Beco Corp. v. Roberts & Sons Construction Co. , 114 Idaho 704 ( 1988 )

BISTLINE, Justice.

Beco Corporation is an Idaho corporation based in Idaho Falls whose sole stockholder is Doyle H. Beck. Roberts & Sons Construction Company, Inc., is a Utah corporation located in Pleasant Grove, Utah. Edward C. Roberts and his wife own all the stock. In the past, Roberts & Sons had been licensed to do business as a foreign corporation in Idaho and had done construction work previously in Idaho. However, during the time relevant to this appeal, Roberts & Sons was no longer registered with the Secretary of State.

In December of 1983, Beco contracted with Roberts & Sons to haul topsoil in Arizona. Roberts & Sons was the prime contractor on a highway project for the State of Arizona. The purpose of the contract was to relandscape and reseed the area around four overpasses which had suffered severe erosion. Beco’s subcontract required it to haul topsoil necessary for the reseeding.

In late 1983 Kurt Anderson, an agent of Roberts & Sons, sought prices from potential subcontractors. At trial, testimony did not establish definitively whether Anderson initiated the contact with Doyle Beck. Negotiations ensued as Beck and Ed Roberts discussed the terms of the subcontract over the phone. Beck drafted the agreement in Idaho Falls on a standard form produced by the Idaho branch of the Associated General Contractors of America. Beck signed it and mailed the contract to Ed Roberts who signed and mailed it back to Beck in Idaho Falls.

In late December 1983, Beco began work on the construction site in Arizona. Beco’s drivers discovered that after crossing the site several times their equipment bogged down in mud beneath the dry, cracked surface. Previous inspections by both parties prior to executing the contract, gave no warning of the subsurface water.

Beco notified Roberts & Sons and the State of Arizona of the muddy conditions. Roberts & Sons obtained permission from the state to stop work to allow the ground to dry out. Beco removed its equipment from the site and never returned. When the job site had dried, Roberts & Sons completed Beco’s contract performance at its own expense prior to the time specified in the subcontract when Beco’s complete performance was due.

Roberts & Sons paid Beco the agreed contract price for the topsoil it hauled. Beco then brought this action alleging it was entitled to additional compensation from Roberts & Sons because of the unforeseen expenses resulting from the muddy conditions. Continental Casualty Insurance Company, Roberts & Sons’ surety on the project, was joined as a defendant in an attempt to collect against the payment bond.

Defendants moved to dismiss for lack of jurisdiction over the person. This motion was denied by Judge George. Pursuant to leave granted by the court, defendants amended their answers to add a counterclaim for their expense in completing Beco’s contractual obligations on the highway project.

A jury trial was held on May 15 to May 19,1986. Judge George denied the defendant’s motion to dismiss for lack of jurisdiction over the person and denied their motion for a directed verdict made at the close of Beco’s case. The jury reached a verdict for Beco on its claim and against Roberts & Sons on its counterclaim. Roberts & Sons requested that the court return the jury to deliberate on the ground that the verdict was inconsistent. Judge George denied the request.

Roberts & Sons filed motions for a new trial, judgment n.o.v., and to amend the judgment. At trial, Beco’s evidence was directed entirely at Roberts & Sons Construction Company. The motion to amend the judgment was to alter the party against whom the judgment was entered, from Ed Roberts, the individual, to Roberts & Sons Construction Company. Judge George denied Roberts & Sons’ motion for a new trial or for a judgment notwithstanding the verdict and granted the motion to amend the judgment. Notices of appeal and cross appeal were timely filed.

Roberts & Sons’ appeal requires us to address the following issues:

1. Did the Idaho court have in personam jurisdiction over Roberts & Sons Construction Co., a Utah corporation?

2. Was Beco Corporation’s work removing its trucks from the mud something necessarily required in the performance of the contract and, therefore, work for which no additional compensation is required?

