Mallory Fire Protection Servs. v. McShane Constr. Co. ( 2017 )

IN THE NEBRASKA COURT OF APPEALS
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
(Memorandum Web Opinion)
MALLORY FIRE PROTECTION SERVS. V. MCSHANE CONSTR. CO.
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
MALLORY FIRE PROTECTION SERVICES, INC., APPELLEE AND CROSS-APPELLANT,
V.
MCSHANE CONSTRUCTION COMPANY, LLC, APPELLANT AND CROSS-APPELLEE.
Filed October 3, 2017. No. A-16-752.
Appeal from the District Court for Douglas County: KIMBERLY MILLER PANKONIN, Judge.
Affirmed.
David J. Koukol and Michael W. Milone, of Koukol & Johnson, L.L.C., for appellant
John A. Svoboda, of Gross & Welch, P.C., L.L.O., for appellee.
MOORE, Chief Judge, and BISHOP and ARTERBURN, Judges.
ARTERBURN, Judge.
I. INTRODUCTION
McShane Construction Company, LLC (McShane) appeals and Mallory Fire Protection
Services, Inc. (Mallory), cross-appeals from an order entered by the district court after a bench
trial which found in favor of McShane for its breach of contract claim, but also found that the
contract was divisible and that Mallory had substantially performed under the contract. On appeal,
McShane argues the district court erred in its construction and application of the contract, finding
that it failed to prove a portion of its damages, dismissing its negligence claims, not admitting
proper evidence, and finding that the contract was divisible and that Mallory substantially
performed under the contract. On cross-appeal, Mallory argues the district court erred by failing
to award damages for work it performed and failing to award prejudgment interest on the work it
performed. For the reasons set forth below, we affirm.
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II. BACKGROUND
McShane was the general contractor for the construction of the Springs at Legacy
Commons Apartments (the Project). The Project involved the construction of a seven building
apartment complex in Omaha, Nebraska. Mallory was the successful bidder for the fire suppression
system subcontract on the Project. On June 8, 2012, McShane and Mallory entered into a
subcontract agreement (Agreement) for the design and installation of a fire suppression system in
each of the seven buildings. The Agreement provided that Mallory would be paid $345,000.00 for
its costs and labor on the Project. A subsequent change order on February 5, 2013, increased the
total payment by $28,565.00, for a total subcontract value of $373,565.00.
The Agreement provided that Mallory would be paid by submitting a monthly estimate of
the work completed pursuant to the General Conditions of Subcontract (General Conditions),
which was incorporated into the Agreement. The General Conditions provided that McShane
would only make payments to Mallory after McShane had received payments from the owner of
the Project. The owner of the Project was not a party in this matter. The Agreement and General
Conditions provided the time frame in which the Project needed to be completed and mandatory
conditions Mallory must have met. The General Conditions included provisions that allowed
McShane to withhold payments from Mallory if Mallory did not meet its contractual obligations.
The construction of the Project began in summer 2012 and occurred sequentially, with
work beginning on Building 1. Buildings 1-3 were completed by Mallory without issue. Building
1 received its certificate of occupancy, which is received when the building has passed its final
inspection, on December 21, 2012. Building 2 received its certificate of occupancy on January 14,
2013, and Building 3 received its certificate of occupancy on March 1, 2013.
Buildings 1-3 and 7 were classified under regulations published by the National Fire
Protection Agency (NFPA) as NFPA-13R buildings. The NFPA governs the codes for fire
sprinkler installation and at the time of this matter the City of Omaha had adopted the 2002 edition
of the NFPA code. NFPA-13R buildings are designated as residential buildings. Buildings 4-6 in
the Project were designated as NFPA-13 buildings. NFPA-13 buildings are designated as
commercial buildings. The key differences between NFPA-13R and NFPA-13 buildings are: (1)
NFPA-13 buildings require a sprinkler system in the attic of the building, and (2) NFPA-13
buildings require either a sprinkler system or complete insulation in the interstitial spaces of the
building. Interstitial spaces are the areas between the ceiling of the lower level of a building and
the framing of the next level of the building.
In January 2013, issues with the Project began to arise while Mallory was working on
Buildings 4 and 5. The Omaha Fire Department discovered that the interstitial spaces in Buildings
4 and 5 did not have sprinkler systems. The bid submitted by Mallory included the installation of
a sprinkler system in the interstitial spaces in Buildings 4-6. However, the design plans for
Buildings 4-6 did not include sprinkler systems in the interstitial spaces. Mallory initially disputed
whether they were responsible for the installation of the system in the interstitial spaces, but
eventually agreed to remedy the problem. Mallory installed sprinklers in the interstitial spaces of
Building 4 and had partially installed sprinklers in the spaces of Building 5 when McShane opted
to fill the interstitial spaces with insulation in Buildings 4-6.
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The parties’ relationship further deteriorated between February and March 2013. Mallory
submitted invoices to McShane for work performed, but McShane ceased paying the requested
amounts. According to Mallory, they left the jobsite on March 8, 2013, because of non-payment.
