DIVISION II

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

TERRY CRABTREE, Judge

CA00-914

April 11, 2001

L.D. VICKERS

APPELLANT AN APPEAL FROM PULASKI COUNTY

CHANCERY COURT

V. NO. EQ98-6671

HONORABLE VANN SMITH

TERRY MORRISON CHANCELLOR

APPELLEE

AFFIRMED ON DIRECT APPEAL AND CROSS-APPEAL

This appeal concerns a home construction contract entered into in 1997 between appellee Terry Morrison, as owner, and appellant's company, Construction Technology, as builder. In mid-1998, a dispute arose over the cost of the home's foundation. As a result, appellant stopped work on the project and appellee refused to make further payments. Appellant subsequently filed suit seeking judgment for his costs expended, and the chancellor awarded him $55,207.42. Appellant argues on appeal that he should have been awarded $124,893.83, plus attorney fees. Appellee argues on cross-appeal that the chancellor erred in awarding any damages at all. We find no error in the award of damages and affirm on both direct appeal and cross-appeal.

On July 31, 1997, a contract was executed whereby Construction Technology (hereafter referred to for the sake of convenience as "CTI," a name also used by the company) agreed to build a Lindal Cedar Home for appellee on a lot in the River Ridge Point Addition in Little Rock. The lot upon which the home was to be built is located on a steep hill above the Arkansas River. Construction began in the fall of 1997 and was to be completed by March 1, 1998. Compensation was to be paid to CTI by appellee on a cost-plus basis, meaning that appellee would reimburse CTI for its actual costs and expenses -- estimated to be $199,500 -- plus a fixed fee of $13,326. According to the contract, such costs and expenses included "all of [CTI's] costs for labor, materials, supplies, subcontracting, equipment, appliances, freight, tool rentals, permits, and other expenses incorporated into the construction or expended in connection with the construction, and all of [CTI's] costs and expenses for payment to subcontractors and other expenses reasonably incurred for the construction." The contract further provided that CTI would keep "careful records" of all costs and expenses and would "keep full and detailed accounts as may be necessary for proper financial management of this construction project." To receive reimbursement for its costs, CTI was to submit applications for payment to appellee on specified forms, accompanied by invoices, with lien waivers submitted where applicable.

Paragraph four of the contract dealt with changes to be made in the project's plans and specifications. It provided that changes could be made only by a written change order. It further provided that, should appellee request any change adding to the construction, then he agreed to make payment to CTI for any such change. Both parties agreed to execute `Change Order Form II' prior to implementing any such change. Paragraph sixteen of the contract dealt with the problem of unforseen conditions and read as follows:

Should [CTI] encounter abnormal soil conditions, rock, or other reasonably unforseen conditions below the surface of the ground that require a variancein the plans and specifications or performance of additional work in order to construct a safe and sound dwelling house then [appellee] and [CTI] agree to execute a Change Order in accordance with Paragraph 4, which provides for the reimbursement to [CTI] of additional costs incurred by reason of such conditions....

Once the contract was executed, financing for the project was secured, and a schedule was implemented whereby appellee would pay appellant in six draws. Appellee made an initial payment of $2,590 and a draw payment of $21,200. Before construction began, however, some difficulty was encountered with regard to cost of the home's foundation. Appellant initially estimated the cost of the foundation at $22,000, which was later raised to $25,000 in consideration of the steepness of the lot. In August 1997, appellant contacted a company called Foundation Specialties for a bid on the foundation. The company bid $48,591.88 for the job, then increased its bid to $56,227.00 upon viewing the site. Appellant and appellee, seeking to improve on this bid, solicited a bid from Steve Garner. Garner orally bid $42,000 for the job.

At some point after excavation began, Garner questioned whether the foundation footers would be adequate, given the grade of the lot. According to his testimony, Garner suggested that the foundation be engineered. There was also evidence that, ever since the inception of the contract, appellant and appellee had discussed the possibility of having the foundation engineered. In any event, an engineer's diagram was ordered and received in December 1997. Based on the engineer's report, it was determined that additional footers, more excavation, and taller walls were needed to support the home. Garner told appellant he would charge for the additional work on a per-unit type basis, consistent with his original bid, i.e., the same rate per cubic yard. No firm dollar amount was ever discussed, and nochange order or other writing memorialized the increased costs. Appellee was not privy to these conversations regarding increased costs, but he unquestionably accepted the $42,000 bid.

In April or May of 1998, appellee was informed that the foundation costs had increased to $60,000, even though the foundation was not yet complete. According to him, he told appellant he would not pay more than $42,000. The project went forward, and the foundation costs increased to approximately $80,000. Shortly thereafter, the foundation was completed at a cost of $85,577.12. Appellee refused to pay for the overage, and appellant, who had been requesting a second draw from appellee since December 31, 1997, stopped construction.

