This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
J. Marco Construction, Inc.,
SAMS Enterprises, LLC, et al.,
SAMS Enterprises, LLC, et al.,
John Oliver & Associates, Inc., et al.,
Third Party Defendants.
Hennepin County District Court
File No. LN 02-011121
Valdis A. Silins, Stephenson & Sanford, PLC, 1905 East Wayzata Boulevard, Suite 220, Wayzata, MN 55391 (for appellants)
Ronald H. Groth, Groth Law Firm,
Considered and decided by Randall, Presiding Judge; Minge, Judge; and Wright, Judge.
Respondent prevailed against appellants in a lawsuit seeking, among other claims, foreclosure on a mechanics’ lien. Appellants assert that the district court erred by (1) denying an extension of a deadline for impleader of third parties; (2) denying a jury trial on appellants’ counterclaims; (3) disregarding the parties’ purported course of dealing with respect to modifications of the contract; (4) ruling that appellants waived the right to written modifications of the contract; (5) awarding excessive damages; and (6) failing to make adequate findings as to the contract. On notice of review, respondent asserts that the district court erred by failing to award a mechanics’ lien for the value of architectural services that it paid for. We affirm.
SAMS Enterprises (SAMS) is the owner of an
improved parcel of commercial real estate in
Marco commenced construction in early May but did not immediately finalize an agreement due to action by SAMS to secure financing and by Marco to solicit bids from its subcontractors. On August 17, 2001, the parties entered into a written contract, which was backdated to March 29, 2001. The contract is captioned as an agreement “where the basis of payment is a [stipulated sum].” The plans for the project were incorporated in the form of drawings that detailed interior and exterior improvements to the property. The contract also incorporated conditions that, in relevant part, required the parties jointly to approve in writing modifications to the existing plans.
tenants were slated to occupy the property on completion of the project. The first-floor tenant was the Community Bank
Commencing in October 2001, Marco submitted bids to the bank, Sasik, and Artelle to complete the improvements to their spaces. When Marco completed these improvements in early 2002, it issued invoices to those tenants, who in turn paid to SAMS the difference between the cost of the improvements and the improvement allowances.
From June to December 2001, Marco performed approximately 29 additional improvements, or “extras,” that purportedly were not incorporated into the parties’ contract. The parties did not execute any written modifications to the contract. Senn denied authorizing any extras, but according to his written notes, the parties contemplated at least $75,000 to $135,000 in extras.
Marco sued SAMS on July 2, 2002, demanding foreclosure on a mechanics’ lien and alleging claims for breach of contract and unjust enrichment. Marco sought to recover approximately $300,000 for the extras and tenant improvements, asserting that payment for these items was not controlled by the contract. Marco also claimed that SAMS had a balance due of approximately $200,000 against the existing contract.
In its answer, SAMS challenged Marco’s characterization of the extras and tenant improvements, asserting that these items were included in the contract. SAMS also brought counterclaims for negligence, breach of contract, breach of express and implied warranties, and determination of adverse claims. SAMS demanded a jury trial on its counterclaims, which the district court denied and proceeded with a bench trial.
SAMS’s defense at trial related to the effect of the parties’ course of dealing with stipulated-sum contracts. Based on prior dealings in four other projects, Senn testified that the parties used a system of “pluses and minuses” in which they offset costs over the stipulated sum by making reductions elsewhere in the project. Thus, Senn asserted, the extras and tenant improvements were contemplated by the contract. Senn characterized this system as a “not-to-exceed contract” in which the entire project was to be completed for less than the stipulated sum. But Senn admitted that, because none of the parties’ previous projects had cost overruns, there was no evidence that the parties had made such offsets.
The district court observed that, on direct examination, Senn delayed his response to questions about documents he was given to read. When the district court inquired about this conduct, Senn admitted that he had difficulty reading. The district court later inferred that, in the course of conducting business, Senn relied on his memory instead of reading documents.
