Hanson Construction and Specialty Cabinets, LLC, Respondent, vs. John Worlein, Appellant.

Hanson Construction and Specialty Cabinets, LLC, Respondent, vs. John Worlein, Appellant. A05-2509, Court of Appeals Unpublished, October 3, 2006.

This opinion will be unpublished and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

A05-2509

 

Hanson Construction and Specialty Cabinets, LLC,
Respondent,
 
vs.
 
John Worlein,
Appellant.

 

Filed October 3, 2006

Affirmed

Peterson, Judge

 

Mower County District Court

File No. C1-04-922

 

Marcus J. Christianson, Jorun G. Meierding, Maschka, Riedy & Ries, Union Square Business Center, 201 North Broad Street, Suite 200, P.O. Box 7, Mankato, MN  56002-0007 (for respondent)

 

Patrick W. Ledray, 1250 East Moore Lake Drive, Suite 242, Fridley, MN  55432 (for appellant)

 

            Considered and decided by Randall, Presiding Judge; Kalitowski, Judge; and Peterson, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

            In this construction dispute, appellant-homeowner argues that (1) a residential contractor that fails to comply with Minn. R. 2891.0030 (2005) and Minn. Stat. § 326.84 (2004) should be precluded from claiming the existence of an implied or oral contract; (2) if noncompliance does not preclude the existence of a contract, any contract in this case should be deemed unenforceable for lack of respondent-contractor's good faith; (3) the record does not support the damages awarded; (4) the district court should have granted appellant's motion for judgment notwithstanding the verdict (JNOV) or a new trial because the evidence of damages did not correspond to work performed; and (5) it was unfair to require appellants to defend two causes of action when one would be decided by the court and the other by the jury.  We affirm.

FACTS

            In March 2002, appellant John Worlein met with Donald Hanson (Hanson) of respondent Hanson Construction and Specialty Cabinets, LLC (Hanson Construction), about a remodeling project for Worlein's home.  Worlein provided Hanson with a drawing and a material list prepared by Freeborn Lumber.  Hanson told Worlein that Hanson would need a much more detailed plan to give an exact cost for the project.  Worlein provided Hanson with one or two more plans, but, according to Hanson, they were not sufficiently detailed.

            On April 2, 2002, Hanson submitted an initial estimate for the project to Worlein in the amount of $321,759, which included approximately $74,000 for materials to be purchased from Freeborn Lumber.  Worlein responded that he had been hoping to keep the cost down in the range of $250,000.  On April 18, 2002, Hanson submitted a revised estimate to Worlein in the amount of $284,578, which again included approximately $74,000 for materials to be purchased from Freeborn Lumber.  Both estimates were prepared based on the material list provided by Freeborn Lumber.  Worlein was satisfied with the revised estimate and orally stated to Hanson that they would go ahead with the project.  The parties did not enter into a written contract.

            Hanson Construction began work on the project in the spring of 2002.  After completing the project in August 2003, Hanson Construction brought this action against Worlein[1] alleging that he had failed to pay the full amount owed for labor and materials.

            Hanson testified at trial:  During the project, Worlein made changes to the project, sometimes bypassing Hanson and dealing directly with subcontractors.  Hanson did not put the change orders in writing because the changes were happening so fast and because he was under the impression that cost was not an issue to Worlein.  Hanson generally discussed the project and the costs of changes with Worlein every morning, and Worlein would give his approval.   Hanson became concerned about the increasing cost of the project and periodically expressed that concern to Worlein.  Worlein always said not to worry and assured Hanson that he would get paid.  Worlein never stopped Hanson from doing anything and never expressed any concern about cost.  Hanson provided specific, detailed testimony about the changes Worlein made.

            Hanson submitted the following invoices to Worlein:

July 21, 2002:                       $45,990

October 21, 2002:                $84,298.16

December 9, 2002:               $89,987.07

January 21, 2003:                  $31,704.92

Along with each invoice, Hanson provided a spreadsheet showing itemized expenses and the differences between the actual expenses and the initial and revised estimated expenses.

