Opinion
No. 107,426.
2013-08-29
BRICK MASTERS, INC., Appellee, v. MURRAY & SONS CONSTRUCTION COMPANY, INC., and The Ohio Casualty Insurance Company, Appellants.
Appeal from Shawnee District Court; John E. Sanders, Judge. Michael L. Entz, of Entz & Entz, P.A., of Topeka, for appellants. John H. Hutton and Amanda S. Vogelsberg, of Henson, Hutton, Mudrick & Gragson, LLP, of Topeka, for appellee.
Appeal from Shawnee District Court; John E. Sanders, Judge.
Michael L. Entz, of Entz & Entz, P.A., of Topeka, for appellants. John H. Hutton and Amanda S. Vogelsberg, of Henson, Hutton, Mudrick & Gragson, LLP, of Topeka, for appellee.
Before HILL, P.J., ATCHESON and ARNOLD–BURGER, JJ.
MEMORANDUM OPINION
PER CURIAM.
This case arises out of a construction project run amok, at least from the perspective of Plaintiff Brick Masters, Inc. as a subcontractor for Defendant Murray & Sons Construction Company on the $13 million job to build a parking garage on the Kansas State University Campus. Brick Masters sued Murray & Sons in Shawnee County District Court alleging project delays and a botched construction plan breached their contract, substantially increasing its labor costs. Following a bench trial, the district court awarded Brick Masters nearly $125,000 in damages. Murray & Sons has appealed on the grounds the district court improperly admitted an exhibit summarizing a component of Brick Masters' revised damage calculations produced 6 days before trial and the evidence failed to support the award. We find no error and affirm.
Because Murray & Sons has not challenged the district court's liability finding on appeal, we need not outline the underlying contractual dispute in great detail. The parties are well familiar with those details. We recite the contours of the dispute in line with Brick Masters' version, as the party prevailing on liability. Murray & Sons successfully bid to be the general contractor on the parking garage project in 2007. Murray & Sons subcontracted with Brick Masters to install “limestone block veneer” on the exterior of the parking structure. Brick Masters was to be paid about $950,000 for that work. Given the nature of the work, Brick Masters and Murray & Sons agreed that the project would be performed in a way permitting installation of the veneer in a systematic pattern around the parking structure. As we understand matters, that approach would have allowed Brick Masters to set up scaffolding and place the veneer with minimal time and labor devoted to preparatory activities.
For reasons that are immaterial here, Murray & Sons didn't keep the project on schedule and managed the overall work in a manner that required Brick Masters to install the veneer haphazardly as various noncontiguous sections of the garage became ready. Brick Masters, therefore, had to set up, teardown, and move scaffolding far more frequently than the agreed-upon plan would have necessitated. And the company had to move large limestone blocks around the garage when it otherwise would not have. As a result, Brick Masters incurred increased labor costs for its hourly wage workers and other additional expenses. Brick Masters sued Murray & Sons and the Ohio Casualty Insurance Company to recover those costs and expenses. Murray & Sons and the insurance carrier are united in interest and jointly represented, so we do not differentiate between them.
As noted in the district court's memorandum decision and order, Brick Masters sought $179,427.96 in damages. The district court awarded Brick Masters $124,798.39. Of that amount, the district court attributed $97,218.75 to “out of scope” labor—the shorthand term the parties have used to describe the increased employment costs Brick Masters attributed to Murray & Sons' mismanagement of the project. Murray & Sons' points on appeal pertain only to the damages for out of scope labor.
We infer that during his deposition Brick Masters President Lee Stewart described why the company experienced increased labor costs and apparently provided a calculation of the claimed damages. The calculation was based on attributing time spent by various employees to in scope labor (work that would have been done had the project been properly managed) and out of scope labor (the excessive work made necessary because of Murray & Sons' contract breach). The deposition is not part of the record, but the parties have discussed it. We also gather that Brick Masters' contemporaneous recordkeeping was less than illuminating; the district court made a finding of fact that the company's documentation “leaves something to be desired.”
After discovery closed, Brick Masters filed a pretrial questionnaire on April 18, 2011, itemizing its claimed damages for “extra cost in labor” as $163,422.48. On May 16, Brick Masters filed an amended questionnaire revising that amount to $97,218.75—the figure the district court awarded the company in the bench trial 3 months later.
Six days before trial, Brick Masters' lawyers provided to their counterparts representing Murray & Sons a 55–page exhibit containing spreadsheets or charts listing company employees for calendar months during the parking garage project and dividing their hours worked each day between in scope and out of scope labor. The exhibit also contains several summary sheets totaling the out of scope hours and the claimed damages attributable to those hours.
