McKinnis Roofing & Sheet Metal, Inc. v. Hicks
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McKinnis Roofing and Sheet Metal and homeowner Jeffrey Hicks entered into two contracts. The first contract related to Hicks' roof, and the second contract related to copper awnings on Hicks' residence. McKinnis filed a complaint in the district court alleging that Hicks breached both contracts after Hicks refused McKinnis' demand for advance payment. After trial, he district court determined that Hicks had breached both contracts, awarding McKinnis damages in the amount of $4,419 with regard to the roofing contract and $789 with regard to the awning contract. McKinnis appealed, arguing that the district court erred in calculating the amount of damages to which it was entitled. Hicks cross-appealed and claimed that the district court erred when it determined that he breached the contracts. The Supreme Court reversed, holding that based on the facts and contract language, Hicks did not breach either contract.
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should be remanded to the Workers’ Compensation Court for
further proceedings consistent with this opinion—and, perhaps, greater clarity from the parties about how Mueller’s
actual take-home pay is calculated. Any issues with respect to
possible overpayment should be addressed by the trial court.
And because it is not clear whether the trial court would have
adopted the opinion of the court-appointed vocational rehabilitation counselor had it not disagreed with her assumptions
regarding Mueller’s average weekly wage, the court should
reconsider that issue in the first instance.
Conclusion
For the foregoing reasons, the judgment of the review panel
of the Workers’ Compensation Court is reversed, and the cause
is remanded with directions to remand the case to the trial
court for further proceedings consistent with this opinion.
R eversed and remanded with directions.
Wright, J., not participating.
McK innis Roofing and Sheet Metal, Inc.,
a Nebraska corporation, appellant and
cross-appellee, v. Jeffrey D. H icks,
appellee and cross-appellant.
___ N.W.2d ___
Filed August 5, 2011.
No. S-10-1048.
1. Contracts: Judgments: Appeal and Error. The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to reach
its conclusions independently of the determinations made by the court below.
2. Contracts. When there is a question about the meaning of a contract’s language,
the contract will be construed against the party preparing it.
Appeal from the District Court for Douglas County: Gregory
M. Schatz, Judge. Reversed and remanded with directions.
David V. Drew, of Drew Law Firm, for appellant.
Patrick D. Pepper, of McGrath, North, Mullin & Kratz, P.C.,
L.L.O., for appellee.
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Heavican, C.J., Wright, Connolly, Gerrard, Stephan,
McCormack, and Miller-Lerman, JJ.
Miller-Lerman, J.
NATURE OF CASE
McKinnis Roofing and Sheet Metal, Inc. (McKinnis), and
homeowner Jeffrey D. Hicks entered into two contracts. The
first contract related to Hicks’ roof, and the second contract
related to copper awnings on Hicks’ residence.
McKinnis filed a complaint in the district court for Douglas
County alleging that Hicks breached both contracts. After trial,
the district court filed an order of judgment on October 1,
2010, in which it determined that Hicks had breached both contracts. With regard to the roofing contract, the court awarded
McKinnis damages in the amount of $4,419.88. With regard to
the awning contract, the district court awarded McKinnis damages in the amount of $789.80.
McKinnis appeals, claiming that the district court erred in
calculating the amount of damages to which it was entitled.
Hicks cross-appeals and claims, inter alia, that the district
court erred when it determined that he breached the contracts.
As explained below, based on the facts and contract language, we determine that Hicks did not breach either contract.
Accordingly, we reverse the order and remand the cause to
the district court with directions to enter judgment in favor
of Hicks.
STATEMENT OF FACTS
Hicks’ home was damaged in a hailstorm in June 2008. The
storm caused damage to Hicks’ wood shake roof and copper
awnings. McKinnis and Hicks entered into a written contract
presented by McKinnis on July 10 regarding the roof. The contract provided that McKinnis would replace or repair the roof
upon approval and payment from Hicks’ insurance company,
Chubb Group of Insurance Companies (Chubb). Paragraph 7
of the roofing contract also provided that acceptance under the
agreement “cannot be withdrawn after McKinnis . . . personnel appear on site ready to perform except by mutual written
agreement of the parties.”
