COURT OF APPEALS DECISION DATED AND RELEASED November 21, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No.
96-0396
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
NEIL H. CAFLISCH, D/B/A CAFLISCH
BUILDING AND REMODELING,
Plaintiff-Respondent,
v.
RICHARD W. CROSS and
CARLA M. CROSS,
Defendants-Appellants.
APPEAL from a judgment
of the circuit court for Sauk
County: THOMAS T. FLUGAUR, Judge. Affirmed.
Before Eich, C.J.,
Vergeront and Roggensack, JJ.
ROGGENSACK,
J. Richard and Carla Cross appeal from a $19,530.89 judgment in
favor of Neil Caflisch, who constructed their home. The Crosses raise the following issues on appeal: (1) whether each detail of their contract
was "of the essence," thereby precluding the application of the
substantial performance doctrine; (2) whether Caflisch proved his claims for
contract additions under oral modification, quantum meruit or unjust
enrichment theories; (3) whether Caflisch's summary of damages was properly
admitted into evidence; and (4) whether the diminished value of the house was
the correct measure of damages for portions of the counterclaim.
We conclude that the
terms of the written contract permitted Caflisch to assert he had substantially
performed. The trial court's findings
that the contract had been orally modified through the words and conduct of the
parties and that the Crosses were fully credited for a chimney enclosure, have
adequate support in the record.
Additionally, the trial court properly exercised its discretion when it admitted
Caflisch's summary of damages. And,
because we hold that diminution in value was the proper measure of damages for
the fully installed pine trim and steel siding, even though the Crosses
contracted for oak trim and a different pattern of steel siding, we affirm.
BACKGROUND
On
May 5, 1994, Neil Caflisch, doing business as Caflisch Building and Remodeling,
signed a contract to build a 5,400 square foot home for Richard and Carla
Cross, for $263,623.00. The contract
was a pre-printed form which stated, "All materials and workmanship are guaranteed
to be as specified." Caflisch
built the house. During construction
there were add-ons for items that were not covered by the initial contract
price, and reductions, when contractual allowances were not fully used. The Crosses paid for most of the work, but
they objected to $21,189.23, the final amount Caflisch claimed was due. When payment was not forthcoming, Caflisch
filed a construction lien.
On May 8, 1995, Caflisch
commenced a foreclosure action, alleging the Crosses owed him the balance of
the orally modified contract price, plus interest. In the alternative, Caflisch claimed the same amount under quantum
meruit or quantum valebant theories. The Crosses counterclaimed for alleged breaches of the
contract. They admitted requesting extra
work from Caflisch, but denied that they had agreed to pay $9,315.58 for it.
At trial, Mary Mistel, a
Caflisch employee who kept track of the time and materials used on the Crosses'
house, testified about the preparation of Exhibit 2, Caflisch's three-page
damage summary. The Crosses objected to
its admission. They presented testimony
of the cost to redo certain parts of the house, which they said were not
constructed according to their instructions.
They presented no evidence that any of these deviations reduced the
value of the house.
After the evidentiary
presentation was concluded and the court had reviewed the briefs of the
parties, it ruled that Caflisch had substantially performed the contract, and
was entitled to the balance of the contract price, as well as $8,919.65 in oral
modifications. The court credited the
Crosses $9,362.23 for unused contract allowances and set-off most of what they
requested for a defective sidewalk, a squeaky living room floor board and
delays in construction. The court also
found that Caflisch had installed the wrong style siding, had used pine rather
than oak trim, and had failed to install a chimney enclosure for the
fireplace. It awarded no damages for
the siding or trim because it found removal would have caused economic waste
and the Crosses failed to offer evidence of the difference in value between the
house as contracted for and as completed.
Additionally, the court found they had already been credited for the
omission of the chimney enclosure. The
court added $1,041.00 in prejudgment interest, and entered a final judgment of
$19,530.89.
DISCUSSION
Scope of Review.
