City of Meridian v. PETRA Inc.

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 39006
THE CITY OF MERIDIAN, an Idaho )
municipal corporation, )
)
Plaintiff-Counterdefendant-Appellant, ) Boise, February 2013 Term
)
v. ) 2013 Opinion No. 43
)
PETRA INCORPORATED, an Idaho ) Filed: April 1, 2013
corporation, )
) Stephen W. Kenyon, Clerk
Defendant-Counterclaimant- )
Respondent. )
______________________________________ )
Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, Ada County. The Honorable Ronald Wilper, District Judge.
The judgment of the district court is affirmed.
Trout Law, PLLC, Boise, for appellant. Kim J. Trout argued.
Cosho Humphrey, LLP, Boise, and Holland & Hart, LLP, Boise, for respondent.
Thomas G. Walker argued.
_____________________
J. JONES, Justice.
This appeal stems from a protracted contract dispute arising out of the construction of
Meridian’s new City Hall. The City of Meridian brought suit against the project’s construction
manager, Petra, Inc., alleging that Petra breached the parties’ agreement in numerous ways. The
City further claimed that Petra was not entitled to any additional fees for its work. Petra
counterclaimed, seeking an equitable adjustment of its construction manager fee. After trial, the
district court entered its findings of fact and conclusions of law, ruling against the City on all but
one of its claims and awarding Petra an additional fee for its services. The court awarded Petra
$595,896.17 in costs and $1,275,416.50 in attorney fees, but stayed enforcement of the judgment
pending appeal. The City timely appealed. We affirm the judgment.
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I.
FACTUAL AND PROCEDURAL HISTORY
In 2006, the City of Meridian was experiencing a surge in growth. Consequently, its Mayor
and City Council (collectively, “the City”) decided to construct a new City Hall. The City’s initial
plan was to build approximately 80,000 sq. ft. of Class A office space, related improvements, and
parking (the Project). The City selected LCA Architects, P.A. (the Architect) to design the Project,
and Petra as its construction manager.
The primary contract between Petra and the City was the Construction Management
Agreement (CMA), which was drafted by the City. The CMA provided that the maximum budget
for the Project would be $12.2 million. Additionally, the CMA incorporated several documents by
reference: the Professional Services Agreement between the City and the Architect, as well as the
AIA 201/CMa–1992 General Conditions (the A201), and the AIA 101/CMa–1992 (the A101). The
CMA required Petra to purchase an errors and omissions liability insurance policy, which it did,
and gave it the option of providing a payment and performance bond, which it did not. Petra and
the City executed their agreement effective August 1, 2006.
The CMA addressed Petra’s compensation as follows: the City agreed to pay Petra a flat
construction management fee of $574,000, and to pay Petra’s reimbursable expenses. The latter
were Petra’s “direct personal expense[s]” of certain professional staff; e.g., the Project Manager,
the Project Engineer, and so on. Furthermore, the City agreed to pay Petra’s reimbursable expenses
for “General Conditions”—those items designated for procurement by Petra.
The CMA provided that changes in Petra’s services could be accomplished upon the City’s
request, or if Petra’s services were affected by “[s]ignificant change to the Project, including, but
not limited to size, quality, complexity, owner’s schedule, budget or procurement method.” In
either event, Petra would be entitled to an equitable adjustment of its construction manager fee
and/or its reimbursable expenses, if the change(s) materially affected its services. Petra was to
notify the City of any change in its services prior to providing them and to receive the City’s
approval for the change. Petra would not be entitled to an equitable adjustment for any change due
to its fault.
Preconstruction of the City Hall began on July, 5, 2006, and construction subsequently
started on May 7, 2007. The prime contractors who performed the construction services contracted
with the City directly, and Petra agreed that it would observe each contractor’s work, on site, at
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least once a day, and report back to the City. Petra agreed to reject the work of any contractor
whose work did not conform to the contract documents. That said, Petra did not guarantee the
work of the contractors and was not responsible for their failure to carry out the work. Instead, each
contractor was to give the City a warranty.
The City was initially scheduled to take occupancy of the building on August 1, 2008, but
discovery of contaminated soil in February 2007 impacted the Project schedule early on.
Accordingly, on May 22, 2007, Petra issued an updated schedule that reflected delays due to
cleanup, and that moved the occupancy date to August 27, 2008. As noted by the district court, the
Project “increased in size, scope, quality, and complexity after the agreement was executed.” A
variety of changes, directed by the City, were performed by Petra. These included:
[I]ncreased size; the addition of a basement to effectively contend with an
unanticipated ground water issue; upgraded offices and council chambers from
those contemplated in the parties’ original agreement; re-design of the Mayor’s
office suite; better than standard exterior stone and brick; high tech mechanical and
electrical systems; and an upgraded public plaza and amphitheater.
As the Project continued to evolve in complexity and scope, the CMA required Petra to update the
Construction Management Plan, and submit it to the City for approval. On January 29, 2008, Petra
presented another updated schedule, which now pegged the occupancy date at October 10, 2008.
During this phase, the budget of the Project also greatly expanded, from the initial budget of $12.2
million, to more than $15 million in 2007, and more than $20 million in 2008. The City was aware
of the costs and approved them.