8. Is a summary admissible under Idaho Rule of Evidence 1006, if the proponent of the summary fails to make the underlying materials on which the summary is based available to the opposing party for inspection?

4. Is a verdict which awards damages on the contract and holds that the contract has been rescinded inconsistent?

Both parties seek attorney fees on appeal. In addition, Beco is seeking attorney fees at the trial level based upon language in the performance bond issued by Continental Casualty Insurance Co.

I.

Roberts & Sons moved for a directed verdict based on lack of jurisdiction at the close of Beco’s case and for a judgment notwithstanding the verdict following trial. The question of the existence of personal jurisdiction over a non-resident defendant is one of law which we review freely.

The question poses a two part analysis. First, Roberts & Sons actions must fall within the terms of our “long arm” statute, I.C. § 5-514. Second, Roberts & Sons must have had minimum contacts with Idaho such that assertion of Idaho jurisdiction will not violate defendant’s right to due process of law guaranteed by the Fourteenth Amendment of the United States Constitution. Schwilling v. Horne, 105 Idaho 294, 297, 669 P.2d 183, 186 (1983); See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Idaho Code § 5-514 provides in relevant part as follows:

Acts subjecting persons to jurisdiction of courts of state.—

(a) The transaction of any business within this state which is hereby defined as the doing of any act for the purpose of realizing pecuniary benefit or accomplishing or attempting to accomplish, transact or enhance the business purpose or objective or any part thereof of such person, firm, company, association or corporation; I.C. § 5-514(a) (1979) (emphasis added).

The first question is whether the conduct of Roberts & Sons falls within the terms of this very broadly worded statute.

The legislation is designed to provide a forum for Idaho residents, and, as remedial legislation of the most fundamental nature, is to be liberally construed. Doggett v. Electronics Corp. of America, 93 Idaho 26, 454 P.2d 63 (1969). But even without the rule of liberal construction, it is evident that the statute applies.

The statute itself defines “transaction of any business within this state” as “the doing of any act for the purpose of realizing pecuniary benefit.” Roberts & Sons conduct of negotiating a contract price with Beco, agreeing that Doyle Beck should draft the agreement, executing the document over Beck’s signature, and mailing the contract back to Idaho Falls certainly falls within the broad statutory language.¹ The fact that Roberts & Sons maintained no physical presence in Idaho does not affect the applicability of the statute. Southern Idaho Pipe & Steel Co. v. Cal-Cut Pipe & Supply, Inc., 98 Idaho 495, 567 P.2d 1246 (1977).

The closer question is whether Roberts & Sons had sufficient minimum contacts with Idaho such that the assertion of jurisdiction would be fair. Since the legislature in adopting I.C. § 5-514 intended to exercise all the jurisdiction available to the State of Idaho under the due process clause of the United States Constitution, Doggett, supra, 93 Idaho 26, 30, 454 P.2d 63, 67, we must turn to our federal cases for guidance while bearing in mind that the minimum contacts test is not susceptible of mechanical application and each case requires an ad hoc analysis of the jurisdictional facts. Schwilling v. Horne, 105 Idaho 294, 298, 669 P.2d 183, 187 (1983).

The leading case involving a contract dispute is the recent Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Burger King Corporation sued Rudzewicz, a franchisee residing in Michigan, in Florida for breach of franchise obligations and trademark infringement. The court ruled that the assertion of jurisdiction by a Florida court did not offend due process even though Rudzewicz and his partner had done business mainly, although not exclusively, with the Michigan office of Burger King.

Reviewing prior cases, Justice Brennan reasoned that the minimum contacts required by International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), are supplied if the defendant “purposefully directs” his activities at residents of the forum state and the litigation arises out of or relates to those activities. Id. 105 S.Ct. at 2182. In contracts cases, those who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to suit in the other state for the consequences of their activities. Id.

