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2011-UP-203 - Witt General Contractors v. Farrell

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Witt General Contractors, Inc., Respondent,

v.

Robert Farrell, Appellant.


Appeal From Horry County
Honorable Willard D. Hanna Jr., Special Referee


Unpublished Opinion No. 2011-UP-203
Submitted March 1, 2011 – Filed May 4, 2011   


AFFIRMED


Tucker S. Player, of Columbia, for Appellant.

V. Denise Hamilton and Stacy L. Stanley, of Little River, for Respondent.

PER CURIAM:  In this mechanic's lien foreclosure action, appellant Robert Farrell appeals the decision of the special referee asserting error in the referee's (1) failure to offset the amount of damages for his breach of warranty claim against the judgment in favor of respondent Witt General Contractor's, Inc., (hereinafter Contractor) (2) award of judgment for Contractor on its breach of contract cause of action, and (3) award of judgment on Contractor's mechanic's lien cause of action.  We affirm.[1]

FACTUAL/PROCEDURAL BACKGROUND

This action arises from a dispute over construction on a house.  Contractor filed a mechanic's lien and thereafter sought foreclosure of the mechanic's lien in an action asserting causes of action of breach of contract and unjust enrichment.  Contractor asserted he was entitled to judgment in the sum of $32,137.53, together with interest, costs and attorney's fees.  Farrell answered and counterclaimed, raising various defenses and asserting deficiencies in Contractor's work to support his counterclaims for, among other things, negligence, unjust enrichment, and breach of warranty. 

By consent, the matter was referred to a special referee. At the hearing on the matter, Wilbur Witt, the owner and president of Witt General Contractor's, Inc., testified he was first contacted by Farrell to work on the house in question around the beginning of October 2004.  According to Witt, Farrell was interested in purchasing the home and wanted him to "check out" the house and see "whether or not he could go ahead and purchase it and finish it and put it on the market" to make a profit.  Based on his evaluation, Witt estimated it would cost between $80,000 and $100,000 to repair the home.  Witt stated his estimation was just a general overview of the house when he went through it, and he did not know exactly "how bad" the house would be until he got in there.  When asked about his arrangement with Farrell, Witt testified that when his men were on the jobsite, "it was going to be time and material," that he was going to pay for all the subcontractors that he subbed out, and at the end of the project they would "divvy up some of the profits." [2]  Witt denied the parties had a fixed price contract, stating he would never have accepted that because of the potential for unforeseen problems.  When explaining what he meant by his assertion that he was to be paid on a time and material basis, Witt stated the time spent on the job was to be billed at his company's hourly rate for each employee.  When Witt took his general walk-through of the property, he noticed some framing problems, but once he got into the project he found other problems with the house, most notably the trusses.  The problems with the trusses then caused significant other problems throughout the house.  Witt maintained he could not have known about these problems when he talked with Farrell about the project in October, as he did not have the truss diagrams at that time.

Contractor began working on the home on December 7, 2004.  In order to provide money for the work, an account was opened by Farrell at a local bank with Farrell and Witt's names on it.  Farrell initially wired $25,000 into the account and Contractor would pay bills from the account as needed, calling Farrell when the account would get low so that Farrell could wire more money.  The parties agreed that Farrell deposited a total of $115,000 into the account for construction of the home.  Toward the end of the project, Farrell informed Witt that he could not put any more money into the house.  Because there were outstanding bills, Witt borrowed $20,000 on a line of credit and put the money in the account for payment of these bills.  Around the middle of May 2005, Contractor had a final inspection on the home and obtained a certificate of occupancy.  According to Witt, the home still needed some touch-up, clean-up and repair work, but Farrell withdrew the remaining money from the account and prevented Contractor from going on the job site to finish the work.  The money Farrell removed from the account included over $4,000 of the unspent portion of the line of credit money Witt had provided.

Included within the cost of the project was labor provided by two of Witt's employees.  Witt acknowledged that he billed them at a rate of $45 an hour for the project, and what he billed for their labor was higher than what the employees were actually paid. Witt explained that $45 was the rate he billed for a "time and material" job, and that this allowed him to cover his overhead and profit.  He noted his overhead included workers' compensation and liability insurance, as well as fuel costs, his own salary and "everything else it takes to operate a business."  Witt stated $45 was his going rate for any customer.