Several companies and individuals performed required testing, observation, and inspection
during the course of construction. These included Petra, the Architect, the engineers, a
commissioning agent hired by the City, and the City’s building inspectors. With a few identified
exceptions, all systems passed inspection, or were corrected after not initially passing. When one
contractor caused a delay in the Project, Petra recommended that the City assess liquidated
damages against it, which the City did.
As construction reached a close, Petra and the Architect jointly developed “punch lists”—
lists that detailed remaining problems with the Project that needed to be corrected. The parties
dispute this point, but it seems that the items on these lists were either corrected, or were covered
by the various contractors’ warranties. At this point, the Architect was required to issue certificates
stating that the work was substantially complete. Petra asked the Architect to do so, but it did not.
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The City took occupancy of the new building on October 15, 2008, which was the same
date the contractors’ warranties became effective. The final cost of the Project was $21,395,962.13.
The catalyst of this litigation was Petra’s request for an equitable adjustment to its
construction manager fee and reimbursable expenses. In 2007, Petra corresponded with the City’s
purchasing agent and discussed an equitable adjustment based on the extra services it was
providing as the Project evolved. The City and Petra agreed that Petra would wait until the final
base contract value of the Project was determined before submitting a fee request. Later that year,
Petra reminded the City of this issue by sending notice of its intention to seek an equitable
adjustment.
In April of 2008, Petra provided the City with a formal “change order” that requested an
equitable adjustment for 4.7% of the cost of the Project in excess of $12.2 million, which, at that
point, amounted to $367,808. The City requested more information to justify the request, which
Petra provided on August 3, 2008. However, the City denied the request on February, 24, 2009.
The parties attempted to resolve their disputes through mediation, but were unsuccessful.
The City filed this lawsuit against Petra on April 16, 2009, seeking a declaratory judgment
that Petra was not entitled to an increased fee. The City also sought damages from Petra for breach
of contract. The City eventually alleged numerous instances of deficient work or damage for which
it claimed Petra was responsible, including roof damage, subpar masonry work, an improperly
balanced HVAC system, and a leaky water feature. Petra counterclaimed, alleging breach of
contract and seeking the amount of its equitable adjustment.
During the pre-trial phase, myriad motions were filed by both parties. This included the
City’s motion for summary judgment, asking the district court to find that the Idaho Tort Claims
Act (ITCA) barred Petra’s counterclaim. The court denied the motion. The City also moved to
amend its Complaint, which the district court denied.
This case was tried by the court, sitting without a jury, from December 2, 2010, to April 7,
2011. The district court held that Petra properly managed the Project’s contractors and that it did
not breach the parties’ agreement. Further, it held that Petra was entitled to an equitable adjustment
for the additional services it provided the City as the Project grew in scope. The district court
concluded that 4.7% was a proper metric for the equitable adjustment. Also, the court found that
Petra had overcharged the City during the course of work, though it did not consider this a breach.
It offset Petra’s damages by $52,000, which resulted in an award of $324,808. The district court
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found Petra to be the prevailing party and entitled to recover “pre-judgment interest, costs allowed
under I.R.C.P. 54, and reasonable attorney fees incurred.” Judgment to that effect was entered on
June 14, 2011. The City timely appealed.
II.
ISSUES ON APPEAL
I. Did the district court err in concluding that Petra is entitled to an equitable adjustment
of its construction manager fee and contract reimbursable expenses?
II. Was the district court’s award of a percentage-based equitable adjustment proper?
III. Did the district court err in not applying Section 8 of the CMA to dismiss Petra’s
counterclaims?
IV. Does the Idaho Tort Claims Act bar Petra’s counterclaim?
V. Was Petra the City’s fiduciary?
VI. Did the district court err in concluding that Petra did not breach the CMA?
VII. Did the district court correctly calculate the damages offset attributable to Petra’s
overcharge?
VIII. Did the district court err in allowing the testimony of Tim McGourty?
IX. Did the district court err by disregarding damages evidence?
X. Did the district court err in not allowing the City to amend its Complaint?
XI. Did the district court err by awarding Petra attorney fees?
XII. Is either party entitled to attorney fees on appeal?
III.
DISCUSSION
A. The district court correctly concluded that Petra is entitled to an equitable
adjustment of its construction manager fee and contract reimbursable expenses.
1. Standard of Review.
This Court limits its review of a trial court’s decision to determining “whether the evidence
supports the findings of fact, and whether the findings of fact support the conclusions of law.”
Shore v. Peterson, 146 Idaho 903, 907, 204 P.3d 1114, 1118 (2009). Unless the trial court’s
findings of fact are clearly erroneous, they will not be set aside. Id. Accordingly, “even if the
evidence is conflicting, if the findings of fact are supported by substantial and competent evidence
[we] will not disturb those findings on appeal.” Id. Conversely, when reviewing a trial court’s
conclusions of law, “this Court is not bound by the legal conclusions of the trial court, but may
draw its own conclusions from the facts presented.” Id.When interpreting a contract, we start with the document’s language. Potlatch Educ. Ass’n
v. Potlatch Sch. Dist. No. 285, 148 Idaho 630, 633, 226 P.3d 1277, 1280 (2010). Further, “[i]n the
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absence of ambiguity, the document must be construed in its plain, ordinary and proper sense,
according to the meaning derived from the plain wording of the instrument.” Id. (quoting C & G,
Inc. v. Rule, 135 Idaho 763, 765, 25 P.3d 76, 78 (2001)). Both interpreting an unambiguous
contract and determining whether there has been a violation of that contract are “issue[s] of law
subject to free review.” Id.
