversion project.  The Part 1 Agreement set forth the basic scope of the project and the preliminary cost estimates, but did not include a guaranteed maximum price.  In April 2001, WBM and Vanman entered into the Part 2 Agreement, which initially listed the total price of the project at $1,695,390.  At the signing of the Part 2 Agreement, however, WBM negotiated a lower price and the first figure was crossed out and replaced with $1,610,541.

            Upon completion of the project, Vanman's final bill increased by $206,108.95 to $1,816,649.95.  A dispute arose over the amount owed, and WBM refused to pay Vanman and its subcontractors.  WBM claimed that the Part 2 Agreement was a fixed-price contract.  But Vanman claimed that both parties knew that the contract price was subject to change and that WBM orally approved of several change orders during the project.  As a result of WBM's nonpayment, Vanman and several of its subcontractors filed mechanics' liens.  Spraungel Construction, Inc., the brick, concrete, and masonry subcontractor, filed a lawsuit to foreclose on its mechanic's lien.  R & S Heating & Air Conditioning, Inc. (R & S) filed a second lawsuit, and the two actions were consolidated.  Vanman and Olympic Pools, Inc. (Olympic) counterclaimed to foreclose on their mechanics' liens.  Shortly before trial, WBM paid all claimants except Vanman, R & S, and Olympic.  The remaining parties proceeded to trial to determine the amount, if any, WBM owed for the project. 

I.

            This court reviews the application of the parol evidence rule as a question of law subject to de novo review.  See Anchor Cas. Co. v. Bird Island Produce, Inc., 249 Minn. 137, 145, 82 N.W.2d 48, 54 (1957) (stating that the parol evidence rule is a matter of substantive law, not a rule of evidence).  The parol evidence rule "prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written agreements, to explain the meaning of a contract when the parties have reduced their agreement to an unambiguous integrated writing."  Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 312 (Minn. 2003) (quoting Richard A. Lord, Williston on Contracts § 33:1 (4th ed. 1999)).  Thus, "when parties reduce their agreement to writing, parol evidence is ordinarily inadmissible to vary, contradict, or alter the written agreement."  Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 713 (Minn. 1985).

            WBM claims that the district court relied on extrinsic evidence to interpret and alter certain terms of the Part 2 Agreement, in violation of the parol evidence rule.  The Part 2 Agreement states, in relevant part:

            It is the intent of the Owner and Design/Builder that the Contract Documents include all items necessary for proper execution and completion of the Work . . . .  This Part 2 Agreement represents the entire agreement between the Owner and the Design/Builder and supersedes prior negotiations, representations or agreements, either written or oral.  This Part 2 Agreement may be amended only by written instrument and signed by both the Owner and the Design/Builder. 

 

WBM contends that because the Part 2 Agreement makes no mention that the contract price is preliminary or subject to further refinement, the price was fixed at $1,610,541.

            Thus, WBM contends the district court erred in considering evidence offered by Vanman to support its claim that the terms of the Part 2 Agreement were modified with respect to price and the requirement that change orders be signed by the parties.  In particular, WBM challenges the district court's finding that "[a]t the time the Part [2] Agreement was signed, [the] President of Vanman . . . [and the] Project Manager for Vanman, told WBM that the projected costs for the . . . [HVAC] and electrical budgets were estimates only and that the costs may increase."  Appellant also takes issue with the district court's findings that WBM orally approved of certain change orders after the Part 2 Agreement was signed.

            The district court found that the increased costs were due to "five change orders agreed to between WBM and Vanman totaling $189,626, additional architectural services of $8,286.25, and reimbursable expenses of $8,196.70, for a final total project cost of $1,816,649.95."  The district court noted that WBM did not challenge Vanman's entitlement to the additional costs for architectural services or reimbursable expenses.  As for the change orders, the district court found that "[a]lthough WBM did not sign the change orders, the changes were discussed and approved at the project meetings or were approved by the conduct of the parties themselves."  The district court also found that WBM knew that Vanman performed the work included in the change orders and expected to be paid for it.

            It is well settled that parol evidence is admissible to show subsequent modification of an original contract.  See Nord v. Herreid, 305 N.W.2d 337, 339-40 (Minn. 1981) (stating that "the parol evidence rule is not violated by testimony of subsequent discussions in transactions relating to alterations of the original contract") (quoting Duffy v. Park Terrace Supper Club, 295 Minn. 493, 206 N.W.2d 24 (1973)).  The district court found that WBM orally agreed to change orders.  This finding is supported by evidence of discussions that took place after the Part 2 Agreement was signed.  This evidence does not violate the parol evidence rule and, therefore, the district court did not violate the parol evidence rule by relying on it. 

II.