On December 22, 1998, appellant and his son, Loy Vickers, who operated as an agent for CTI, sued appellee in Pulaski County Chancery Court seeking a lien and judgment for money owed on the contract. The lien claim was ultimately dismissed, but the contract claim proceeded in chancery court under the clean-up doctrine. Appellee counterclaimed for the cost of finishing the home.

At trial, appellant sought damages for the increased cost of foundation construction in the amount of $65, 577.12, having already paid Garner $20,000; an additional $9,000 for site excavation; and $54,566.71 in general costs and expenses incurred on the job. Following a trial, the chancellor awarded appellant the original $42,000 bid for the foundation, plus $9,000 in excavation costs, for a total of $51,000. From this amount, he deducted the two payments of $2,590 and $21,100 already made by appellee, leaving a total judgment of $29,900 against appellee. The chancellor declined to award damages to appellee for cost ofcompletion on the ground that appellee had received a foundation worth $94,577.12 (the amount alleged to be the actual value of the foundation) for $51,000. After entry of that judgment, appellant filed a motion for reconsideration seeking an award of his general costs. The court reconsidered and awarded additional expenses of $25,307, bringing the total judgment to $55,207. No award of attorney fees was made to either party.

The first issue we address is an evidentiary one raised by appellee on cross-appeal and mentioned by appellant on direct appeal. We note that trial courts are accorded wide discretion in evidentiary rulings, and we will not reverse absent a manifest abuse of discretion. See Jackson v. Buchman, 338 Ark. 467, 996 S.W.2d 30 (1999). The issue concerns an exhibit used by appellant to prove the general cost and expense portion of his damages. The exhibit was a computerized report that purported to show all expenses incurred on the project. Included were such items as fees and permits, insurance, postage, materials, equipment rentals, and travel expense. A $54,566.71 balance due for such expenses was shown. Upon appellant's introduction of the exhibit, appellee objected that the computerized report was insufficient as proof of damages because the contract called for submission of actual invoices in order to receive payment for costs and expenses. He also argued that the exhibit could not be introduced as a business record under Ark. R. Evid. 803(6). Appellant countered that the report was admissible because invoices had been made available to appellee for inspection and copying and the report reflected a regularly conducted business activity. The court allowed the exhibit, subject to review of the invoices. Later, at the close of appellant's evidence, appellee made a motion that was in the nature of a directed verdict motion in which he again complained that appellant had not providedinvoices to back up his damage claim. Appellee admitted that he had the invoices that appellant had provided. However, he contended that appellant had produced no invoices to document some of its expenses, such as travel and lodging.

The court did not specifically rule on appellee's motion, but proceeded with the trial and ultimately awarded appellant $25,307 of the $54,566.71 claimed on the computerized report. The remainder of the expenses were disallowed by the chancellor upon a finding that appellant had not presented sufficient evidence for reimbursement of them. The detailed findings in the court's order with regard to these expenses indicates that he had invoices before him to compare with the totals listed on the report. In fact, he expressly stated that his award of damages was made upon reconsideration "of all the evidence presented, including, but not limited to the Job Expense Report."

Appellee argues on cross-appeal that the chancellor erred in admitting the computerized report into evidence and, as a result, appellant failed to prove damages. Appellant argues that the report was admissible as a summary pursuant to Ark. R. Evid. 1006. The chancellor did not reveal his basis for accepting the computerized report into evidence but, as appellant suggests, it was an admissible summary pursuant to Ark. R. Evid. 1006. Rule 1006 provides that the content of voluminous writings which cannot be conveniently examined by the court may be presented in the form of a summary. The originals or duplicates must be made available to other parties for inspection and copying. However, the underlying writings need not actually be introduced into evidence at trial. See Christopher Mueller and Laird Kirkpatrick Federal Evidence, § 585 at 420 (2d ed. 1994) (referring to the identical Fed. R. Evid. 1006). Here, appellant used the report as evidenceof his damages and provided copies of invoices to appellee. Therefore, the chancellor did not err in admitting the exhibit, and appellant met his burden of proving damages. Although the chancellor did not state the basis for his ruling on this mater, we note that we will affirm a chancellor's ruling if it is correct for any reason. Moon v. Moon Enterprises, Inc., 65 Ark. App. 246, 986 S.W.2d 134 (1999).