At trial, Stewart explained he consulted with his two primary job supervisors and revised the out of scope hours and, hence, the damage calculations. Murray & Sons objected to the exhibit as a new damage calculation and asserted undue surprise. Murray & Sons also objected on the grounds that the exhibit necessarily reflected hearsay from the supervisors. Brick Masters told the district court the supervisors would be called as witnesses, though they were not. The district court denied the objections and admitted the exhibit.
Murray & Sons has timely appealed. We take up the issues in order beginning with the admission of the damage exhibit.
Nobody disputes the exhibit was relevant and material to the damage calculation and to the testimony Stewart provided at trial. See State v. Berriozabal, 291 Kan. 568, 586, 243 P.3d 352 (2010) (an appellate court reviews de novo a contested determination of materiality). A decision to admit or exclude a particular piece of evidence that is otherwise material largely rests in the trial court's sound discretion. Wendt v. University of Kansas Med. Center, 274 Kan. 966, 975, 59 P.3d 325 (2002); Ives v. McGannon, 37 Kan.App.2d 108, 120, 149 P.3d 880 (2007). The district court may exclude evidence under K.S.A. 60–445 if its admission would unfairly surprise or prejudice a party. That determination is reviewed on appeal for abuse of discretion, as the statutory language would suggest. McGinnes v. Wesley Medical Center, 43 Kan.App.2d 227, Syl. ¶ 4, 224 P.3d 581 (2010). The admission of hearsay is similarly subject to review for abuse of discretion. See State v. James, 48 Kan.App.2d 310, 323, 288 P .3d 504 (2012).
A district court may be said to have abused its discretion if the result it reaches is “arbitrary, fanciful, or unreasonable.” Unruh v. Purina Mills, 289 Kan. 1185, 1202, 221 P.3d 1130 (2009). That is, no reasonable judicial officer would have come to the same conclusion if presented with the same record evidence. An abuse of discretion may also occur if the court fails to consider or to properly apply controlling legal standards. State v. Woodward, 288 Kan. 297, 299, 202 P.3d 15 (2009). A district court errs in that way when its decision “ ‘goes outside the framework of or fails to properly consider statutory limitations or legal standards.’ “ 288 Kan. at 299 (quoting State v. Shopteese, 283 Kan. 331, 340, 153 P.3d 1208 [2007] ). Finally, a district court may abuse its discretion if a factual predicate necessary for the challenged judicial decision lacks substantial support in the record. State v. Ward, 292 Kan. 541, Syl. ¶ 3, 256 P.3d 801 (2011), cert. denied132 S.Ct. 1594 (2012) (outlining all three bases for an abuse of discretion). The asserted errors in the admission of the damages exhibit do not implicate legal or factual mistakes on the district court's part. So we are left to ask whether the district court would stand alone in its decision to admit the exhibit.
We are particularly reluctant to second-guess a district court's evidentiary rulings in a comparatively complex, contentious case tried without a jury. The district court is especially well positioned to make those sorts of calls from a vantage point of having shepherded the case through discovery and motion practice to trial. We are not comparably situated even after perusing the record on appeal. While the question might be closer than some, especially given the notably late disclosure of the exhibit, we find no abuse of discretion.
Here, Brick Masters revised its damage claim in the amended questionnaire filed about 3 months before trial. At that point, the company's lawyers presumably had at least some inkling that Stewart had modified his views about the extent of out of scope work. So delivering the exhibit underlying those modifications less than a week before trial looks to be a tactic rather than the product of procrastination. Either way, however, the late disclosure of witnesses or documentary evidence thwarts the basic purpose of civil discovery in affording the parties full and fair opportunity to obtain all reasonably relevant information well in advance of trial to facilitate litigation preparation and settlement discussion.