McShane signed a contract with another fire suppression company, Continental Fire Sprinkler
Company (Continental), the day before Mallory left the jobsite. McShane contracted with
Continental to examine, evaluate, repair, and complete the design and installation of the fire
sprinkler systems in Buildings 4-7. Continental worked on the Project for approximately three
weeks. Continental encountered issues with the use of Mallory’s designs, as well as deficiencies
in the work completed by Mallory and submitted a new proposal to McShane to perform remedial
measures and complete the Project. After receiving the new proposal, McShane determined that it
would be best for both McShane and Mallory if Mallory could return to the jobsite to finish the
Project.
The issues encountered by Continental were substantial. Continental discovered that some
of the pipes installed were not the size called for in the design plan. This had occurred within the
walls of the buildings and in the attic spaces. Additionally, Continental discovered that the main
risers in the buildings were not the correct size.
The parties exchanged emails about Mallory returning to the Project in late March 2013.
McShane requested that Mallory perform the necessary remedial work and to complete Buildings
4-6. McShane agreed that upon final inspection of the buildings, it would pay Mallory $130,604.54
for the completed work. Mallory agreed to provide the revised engineering plans to McShane
before receiving payment, perform the remedial work, and complete the buildings.
Mallory hired a new engineer, Craig Taschner, to redesign the installation plans for the
buildings. Taschner’s new plans called for a major overhaul because he discovered the previous
design plans were not NFPA compliant. Some of the installed pipe needed to be replaced, some
locations required different sprinkler heads, and some units required an additional wall to hide the
pipe feeding into the attic system. A few units with two-car garages needed to be converted into
one-car garages with a fire door replacing the installed door. Additionally, the RPZ backflow
prevention valve in the buildings needed to be removed and another prevention valve needed to be
installed.
Mallory returned to the jobsite in late March 2013 to perform its duties under the
Agreement. In order for Mallory to perform remedial work on Buildings 4 and 5, drywall had to
be removed and then replaced. At the time of the remedial work, the apartments in Building 4 were
finished completely with carpeting, paint, cabinetry, and appliances. The apartments in Building
4 were in move-in condition before the remedial work began. Building 5 was two weeks behind
Building 4, but it was near move-in condition at the time Mallory began its remedial work.
Building 6 was about one month behind Building 5, and did not have any drywall hung at the time
Mallory began its work.
Mallory completed all of its work on Buildings 4-6 around May 22, 2013. Building 4
received its certificate of occupancy on April 30, 2013, Building 5 received its certificate of
occupancy on May 9, 2013, and Building 6 received its certificate of occupancy on June 28, 2013.
Building 6 passed its fire sprinkler system inspection on May 22, 2013. On May 21, 2013, Mallory
requested payment for the work it performed on Buildings 4-6. On May 22, 2013, McShane
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responded by informing Mallory that it would not be paid until the final inspections, which would
occur in roughly 30 days. Mallory was beginning work on Building 7, but upon learning that it
would not be paid for its completed work, walked off the jobsite permanently.
After Mallory left the Project, it filed a construction lien on the property. Two of Mallory’s
suppliers, Ferguson Supply and Howell’s Fab., also filed construction liens on the Project for
nonpayment. McShane posted a bond to have Mallory’s lien taken off the Project, negotiated with
Ferguson Supply to have it assign its claim against Mallory to McShane, and paid off the Howell’s
Fab. construction lien.
Mallory filed suit for breach of contract against McShane on June 19, 2013. McShane filed
its answer and counterclaim for breach of contract on July 22, 2013. McShane alleged that as a
result of Mallory’s breach of their agreement, Mallory owed damages resulting from the following:
the insulation of the interstitial spaces, Continental’s services for remediation work, drywall
remediation and repair, painting, cleaning, temporary labor, owner damages, extended general
conditions damages, time management fees, owner’s nonpayment, management travel expenses,
design review fees, construction liens, overhead and profit, electricity costs, additional building
requirements, and additional sprinkler repair. The matter proceeded to a bench trial on January 11,
2016, and concluded on January 15, 2016. A number of witnesses testified at trial. We will discuss
specific testimony as it becomes relevant in the analysis of this opinion.
After trial, the district court determined that Mallory initially breached the Agreement in
two material ways. First, Mallory breached by failing to install the interstitial sprinkler heads in a
timely manner in Buildings 4 and 5. Second, the court found that Mallory breached the Agreement
by walking off the Project in March 2013. The court found that the March 2013 emails between
the parties was a clarification of the duties owed to each other under the contract. Finally, the court
determined that Mallory breached the Agreement for a second time when it left the jobsite in May
2013.
The district court determined that Mallory owed McShane $132,169.27 in damages for
portions of the remediation work McShane paid for as a result of Mallory’s breach. The district
court also determined that the Agreement was divisible, that Mallory had substantially performed
under the Agreement, and that McShane owed Mallory $130,604.54 for the work Mallory had
performed.
III. ASSIGNMENTS OF ERROR
Restated, reordered, and consolidated, McShane argues the district court erred in (1) its
construction and application of the contract; (2) finding McShane failed to prove a portion of its
damages with reasonable certainty and by the greater weight of the evidence; (3) finding the
contract was divisible and that Mallory had substantially performed under the contract; (4)
dismissing McShane’s negligence claims against Mallory; and (5) not admitting specific evidence.