            Worlein paid the invoices in a timely manner.[2]  On June 30, 2003, Worlein paid Hanson an additional $20,000 without an invoice.  As of June 30, 2003, the total amount that Worlein had paid Hanson was $270,694.92.  Worlein also made the following payments directly to Freeborn Lumber:

July 29, 2002:                            $325.40

September 16, 2002:                        $45,977.76

October 31, 2002:                  $8,009.09

December 12, 2002:             $26,354.11

April 1, 2003:                        $12,626.29

 

The payments to Freeborn Lumber totaled $93,292.65.  The payments to Hanson and Freeborn Lumber totaled $363,987.57.

            The spreadsheet attached to the December 9, 2002 invoice showed the total project cost at $410,946.40.  The spreadsheet attached to the January 21, 2003 invoice showed a total project cost of $418,976.64.  A final spreadsheet, prepared by Hanson after the project was completed, showed a final total project cost of $444,958.70.  The total project cost included the amounts paid to Freeborn Lumber.  The total amount that Worlein paid to Hanson and Freeborn Lumber was $80,971.13 less than the final total project cost of $444,958.70.  Along with the final spreadsheet, Hanson sent Worlein a four-page letter itemizing and explaining cost overruns.

            Worlein testified that he understood that if a project cost exceeded the amount allowed on the estimate, the additional cost would be billed to him.  He also understood that if an item was added to the project, it would increase the total cost.  Worlein understood that the changes he requested would result in additional costs but was surprised by the amount.

            Worlein agreed that some costs exceeded allowances.  Worlein admitted that he approved changes to the project, including leaded glass doors, mirrors on upstairs doors, a septic tank, speakers and wiring, a pool, a shower system, a glass shower, using cherry trim instead of oak trim, and using wider-than-standard baseboards.  Worlein testified that he did not agree to have a Wirsbo heating system installed in the turret, but he otherwise agreed to project changes.

            The jury found by special verdict that a contract existed between Hanson Construction and Worlein; Worlein breached the contract by failing to pay sums owed under it; and Worlein owed Hanson Construction $65,000.  The district court issued an order adopting the jury's special verdict and granting judgment for Hanson Construction against Worlein in the amount of $65,000 plus costs and disbursements.  The district court denied Worlein's posttrial motion for amended findings of fact, a JNOV, or, alternatively, a new trial.  This appeal followed.

D E C I S I O N

I.

            Statutory construction is a question of law, which this court reviews de novo.  Ryan Contracting, Inc. v. JAG Invs., Inc., 634 N.W.2d 176, 181 (Minn. 2001).  The object of statutory interpretation is to ascertain and effectuate legislative intent.  Minn. Stat. § 645.16 (2004).

            "A person who meets the definition of a residential remodeler as defined in section 326.83, subdivision 16, or a residential building contractor as defined in section 326.83, subdivision 15, must be licensed as a residential building contractor or residential remodeler."  Minn. Stat. § 326.84, subd. 1 (2004).  "The commissioner may adopt rules to administer and enforce sections 326.83 to 326.98."  Minn. Stat. § 326.98 (2004).  The commissioner has adopted the following rule:

            Contracts between a contractor and a customer for the performance of a licensee's services must be reduced to writing and must contain the following:

                        A. a summary of the work to be performed;

                        B. a description of materials to be used or a list of standard features included; and

                        C. the total contract price, or a description of the basis on which the price will be calculated.

 

            The licensee shall provide at no cost to the customer a copy of all written contracts between the licensee and its customer, including, but not limited to, proposals, quotations, change orders, and purchase orders at the time the document is executed.

 

Minn. R. 2891.0030 (2005).

            Worlein argues that Hanson violated Minn. R. 2891.0030, and, therefore, any contract and change orders agreed upon by the parties should be held unenforceable.  But the legislature has prescribed specific penalties for violations of chapter 326 and other prohibited conduct by licensees and has granted the commissioner enforcement authority.

Minn. Stat. § 326.91, subd. 1 (2004).

The commissioner may by order deny, suspend, or revoke any license or may censure a licensee, and may impose a civil penalty as provided for in section 45.027, subdivision 6, if the commissioner finds that the order is in the public interest, and that the . . . licensee . . . :

            . . . .