Farrell testified that he asked Witt to look at the house and let him know what he thought it would take to finish the construction.  He stated Witt informed him he could complete the house for between $80,000 and $100,000, closer to $100,000 if he wanted certain upgrades.  According to Farrell, the parties had a verbal contract.  He claimed it was a fixed price contract, where Witt would complete the house for between $80,000 and $100,000.  When they had already spent $110,000 and Witt asked for $5,000 more, Farrell agreed but told Witt that he would put no more into the project.  Farrell changed the locks on the house, locking out Witt, when Witt failed to complete the house within a promised two week period.  Farrell acknowledged that Witt loaned $20,000 to the project, depositing the money into the account on June 2, 2005.  However, he testified Witt did not tell him about the loan and he thought the remaining money he removed from the account was his.  When asked whether he had an issue with Witt's labor charges of $45 an hour, Farrell stated he did not, asserting that the parties had a fixed price contract.  He further stated he was not concerned with the labor charges "in the least bit, not under the agreed contract." 

Following the hearing, the referee issued an order concluding Contractor had a valid mechanic's lien, Contractor and Farrell did not have a valid contract but one was not needed to uphold the mechanic's lien, and that Contractor bestowed a benefit to Farrell in the amount of $20,000 and Farrell was unjustly enriched in that amount.  The referee further denied an award of attorney's fees and costs to either party.  He then ordered Farrell's causes of action against Contractor be dismissed, with the exception of Farrell's unjust enrichment claim for labor and materials.[3]

Farrell filed a motion for reconsideration pursuant to Rule 59(e), SCRCP asserting, among other things, because there was no written contract and Contractor failed to present evidence of the amount of his overhead, numerous items were nonlienable and could not be included in the mechanic's lien.  Included within those items was an alleged "minimum of $2,358.00" for labor charges on two of Contractor's employees, which Farrell contended was an overcharge by Contractor.  Farrell also asserted, while there was no written contract, there was a quasi-contract or contract implied at law, and the evidence presented indicated the contract provided the cost of repair to the house was not to exceed $100,000.  Additionally, Farrell maintained in his 59(e) motion that he was entitled to an award for his breach of implied warranty of services in a workmanlike manner claim based on evidence of the Contractor's deficiencies in his work on the house.

In response, the special referee filed a supplemental order addressing the various matters raised by Farrell in his 59(e) motion.  In regard to Farrell's argument concerning nonlienable labor charges, the referee determined that the testimony of Witt showed that part of the hourly basis for his services included overhead and profit, and, as such, these amounts were not submitted standing alone and were therefore properly lienable.  

As to Farrell's assertion regarding a quasi-contract or implied contract, the referee noted that in his original order he had determined there was no meeting of the minds with regard to the material elements of a contract and therefore awarded Contractor damages on its unjust enrichment claim.  The referee then stated, "[Farrell's] argument convinces me that this was an error and a decision on the basis of implied contract should have been rendered instead," and found the parties were in agreement with all of the substantial terms of the proposed improvements to the real estate.  The referee noted the only material point of disagreement between the parties was that Farrell claimed the cost of the repairs and upgrade was not to exceed $100,000, while Witt asserted their discussion on the matter included only an estimate of costs between $80,000 and $100,000.  He concluded, "[a]fter listening to all of the testimony and having a chance to observe the witnesses, I am of the opinion that there was an implied contract under which [Contractor] was to improve the house and be reimbursed the cost of labor at an agreed rate, plus the cost of materials.  I, therefore, reverse my decision on the mechanic's lien and find that [Contractor] is entitled to foreclosure on the mechanic's lien on the basis of implied contract."  The referee determined he accepted the testimony and accounting records of Mrs. Witt regarding the $32,137.53 figure due, with the exception of a $5,000.00 deposit, and concluded the amount due Contractor on the implied contract was therefore $27,137.53.  Additionally, the referee determined Contractor was the prevailing party and was entitled to attorney's fees of $9,578.45 and costs of $1,597.80, for a total judgment against Farrell in the amount of $38,313.78.

Finally, as to Farrell's argument that he was entitled to an award for Contractor's breach of implied warranty of services in a workmanlike manner, the referee agreed Contractor did breach this implied warranty.  He therefore "award[ed] damages sustained by [Farrell] on the breach of implied warranty cause of action in the amount of $7,000."  This appeal follows.

ISSUES

1. Whether the referee's supplemental order failed to properly offset the amount of damages awarded Farrell on his breach of warranty claim.

2.  Whether the referee erred in awarding judgment with regard to Witt's breach of contract cause of action because (a) the referee did not have the power to rule in favor of Witt on his breach of contract claim in the supplemental order and (b) the referee's award of judgment on Witt's breach of contract claim was not supported by the evidence.