On cross-appeal, Mallory argues the district court erred in (1) failing to award damages under the
change order; (2) failing to award damages for work performed on Building 7; and (3) failing to
award prejudgment interest.
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IV. STANDARD OF REVIEW
A suit for damages arising from breach of a contract presents an action at law. In a bench
trial of a law action, the trial court’s factual findings have the effect of a jury verdict and will not
be disturbed on appeal unless clearly wrong. Anderson Excavating v. SID No. 177, 265 Neb. 61,
654 N.W.2d 376 (2002). The trial court is the sole judge of the credibility of the witnesses and the
weight to be given their testimony. Henderson v. City of Columbus, 285 Neb. 482, 827 N.W.2d
486 (2013). An appellate court will not reevaluate the credibility of the witnesses or reweigh
testimony but will review the evidence for clear error. Id.V. ANALYSIS
1. CONTRACT
(a) Construction and Application of Contract
McShane argues the district court erred in its interpretation of the contract between the
parties. McShane specifically argues that there was no waiver or modification of the contract.
Mallory argues that the district court was correct in its interpretation that the email communication
in March 2013 was a “clarification” of the parties’ duties under the contract and was enforceable.
The construction of a contract is a question of law, and is reviewed de novo. Labenz v.
Labenz, 291 Neb. 455, 866 N.W.2d 88 (2015). Ordinarily, to establish a waiver of a legal right,
there must be a clear, unequivocal, and decisive act of a party showing such a purpose, or acts
amounting to an estoppel on his or her part. D & S Realty v. Markel Ins. Co., 280 Neb. 567, 789
N.W.2d 1 (2010). A party may waive a written contract in whole or in part, either directly or
inferentially. Id. A party may prove the waiver by: (1) a party’s express declarations manifesting
the intent not to claim an advantage or (2) a party’s neglecting and failing to act so as to induce
the belief that it intended to waive. Id. After a breach of contract, modification of that contract
requires new consideration. Selig v. Wunderlich Contracting Co., 160 Neb. 215, 69 N.W.2d 861(1955).
The district court found that the March email exchange between the parties was a
clarification of the duties owed to one another. Scott Hoppa, senior vice president at McShane
emailed Mallory’s legal counsel on March 28, 2013. Hoppa agreed that if Mallory would perform
the necessary remedial work and complete Buildings 4-6, that upon final inspection of the
buildings, McShane would pay Mallory $130,604.54 for the completed work. Mallory agreed to
provide the revised engineering plans, perform the remedial work, and complete the buildings
before receiving payment. Mallory had previously been paid $169,516.00 for its work prior to
March 2013. Hoppa testified that prior to the March email exchange, McShane had been paid
$300,120.00 by the owner for the work completed on the sprinkler systems for the Project. The
total sum to be paid to Mallory upon remedy and completion of Buildings 4-6 equals the total
amount of money the owner had paid McShane for the progress on the sprinkler system to that
date.
Upon our de novo review, we find the district court did not err in its construction and
application of the contract. The district court explicitly stated in its order, “[T]he Court finds that
this email exchange to merely be the parties clarifying to each other the duties that they owed each
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other under the Agreement.” The district court did not find that the email exchange waived
McShane’s rights under the contract. Instead, the district court simply determined the parties
understood how the duties imposed by the contract on each of them would be performed. McShane
can demonstrate no prejudice because even if the district court decision is read to have determined
McShane had waived Mallory’s first breach for purposes of paying Mallory, the district court still
found that Mallory’s breach should result in an award of damages to McShane.
(b) Breach of Contract
A breach of contract is the nonperformance of a duty. Weber v. North Loup River Pub.
Power, 288 Neb. 959, 854 N.W.2d 263 (2014). In interpreting a contract, a court must determine,
as a matter of law, whether that contract is ambiguous. Gibbons Ranches v. Bailey, 289 Neb. 949,
857 N.W.2d 808 (2015). A contract is ambiguous when a word, phrase, or provision in the contract
has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings. Id.When the terms of a contract are clear, a court may not resort to rules of construction, and the
terms are to be accorded their plain and ordinary meaning as an ordinary or reasonable person
would understand them. Id.Section 13.1.1 of the General Conditions provides, “[Mallory] shall be in default and
material breach of this Agreement if any of the following occur at any time. . . . [Mallory] refuses
or fails, except in cases for which extension of time is provided, to supply enough properly skilled
workers or proper material to meet all aspects of the current schedule. . . .” The district court found
that Mallory breached the Agreement between the two parties when Mallory walked off the Project
in May 2013 and never returned. The district court found that there was no breach of the Agreement
by McShane. We determine that the Agreement was not ambiguous. We further agree with the
district court that Mallory breached the Agreement through its May 2013 departure and that there
was no breach on the part of McShane.
2. MALLORY’S CLAIMS
(a) District Court’s Award of $130,604.54
As previously discussed, the district court found that the email exchange was not a
modification of the Agreement, but a clarification of terms. Based on that finding, the court
proceeded to analyze whether Mallory was entitled to payment for the work completed after its
return to the jobsite. The district court ultimately determined that the Agreement was divisible and
that Mallory had substantially performed under the contract.