In any event, it is apparent that the chancellor in this case not only viewed the summary but viewed the invoices upon which the summary was based, though the invoices were not formally introduced into evidence. Based upon a lack of documentation for more than half of the expenses claimed, the chancellor reduced the amount requested by over half. Under these circumstances, we cannot say that the chancellor's consideration of the report was a manifest abuse of discretion.1

Appellee argues next that the chancellor erred in awarding damages to appellant even though appellant was first to breach the contract by failing to complete the house on time, failing to use written change orders, failing to act in good faith, and failing to keep detailed records. As a general rule, the failure of one party to perform his contractual obligations releases the other party from his obligations. See Stocker v. Hall, 269 Ark. 468, 602 S.W.2d662 (1980). However, even if appellant was in breach and did not substantially perform the contract, he may nevertheless recovery on a restitutionary theory or quantum meruit. See Cox v. Bishop, 28 Ark. App. 210, 772 S.W.2d 358 (1989). Such recovery is allowed, not on the basis of fault or innocence, but on the basis that one person has retained benefits provided by another. Id.; see also Pickens v. Stroud, 9 Ark. App. 96, 653 S.W.2d 146 (1983). A quantum meruit recovery is for the value of the work done. See Gibson v. Heiman, 261 Ark. 236, 547 S.W.2d 111 (1977). The chancellor, although he did not expressly refer to a quantum meruit recovery, awarded appellant what he believed was the reasonable value of appellant's work, as evidenced by the reasonable costs incurred on the job. Thus, there was no error in awarding damages to appellant.

We turn now to appellant's arguments on direct appeal. His first argument is that, because this was a cost-plus contract, appellee was bound to reimburse appellant for costs incurred on the job, including the full amount of expenses claimed and the full amount owed for the foundation. Chancery cases are reviewed de novo on appeal, and we will not reverse a chancellor's findings unless they are clearly erroneous. See Pickens v. Stroud, supra.

Commentators have recognized that there are two disadvantages to the owner inherent in cost-plus contracts: 1) the difficulty in determining how much the project will cost, and 2) the lack of incentives for a builder to keep costs down. See Steven Siegfried Introduction to Construction Law, § 2.01(a) (1987). Usually, these disadvantages are addressed by providing for a cap on costs or by giving the builder an incentive to keep costs down. See Justin Sweet Sweet On Construction Law, § 3.4(e) (1997). In light of these disadvantages, the law expects each party to a cost-plus contract to exercise good faith and fair dealing. Id.at § 3.6. It is implicit in cost-plus contracts that the price charged will not be whatever the contractor sees fit to charge but will be whatever may be shown to be the reasonable and proper cost. Wendel v. Maybury, 75 So.2d 379 (La. App. 1954). The contractor must use the same skill and ability as is used in contract work for a gross sum. See Shaw v. Bula Cannon Shops, 205 Miss. 458, 38 So.2d 916 (1949).

The evidence, though in some conflict, supports a finding in this case that appellant did not adequately inform appellee that the $42,000 price on the foundation was subject to substantial increase. Further, Loy Vickers testified that he didn't insist on a written bid from Garner because this was a cost-plus contract, but he probably would have insisted if the work was being done on his own account. The chancellor made the reasonable decision to allow appellant to recover only the price that appellee expected to pay. Thus, we agree with the decision to award appellant only $42,000 of the $85,577.12 expended on the foundation, based on appellant's lack of diligence and good faith in monitoring the costs of the foundation and keeping appellee informed. We also agree with the chancellor's award of only a portion of the $54,566.71 in expenses claimed by appellant based on deficiency of proof, as mentioned earlier.

Appellant argues further that the trial court's decision is equitable in nature and, because the court was sitting pursuant to the clean-up doctrine, it should not have exercised equitable powers. However, equity need not disregard equitable remedies in favor of legal remedies when acting pursuant to the clean-up doctrine. See Smith v. Eastgate Properties, Inc., 312 Ark. 355, 849 S.W.2d 504 (1993).

The final issue on appeal concerns the chancellor's failure to award attorney fees to appellant. The decision not to award attorney fees will be reversed only if an abuse of discretion is shown. See Jones v. Abraham, 341 Ark. 66, 15 S.W.3d 310 (2000). The contract in this case provides that attorney fees may be awarded to the "prevailing" party. See also Ark. Code Ann. § 16-22-308 (Repl. 1999). Because the chancellor awarded appellant considerably less damages than he sought, we cannot say it was an abuse of discretion for the chancellor to decline to award attorney fees in this case.

Affirmed on direct appeal; affirmed on cross-appeal.

Robbins and Vaught, JJ., agree.

1 Appellee also suggests that the summary was not sufficient to prove damages because the contract called for verification of expenses through invoices. First, we are concerned here with the presentation of evidence sufficient to prove damages in court, not the procedure by which a builder might seek payment under the contract. Secondly, as we have already noted, it is apparent that the chancellor considered copies of actual invoices in making his damage award.

It is not clear if appellee also contends that appellant's evidence was insufficient to be used as proof of damages for the extra work on the foundation and the extra excavation costs. If so, we note that appellant put on oral testimony and documentary exhibits concerning both of these items.