3. Whether the referee erred in awarding judgment with regard to Contractor's mechanic's lien cause of action because (a) the referee did not have the power to rule in favor of Witt on his mechanic's lien action in the supplemental order, (b) the invoices submitted in support of the mechanic's lien contained numerous items that were not for the improvement of real estate, and (c) the special referee erred in ruling Witt was entitled to reimbursement of attorney's fees and costs under the mechanic's lien statute.

STANDARD OF REVIEW

Foreclosure of a mechanic's lien is an action at law.  T.W. Morton Builders, Inc. v. von Buedingen, 316 S.C. 388, 397, 450 S.E.2d 87, 92 (Ct. App. 1994).  An action for breach of contract seeking money damages is an action at law.  Roberts v. Gaskins, 327 S.C. 478, 483, 486 S.E.2d 771, 773 (Ct. App. 1997).  In an action at law, the appellate court will correct any error of law, but must affirm the special referee's factual findings unless there is no evidence that reasonably supports those findings.  Id.

LAW/ANALYSIS

I.   Offset of Damages

Farrell first contends the special referee erred in failing to properly offset the amount of damages awarded to him under his counterclaim for breach of implied warranty of services in a workmanlike manner.  He notes that, though the referee found he was entitled to an award against Contractor in the amount of $7,000, the referee only ordered judgment against him in the amount of $38,313.78 in the "Conclusions" portion of his supplemental order.  In response to Contractor's assertion that this issue is not preserved for appeal, Farrell maintains he did not challenge the matter through a second motion because the order was plain on its face in awarding him $7,000 and awarding Contractor $38,313.78, and it was only through Contractor's interpretation of the order that any error occurred.  Farrell maintains that during preparation of this appeal, he learned Contractor's position was that Farrell owed the full $38,313.78, without credit for the $7,000 awarded to him in the supplemental order.

We find the order is plain on its face and grants judgment to Contractor in the amount of $38,313.78, which includes $27,137.53 on Contractor's implied contract cause of action along with attorney's fees of $9,578.45 and costs of $1,597.80.  The order also clearly awards Farrell $7,000 on his breach of implied warranty cause of action.  Therefore, there was no error by the referee, and the order is plain on its face that Farrell is entitled to an offset of $7,000 against Contractor's award of $38,313.78.

II.  Breach of Contract

A.  Power to Rule

Farrell contends the special referee did not have the power to rule in favor of Contractor with regard to Contractor's breach of contract cause of action because, though Farrell filed a motion to alter or amend the original order, Contractor did not file any post-trial motions or seek relief from the referee's original order.  He therefore contends the issue of Contractor's breach of contract claim was not properly before the referee and the referee's reversal of his previous order on Contractor's cause of action for breach of contract was beyond the scope of the motion before the referee.

This issue is not preserved for our review.  Farrell is asserting the supplemental order granted relief not presented to the referee.  Because Farrell is challenging something that was altered from the original judgment, he was required to bring a second motion for reconsideration to present the issue to the referee for his consideration.  Since this argument was neither raised to nor ruled upon by the referee, it is not preserved for our review.  See Robinson v. Robinson, 365 S.C. 583, 585, 619 S.E.2d 425, 426 (2005) (finding a second motion for reconsideration is appropriate if it challenges something that was altered from the original judgment as a result of the initial motion); I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 422, 526 S.E.2d 716, 724 (2000) (noting the losing party generally must both present his issues and arguments to the lower court and obtain a ruling before an appellate court will review those issues and arguments); Van Ness v. Eckerd Corp., 350 S.C. 399, 403-04, 566 S.E.2d 193, 196 (Ct. App. 2002) (determining, where the trial judge recused himself following the filing of a motion to reconsider, the issue of propriety of trial judge's recusal was not preserved for review because appellant failed to make a Rule 59(e) motion challenging the recusal); In re Estate of Timmerman, 331 S.C. 455, 460, 502 S.E.2d 920, 922 (Ct. App. 1998) (holding when a party receives an order granting relief not previously contemplated or presented to the trial court, the aggrieved party must move, pursuant to Rule 59(e), SCRCP, to alter or amend the judgment in order to preserve the issue for appeal).

B.  Support of Evidence

Farrell next contends the referee erred in awarding Contractor judgment on his breach of contract cause of action because the referee's award was not supported by the evidence.  Farrell argues the referee's finding that the parties were in agreement with all the substantial terms of the proposed improvements to the real estate was a direct contradiction of the evidence.  In particular, Farrell asserts the evidence shows (1) Contractor never sent any invoices to him until after the mechanic's lien was filed, (2) the hourly rates charged to the project were never disclosed to him prior to or during the renovations, and (3) the parties discussed that the repairs would cost between $80,000 and $100,000.  He therefore contends the evidence demonstrates there was no meeting of the minds and the award based on breach of contract is unsupported by the evidence.