The
construction of a written contract is a question of law, which we review
without deference to the trial court. M
& I First Nat. Bank v. Episcopal Homes Management, Inc., 195 Wis.2d
485, 498, 536 N.W.2d 175, 182 (Ct. App. 1995).
However, a trial court's finding that a contract has been orally
modified will be sustained unless it is clearly erroneous. See Noll v. Dimiceli's, Inc.,
115 Wis.2d 641, 643, 340 N.W.2d 575, 577 (Ct. App. 1983). We review the trial court's evidentiary
decisions under the erroneous exercise of discretion standard. State v. Chambers, 173 Wis.2d
237, 255, 496 N.W.2d 191, 198 (Ct. App. 1992); see also City of
Brookfield v. Milwaukee Metropolitan Sewerage Dist., 171 Wis.2d 400,
423, 491 N.W.2d 484, 493 (1992). A
trial court properly exercises its discretion when it acts in accordance with
accepted legal standards and in accordance with the facts of record. Lievrouw v. Roth, 157 Wis.2d
332, 348, 459 N.W.2d 850, 855 (Ct. App. 1990).
And finally, determining the
correct measure of damages is a question of law which we decide without
deference to the trial court. Schrubbe v. Peninsula Veterinary Service,
Inc., 204 Wis.2d 37, 41, 552 N.W. 2d 634, 635 (Ct. App. 1996).
Substantial
Performance.
The trial court found
Caflisch had substantially performed the contract. Substantial performance is an equitable doctrine which acts as an
exception to complete performance. Klug
& Smith Co. v. Sommer, 83 Wis.2d 378, 386, 265 N.W.2d 269, 272
(1978). The doctrine allows a builder
who meets the essential purposes of the contract to claim the contract price,
despite minor performance deficiencies.
His claim is subject to an offset to remedy any defects and any
diminution in the value of the building, as completed. Because the amount due usually can be
ascertained prior to judicial determination, pre-judgment interest is
appropriate. Id.
The
test for substantial performance is "whether the performance meets the
essential purpose of the contract."
Plante v. Jacobs, 10 Wis.2d 567, 570, 103 N.W.2d 296, 298
(1960). Thus, not every detail must be
in strict compliance with the specifications for a new building, "unless
all details are made the essence of the contract." Id. at 571, 103 N.W.2d at
298. Applying this rule in Plante
v Jacobs, the Wisconsin Supreme Court held that a builder had
substantially performed a contract to build a house, despite misplacing a living
room wall. Id. at 572,
103 N.W.2d at 298.
The Crosses assert that
all contract details were made of the essence by the pre-printed
statement: "All materials and
workmanship are guaranteed to be as specified." They interpret "guaranteed to be as specified" to mean
that all materials provided and all tasks performed in building the house were
made "of the essence," as a matter of law. We decline to construe the contract in that manner.
Plante v. Jacobs
refers to "situations in which features or details of construction of
special or of great personal importance, if not performed, would prevent a
finding of substantial performance of the contract." Plante at 571, 103 N.W.2d at
298. However, that was not the case
here. We note that many of the details
of the contract were not specified at all.
Rather, certain materials, such as the pattern of the siding, were to be
chosen at a later date. The Crosses singled
out no specific features as especially important, and gave absolutely no
indication that they communicated to Caflisch that all details were of such
importance.
"Of the
essence" in contract parlance is defined as "any condition or
stipulation in a contract which is mutually understood and agreed by the
parties to be of such vital importance that a sufficient performance of the
contract cannot be had without exact compliance with it." Black's
Law Dictionary 546 (6th Ed. 1990).
A general guarantee of materials and workmanship does not rise to a
sufficient level of specificity to cause every act required under the contract
to be "of the essence."
Therefore, we conclude that the broad language used here was no bar to
Caflisch's claim that he had substantially performed.
Contract
Modifications.