Marco challenged Senn’s description of the parties’ course of dealing. Marco offered a note, made by Senn during the project, which referred to “extras.” Based on this note and other testimony, Marco asserted that Senn knew of extras that were not contemplated by the contract and that the parties never negotiated project reductions to offset added costs. Marco also tendered the testimony of two experts, John Russo and Thomas Deans, on the customary effect of a stipulated-sum contract. Both testified that a stipulated-sum contract specifies work to be performed by the builder for a certain price. Should the cost of the work exceed that price, the builder bears the added cost. But if the cost of the work is less than the specified price, the builder retains the additional profit. In a stipulated-sum contract, the price does not account for extra improvements or work beyond the amount of tenant improvement allowances.
The district court concluded that the contract contemplated only the improvement allowances. Any additional work entitled Marco to further compensation. In support of this ruling, the district court observed that the tenants bid separately on these projects and that they paid SAMS for the cost difference between the improvements and the allowance. Finding that the contract required extras and tenant improvements to be treated as modifications to the contract, the district court held that SAMS waived any requirement that contract modifications be executed in writing. The district court also found that Senn preferred oral modifications because he had difficulty reading. The district court concluded that SAMS agreed to the extras and that the parties’ written contract did not govern the amount owed for these items. Holding that Marco was entitled to recover the balance due on the contract plus the reasonable value of the extras, the district court entered judgment for Marco in the amount of $464,266 and awarded a mechanics’ lien against the property in the amount of $445,042.
SAMS moved for amended findings or a new trial. In support of the motion, SAMS asserted, in relevant part, that the district court improperly assessed the parties’ prior course of dealing because this conduct evinced the parties’ intent to enter a not-to-exceed contract. SAMS also challenged the amount of damages, claiming in part that the contract price was so excessive as to indicate a mistake.
The district court denied the motion for a new trial. In its amended findings, the district court rejected SAMS’s assertion that the parties’ prior course of dealing established that they entered a not-to-exceed contract, noting that, although Senn knew of the additional costs, the parties never considered offsets that would reduce the cost of the project. The district court also found that the damages award was justified. This appeal followed.
SAMS first asserts that the district court erred in denying an extension of the deadline for impleader of third parties. Had such an extension been granted, SAMS claims it would have initiated an action against Amcon Construction (Amcon), the original architect for the project, and John Oliver & Associates, Inc. (Oliver), which handled engineering during the project.
Our review of the record establishes that SAMS impleaded Oliver as a third-party defendant before the impleader deadline. Because it was unable to file a timely affidavit of expert review in accordance with Minn. Stat. § 544.42, subd. 2(1) (2004), SAMS voluntarily dismissed the claim. SAMS then sued Amcon and Oliver in a separate action. In December 2003, the parties to this action reached a settlement, dismissing with prejudice the claims against Amcon and Oliver.
dismissal with prejudice is a final determination on the merits that cannot be
set aside absent fraud, collusion, or mistake.
Butkovich v. O’Leary, 303
on appeal is moot when an event occurs that makes an award of effective relief
impossible or a decision on the merits unnecessary. In re Inspection of Minn. Auto
Specialties, Inc., 346 N.W.2d 657, 658 (
argues that the district court erred by denying its demand for a jury trial on
its counterclaims. Whether a party has a
right to a jury trial is a question of law, which we review de novo. Abraham v.
Minnesota Constitution provides that “[t]he right of trial by jury shall remain
inviolate, and shall extend to all cases at law without regard to the amount in
different lines of authority have developed on whether the right to a jury
trial attaches to a counterclaim. The
first and prevailing line of authority is derived from the decision of the
Minnesota Supreme Court in Koeper v. Town of Louisville, 109 Minn. 519,
124 N.W. 218 (1910). The Koeper
court held that, in an action “where the plaintiff seeks both equitable and
legal relief, neither party is entitled to a jury trial as a matter of
the rule of Koeper favorably in Olson v. Aretz, 346 N.W.2d 178,
separate line of authority begins with the decision of the Minnesota Supreme
Court in Morton Brick & Tile Co. v. Sodergren, 130 Minn. 252, 153 N.W. 527 (1915). Without acknowledging Koeper or Behrens,
the Morton Brick court stated that, when a party brings mixed claims at
law and in equity, the claims are severed so that a jury may hear the claims at
The preponderance of authority here favors the rule articulated in Behrens that, when a plaintiff proceeds with a suit in equity, the defendant loses the right to a jury trial on any counterclaim. See Notes, The Right to Jury Trial Under Merged Procedures, 65 Harv. L. Rev. 453, 455 (1952) (comparing this rule with that of other jurisdictions). Yet Behrens predates the promulgation of the Minnesota Rules of Civil Procedure and thus does not contemplate compulsory counterclaims. See Minn. R. Civ. P. 13.01 (requiring a counterclaim if it arises out of the same transaction that is the subject matter of an adverse party’s claim).