            (2) has engaged in a fraudulent, deceptive, or dishonest practice;  [or]

            . . . .

            (5) has violated or failed to comply with any provision of sections 326.83 to 326.98 or any rule or order under  sections 326.83 to 326.98[.]

 

Id.  Minn. Stat. § 45.027, subd. 6 (2004), authorizes the commissioner to impose a civil penalty not to exceed $10,000 per violation.

            We decline to expand the penalties for violating Minn. R. 2891.0030 expressly provided by the legislature.  See Ullom v. Indep. Sch. Dist. No. 112, 515 N.W.2d 615, 617 (Minn. App. 1994) (stating that this court cannot add to a statute what the legislature may have inadvertently overlooked or purposely omitted); cf. Schermer v. State Farm Fire & Cas. Co., 702 N.W.2d 898, 904 (Minn. App. 2005) (explaining that private party does not have cause of action against insurer for a violation of the Unfair Claims Practices Act (UCPA) because the UCPA's comprehensive administrative-enforcement scheme is more appropriate to investigating and regulating insurer's business practices), aff'd, ___ N.W.2d ___ (Minn. Sept. 14, 2006); Mut. Serv. Cas. Ins. Co. v. Midway Massage, Inc., 695 N.W.2d 138, 142 (Minn. App. 2005) (discussing factors that must be considered when determining whether a cause of action can be inferred from a statute), review denied (Minn. June 14, 2005).

            Citing a case involving fee-splitting by attorneys, Worlein argues that enforcement of a contract in this case violates public policy.  In that case, the supreme court stated:

            The purpose of these rules governing fee-splitting agreements is to protect the client's best interests throughout his/her representation.  Each client has a right to choose the attorney that he/she prefers and to be knowledgeable about the specifics of his/her case, especially those terms regarding the payment of fees.  To allow attorneys to proceed with fee-splitting arrangements without the client's written agreement or knowledge would put the client at a severe disadvantage in the lawyer-client relationship.

 

            . . . Legal commentators have noted reasons why fee-splitting agreements often require a division of labor or responsibility to be consistent with public policy:  An agreement to pay a referral fee is often viewed as unenforceable as against public policy.  It is thought likely to increase the overall fee charged, to ignore the rights of the client to choose his own lawyer, and to encourage neglect and unethical conduct in the referring attorney, besides being unfair to the one who has done all of the work.

 

Christensen v. Eggen, 577 N.W.2d 221, 225 (Minn. 1998) (quotation omitted).  The policy concerns noted in Christensen are not present in this case.  Hanson Construction contracted with Worlein to complete a remodeling project, and brought suit to obtain payment for the work it performed.

II.

            Worlein argues that any contract is unenforceable based on a lack of good faith and fair dealing by Hanson.[3]  A contract is the result of a bargained-for exchange where both sides exercised good faith and fair dealing.  In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn. 1995) ("[E]very contract includes an implied covenant of good faith and fair dealing . . . ."); Cederstrand v. Lutheran Bhd., 263 Minn. 520, 530, 117 N.W.2d 213, 220 (1962) (stating that a contractual promise must be the product of a bargain); Restatement (Second) of Contracts §§ 17, 205 (1981).  Good faith, at a minimum, excludes actions that violate community standards of decency, fairness, or reasonableness.  Restatement (Second) of Contracts § 205 cmt. a.  Subterfuge, evasion, and "abuse of a power to specify terms" are some examples of bad faith.  Id. cmt. d.  The existence of bad faith is a factual question.  Gendreau v. Foremost Ins. Co., 423 N.W.2d 712, 714 (Minn. App. 1988).

            Worlein suggests that Hanson acted improperly by labeling documents as invoices when what the documents represented were draws.  Hanson explained that the amounts on the invoices did not necessarily include all work completed on the project but that rather he was drawing money to cover his costs.  An invoice is defined as "[a] detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill."  The American Heritage Dictionary of the English Language 949 (3d ed. 1992).  Even if labeling the documents as invoices was technically incorrect, the record does not show that the documents were misleading.