First, there is evidence of record that the reason the invoices were not sent to Farrell was that Farrell declined Contractor's offer to fax them to him, instructing Contractor instead to keep the invoices in the file.  Contractor then made two copies of each invoice so that Farrell would have a copy, and the file was always available to Farrell.  As to Contractor's failure to disclose the hourly rates charged to the project, Witt stated $45 was his going rate for any customer, and Farrell testified he had no issue with Contractor's $45 an hour labor charges and he was not concerned "in the least bit" with those charges.  Finally, while the parties did discuss the figures of $80,000 to $100,000 for the cost of repairs, Witt's testimony is clear that this was not a term of the contract, but was only an initial estimate of the costs of the project.  Accordingly, we find no merit to Farrell's argument that the award based on breach of contract is unsupported by the evidence. [4]

III.  Mechanic's Lien

A. Power to Rule

Farrell contends the original order of the special referee did not grant judgment to Contractor on the mechanic's lien, but the referee reversed this previous order and awarded Contractor relief on the mechanic's lien cause of action.  Farrell asserts, as with the breach of contract cause of action, there was no motion before the referee that allowed for reconsideration of the referee's original denial of the mechanic's lien, and the referee was therefore without the power to rule for Contractor on the mechanic's lien cause of action.

Farrell is, again, asserting the supplemental order granted relief not presented to the referee.  Because Farrell is challenging something that was altered from the original judgment, he was required to bring a second motion for reconsideration to present the issue to the referee for his consideration.  As with Farrell's argument concerning the referee's power to rule in favor of Contractor on its breach of contract cause of action, this argument is not preserved for our review.

B.   Inflated Salary Rates

Farrell contends the special referee erred in awarding judgment with regards to Contractor's mechanic's lien cause of action because the invoices submitted in support of the mechanic's lien contained numerous items that were not for the improvement of real estate.  He argues that section 29-5-10 et. seq. applies only when a person performs work or furnishes material actually used in the erection, alteration, or repair of a building or structure, and items filed for matters other than improvement of real estate are invalid, unless specifically set forth in the contract.  Because lost profits and overhead were not specifically included as construction items in the contract, they were not lienable and not recoverable items.  Farrell argues it was impossible for the special referee to find that the "inflated" salary rates of Contractor's employees were an agreed upon term of the contract, and as a result, "the mechanic's lien must be greatly reduced."

Section 29-5-10 of the South Carolina Code provides in pertinent part as follows:

(a)     A person to whom a debt is due for labor performed or furnished or for materials furnished and actually used in the erection, alteration, or repair of a building or structure upon real estate or the boring and equipping of wells, by virtue of an agreement with, or by consent of, the owner of the building or structure, or a person having authority from, or rightfully acting for, the owner in procuring or furnishing the labor or materials shall have a lien upon the building or structure and upon the interest of the owner of the building or structure in the lot of land upon which it is situated to secure the payment of the debt due to him.

S.C. Code Ann. § 29-5-10 (2007).

In Sentry Engineering & Construction, Inc. v. Mariner's Cay Devlopment. Corp., 287 S.C. 346, 338 S.E.2d 631 (1985), our supreme court noted a contractor's mechanic's lien may properly include "oversight" and supervisory services, and stated the following general rule:

Since the statutes provide a lien for labor performed and materials furnished, the question arises, particularly where a contractor works under a cost-plus contract, whether items which are not direct labor or material costs, such as overhead and profit, are lienable.  Such items, as such and standing by themselves, are nonlienable, but they become lienable when they are included in a contract price or are reflected in the reasonable value of labor or materials furnished.  Thus, the cost or value of labor for which a lien may be claimed is not necessarily confined to the actual wages paid by the employer to the employee actually performing the labor.  It may also include costs and expenses of operation in addition to direct wages paid. 

Id. at 352, 338 S.E.2d at 634-35 (quoting 53 Am. Jur. 2d Mechanic's Liens, § 107 (1970)) (emphasis added).  Thus, the court determined overhead and profit, when stated as part of the contract price, are proper components of a mechanic's lien.  Id. at 352, 338 S.E.2d at 635.