Due to compulsory counterclaims
and the inability to proceed with separate actions in courts of law and equity,
federal courts have held that the right to a jury trial attaches to
counterclaims at law under the Seventh Amendment. Beacon Theatres, Inc. v. Westover, 359
U.S. 500, 510-11, 79 S. Ct. 948, 956-57 (1959); 6 Charles A. Wright, Arthur R.
Miller & Mary K. Kane, Federal Practice & Procedure Civil § 1405
(2d ed. 1990). The persuasive value of
these authorities is questionable, however, because
brought suit to foreclose on a mechanics’ lien, as well as actions for breach
of contract and unjust enrichment. The
right to a jury trial does not attach in a mechanics’ lien foreclosure action. Engler Bros. Constr. Co. v. L’Allier,
raises a series of challenges that relate to the formation and effect of
modifications that the parties made to their contract. The interpretation of a contract is a
question of law, which we review de novo.
Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (
purpose of contract interpretation is to ascertain and enforce the intent of
the parties. Travertine Corp.,
683 N.W.2d at 271. When the language of
a contract is unambiguous, the intent of the parties is determined from the
plain language of the contract.
When a contract controlled by
common law is ambiguous, relevant evidence may be taken from the parties’
course of performance, their course of dealing, and the usage of trade. Restatement (Second) of Contracts § 202(5)
(1981). But greater weight will be given
to the language of the contract than to the parties’ actions or to usage of
Course of performance refers to
the actions of the parties during the performance of the contract. Cut Price Super Markets v. Kingpin Foods,
Usage of trade refers to the
general practice of those engaged in the business of the parties. Apple Valley Red-E-Mix, Inc. v.
Mills-Winfield Eng’g Sales, Inc., 436 N.W.2d 121, 124 (Minn. App. 1989), review
denied (Minn. Apr. 26, 1989). Usage
of trade may supply the meaning of technical terms in a contract. Starr v. Starr, 312
SAMS claims that, in accordance with the parties’ course of dealing, the parties intended a not-to-exceed contract in which extra improvements would be offset by other project reductions. The essence of this argument is that the extra improvements were not made pursuant to contract modifications. Rather, they were contemplated by the existing contract.
usage of trade provides that, when the parties have executed a stipulated-sum
contract, the builder is only required to complete the work set out in the
plans. If the builder performs any work that
was not contemplated by the plans and the owner knowingly receives the work
without objection, the owner is liable to the builder for more than the amount
of the stipulated sum. New
parties do not reach an agreement on the price of extra improvements, the party
providing the improvement may seek relief through the doctrine of quasi
contract. When the essential terms of a
contract are indefinite and, therefore, no actual contract exists, quasi
contract may allow a party to recover the reasonable value of goods and
services it provides to another. See Druar
v. Ellerbe & Co., 222
Here, the contract provided for certain work to be performed in accordance with the project plans. SAMS admits that certain improvements were not included in the plans, but claims that the parties intended a system of offsets wherein extra improvements would be offset by reductions elsewhere in the project. But the contract does not describe such a system of offsets. The work provisions of the contract consist entirely of the drawings, which are not affected by the alleged offsets or reasonably susceptible of more than one meaning. Thus, SAMS cannot resort to the parties’ course of dealing to interpret the work provisions of the contract. Travertine Corp., 683 N.W.2d at 271.