If minimum contacts exist, the analysis takes one further step:

Once it had been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with “fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S., at 320, 66 S.Ct., at 160. Thus courts in “appropriate case[s]” may evaluate “the burden on the defendant,” “the forum State’s interest in adjudicating the dispute,” “the plaintiff’s interest in obtaining convenient and effective relief,” “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies,” and the “shared interest of the several States in furthering fundamental substantive social societies.” World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., [286] at 292, 100 S.Ct., [559] at 564. These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required____ On the other hand, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Burger King, at 2184-2185. (citations omitted).

Applying these guidelines to the .case at hand we believe there is sufficient evidence in the record to support the district court’s assertion of jurisdiction over Roberts & Sons. There was evidence of defendant-initiated contacts. Doyle Beck testified as follows:

Q. Can you explain to me how you first became aware that there was a project going on in Arizona as best you recall?

A. It seems to me like — I can’t remember — I had run into Kurt somewhere. Maybe he had come into our office or something. But I remember him² asking me if we wanted to put our equipment to work during the winter on a job he had down in Arizona.

Q. And who was Kurt employed by then?

A. Well, he represented to me that he was joint venturing the project with Roberts & Sons of Provo. Tr., pp. 9-10 (emphasis added).

In addition, the contract price was negotiated over the telephone with calls originating from both Idaho Palls, Idaho, and Pleasant Grove, Utah. Tr., pp. 146-148. After Beco left the job site, Kurt Anderson called or visited Idaho Falls several times around April 9,1984, to determine when, or if, Beco intended to return. Tr., pp. 363-364. At about the same time period, Ed Roberts sent a Western Union mailgram to Beco informing it that unless arrangements for Beco’s return to the site were made by 8 a.m. on April 13, 1984, Beco would be “defaulted for failure to perform.” Plaintiff’s Exhibit No. 14.

Thus, there is evidence in the record that Roberts & Sons deliberately reached out beyond Utah to negotiate with an Idaho corporation and executed a contract which established a relationship of some months with Beco. While the relationship here was not as enduring nor as complex as that of Rudzewicz with Burger King Corp. (20-year franchise), it was certainly more involved than that which obtained in McGee v. International Life, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957) (a single, mailed life insurance renewal letter), cited repeatedly in Burger King.

Entering into a contract is by its nature an intentional, purposeful act. Manufacturer’s Lease Plans, Inc. v. Alverson, 115 Ariz. 358, 565 P.2d 864, 866 (Ariz.1977). However, the Burger King court specifically rejected the notion that a contract alone establishes minimum contacts. Burger King, supra, 105 S.Ct. at 2185.³ Instead, the court emphasized that the dealings between the parties prior to, and following, the execution must be examined. Id., 105 S.Ct. p. 2186. We have completed such an examination above; and finding repeated defendant-initiated contacts, we are satisfied that the guidelines of Burger King are met.

Turning to the question of whether the assertion of jurisdiction comports with “fair play and substantial justice,” we find that it does. In this case, a leading consideration is whether it would unduly burden Roberts & Sons to litigate in Idaho Falls as opposed to Provo, Utah, the county seat of Roberts & Sons home office. Since the towns are approximately 200 miles apart, Roberts & Sons case is not compelling that trial in Idaho is unreasonable. There are trial venues within each state separated by greater distance. This case is unlike Asahi Metal v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), where a majority of the Court could agree only that it was unduly burdensome to require a Japanese defendant to litigate thousands of miles from home.

In addition, the forum state’s interest in adjudicating the dispute is strong. Jurisdiction here is asserted under Idaho’s long-arm statute through which the legislature intended to provide a forum for Idaho residents. Doggett, supra.

Thus, the trial court had an adequate basis upon which to assert jurisdiction over Roberts & Sons and we affirm the court’s denial of a judgment n.o.v. on the jurisdictional ground.

II.

Next, we consider the merits. Roberts & Sons contends that the trial court erred by denying its motion for a new trial since there was no evidence to support the jury’s verdict awarding damages for the performance of “extra work.” We affirm the trial court.