(b) Divisibility
The question of whether a contract is divisible is a finding of fact. In a bench trial in an
action at law, a finding of fact will not be set aside unless clearly wrong. Honstein Trucking v.
Sandhills Beef, Inc., 209 Neb. 422, 308 N.W.2d 331 (1981). Generally speaking, the test is that
where there are several undertakings, each supported by a distinct consideration, the contract is
severable. Gaspar v. Flott, 209 Neb. 260, 307 N.W.2d 500 (1981). Whether a contract is entire or
several is a question of intentions apparent in the instrument. Id. In an unambiguous contract, it is
to be determined from the language, the subject matter, and the construction placed upon it by the
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parties in light of the surrounding circumstances. Id. A contract which in its nature and purpose is
susceptible of division and apportionment is divisible and severable. Id.The district court found that the Agreement was divisible because the seven total buildings
were assigned specific monetary amounts for the completion of each building. The district court
went on to find that Mallory had substantially completed the contract, leaving only Building 7
unfinished. Upon our review, we find that the Agreement was not divisible. Our review of the
Agreement does not reveal that each of the buildings was individually assigned a specific monetary
value for the work performed. Rider “B” to the contract prescribes the total payment of
$345,000.00 for the completion of work on seven buildings total. While the buildings in the Project
were constructed sequentially, with Mallory receiving payment after submitting an invoice for the
work it performed, payment occurred based on monthly estimates of work completed provided by
McShane to the owner. McShane, once paid, was to disburse the amount received for work
completed within seven days so long as Mallory was not in default of the contract provisions (less
10 percent retainage). This finding does not end our analysis however.
To successfully bring an action on a contract, a plaintiff must first establish that the plaintiff
substantially performed the plaintiff’s obligations under the contract. RN Campbell Indus. v.
Midwest Renewable Energy, 294 Neb. 326, 886 N.W.2d 240 (2016). To establish substantial
performance under a contract, any deviations from the contract must be relatively minor and
unimportant. Id. If there is substantial performance, a contract action may be maintained, but
without prejudice to any showing of damage on the part of the defendant for failure to receive full
and complete performance. Id.Where there is a lack of substantial performance, but there has been a part performance
and it has been of substantial benefit to the other party and he or she has accepted and retained the
benefits thereof, he or she should not be permitted entirely to avoid the duties assumed by him or
her under his or her contract, and, under such circumstances, the party partially performing is
entitled to recover the reasonable or fair value of such performance, subject to the reciprocal right
of the other party to recoup such damages as he or she has suffered from the failure of the
part-performing party to perform fully or substantially his or her contract. Id.As stated above, Mallory was in breach of the Agreement when it left the jobsite in May
2013, leaving Building 7 partially completed. However, Mallory had completed work on Buildings
1-3 as well as the remedial and final installation work in Buildings 4-6 before leaving. Their work
on all six buildings had passed inspections by City of Omaha officials. Based on these events, we
find that at minimum Mallory had partially performed its obligations under the contract resulting
in a substantial benefit to McShane. McShane thereafter accepted and retained the benefits of
Mallory’s work on Buildings 1-6. Therefore, Mallory is entitled to recover the reasonable fair
value of their performance.
The district court’s award of $130,604.54 to Mallory reflected the parties’ own clarification
of the amount that would be payable upon the completion of Buildings 4-6. We cannot say that the
award granted to Mallory was clearly wrong. While our reasoning varies somewhat from that of
the district court, we nevertheless affirm the result. An appellate court will affirm a lower court’s
ruling that reaches the correct result, although based on different reasoning. Latzel v. Bartek, 288
Neb. 1, 846 Neb. 153 (2014).
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(c) Change Order
Mallory argues the district court erred by failing to award it damages for the work
performed on the change order for Buildings 1-3. The change order was executed by the parties
on February 5, 2013, and received into evidence as Exhibit 24. In its order, the district court recited
that in its complaint Mallory was seeking a total of $181,694.00 in damages.
The district court entered judgment in favor of Mallory for the $130,604.54 “based on the
email exchange.” Having reviewed the record, we find no clear error in the district court’s findings.
While there was evidence adduced that Mallory performed the work contemplated by the change
order on Buildings 1-3, there is also evidence that Continental performed work on Buildings 4-6
during Mallory’s first absence from the jobsite. Mallory produced little, if any, evidence of the
value of any further work it performed beyond what was agreed to in the parties’ email exchange.
This being a case involving partial performance, the burden was on Mallory to prove the reasonable
fair value of their performance. The district court was not clearly wrong in determining that
Mallory failed to do so beyond the amount recited in the email exchange.
(d) Building 7
Mallory assigned as error that the district court erred by failing to award it damages for the
work it performed on Building 7. In its brief, Mallory’s only argument concerning this assignment
of error was, “In addition, the Court should have awarded Mallory damages for its work on
building 7. Mallory completed 75 percent of the fire sprinkler installation work on building 7.”
Appellants are required to point out the factual and legal bases that support their
assignments of error. Marcuzzo v. Bank of the West, 290 Neb. 809, 862 N.W.2d 281 (2015).