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The record is replete with evidence, not necessary to repeat
here, regarding the efforts required to obtain the insurance
payment. Chubb agreed to pay for the roof repair and issued a
payment to Hicks in the amount of $74,913.23. Hicks notified
McKinnis that he was going to replace the roof with a slate
roof using a different contractor. McKinnis sued Hicks for lost
profits for losing the wood shake roof replacement job.
On September 16, 2008, the parties agreed that McKinnis
would replace Hicks’ copper awnings damaged in the storm.
Paragraph 15 of the awning contract provided that Hicks
would pay McKinnis the cost of material and labor for job
setup “when the same are delivered to the job site” and that the
balance would be due upon completion. Despite the ongoing
litigation, McKinnis informed Hicks through its attorney that
it still intended to perform its obligation under the awning
contract. However, because of the pending issues involving
the roof contract and despite the language of the awning contract, McKinnis demanded payment on the awning contract
before it would perform. Hicks declined McKinnis’ proposal
for advance payment and repeatedly indicated his readiness to
adhere to the awning contract. McKinnis did not go forward
with the awning contract and sued Hicks for loss of profits
for the copper awning job based generally on a theory that
Hicks’ refusal of its demand for advance payment was a breach
by Hicks.
The district court conducted a trial and filed its order
on October 1, 2010, in which it determined that Hicks had
breached both contracts and owed McKinnis damages. The
district court generally determined that McKinnis had satisfied the conditions of the roof contract and that, in reliance on
Restatement (Second) of Contracts § 251 (1981), McKinnis was
justified in seeking “assurance of performance” by requesting
advance payment before performing under the awning contract.
The court awarded McKinnis $4,419.88 on the roof contract
and $789.80 on the awning contract. McKinnis appeals, and
Hicks cross-appeals.
ASSIGNMENTS OF ERROR
In its appeal, McKinnis generally claims that the district
court awarded insufficient damages and specifically erred
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when it calculated damages due to the breach of the contracts
based on McKinnis’ net profit margin rather than its gross
profit margin.
In his cross-appeal, Hicks claims, summarized and restated,
that the district court erred when it determined that Hicks had
breached both contracts.
STANDARD OF REVIEW
[1] The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to
reach its conclusions independently of the determinations made
by the court below. Davenport Ltd. Partnership v. 75th &
Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 (2010).
ANALYSIS
McKinnis’ Appeal: Because There Is Merit to the
Cross-Appeal, We Need Not Consider the
Correctness of the Damage Awards.
McKinnis claims that the damage awards entered by the district court were insufficient as to each of the contracts. In this
regard, McKinnis urges this court to adopt a theory of contract
damages which would, in certain cases, permit the award of
damages based on a gross lost profit margin rather than a net
lost profit margin. Without regard to the desirability of endorsing such a damage formulation, and despite the scholarship
exhibited in the briefs related thereto, because we determine
that Hicks did not breach either the roof contract or the awning
contract, we do not consider McKinnis’ assignment of error
related to the proper measure of damages.
Hicks’ Cross-Appeal: Hicks Did Not Breach
the Roof Contract.
Hicks claims that because he properly withdrew his accept
ance of the roof contract in accordance with paragraph 7, he
did not breach the contract, and that the district court erred
when it determined that he had breached the roof contract.
We find merit to Hicks’ cross-appeal and determine that the
district court erred when it determined that Hicks breached the
roof contract.
The parties and the district court devote considerable attention to the relative efforts of the parties to obtain the insurance
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settlement check. In any event, there is agreement that Chubb
sent the check, and we determine the means by which this
was achieved was not a breach of the contract and is not
determinative of the outcome of this appeal regarding the
roof contract.
Although we recognize that the district court stated generally that Hicks did nothing to rescind or cancel the roof
contract, elsewhere, it specifically found in its order that
“[f]ollowing receipt of the insurance settlement from Chubb,
[Hicks] informed [McKinnis] that [Hicks] was having his roof
replaced with a slate roof, by another contractor.” The court
found that “[McKinnis] then sued [Hicks].”