            "While a written contract may be modified by the parties' subsequent conduct, whether such a modification occurred is a question for the factfinder."  Poser v. Abel, 510 N.W.2d 224, 228 (Minn. App. 1994), review denied (Minn. Feb. 24, 1994).  The district court, after hearing both parties' evidence, concluded that a modification of the contract had occurred.  When reviewing a district court's conclusions on ultimate issues, such as contract modification, this court must carefully examine the explanations given by the court for its decisions.  See Maxfield v. Maxfield, 452 N.W.2d 219, 221 (Minn. 1990).  If the underlying findings of fact made by the district court are undisputed or sustainable (because not clearly erroneous), the district court's ultimate findings must be affirmed in the absence of a demonstrated abuse of the district court's discretion.  Id. 

            WBM argues that the evidence does not support the district court's finding that WBM orally agreed to change orders that increased the cost of the project.  But, notwithstanding its claim that the Part 2 Agreement established a fixed price, WBM concedes that "it had requested some additional work to be included in the project," and that it would pay for $76,068 of the $189,626 claimed in the change orders.  WBM argues that the change order for the HVAC and electrical work is by definition not a change order because, "[w]hile a change in price is shown, there is no corresponding change in work."  But the validity of the change orders is a fact question for the district court, and we cannot say as a matter of law that this particular change order was invalid by definition. 

            Further, WBM concedes that Vanman informed WBM of an increase in the HVAC and electrical costs three months after the Part 2 Agreement was signed.  Moreover, although the agreement required written approval of changes, WBM's representative, Wade Johnson, testified that the parties to the Part 2 Agreement had a practice of orally approving change orders.  And Johnson's meeting minutes indicate that WBM was aware of the increased cost of work.  Further, the record includes correspondence indicating that WBM requested a breakdown of the increased cost of certain work, such as the HVAC and electrical work, but never asked that work be stopped.  The President of Vanman testified that change orders were discussed with WBM at "on-site progress meetings, weekly meetings that we also had, and that's where they were verbally accepted or rejected."  He also testified that it was not until foreclosure proceedings began that Vanman learned that WBM was claiming that the unsigned change orders were a reason for nonpayment. 

            The record supports the district court's finding that WBM knew that Vanman had performed the work included in change orders totaling $189,626 and expected to be paid for it.  The record also supports the district court's finding that "[a]lthough WBM did not sign the change orders, the changes were discussed and approved at the project meetings or were approved by the conduct of the parties themselves."  Therefore, we conclude that the district court's findings with respect to the change orders are not clearly erroneous.  And the district court did not abuse its discretion in concluding that the parties modified the contract by orally agreeing to change orders. 

III.

            On appeal, this court will not reverse the district court's award or denial of attorney fees absent an abuse of discretion.  Becker v. Alloy Hardfacing & Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987).  In awarding attorney fees, the district court must consider (1) the time and effort required; (2) the novelty or difficulty of the issues; (3) the ability and experience of the attorneys; (4) the value of the interest involved; (5) the customary charges for similar services; and (6) the results obtained.  Jadwin v. Kasal, 318 N.W.2d 844, 848 (Minn. 1982). 

            In challenging the award of attorney fees, WBM contends that (1) it should not be penalized for raising good-faith positions on the amount owed under the Part 2 Agreement and defects in work; (2) this case was routine; (3) the amount owed under the contract and the parol evidence issues did not involve R & S and Olympic; (4) the district court failed to consider WBM's ability to pay attorney fees; (5) the district court was wrong to find that WBM made no settlement offers to Vanman; and (6) the fees awarded to R & S and Olympic exceed the amount of the payment claims. 

            The district court properly considered the factors set forth in Becker and found:

            Counsel for Vanman, Olympic and R & S were required to expend significant amounts of attorney time to respond to cross claims; participate in discovery, including serving and responding to interrogatories and document requests; taking and defending a total of eight depositions; attending to property inspections; participating in a court-ordered arbitration; and preparing and appearing at a four day trial.

 

The district court also found that "[a]dditional time was expended making motions to obtain discovery from [WBM].  This case was very complex with the amount at stake, the numerous parties involved, and the large number of claims."  We conclude that the record supports these findings.   

            As argued by WBM, the award of attorney fees "must bear a reasonable relation to the amount of the judgment secured."  Lyman Lumber Co. v. Cornerstone Constr. Inc., 487 N.W.2d 251, 255 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992) (quotation omitted).  But WBM cites no authority to support the position that attorney fees are unreasonable merely because they exceed the amount of the judgment.  And whether or not WBM made any substantial settlement offers, we are not persuaded that the district court penalized WBM in its award of attorney fees.  Finally, in its memorandum to the district court in opposition to attorney fees, WBM did not claim inability to pay.  And we find nothing in the record to indicate that WBM ever presented the district court with evidence of its alleged inability to pay attorney fees.  Accordingly, we conclude that the district court did not abuse its discretion in its award of attorney fees. 

            Affirmed.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.