The decision to grant a motion for a new trial is directed to the sound discretion of the trial judge. After weighing the evidence, a denial of a motion for a new trial will not be overturned absent a manifest abuse of discretion. We believe the evidence is sufficient to support the jury verdict.

Both parties cite to Obray v. Mitchell, 98 Idaho 533, 567 P.2d 1284 (1977), as providing the definition of “extra work.” In Obray, we read:

Extra work means work done which is not required in the performance of the contract, something done or furnished in addition to or in excess of the requirements of the contract.

98 Idaho at 537, 567 P.2d at 1288, citing Dravo Corp. v. Municipality of Metropolitan Seattle, [79 Wash.2d 214] 484 P.2d 399 (1971), and 13 McQuillan, Municipal Corporations § 37.165. See also, Cutler v. Geissler, 107 Idaho 637, 691 P.2d 1252 (Ct.App.1984).

Neither this definition nor our cases provides concrete guidance on the issue. However, if we read further in the McQuillan treatise, supra, we gain some insight on the matter in the context of public works contracts:

There can be no true test to determine whether or not certain work falls within the classification in a contract for public work, other than the understanding of the parties. The law prescribes no rules to govern with respect to matters of this kind, but leaves the parties to group and classify for purposes of contract according to any standard or system they may choose to adopt, and when controversy arises, all it seeks to do is to ascertain, as the true test, the understanding of the parties. 13 McQuillan, supra, § 37.165. (emphasis added).

Regarding the understanding of the parties, their contract provides no help since “extra work” is undefined. However there was testimony concerning whether either Beco or Roberts anticipated the muddy conditions at the time of contracting:

[MR. FULLER]: Were the site conditions different from what you expected?

[MR. ROBERTS]: I believe site conditions are different in almost every job than what you expect. Sometimes they are devastating, sometimes they are in your favor.

Q. Would you classify these as devastating?

A. They weren’t very pleasant to manage.

Q. It was a disaster, wasn’t it?

A. It was for us.

Q. Were you aware of the previous flooding, and that that flooding would cause a problem?

A. No.

Q. Would a view of the surface reveal that any problem would result?

A. Oh, when you realize that there had been a flooding and there was evidence, you could see it, but you didn’t look for it before bidding.

Q. Roberts & Sons didn’t know?

A. No.

Q. And Beco didn’t know?

A. No. Tr., p. 334-5. (emphasis added).

In addition, photographs of the site admitted as Plaintiffs Exhibit Nos. 24 and 25, show trucks buried up to the wheel hubs in subsurface mud covered by a cracked and deceptively dry looking surface, thus corroborating the testimony of Mr. Roberts.

The state’s specifications⁴ for the project (Plaintiff’s Exhibit No. 2), upon which contractors relied when preparing their bids, state that when test holes were drilled in the area, no water was noted in any of the test holes. Case law has established a rule that

under appropriate circumstances, the contractor who encounters substantially different conditions in performing a construction contract from those contemplated and set forth in the plans and specifications contained therein may be entitled to increased compensation for the additional work. See generally 76 A.L.R. 268; 85 A.L.R.2d 212. The test of whether or not such contractor is entitled to additional compensation is whether or not he justifiably relied upon the plans and specifications for the construction in making his bid and entering into the contract. (citations omitted). The reason for this rule is that if unanticipated conditions not reasonably foreseeable are actually encountered in the work and vary substantially from anticipated conditions reasonably foreseeable by the parties at the time they entered into the contract, the contractor is performing an entirely different contract than the one agreed upon and in such case is entitled to the reasonable value of his additional services. Hash v. R.T. Sundling & Son, Inc., 150 Mont. 388, 436 P.2d 83, 86 (1967).

Accord Sornsin Construction Co. v. State, 180 Mont. 248, 590 P.2d 125 (Mont.1978); L.A. Young Sons Construction Co. v. County of Tooele, 575 P.2d 1034 (Utah, 1978); see also, Zontelli & Sons v. City of Nashwauk, 373 N.W.2d 744 (Minn.1985); Metropolitan Sewerage Commission v. R.W. Construction, Inc., 72 Wis.2d 365, 241 N.W.2d 371 (1976).