Further, an argument that does little more than restate an assignment of error does not support the
assignment, and an appellate court will not address it. Id. We find that this assignment of error was
only marginally argued. Therefore it is difficult to assess the merits of the argument. Even
assuming that this was sufficient argument for the assignment of error, the deficiencies discussed
above as to the change order are equally applicable to Building 7. The district court was not clearly
wrong in determining that Mallory should not recover for the work it performed on Building 7.
(e) Prejudgment Interest
Mallory argues the district court erred in refusing to award it prejudgment interest on its
claim. Mallory argues that Neb. Rev. Stat. § 45-104 (Reissue 2010) is the applicable statute
because the controversy between the parties involved an instrument in writing.
Two recent opinions authored by the Nebraska Supreme Court have contemplated the
interplay between § 45-104 and Neb. Rev. Stat. § 45-103.02 (Reissue 2010). In BSB Constr. v.
Pinnacle Bank, 278 Neb. 1027, 776 N.W.2d 188 (2009), the court analyzed whether a party should
have been awarded prejudgment interest under § 45-104 and § 45-103.02 and determined that
neither section allowed an award of prejudgment interest. Similarly, in Brook Valley Ltd. Part. v.
Mutual of Omaha Bank, 285 Neb. 157, 825 N.W.2d 779 (2013), the Nebraska Supreme Court
analyzed the award of prejudgment interest under both statutes. In deciding which statute to apply,
the court stated, “[w]e see no need to resolve this issue because we conclude this case is not a type
enumerated under § 45-104. So regardless which approach is correct, whether prejudgment interest
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is proper depends on whether this case presented a reasonable controversy.” 285 Neb. at 171, 825
N.W.2d at 791.
In the most recent Nebraska Supreme Court opinion discussing the award of prejudgment
interest, the court determined that prejudgment interest may be awarded only as provided in
§ 45-103.02. Roskop Dairy v. GEA Farm Tech., 292 Neb. 148, 871 N.W.2d 776 (2015). The court
cited with approval to Brook Valley Ltd. Part., supra, and determined there was a reasonable
controversy over the right to recover. Id.
In an abundance of caution, we will address whether Mallory qualifies for prejudgment
interest under § 45-104 while being mindful that an analysis under § 45-103.02 would still be
required. Section 45-104 provides:
Unless otherwise agreed, interest shall be allowed at the rate of twelve percent per annum
on money due on any instrument in writing, or on settlement of the account from the day
the balance shall be agreed upon, on money received to the use of another and retained
without the owner’s consent, express or implied, from the receipt thereof, and on money
loaned or due and withheld by unreasonable delay of payment.
We determined above that Mallory is recovering under a theory of partial performance, not an
instrument in writing. Therefore, none of the enumerated instances in § 45-104 are applicable.
Even if we were to find § 45-104 applicable, § 45-103.02(2) provides, in relevant part, that “interest
as provided in section 45-104 shall accrue on the unpaid balance of liquidated claims from the date
the cause of action arose until the entry of judgment.”
Under § 45-103.02(2), prejudgment interest is recoverable only when the claim is
liquidated, that is, when there is no reasonable controversy as to the plaintiff’s right to recover and
the amount of such recovery. Roskop Dairy, supra. This determination requires a two-pronged
inquiry. Archbold v. Reifenrath, 274 Neb. 894, 744 N.W.2d 701 (2008). There must be no dispute
as to the amount due and to the plaintiff’s right to recover. Id.There was clearly a dispute as to whether Mallory was entitled to recover any damages due
to their breach of the Agreement. Moreover, the amount of any potential recovery was
controverted. Indeed, the recovery determined by the district court and affirmed herein is less than
the amount prayed for. Therefore, we find the district court did not err in refusing to award
prejudgment interest.
3. MCSHANE’S COUNTERCLAIM FOR DAMAGES
The district court found that Mallory’s breach did result in damages to McShane.
Specifically, the court found that the following expenses incurred by McShane due to Mallory’s
breach were proven:
McShane is awarded the following damages: $67,914.00 for interstitial insulation,
$54,499.88 for drywall remediation and repair, $4,500.00 for painting services, $2,466.32
for cleaning services, and $2,789.07 for temporary labor. This is $132,169.27 total
damages awarded to McShane.
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The court rejected numerous other claims for a variety of reasons fully set out in its opinion that
will be addressed individually hereafter.
McShane argues the district court erred by failing to find that McShane had proved portions
of its damages with reasonable certainty and by the greater weight of the evidence. Mallory argues
the district court did not err and that the district court is the sole judge of credibility of the
witnesses. Important to many of the rejected claims are evidentiary rulings made by the district
court. We will address these rulings first, and then address McShane’s individual claims.
(a) Evidentiary Rulings
McShane argues the district court erred by excluding testimony from the owner of the
Project regarding its claim against McShane and by not receiving Exhibit 176, its “compendium”
of documentary damages.