Even if the work provisions of the contract were ambiguous, the parties’ course of performance establishes that extra improvements were made, but the parties did not negotiate offsets elsewhere in the project. According to the district court, the parties treated the extras as separate from the existing contract, in accordance with usage of trade. Because the district court rejected SAMS’s characterization of the parties’ course of dealing, we conclude that the district court did not err in awarding Marco compensation for extras.
also argues that, contrary to the conclusion of the district court, it did not
waive the requirement that modifications to the contract be made in
writing. The parties to a contract
cannot prospectively limit their ability to modify an existing contract or to
negotiate a new contract. Helsby v.
If the parties’ course of performance
demonstrates that the owner tends to direct changes to a construction contract orally,
those directions constitute a waiver of the right to require modifications
executed in writing. Standard Constr.
Co. v. Nat’l Tea Co., 240
The district court found that Senn frequently gave Marco oral directions to complete improvements that were not required by the contract. And when no such direction was given, Senn knowingly permitted the extra improvements without objection. As discussed below, these findings are not clearly erroneous. Accordingly, we conclude as a matter of law that, as a result of Senn’s actions, SAMS waived the right to require written approval for such modifications.
challenges the district court’s reliance on certain evidence in its
determination of waiver. SAMS initially
asserts that, because Senn rejected many of the extra improvements to the property,
the district court had insufficient evidence to conclude that SAMS waived the
requirement for written approval of modifications. Because this argument challenges the
sufficiency of the district court’s findings, we review for clear error, viewing
the record in the light most favorable to those findings. Chafoulias
v. Peterson, 668 N.W.2d 642,
testified that he expressly rejected many of the extra improvements to the
property. Lee and Plowman testified that
Senn either directed them to make the extra improvements or that Senn had
knowledge of the extra improvements.
Taking all reasonable inferences in support of the findings, the
testimony of Lee and Plowman supports the conclusion that Senn either approved
of, or did not object to, the extra improvements. See
Sefkow v. Sefkow, 427 N.W.2d 203, 210 (
also asserts that the district court erroneously considered certain evidence in
its determination of waiver. Because the
district court has broad discretion to admit or exclude evidence, its rulings
on evidentiary matters are reviewed for an abuse of discretion. Bergh & Misson Farms, Inc. v. Great
Lakes Transmission Co., 565 N.W.2d 23, 26 (
SAMS first challenges evidence that Lee, Senn, and Plowman attempted to form a joint venture in the spring and summer of 2001. The record here supports the determination that, while the formation was pending, Senn held himself out as an officer of this joint venture. It may be inferred that, during this time, the parties accorded greater trust to one another and were more likely to dispense with formalities in their dealings. It was not an abuse of discretion for the district court to consider the parties’ joint venture as evidence that SAMS waived the requirement for written approval for extra improvements at least during the period of the joint venture’s existence.
also challenges the sufficiency of the evidence that Senn had difficulty
reading. We accord substantial deference
to the district court’s opportunity to observe firsthand the demeanor of a witness. Tamarac Inn, Inc. v. City of
SAMS claims that the district
court’s damages award is excessive. The
district court’s decision to deny remittitur or a new trial on the basis of
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 (
SAMS asserts that, because of the district court’s misinterpretation of the parties’ contract, Marco effectively received a double recovery. In advancing this argument, SAMS relies on its interpretation of the parties’ contract, which we previously rejected. Thus, this aspect of SAMS’s claim of excessive damages is without support.
SAMS also claims that the district court miscalculated the reasonable cost of goods and services in awarding damages based on a quasi contract theory. But rather than calculating this cost, the district court relied on a stipulation by the parties. Because this award cannot be characterized as the product of passion or prejudice, the district court did not abuse its discretion.
alternatively argues that the amount of damages is so excessive as to indicate a
mistake. A contract may be rescinded if
a party makes a mistake as to the price of an item, reasonable investigation
would not have disclosed the price of the item, and the contract would not have
been formed but for this mistake. Gartner
v. Eikill, 319 N.W.2d 397, 398-99 (
also contends that, because Marco completed some extra improvements before the
parties’ contract was executed, it is not entitled to recover for those
improvements. As we have noted, the
builder may recover against the owner by quasi contract when an owner knowingly
receives improvements that are not contemplated by the parties’ contract. New
objects to the adequacy of the district court’s findings on three of its
“defenses.” SAMS contends that the
inadequate findings demonstrate that the district court failed to consider its
defenses. The district court is required
to “find the facts specially and state separately its conclusions of law[.]”