In his answer, Hicks alleged in the sixth affirmative defense
that he “withdrew any alleged acceptance prior to any McKinnis
. . . personnel appearing on site ready to perform.” At trial,
Hicks testified that he terminated the agreement, inter alia,
because under the roof contract, he was allowed to withdraw
his acceptance. At trial, a representative of McKinnis testified
essentially that McKinnis “never had a crew of construction
personnel show up at the Hicks [residence] to do any of the
replacement tasks because [McKinnis] never even bought any
of those raw materials.”
Notwithstanding its specific finding that Hicks informed
McKinnis that he was going to engage another contractor to
replace the roof, the district court failed to analyze the significance of this fact in the context of the rights and obligations of
the parties under the roof contract. In this regard, Hicks draws
our attention to paragraph 7 of the roof contract which provides
that the agreement “cannot be withdrawn after McKinnis . . .
personnel appear on site ready to perform except by mutual
written agreement of the parties.”
In its appellate brief, McKinnis does not meaningfully suggest that its personnel appeared on the site ready to replace
the roof, but instead asserts that “McKinnis personnel came to
the Hicks residence several times to take pictures documenting
the hail damage to be presented to the insurance carrier [and]
this appearance at the Hicks residence by McKinnis personnel eliminated Hicks’ right to withdraw his acceptance of the
contract.” Reply brief for appellant at 13. We disagree with
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McKinnis regarding the significance of these facts under the
terms of the roof contract.
[2] The roof contract was presented by McKinnis to Hicks.
When there is a question about the meaning of a contract’s
language, the contract will be construed against the party preparing it. Lexington Ins. Co. v. Entrex Comm. Servs., 275 Neb.
702, 749 N.W.2d 124 (2008). The plain language of paragraph
7 permits Hicks to withdraw and terminate the roof contract
before McKinnis’ personnel appear on the site ready to perform
the work of replacing the roof. We do not accept McKinnis’
reading of the roof contract equating inspection of the roof
and photographing roof damage for insurance purposes as an
appearance “on site ready to perform” roof replacement work
as provided for in paragraph 7.
The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to reach its
conclusions independently of the determinations made by the
court below. Davenport Ltd. Partnership v. 75th & Dodge I,
L.P., 279 Neb. 615, 780 N.W.2d 416 (2010). Upon our review
on appeal, we conclude that the district court erred when it
failed to accord legal significance under the controlling contract to its finding that Hicks decided to use another contractor
at a point in time prior to McKinnis’ appearance to perform
the replacement work. Hicks’ decision had the legal effect of
withdrawing from the roof contract, as he was permitted to do
under paragraph 7. Hicks’ withdrawal was not a breach of the
roof contract. The district court erred when it found that Hicks
breached the roof contract.
Hicks’ Cross-Appeal: Hicks Did Not Breach
the Awning Contract.
Hicks claims that the district court erred when it determined
that he breached the awning contract. We find merit to this
assignment of error.
The parties entered into the awning contract in September
2008. Paragraph 15 of the awning contract provides that
Hicks would pay McKinnis the cost of material and labor for
job setup “when the same are delivered to the job site” and
that the balance would be due upon completion. Reference
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is made in the record to a letter dated February 10, 2009, in
which Hicks informed McKinnis that he was ready to perform
his obligations under the awning contract. McKinnis filed its
complaint on March 5, in which it alleged that the parties
had entered into the awning contract on September 16, 2008,
that McKinnis had performed conditions precedent, and that
Hicks had breached the awning contract by refusing to permit
McKinnis to perform replacement of the copper awnings on
Hicks’ residence.