In proceedings where the Nebraska Evidence Rules apply, the admissibility of evidence is
controlled by the Nebraska Evidence Rules. Judicial discretion is a factor only when the rules make
such discretion a factor in determining admissibility. ACI Worldwide Corp. v. Baldwin Hackett &
Meeks, 296 Neb. 818, 896 N.W.2d 156 (2017). To constitute reversible error in a civil case, the
admission or exclusion of evidence must unfairly prejudice a substantial right of the litigant
complaining about evidence admitted or excluded. Id. The exercise of judicial discretion is implicit
in determining the relevance of evidence, and we will not reverse a trial court’s decision regarding
relevance absent an abuse of discretion. Arens v. NEBCO, Inc., 291 Neb. 834, 870 N.W.2d 1(2015). A judicial abuse of discretion exists when the reasons or rulings of a trial judge are clearly
untenable, unfairly depriving a litigant of a substantial right and denying just results in matters
submitted for disposition. Id.McShane argues the district court erred by excluding the testimony of Angelo Eguizabal,
a representative of the owner of the Project regarding the owner’s claims against McShane for lost
rents due to the delay in the Project. The district court determined that since the contract between
the owner and McShane was never produced, the testimony was not relevant and damages
thereafter would not be reasonably certain. These damages stem from a lawsuit by the owner
against McShane in a case that was not before the district court. Upon our review, we agree with
the district court’s rationale and find that the district court did not abuse its discretion in excluding
testimony from the owner of the Project.
Next, McShane argues the district court erred by sustaining a hearsay objection to Exhibit
176 because its witnesses had compiled the exhibit and possessed direct personal knowledge of its
contents as a business record. Neb. Rev. Stat. 27-803(5) (2016) provides the following documents
are not excluded by the hearsay rule:
A memorandum, report, record, or data compilation, in any form, of acts, events, or
conditions, other than opinions or diagnoses, made at or near the time of such acts, events,
or conditions, in the course of a regularly conducted activity, if it was the regular course of
such activity to make such memorandum, report, record, or data compilation at the time of
such act, event, or condition, or within a reasonable time thereafter, as shown by the
testimony of the custodian or other qualified witness unless the source of information or
method or circumstances of preparation indicate lack of trustworthiness. The
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circumstances of the making of such memorandum, report, record, or data compilation,
including lack of personal knowledge by the entrant or maker, may be shown to affect its
weight.
It is of note that the district court allowed McShane to utilize Exhibit 176 to refresh the
recollection of witnesses but did not allow its admission. Upon our review, we find that the district
court did not abuse its discretion by sustaining a hearsay objection to Exhibit 176. This document
was created exclusively for the purpose of litigation and would not have been created in the normal
course of business for McShane. We note that many of the documents attached to the compendium
could have been admissible under the business records exception, these documents were not
created by McShane. No witnesses were produced who could lay the proper foundation as records
custodians for them to be received under the hearsay exception. Therefore, we find no error on the
part of the district court.
(b) Damage Claims
In a breach of contract case, the ultimate objective of a damages award is to put the injured
party in the same position the injured party would have occupied if the contract had been
performed, that is, to make the injured party whole. Aon Consulting v. Midlands Fin. Benefits, 275
Neb. 642, 748 N.W.2d 626 (2008). While damages need not be proved with mathematical
certainty, neither can they be established by evidence which is speculative and conjectural.
Dutton-Lainson Co. v. Continental Ins. Co., 279 Neb. 365, 778 N.W.2d 433 (2010). The proof is
sufficient if the evidence is such as to allow the trier of fact to estimate actual damages with a
reasonable degree of certainty and exactness. Shipler v. General Motors Corp., 271 Neb. 194, 710
N.W.2d 807 (2006). The amount of damages to be awarded is a determination solely for the fact
finder, and the fact finder’s decision will not be disturbed on appeal if it is supported by the
evidence and bears a reasonable relationship to the elements of the damages proved.
Dutton-Lainson Co., supra.
The district court began its trial findings by stating, “The majority of the facts in this case
are heavily disputed. The Court finds the following statement of facts to be credible based upon
its review of the evidence and consideration of live trial testimony.” In a bench trial of a law action,
the trial court’s factual findings have the effect of a jury verdict and will not be disturbed on appeal
unless clearly wrong. Donut Holdings v. Risberg, 294 Neb. 861, 885 N.W.2d 670 (2016). We will
analyze each of McShane’s claimed errors for damages in the subsections below.
(i) Drywall Remediation and Repair
McShane argues the district court erred in not awarding it the total amount alleged in
drywall remediation and repair damages, which it claims totaled $62,582.93. The district court
awarded McShane $54,499.88 in damages for the drywall remediation and repair in Buildings 4-5.
The district court deducted $8,082.12 from the change order in Exhibit 165 because John Anderson
Jr., the owner of Anderson Drywall, testified that his company installed drywall in Building 4
twice due to McShane not inspecting the work before the drywall was put in place. Upon our
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review, we find that the district court’s finding was supported by the evidence adduced. The court
was not clearly wrong in denying this cost.
(ii) Temporary Labor Costs
McShane argues the district court erred in not awarding it the total amount alleged for
temporary labor services to assist the remediation work in Buildings 4 and 5, which it claims
totaled $26,676.00. The district court received into evidence Exhibit 175, which were invoices
from Labor Ready’s representative. The district court also heard testimony from Mark
Bowermeister, assistant superintendent of the Project, who had prepared a daily manpower report,
Exhibit 163, for the labor related to the “sprinkler system changes.” The district court determined
that Labor Ready only performed work relating to the “sprinkler system changes” for portions of
11 days. The court determined the only invoices that were reasonably certain were from April 5th,
26th, and May 3rd. These invoices totaled $2,789.07. Upon our review, only the invoices dated
April 5, April 26, and May 3 relate to dates listed by Bowermeister as relating to the remediation.