The first purported defense is that, according to their course of dealing, the parties intended a system of “pluses and minuses” in which extra improvements would be offset by reductions elsewhere in the project. As to this theory, the district court found that SAMS failed to produce documentary evidence of such offsets. Finding that Senn’s testimony lacked credibility, the district court rejected his description of the parties’ course of dealing. The findings otherwise provide, based on the parties’ course of performance and usage of trade, a detailed explanation of the district court’s determination of the nature of the parties’ contract and are, therefore, adequate.
The second purported defense is that Marco did not submit to the district court “contractually required documentation” of extra improvements. This defense is premised on SAMS’s repeated argument that modifications to the contract had to be executed in writing. Because we affirm the district court’s conclusion that SAMS waived the right to written modification, findings on “contractually required documentation” are not required.
The third purported defense is that the amount of damages was excessive and indicative of mistake. Here, the district court made extensive findings on its damages calculation, relying substantially on the parties’ stipulation with respect to the value of extra improvements. Moreover, SAMS’s arguments on this issue are substantially based on its interpretation of the contract, which the district court rejected. As previously noted, the findings of the district court provide a detailed basis for its interpretation of the contract.
These purported defenses parallel the issues that SAMS has previously raised, regarding contract modification and damages. As the foregoing analysis indicates, we have sufficient findings to conduct informed and meaningful appellate review of these issues. As such, SAMS’s challenge to the adequacy of the district court’s findings fails.
of review, Marco asserts that it is entitled to a mechanics’ lien of $10,000
for architectural services. The claim is based on Marco’s payment to
SAMS, which SAMS then paid an architect to create plans for the project. The availability of a mechanics’ lien is
controlled by statute; and the interpretation of this statute presents a
question of law, which we review de novo.
David-Thomas Cos. v. Voss, 517 N.W.2d 341, 342 (
The mechanics’ lien statue provides in relevant part:
Whoever performs engineering or land surveying services with respect to real estate, or contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery for any of the purposes hereinafter stated, whether under contract with the owner of such real estate or at the instance of any agent, trustee, contractor or subcontractor of such owner, shall have a lien upon the improvement . . . .
Section 514.01 limits the availability of a mechanics’ lien to a party who “performs . . . or contributes to the improvement of real estate by performing labor, or furnishing skill[.]” This provision contemplates that the contribution is made at the direction of the owner or the owner’s agent. Marco does not assert that it performed any architectural services that contributed to the improvement of real property. It merely contributed cash that paid for architectural services performed by a third party.
Nothing in the plain language of the statute suggests that Marco is
entitled to a mechanics’ lien under these circumstances. Furthermore, the purpose of a mechanics’ lien
is to protect the rights of those who contribute labor or services to the
improvement of real property. Twin
City Pipe Trades Serv. Ass’n, Inc. v. Peak Mech., Inc., 689 N.W.2d 549, 551
 SAMS and another entity, Marcus Corporation (Marcus), were defendants before the district court and are appellants here. Both SAMS and Marcus are controlled and operated by Senn, who at all times relevant to this matter, acted on behalf of both entities. The roles of these entities varied during the timeframe relevant to this matter. Because these entities have identical interests on appeal, we refer to SAMS throughout in lieu of the actual parties in interest.
 SAMS’s description of a
not-to-exceed contract varies from the ordinary usage in the construction
industry, which treats a not-to-exceed contract as a type of “cost plus”
contract. A cost-plus contract provides
that the builder will complete certain work for the price of labor and
materials plus a certain percentage that the builder may apply to overhead or
otherwise keep as profit. Black’s Law
Dictionary 312 (5th ed. 1979); see also
Boller v. Comm’r of Taxation, 233
 Marco also argues that the
district court erred by excluding Senn’s deposition as substantive evidence at
trial, but it does not assert any prejudice as a result of this ruling. Even if we assume an error, we conclude that
the district court did not abuse its discretion. See
State by Clark v. Wolkoff,