            Worlein argues that Hanson acted in bad faith by failing to execute a written contract and change orders.  Worlein also argues that he never gave Hanson uncontrolled discretion regarding cost and materials provided but Hanson exercised that power and, therefore, acted in bad faith.  But Worlein accepted the revised estimate and orally told Hanson to go ahead with the project, and the record does not show that Worlein was misled regarding the items in the revised estimate.  When Hanson's testimony is credited, the evidence shows that Worlein requested and approved numerous changes and that when Hanson expressed concern to Worlein about the increasing project cost, Worlein indicated that cost was not an issue.

            It is the jury's function to determine witness credibility.  Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982).  Appellate courts afford great deference to the fact-finder's determination of weight of testimony and credibility of witnesses.  Hasnudeen v. Onan Corp., 552 N.W.2d 555, 557 (Minn. 1996).  Whether an enforceable contract existed was a factual question properly resolved by the jury.

III.

            The district court's decision to deny remittitur or a new trial based on excessive damages will not be disturbed absent an abuse of discretion.  Hanson v. Chicago, Rock Island & Pac. R.R. Co., 345 N.W.2d 736, 739 (Minn. 1984).  A party seeking remittitur or a new trial on the basis of excessive damages must establish that the amount of damages exceeds the highest amount permitted by the evidence, such that the award only can be the product of passion or prejudice.  Kinikin v. Heupel, 305 N.W.2d 589, 596 (Minn. 1981); Sandt  v. Hylen, 301 Minn. 475, 476, 224 N.W.2d 342, 343 (1974).

            Worlein argues that the damages award should be reduced to $14,500.  But Hanson presented detailed evidence regarding the costs of numerous changes in the project and the difference between the revised estimate cost and the actual project cost.  

            Subtracting from the total project cost the total payments that Worlein made to Hanson and Freeborn Lumber leaves a balance due of $80,971.13, which is greater than the amount of the $65,000 jury verdict.  The district court did not abuse its discretion in denying remittitur.

IV.

            Worlein argues that the district court erred in denying a new trial or JNOV.  Ordinarily, appellate courts will not disturb the district court's decision to grant or deny a new trial absent a clear abuse of discretion.  Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990) (noting that if district court's decision to grant new trial is based on error of law and not exercise of discretion, standard of review is de novo).  "On appeal from a denial of a motion for a new trial, the verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict."  ZumBerge v. N. States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992), review denied (Minn. Apr. 29, 1992).

            The de novo standard applies when reviewing the denial of a JNOV.  Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998).  When the district court has denied JNOV, the reviewing court must affirm the denial if there is any competent evidence in the record "reasonably tending to sustain the verdict."  Id. (quotation omitted).  The evidence is viewed in the light most favorable to the verdict, and every inference reasonably to be drawn from such evidence, as well as the credibility of the prevailing party's testimony is deemed admitted.  Edgewater Motels, Inc. v. Gatzke, 277 N.W.2d 11, 14 (Minn. 1979).

            Relying on the evidence distinguishing between draws and invoices, Worlein argues that the record contains no evidence connecting work performed to a specific amount of money.  But the fact that the amounts on individual invoices did not correspond to work completed does not mean that the costs shown on the final invoice did not correspond to actual costs.

            Worlein also argues that the final invoice included costs that he paid directly to subcontractors, including Troy Groe, who performed cement work, and that the final invoice does not accurately reflect costs for items including siding and cedar decking and railings.  Worlein does not cite evidence supporting his claim that the final invoice included costs paid directly to subcontractors other than Freeborn Lumber.  The party seeking reversal has the burden of showing error.  Bloom v. Hydrotherm, Inc., 499 N.W.2d 842, 845 (Minn. App. 1993), review denied (Minn. June 28, 1993).  Hanson testified that the cedar deck materials were supposed to be provided by Freeborn Lumber but instead were bought from his lumberyard and that the $2,443.42 cost on the final invoice was what those materials cost him.