The A.L.R. annotation cited by the Hash court, supra, 76 A.L.R. 268, “Right of public contractor to allowance of extra expense over what would have been necessary if conditions had been represented by the plans and specifications” provides additional support:

It may be further observed that apparently, as to contracts undertaken upon the unit basis, as distinguished from contracts in gross, special importance generally attaches to the work being other than as defined; for in many of such cases the contract may be readily interpreted as one to perform only work of the indicated character. 76 A.L.R. 268, 269.

Significantly, Beco’s contract was on a unit basis. Roberts & Sons agreed to pay $2.00 per cubic yard for the dirt that Beco hauled.

Thus, the evidence was ample that the muddy conditions were not contemplated by the parties at the time of contracting. The trial court did not abuse its discretion by denying Roberts & Sons’ motion for a new trial.

III.

Next, we consider Roberts & Sons claim of error regarding the admission of evidence. The contention is made that the court erred by admitting Plaintiff’s Exhibit No. 9. The exhibit included a list of Beco’s costs directly attributable to the muddy conditions and provided the only direct evidence of Beco’s damages covering its “extra work” claim. Roberts & Sons asserts that the exhibit is inadmissible under I.R.E. 1006 as a summary for which the advancing party failed to make the underlying materials available for inspection by the opposing party.

But Roberts & Sons’ argument ignores the principal basis upon which the exhibit was admitted. The exhibit was actually admitted as a business record exception to the rule against hearsay, Tr., p. 48, pursuant to I.R.E. 803(6), which provides as follows:

(6) Records of regularly conducted activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course • of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The term “business” as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

A trial court’s decision to admit business record evidence will not be overturned absent a clear showing of abuse. Cheney v. Palos Verdes Investment Corp., 104 Idaho 897, 665 P.2d 661 (1983). Idaho Rule of Evidence 803(6) is consistent with former I.C. § 9-414 which prior cases had held must be broadly construed. Curiel v. Mingo, 100 Idaho 303, 597 P.2d 26 (1979). Thus, in doubtful or close cases, the evidence should come in.

Doyle Beck testified that the Exhibit was a summation produced from daily time cards of individuals and from daily job activity sheets produced by his employee Theron Nebeker. The activity sheets were admitted as Plaintiff’s Exhibit No. 23. The summary was produced no later than February 24, 1983 when it was submitted to Roberts & Sons for payment. The costs for which reimbursement was requested were incurred between December 15, 1983, and February 2, 1984.

These facts bring the case in line with Cheney, supra. There this Court affirmed a trial court admission of monthly summaries of feed consumed by livestock. The summaries were prepared from daily feed sheets which had been destroyed. There, as here, the evidence was produced in the ordinary course of business, at or near the time of occurrence and not in anticipation of trial. These qualities supply the degree of trustworthiness necessary to justify an exception to the rule against hearsay.

Since we affirm the trial court’s admission of the exhibit under I.R.E. 803(6), we need not address Roberts & Sons’ contention that it was inadmissible under I.R.E. 1006.

IV.

Roberts & Sons next argue that the jury’s verdict was fatally inconsistent since it awarded damages and yet held that the contract had been rescinded. While we cannot but agree with the proposition that rescission and damages are incompatible remedies, it is abundantly clear that rescission was not an issue before the jury.

The special verdict made no inquiry of the jury regarding rescission. R., p. 161-62. Nor was the jury instructed on the law of rescission. Instead, the jurors were instructed on the concept of waiver. R., p. 154. Apparently, they were persuaded that Roberts & Sons waived its right to complain of Beco’s incomplete performance when they elected to complete the dirt hauling prior to the date upon which Beco’s completed performance was due.