In a letter dated April 1, 2009, Hicks referred to his February
10 letter and again expressed his willingness to adhere to the
awning contract. In his answer filed April 2, Hicks denied
McKinnis’ allegations “because [McKinnis] has not performed,
at all . . . despite . . . Hicks’ requests for [McKinnis] to perform
under this [awning] contract.” In his third affirmative defense,
Hicks alleged that McKinnis had “materially breached the contracts between the parties.” In McKinnis’ answer to request for
admissions, it admitted that as of April 2, it had not replaced
the copper awnings.
On April 9, 2009, McKinnis demanded prepayment of the
cost of the awning contract “prior to performance.” On April
22, Hicks declined McKinnis’ demand to prepay but repeated
his willingness to abide by the awning contract.
In the district court’s order, it found that Hicks had “made
[his] demand on [McKinnis] to perform on the [awning]
contract in February and April, 2009, and [McKinnis] would
have presumably accomplished the copper awnings job in
2009.” Although the district court found that Hicks stood
ready to abide by the contract, the district court nevertheless
found that
under the circumstances, [McKinnis] was justified in
demanding [on April 9, 2009,] assurance of perform
ance from [Hicks]. . . . See Section 251 of Second
Restatement of Contracts. When [Hicks] refused to pay
the entire contract price prior to [McKinnis’] perform
ance, [McKinnis] was justified in treating the refusal as
[Hicks’] breach . . . .
Restatement (Second) of Contracts § 251 at 276-77 (1981),
upon which the district court relied, provides:
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When a Failure to Give Assurance May Be Treated as
a Repudiation
(1) Where reasonable grounds arise to believe that
the obligor will commit a breach by non-performance
that would of itself give the obligee a claim for damages
for total breach under § 243, the obligee may demand
adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not
already received the agreed exchange until he receives
such assurance.
(2) The obligee may treat as a repudiation the obligor’s
failure to provide within a reasonable time such assurance
of due performance as is adequate in the circumstances of
the particular case.
The district court did not specifically explain “the circumstances” upon which it relied as a basis for invoking § 251 and
endorsing McKinnis’ demand for prepayment, the refusal of
which it deemed a breach by Hicks. McKinnis asserts that its
demand for prepayment was based primarily on Hicks’ having
breached the roof contract.
We need not consider the wisdom of adopting § 251 of the
Restatement or whether, if adopted, it would apply to the facts
of this case. The basis on which McKinnis and the district court
evidently believed that McKinnis’ demand for assurance was
appropriate was the presumed meritoriousness of McKinnis’
claim that Hicks had already breached the roof contract and
was therefore inclined to also breach the awning contract. As
we have already determined in this opinion, the foundation for
these beliefs was erroneous.
The basis for McKinnis’ belief that Hicks would commit a
breach of the awning contract was nullified by Hicks’ assurances of performance both before and after McKinnis filed the
lawsuit. As the district court’s finding that Hicks demanded
that McKinnis perform makes clear, Hicks did not repudiate
the awning contract. See Anderson Excavating v. SID No. 177,
265 Neb. 61, 654 N.W.2d 376 (2002) (stating that repudiation
is question of fact). Further, we have determined that Hicks did
not breach the roof contract; thus, even if we were to adopt
§ 251 of the Restatement, the belief by McKinnis and the court
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that one breach foreshadows another and serves as a basis for
McKinnis to demand assurance and avoid its duty under the
awning contract was not reasonable. Hicks has not breached
the roof contract or repudiated the awning contract. The prepayment by McKinnis was not warranted, and Hicks’ refusal of
the demand was not a breach of the awning contract.
The district court’s findings show that Hicks stood ready
to perform his obligations under the awning contract and that,
inter alia, in the absence of a breach of the roof contract by
Hicks, McKinnis was not justified in seeking prepayment contrary to the payment terms and schedule in paragraph 15 of the
awning contract. Hicks’ refusal to prepay for the awning job
was not a breach by Hicks.
The district court erred when it determined that Hicks
breached the awning contract.
CONCLUSION
Hicks did not breach the roof contract or the awning contract.
We therefore reverse the order of the district court and remand
the cause with directions to vacate the judgment entered on
McKinnis’ behalf and to enter judgment in favor of Hicks.
R eversed and remanded with directions.
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