The parties were in
dispute over items that were added to the contract during the course of
construction. While the Crosses agreed
that extra work had been done, generally they disputed the charges levied by
Caflisch either because they thought the $263,623.00 contract should have
covered them or because Caflisch charged too much. At trial, Caflisch sought recovery under theories of oral
modification, quantum meruit and unjust enrichment. The trial court found oral modification.
It is widely accepted
that a contract can be orally modified, even though it provides that all
modifications must be in writing. 6 Corbin on Contracts § 1295
(1962). When the parties evidence by
their words or conduct an intent to waive the contract provision requiring
change orders to be in writing, the court will avoid these provisions in the
construction of the contract. Wiggins
Constr. Co. v. Joint School Dist. No. 3 of Village of Hales Corners, Cities of
Franklin and Greenfield, 35 Wis.2d 632, 638, 151 N.W.2d 642, 645
(1967). The party seeking to avoid a
written change order requirement must show that the provision was waived by the
words or conduct of the parties. S
& M Rotogravure Service, Inc. v. Baer, 77 Wis.2d 454, 468-69, 252
N.W.2d 913, 920 (1977). Whether the
contractual requirement has been waived, modified or abrogated is a question of
fact. Id. at 472, 252
N.W.2d at 921.
Additionally,
"price is an essential ingredient of every contract ¼ for
the rendering of services." Goebel
v. National Exchangors, Inc., 88 Wis.2d 596, 615, 277 N.W.2d 755, 765
(1979) (quoting 12 Am. Jur., Contracts,
§ 70). To create a valid oral
contract, "the price must be certain or capable of being ascertained from
the agreement itself." Id. While a specific figure need not be
specified, an oral contract or modification requires at least agreement over
the proper measure of the value of the services contracted for. See Harper, Drake &
Associates, Inc. v. Jewett & Sherman Co., 49 Wis.2d 330, 339, 182
N.W.2d 551, 556 (1967).
The Crosses did not
dispute the additional charges for the window wells, the heat, the closet maid
shelves, or the sound proofing, even though there were not written agreements
to support all of these changes.
Caflisch testified Crosses typically said, "Just do it and bill
me." Thereafter, the requested
work was completed, without protest by the Crosses. This is sufficient support for the trial court's finding that the
parties had waived the requirement that all changes be in writing and that
Caflisch's normal billing procedure for labor and materials would be the proper
measure of the price for the additional work.
The Crosses allege that
some of the items Caflisch claimed as additions were actually included in the
original contract price, e.g., the glass block windows in the mud room,
the construction of a furnace and utility room, and excavation costs. However, the contract provisions which
described this work are unclear[1]
as to exactly what was included. The
testimony of the parties was in conflict.
The trial court was in the best position to determine the credibility of
the witnesses. Gehr v. City of
Sheboygan, 81 Wis.2d 117, 122, 260 N.W.2d 30, 33 (1977). It determined the Crosses had ordered and
agreed to pay for work in addition to that contemplated by the contract
provisions. These factual findings are
not clearly erroneous.
Admission
of Summary.
Summary statements may
be admitted as evidence under § 910.06, Stats. However, before tabulations or summarized
statements are admitted, the books or records upon which they are based must be
in evidence, or in court, or available to the opposite party. Tri-Motor Sales, Inc. v. Travelers
Indem. Co., 19 Wis.2d 99, 107, 119 N.W.2d 327, 331-32 (1963). The trial court admitted the summary
statement contained within Exhibit 2.
Exhibit 2 was presented
by Mistel, who did the bookkeeping on Crosses' house. She testified that in regard to contract additions, labor was
charged at $25.00 per hour and materials at cost plus 10%. She said these were Caflisch's standard
charges. The exhibit included invoices
for materials, but not the time sheets for the workers' hours. However, Mistel testified how many hours of
labor were spent on each item. Exhibit
2 was relevant to Caflisch's claim for damages, supporting documentation was
available, and it had been prepared by one with personal knowledge, who was
available for cross examination. The
trial court acted in accord with evidentiary legal standards and with the facts
of record.