In Zepsa Construction, Inc. v. Randazzo, 357 S.C. 32, 38, 591 S.E.2d 29, 32 (Ct. App. 2004), this court determined the builder of a restaurant, which was only partially completed, was not entitled to his overhead and lost profits as part of a mechanic's lien claim, finding Sentry inapplicable for several reasons, including that the parties' agreement did not include a provision for overhead and profit, and the fact that construction in Sentry was substantially completed, whereas only $10,000 of the $610,000 Zepsa project had been completed.  In doing so, this court stated as follows:

Based on our reading of Sentry, we believe the Supreme Court expanded the items that are recoverable under the mechanic's lien statute to include overhead and profit.  However, this holding is only available in the limited situation where the terms of overhead and profit are agreed upon by the parties and are subsequently embodied within a contract.

Id. at 37-38, 591 S.E.2d at 31-32.

Here, the evidence supports a finding that the overhead and profit were reflected in the reasonable value of labor furnished.  The amount Contractor charged for labor was that which was charged for all customers, and was included within the costs of providing labor.  It was not the overhead and profit for the entire job to be performed by Contractor, as it was in Zepsa.[5]  Further, the job here, as in Sentry, was substantially completed.  More importantly, Farrell specifically indicated he had no problem with the amount charged for labor on the job.  He merely disputed that the parties had a time and materials contract, but instead insisted the parties agreed to a fixed price contract.  The special referee resolved this issue in favor of Contractor.  Accordingly, there was evidence to support the referee's inclusion of the invoices for labor charges.

C.   Attorney's Fees and Costs

Finally, Farrell contends the special referee failed to properly award attorney's fees and costs to him as the prevailing party in his original order, and then compounded the error by reversing his original ruling and then awarding fees and costs to Contractor in his supplemental order.  He asserts, in the event this court finds the referee erred in reversing its decision on the mechanic's lien, he is entitled to reimbursement for attorney's fees and costs, as he would then be the prevailing party.  Alternatively, he argues should this court find the referee did have the power to reverse himself on the mechanic's lien, but that such lien should be reduced because of the improper inclusion of overhead and profit, the matter should be remanded for a new determination as to the prevailing party.

Farrell's argument in this regard is wholly dependent on this court's reversal of the special referee.  Because we find Farrell is not entitled to reversal of these issues, we affirm the attorney's fees and costs.

CONCLUSION

For the foregoing reasons, the special referee's order granting judgment to Contractor in the amount of $38,313.78, offset by Farrell's award of $7,000, is

AFFIRMED.

HUFF, SHORT, and PIEPER, JJ., concur.


[1] We decide this case without oral argument pursuant to Rule 215, SCACR.

[2] Although the record indicates the home was actually sold before this hearing was held, the record before the court does not reflect if it was sold for a profit and, if so, how much profit.  If it was sold for a profit, there is no indication Witt actually shared in any of the profit.

[3] In determining no valid contract existed between the parties, the special referee found Contractor and Farrell did not have a meeting of the minds as to a contract for the renovations and repairs, as the parties did not mutually agree and assent to the terms of a contract.  Further, it appears the referee's refusal to dismiss Farrell's counterclaim for unjust enrichment was based upon his finding that Contractor failed to pay Farrell for the labor and materials resulting from Contractor's deficiencies and incomplete work on the subject property.  However, the referee did not grant Farrell any sort of judgment or offset for Farrell's unjust enrichment claim in his initial order.

[4] It should be noted, although Farrell asserted in his motion for reconsideration that there existed a quasi-contract or contract implied at law, the referee implicitly determined there existed a contract implied in fact, citing law for implied in fact contracts.  Express contracts and contracts implied in fact are law actions, with the measure of damages being determined by the parties' agreement, while quasi-contracts and contracts implied by law are actions in equity for which the measure of the recovery is the extent of the duty or obligation imposed by law, and is expressed by the amount which the court considers the defendant has been unjustly enriched at the expense of the plaintiff.  Myrtle Beach Hosp., Inc. v. City of Myrtle Beach, 341 S.C. 1, 8, 532 S.E.2d 868, 872 (2000).  A contract "implied in fact" arises when the assent of the parties is manifested by conduct, not words.  Stanley Smith & Sons v. Limestone Coll., 283 S.C. 430, 434 n.1, 322 S.E.2d 474, 478 n.1 (Ct. App. 1984).  A quasi-contract or contract implied in law, on the other hand, is no contract at all, but an obligation created by the law in the absence of any agreement between the parties.  Id.  Farrell does not appeal the referee's implicit finding of an implied in fact (legal) contract as opposed to an implied at law (equitable) contract.

[5] Indeed, Contractor's position was that the contract between the parties, aside from charges for time and material, provided that Contractor was also entitled to share in any profits from the sale of the home.  Such, if any existed, however, was clearly not awarded to Contractor.