            Worlein argues that the final invoice improperly shows a cost of $16,863 for steel siding when no steel siding was used.  But Hanson testified that it cost $28,221 to stucco the first two sides of the house and that the $16,863 was the additional cost of stuccoing all sides of the house.  Hanson specifically explained the additional cost of stuccoing the entire house in a December 4, 2003 letter to Worlein.  Hanson's testimony indicates that the final invoice accurately reflects project costs.

            To the extent there was conflicting evidence, credibility issues are for the fact-finder to resolve.  Tolzmann v. McCombs-Knutson Assocs., 447 N.W.2d 196, 198 (Minn. 1989).  Viewed in the light most favorable to the verdict, the evidence supports the jury's determination of damages.  The district court did not err in denying Worlein's motion for a new trial or JNOV.

V.

            Worlein argues that the district court erred in allowing Hanson Construction to proceed under two theories, breach of contract and unjust enrichment.  Hanson Construction argues that Worlein waived this issue by failing to raise it as an affirmative defense.  Because the complaint did not make it clear that Hanson intended to proceed under two alternative theories, Worlein did not waive this issue by failing to raise it as an affirmative defense.

            The doctrine of election of remedies requires a party to adopt one of two or more coexisting and inconsistent remedies which the law affords the same set of facts.  The purpose of the doctrine is not to prevent recourse to any particular remedy but to prevent double redress for a single wrong.

            However, if inconsistent remedies are sought and it is doubtful which one will bring relief, a party may claim either or both alternatively until one remedy is pursued to a determinative conclusion.   Therefore, a party should not be bound by an election unless he has pursued the chosen course to a determinative conclusion or has procured advantage therefrom, or has thereby subjected his adversary to injury.

 

Christensen, 577 N.W.2d at 224 (quotation and emphasis omitted).

            Only the contract theory was presented to the jury, and Hanson Construction did not recover under unjust enrichment.  Under Christensen, the district court did not err in allowing Hanson Construction to proceed under both theories.

            Worlein argues that Hanson Construction should not have been allowed to proceed under an unjust-enrichment theory because it failed to pursue the legal remedy of a mechanic's lien action.  But because Hanson Construction did not recover under an unjust-enrichment theory, Worlein's argument does not present a justiciable controversy.  See In re Schmidt, 443 N.W.2d 824, 826 (Minn. 1989) (explaining that appellate courts decide only actual controversies and will not issue advisory opinions or decide moot issues).  

            Worlein also argues that he was prejudiced by the district court's late decision, after Hanson Construction had finished presenting its case, to submit the issue of damages to the jury.  But following Hanson Construction's opening statement, Worlein's counsel raised a concern about the jury possibly becoming confused about the amount of money involved.  The district court responded:

As I see it, it's going to turn if the jury does, in fact, find a contract exists and that the changes were agreed to and were part of the contract then the jury may well be asked to find the numbers.  If the jury finds that there is no contract, then it will be up to the Court on an equitable basis to determine whether or not there has been any unjust enrichment or should be order by the Court of damages for unjust enrichment.

 

            This pretrial statement by the district court provided Worlein notice that the issue of damages would be submitted to the jury if the jury found that a contract existed.  Worlein did not seek a continuance and has not shown any prejudice as a result of insufficient notice that the issue of damages would be presented to the jury.  See Phelps v. Blomberg Roseville Clinic, 253 N.W.2d 390, 394 (Minn. 1977) (concluding that district court did not err in declining to suppress expert testimony based on late disclosure when party did not seek a continuance and failed to show prejudice).  Therefore, even if the notice was insufficient, Worlein is not entitled to reversal. 

            Affirmed.

[1] Rosemary Linderman Worlein was initially named as a defendant, but she was dismissed from the action by district court order.

[2] For the October 21, 2002 invoice, Worlein paid $84,000, and for the December 9, 2002 invoice, Worlein paid $89,000, rather than the invoice amounts.

[3] Hanson Construction argues that this issue is not properly before this court because it was not raised before the district court.  Worlein's argument in his new-trial motion that there could be no oral contract because Hanson acted in a deceptive and misleading manner was sufficient to preserve this issue for appellate review.