Damages
for Deficient Performance.
A party is entitled to
have what he contracts for, or its equivalent in monetary damages. DeSombre v. Bickel, 18 Wis.2d
390, 398, 118 N.W.2d 868, 872 (1963).
Wisconsin courts measure damages in construction defect cases either by
(1) the cost of repairing the defect, or (2) the difference between the value
of the structure as contracted for and its value as built. Plante, 10 Wis.2d at 573, 103
N.W.2d at 299. Whether to apply the
cost-of-replacement rule or the diminished-value rule "depends upon the
nature and magnitude of the defect."
Id. When the cost
of repairing a defect would result in economic waste, damages are limited to
the diminished-value measurement. W.
G. Slugg Seed & Fertilizer, Inc. v. Paulsen Lumber, Inc., 62 Wis.2d
220, 225-26, 214 N.W.2d 413, 416 (1974).
Economic waste occurs when "in order to conform the work to the
contract requirements, a substantial part of what has already been done must be
undone," DeSombre, 18 Wis.2d at 398, 118 N.W.2d at 872-73,
or when repair would require "the reconstruction of a substantial part of
the building or a great sacrifice of work or material already wrought." Plante,
10 Wis.2d at 573, 103 N.W.2d at 299.
These determinations are not subject to mathematical calculation, but
rather, must be made on a case by case basis.
Id. at 572, 103 N.W.2d at 298.
The Crosses contracted
to have oak trim around their windows and doors and a particular style of
siding on the rear of their house, as well as a chimney enclosure. They received pine trim, a different style
of siding and no chimney enclosure. The
trial court found that tearing out the pine trim and replacing it with oak and
replacing the steel siding with a different pattern of steel siding would
result in economic waste. That factual
finding is not clearly erroneous.
Therefore, we conclude the trial court correctly held that damages were
to be measured by the difference between the value of the Crosses' house as
contracted for and as completed. W.
G. Slugg, 62 Wis.2d at 225-26, 214 N.W. 2d at 416.
While damages do not
need to be proved with mathematical certainty, it is the burden of the party
claiming damages to put into evidence a reasonable basis for their computation
that is consistent with the law. DeSombre,
18 Wis.2d at 398-99, 118 N.W.2d at 873.
The Crosses failed to prove any diminution in the value of their home as
contracted for, when compared with it as constructed. They already had been credited with the $500.00 difference in the
cost of oak over pine. There was no
difference in the cost of the siding used, as compared with the style the
Crosses wanted. And finally, the trial
court found Caflisch did credit the Crosses $3,190.91 for the omitted chimney
enclosure. We cannot say the trial
court's findings were clearly erroneous.
CONCLUSION
The statement, "All
materials and workmanship are guaranteed to be as specified" is
insufficient to show the parties agreed that each term was made "of the
essence" in this contract, where many details were not stated with any
degree of specificity but left for the owner to choose at a later date. Therefore, the trial court's conclusion that
Caflisch substantially performed the contract has a sound legal basis and a
factual basis adequately supported by the record. The trial court properly exercised its discretion when it
admitted Caflisch's damage exhibit. And
its findings that the parties had modified or waived the contract provision
which required additions to be in writing and that the Crosses had been fully
credited for the chimney enclosure have sufficient support in the record. Finally, the trial court correctly
determined that, for the siding and the interior trim, diminution in value was
the correct measure of damage.
Therefore, we affirm.
By the Court.—Judgment
affirmed.
Not recommended for
publication in the official reports.
[1] An example of the imprecise contract specifications is shown by the provision in the contract which states that Caflisch "will build a Furnace and Utility Room. [Note** A Change Order — EXTRA — will be presented.]" Because of the apparent ambiguity in the quoted statement, the court took testimony from the parties about what work they thought it included.