We were able to determine that the district court arrived at its damages figure by factoring the
amount of work hours logged by Bowermeister and the standard rate that Labor Ready charged
for its services. Therefore, we find the district court was not clearly wrong in its award.
(iii) Owner Damages
McShane argues the district court erred in not awarding it the amount alleged for damages
of money withheld by the owner of the Project against McShane. The district court found these
damages were too remote as there was no evidence of the contract between McShane and the
owner of the Project. The contract between McShane and the owner was never produced in
discovery and the damages allegedly incurred by McShane were not reasonably certain. The
district court also noted in its opinion that there was testimony regarding a pending insurance claim
for this alleged amount, which was not further elaborated on. Upon our review, we find the district
court was not clearly wrong in its denial of damages associated with the owner of the Project, as
this claim was too remote and speculative to support recovery in this matter.
(iv) Extended General Conditions
McShane argues the district court erred in not awarding it the amount alleged for the
extended general conditions due to Mallory’s failure to complete their work in a timely manner,
which it claims totaled $160,207.00. Brian Wood, McShane’s project manager for the Project,
testified that he arrived at the total alleged damages for extended general conditions by taking the
sum of the original general conditions between McShane and the owner of the Project, divided the
sum by the number of days the Project was originally scheduled to take to complete, and multiplied
the daily general conditions figure by the number of days the Project was delayed. Wood testified
that the daily cost of the general conditions for the Project was $2,200.00. Wood then testified that
the Project was delayed 71 days from when the Project was supposed to be completed. Wood
testified that the contract between McShane and the owner called for the Project to be complete by
May 17, 2013, and was actually turned over on July 26, 2013.
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The district court found that the calculation of these alleged damages were too speculative
to be reasonably certain. The court first noted that the original contract between the owner and
McShane was never introduced into evidence. The court then noted that most of the costs
associated with the extended general conditions, such as the need for rental equipment, would have
been less near the close of the Project. The district court also noted that McShane could have
provided bills actually paid during the delay, but failed to do so. Upon our review, we find the
district court was not clearly wrong in its denial of damages associated with the extended general
conditions.
(v) Project Management Costs
McShane argues the district court erred in not awarding it the amount alleged for the project
management time due to Mallory’s failure to complete their work in a timely and correct manner,
which it claims totaled $49,250.00. McShane argues that their project managers, Brian Wood, Ken
DeBardelaben, and Scott Hoppa, devoted extra time to the Project due to Mallory’s inability to
properly install the sprinkler systems. McShane insists that the managers’ work on the Project
prohibited them from working on other projects, amounting to the damages alleged. The district
court found that since these employees were salaried employees, the employees would have been
paid the same regardless of which project they devoted their attention.
McShane also argues that the managers’ travel expenses to the Project should be awarded
as damages. The district court found that no evidence was adduced to prove these expenses were
associated with Mallory’s conduct on the Project and no evidence was adduced to prove these
expenses were reasonable. Upon our review, we note that McShane produced no evidence that
other clients failed to pay McShane due to the extra time the project managers devoted to the
Project, nor were any specific billings for travel expenses introduced. Therefore, we find the
district court was not clearly wrong in its denial of damages associated with the project managers’
time and expenses associated with delays on the Project.
(vi) Continental Sprinkler
McShane argues the district court erred in not awarding it the amount alleged for the cost
of Continental to design, review, and complete the installation of the sprinkler system on Buildings
4-6, which McShane alleged totaled $7,925.00. Additionally, McShane argues that the district
court erred in not awarding it the amount alleged for Continental’s “emergency mobilization” in
March 2013 after Mallory left the jobsite for the first time, which McShane alleged totaled
$34,455.00. Finally, McShane argues that the district court erred in not awarding it the amount
alleged for Continental to complete the installation of the sprinkler system in Building 7 after
Mallory left the Project in May 2013, which McShane alleged totaled $38,800.00. The district
court found that without evidence of invoices, the amount of damages requested for the review of
Buildings 4-6 and the “emergency mobilization” was not reasonably certain. Upon our review, we
find the district court was not clearly wrong in its denial of damages associated with Continental’s
design and installation work performed on Buildings 4-6.
Regarding Building 7, McShane alleged that they paid Continental $38,000.00 to complete
the building after Mallory left the jobsite. The district court found that this amount paid to
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Continental was less than the $51,089.46 which was still due to Mallory under the Agreement for
Building 7. The district court determined that because the amount paid to Continental was less
than McShane would have paid to Mallory, McShane was not able to recover any damages on this
claim. Upon our review, we find the district court was not clearly wrong in its denial of damages
associated with Continental’s work performed on Building 7.