Murray & Sons' lawyers could have sought permission from the district court to reopen Stewart's deposition to explore the information in the exhibit, perhaps coupled with a trial continuance. A court may—though it certainly need not—provide that sort of remedy for evidence disclosed late, often with an award of associated attorney fees or other costs against the dilatory party. See, e.g., Dolin v. Contemporary Financial Solutions, Inc., No. 08–cv–00675–WYD–BNB, 2009 WL 4730465, at *6 (D.Colo.2009); Pinstripe, Inc. v. Manpower, Inc., No. 07–cv–620–GKF–PJC, 2009 WL 2252131, at *4 (N.D.Okla.2009); Kallenberg v. Knox County Board of Education, No. 3:06–cv–371, 2009 WL 2356693, at *4 (E.D.Term.2009). Murray & Sons did not go that route and chose to bank on excluding the exhibit at trial. A district court probably could have favorably entertained that request without abusing its discretion—the question is not before us, so we don't presume to formally answer it. In short, this is one of those situations in which an appellate court would be hard pressed to find an abuse of discretion with either result. See McMahan v. Toto, 256 F.3d 1120, 1129 (11th Cir.2001) (“[U]nder an abuse of discretion standard there will be circumstances in which we would affirm the district court whichever way it went.”); Kleban v. Eghrari–Sabet, 174 Md.App. 60, 101–02, 920 A.2d 606 (2007).
We also suppose that Stewart could have testified to his revised damage calculations without the admission of the exhibit. Brick Masters had not designated Stewart as an expert on damages. The rules tend to be much stricter on expert disclosures, see K.S.A. 60–226(b)(5), and the courts considerably less forgiving of experts who create moving targets with shifting opinions or ever expanding factual foundations for their conclusions. On appeal, Murray & Sons does not challenge the admission of Stewart's damage testimony. With or without the exhibit in evidence, Stewart was subject to cross-examination based on conflicting testimony he might have given in his deposition. And Murray & Sons could have requested a brief continuance to prepare to meet his changed trial testimony.
Murray & Sons also suggests the damage exhibit contains inaccuracies or, at the very least, appears inconsistent with other documents Brick Masters produced. It points to several examples of purported discrepancies. At best, however, those go to the weight to be given the damage exhibit rather than its admissibility, especially in a trial to the district court.
In sum, the district court did not abuse its discretion in denying Murray & Sons' motion to exclude the damages exhibit as impermissibly late, unfairly surprising, or unduly prejudicial.
As to the hearsay objection, we assume without deciding that the exhibit contains hearsay to the extent Stewart relied on information from his supervisors in preparing the allocation of employee hours to in scope or out of scope labor. Under K.S.A. 60–460(a), hearsay may be admitted if the person making the out of court statement “is present at the hearing and available for cross-examination.” In a civil case, the proponent of the hearsay statement need not call the person making the out of court statement as a witness. Although Brick Masters indicated it would call the supervisors as witnesses, the company never did. But Brick Masters was not obligated to put them on the stand, so long as they were available to Murray & Sons for that purpose. Here, the record does not indicate that Murray & Sons attempted to call the supervisors as witnesses (or even wished to do so), only to find they were in places unknown or otherwise unavailable.
Under those circumstances, we find no hearsay violation and no abuse of discretion on the district court's part in receiving the exhibit over that objection.
For its second issue on appeal, Murray & Sons argues that Brick Masters realized a “margin” in excess of its expectations on the parking garage project and, therefore, cannot recover additional labor costs. Murray & Sons cites no legal authority supporting such a defense to damages on a breach of contract claim or in any other sort of action for that matter.
We infer that Murray & Sons refers to margin as reflecting the revenue Brick Masters generated from the parking garage project less the costs attributable to that project. That sort of calculation does not reflect fixed costs or overhead of the business itself. Those would have to be deducted from the margin, at least on a proportionate basis, to get toward a number reflecting Brick Masters' profit on the job. But those accounting gymnastics are beside the point. Even if Brick Masters earned a healthy profit on the parking garage job—well beyond the amount Stewart estimated or hoped for at the beginning—that profit would have been greater still had there been no additional labor costs directly attributable to Murray & Sons' breach of contract and poor management of the project.
Brick Masters is the injured party here—a point Murray & Sons concedes with its decision against appealing the district court's liability finding—and is, therefore, legally entitled to be compensated for the financial harm it suffered as a result of the breach of contract. See Moore Const. Co. v. Clarksville Dept. of Elec., 707 S.W.2d 1, 15–16 (Tenn.App.1985) (increased labor costs recoverable on breach of contract); Fairfax County Redevelopment v.. Worcester Bros., 257 Va. 382, 388, 514 S.E.2d 147 (1999) (party may recover labor costs attributable to delay in contract performance caused by the other party's breach). That the compensation offsets increased costs and effectively augments an existing profit, even a big one, as opposed to transforming a sizeable loss into a smaller loss or into a tiny profit simply makes no difference. The argument fails to advance a legally recognized basis to reduce or set aside the damage award.
Affirmed.