Consequently, the trial court correctly refused to return the jury to the jury room to reconsider its allegedly inconsistent verdict. Roberts & Sons argument borders on the frivolous.

ATTORNEY FEES

On its cross-appeal, Beco asks us to reverse the trial court’s denial of attorney fees. Beco’s claim for attorney fees was based upon language in the payment bond supplied by Roberts & Sons surety, Continental Casualty Insurance Company. The court denied attorney fees based on a supposed lack of jurisdiction over the defendant insurance company pursuant to I.C. § 54-1927. R., p. 194.

However, the trial judge misread and misapplied the statute. The issue of whether I.C. § 54-1927 is a jurisdiction or a venue provision has not been addressed in our cases. But, since our act was based on the federal Miller Act, this Court has held that we will look to the federal cases for guidance. City of Weippe v. Yarno, 96 Idaho 319, 528 P.2d 201 (1974). Although the lower federal courts have differed, a decision by the Supreme Court of the United States put the matter to rest:

We also agree with the courts below that venue under the Miller Act for suit on the shipment diverted to South Carolina properly lay in the Eastern District of California. The Act provides:

Every suit instituted under this section shall be brought in ... the United States District Court for any district in which the contract was to be performed and executed and not elsewhere....” 40 U.S.C. § 270(b).

Petitioners argue that this provision bars a district court in California from adjudicating respondent’s claims arising from the shipments of plywood delivered in South Carolina. But § 270(b) is merely a venue requirement and there was clearly a sufficient nexus for its satisfaction. F.D. Rich Co., Inc. v. United States, Industrial Lumber Co., Inc., [417 U.S. 116] 94 S.Ct. 2157, 2163 [40 L.Ed.2d 703] (1974) (emphasis added).

Moreover, and more importantly, the trial judge erred in applying the Idaho statute in the first place. Idaho Code §§ 54-1925 through-1930 is known as the Public Contracts Bond Act, I.C. § 54-1925. By its terms, it applies to public contracts for public works within the State of Idaho:

Performance and payment bonds required of contractors for public buildings and public works of the state, political subdivisions and other public instrumentalities — Requirement for bonds. — Before any contract for the construction, alteration, or repair of any public building or public work or improvement of the state of Idaho, or of any county, city, town, municipal corporation, township, school district, public educational institution, or other political subdivision, public authority, or public instrumentality, or of any officer, board, commission, institution, or agency of the foregoing, is awarded to any person, he shall furnish to the state of Idaho, or to such county, city, town, municipal corporation, township, school district, public educational institution, or other political subdivision, public authority, or public instrumentality, or to such officer, board, commission, institution, or agency thereof, bonds which shall become binding upon the award of the contract to such person, who is hereinafter designated as “contractor”[.] I.C. § 54-1926 (Supp. 1987) (emphasis added).

Common sense dictates that the Act cannot apply to an Arizona highway project payment bond.

Counsel for Beco argued for the application of Arizona law based on choice of law principles, Tr., vol. 3, pp. 50-66, which argument failed to move the court. But no elaborate choice of law analysis is required to come to the conclusion that a payment bond issued under Arizona statutes must be enforced under Arizona law. Therefore, we reverse and remand to the district court to determine if attorney fees are appropriate to the prevailing party under A.R.S. § 34-201, et seq. If the court determines that trial level fees are called for, then it shall address Beco’s request for attorney fees on appeal applying Arizona law.

Costs to respondent.

SHEPARD, C.J., and HUNTLEY, J., concur. DONALDSON, J., sat, but did not participate due to his untimely death.

1 . The very definition of "transact" is to prosecute negotiations. Black’s Law Dictionary, p. 1341,-5th ed. (1979).

2 . Kurt Anderson testified that he couldn’t remember who initiated the contact. Tr., pp. 101-102.

3 . See Brewer, Jurisdiction in Single Contract Cases, 64 Ark. Little Rock L.J. 1. (1983).

4 . The specifications were incorporated by reference into the contract between Roberts & Sons and Beco.