(vii) Profit and Overhead
McShane argues the district court erred in not awarding it the amount it alleged was lost in
overhead and profit, $22,466.64. Wood testified that he calculated this by taking the original
overhead and profit from the contract between McShane and the owner of the Project and applying
it to the cost of the substandard performance of Mallory. The district court found that there was no
evidence of the contract between the owner and McShane. Therefore, no credible evidence was
adduced as to the percentage utilized for profit. Thus, the damages were not reasonably certain.
Upon our review, we find the district court was not clearly wrong in its denial of damages
associated with alleged lost overhead and profits.
(viii) Electrical Expenses
McShane argues the district court erred in not awarding it $11,828.07 for the electrical
utility expenses incurred due to the delay of 71 days for Mallory’s remediation and completion of
the sprinkler system. The district court found that the invoices admitted into evidence from the
Omaha Public Power District pertained to multiple properties that McShane worked on, and that
the invoices did not identify which buildings the cost of electricity was associated with at the time.
The district court found that these alleged damages were not reasonably certain. Upon our review,
we find the district court was not clearly wrong in its denial of damages associated with alleged
electrical utility costs.
(ix) Additional Fire Wall and Doors
McShane argues the district court erred in not awarding it $657.20 in damages for the
addition of a wall and fire door necessitated by Mallory’s remediation work. The district court
found that McShane did not produce any evidence of invoices for the installation of the fire wall
and door nor was any evidence produced as to who installed them. Consequently, the court found
the evidence to lack sufficient certainty to be a basis for damages. Upon our review, we find the
district court was not clearly wrong in its denial of damages associated with the installation of the
wall and fire door on at the Project.
(x) Lien Bonds
McShane argues the district court erred in not awarding it the amount alleged for paying
off construction liens filed against the Project. McShane argues it paid $3,537.00 for a bond against
the lien filed by Mallory and $8,571.63 to pay Howell’s Fab. to remove their construction lien for
supplies furnished to Mallory. The district court found that McShane did not produce any evidence
of invoices for the alleged damages for the lien filed by Mallory. The district court additionally
found that McShane failed to prove the original amount of the cost associated with the amount of
materials purchased by Mallory or how much McShane paid to remove Howell’s Fab. to remove
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the lien. Upon our review, we find the district court was not clearly wrong in its denial of damages
associated with payment of the construction liens.
(xi) Sprinkler Repairs
McShane argues the district court erred in not awarding it $2,024.00 for repairs to the
sprinkler system performed by Viking Sprinkler after the sprinkler systems were installed. The
district court found that McShane did not produce any evidence of invoices for these alleged
damages. Additionally, the district court found that the testimony regarding the work done by
Viking related to RPZ valve replacement. The court determined that there was not sufficient
evidence to demonstrate that the RPZ valves had been left in place by Mallory. There was evidence
that the only RPZ valves remaining on the property when Mallory left were associated with a lawn
irrigation system. Upon our review, we find the district court was not clearly wrong in its denial
of damages associated with sprinkler systems repairs.
(xii) Ferguson Supply
McShane argues the district court erred in not awarding it the amount alleged for damages
it incurred by paying Ferguson Supply for assignment of its claim against Mallory to McShane.
The district court found that since it had already denied a motion to consolidate the Ferguson
Supply claim with the present case before trial, the district court did not have jurisdiction over the
claim. Upon our review, we find the district court was not clearly wrong in its choosing not to
address any damages associated with Ferguson Supply.
(c) Dismissal of Negligence Claims
McShane argues the district court erred in dismissing its professional and ordinary
negligence claims because Mallory owed McShane an independent duty under tort law and
breached that duty. The district court determined that these claims were essentially alternative
theories of recovery as to the breach of contract claim.
Where only economic loss is suffered and the alleged breach is of only a contractual duty,
then the action should be in contract rather than in tort. Lesiak v. Central Valley Ag Co-op, 283
Neb. 103, 808 N.W.2d 67 (2012). The economic loss doctrine would not bar tort theories in cases,
where either (1) the damages alleged were not solely economic losses or (2) there existed an
independent tort duty alleged to be breached, which was separate and distinct from the contractual
duty. Id.Assuming, without deciding, that an independent tort duty existed which was separate and
distinct from the contractual duties existing in this case, the district court’s dismissal of the
negligence claims would have been harmless error. The alleged tort duties in this case are closely
related to the contractual duties. Many of the alleged damages in tort were remedied by Mallory’s
reentry into the Project, and its installation of the revised sprinkler plan. The remaining damages,
whether couched in contract or tort, were identical. The court addressed these damages
individually as to whether they were adequately proven. Some were awarded and some were not.
The inadequacies of proof noted by the court on the damage claims rejected would not have been
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cured by a tort theory of recovery. Therefore, we find that even if the district court’s dismissal of
the negligence claims was error, it would be harmless.
VI. CONCLUSION
Upon our review, we find the district court did not err in its construction and application
of the contract. The district court did not err by finding that McShane failed to prove its damages
with reasonable certainty and by the greater weight of the evidence. The district court did err by
finding the contract was divisible, but reached the correct result by awarding Mallory damages for
the benefits conferred to McShane. The district court did not err by dismissing McShane’s
negligence claims against Mallory. The district court did not err by excluding certain evidence.
The district court did not err by failing to award damages under the change order. Finally, the
district court did not err by refusing to award prejudgment interest.
AFFIRMED.
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