2. The Agreement Between Petra and the City.
In its Order, the district court determined that the parties’ agreement consisted of three
documents: 1) the CMA, which “forms the basis of the contract”; 2) the provisions of the A201;
and, 3) the Professional Services Agreement between the Architect and the City. On appeal, the
City contends that the “Contract Documents” are far more expansive, and that they include the
CMA, the A101, the A201, the Professional Services Agreement, the Construction Management
Plan, and the various City Hall specifications. Petra’s response, on the other hand, contends that
the CMA was the primary contract document, but that the parties’ agreement include[ed] the
general conditions set forth in [the A201].” The issue—crucial for evaluating the multitude of other
issues in this litigation—is which documents made up the parties’ agreement. We conclude that the
CMA, A101, A201, and Professional Services Agreement comprised the parties’ agreement.
If a written contract is complete upon its face and unambiguous, and no party alleges any
fraud or mistake, “extrinsic evidence of prior or contemporaneous negotiations or conversations is
not admissible to contradict, vary, alter, add to, or detract from the terms of the contract.” Howard
v. Perry, 141 Idaho 139, 141, 106 P.3d 465, 467 (2005). If a written contract contains a merger
clause, then it is complete upon its face. Id. at 142, 106 P.3d at 468. As explained in Howard:
The purpose of a merger clause is to establish that the parties have agreed that the
contract contains the parties’ entire agreement. The merger clause is not merely a
factor to consider in deciding whether the agreement is integrated; it proves the
agreement is integrated. To hold otherwise would require the parties to list in the
contract everything upon which they had not agreed and hope that such list covers
every possible prior or contemporaneous agreement that could later be alleged.
Id. Despite this, “[a] signed agreement may incorporate by reference to another agreement, which
is not signed by the parties, if the terms to be incorporated are adequately identified and readily
available for inspection by the parties.” Harris, Inc. v. Foxhollow Const. & Trucking, Inc., 151
Idaho 761, 777, 264 P.3d 400, 416 (2011). Additional terms that post-date the original agreement
are necessarily unavailable for inspection; thus, the original agreement cannot incorporate them by
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reference. Id. (finding that “the ‘General Conditions of Contract’ post-dated the original agreement
by three months” and, with no evidence that those terms were available to the parties, they were
“not established to have become part of the agreement”).
Here, it is clear and undisputed that the CMA is the basis of the parties’ agreement—it was
drafted by the City and executed by both parties in August of 2006. And, although the CMA has an
integration clause and is thus clear on its face and integrated, it incorporates additional documents.
First, it expressly incorporates the Professional Services Agreement between the Architect and
Petra: “Construction Manager hereby acknowledges that it has received, reviewed, and studied the
agreement form that Owner intends to use with Architect (the “Architectural Agreement”), and the
same is herein incorporated by reference.” The Professional Services Agreement was executed a
month before the CMA, and nothing suggests that the parties did not have access to its terms, so it
was properly incorporated into the original agreement.
The CMA then incorporates other documents:
Construction Manager shall have and perform those duties, obligations and
responsibilities set forth in the construction agreements between Owner and each
Contractor (the “Construction Contracts”). Construction Manager hereby
acknowledges that it has received, reviewed, and studied the forms that Owner
intends to use for the Construction Contracts, and the same is herein incorporated
by reference.
The parties and the district court concluded that this refers to the A101 and the A201. For one
thing, the A101 was the contract entered into between the City and the various prime contractors.
Further, witnesses with construction industry experience verified that “Construction Documents”
referred to the two documents—the former being the agreements “between the [City] and the
prime contractors or the trade contractors,” and the latter being the “general conditions” for the
Project. With respect to the availability of the A101 and the A201, these are standard American
Institute of Architects forms and have been in service since 1992. Thus, the A101 and A201
existed at the time the CMA was executed and were presumably readily available for inspection.
Accordingly, the A101 and A201 were properly incorporated into the CMA.
Despite the CMA’s incorporation of these documents, the parties’ agreement would not
include the Construction Management Plan, or the City Hall specifications, as alleged by the City.
Harris allows a signed agreement to incorporate other unsigned documents by reference. Here,
however, the CMA does not expressly incorporate the Plan or any specifications. And, although
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the CMA did allow for modifications, it provided that “[t]his Agreement may be modified only in
writing signed by both parties.” Neither the Construction Management Plan, nor any of the
specifications, were signed by the parties. Thus, the Plan and specifications did not modify the
agreement between the parties.
In sum, we hold that the parties were bound by four documents: the CMA, the Professional
Services Agreement, the A101, and the A201.
3. The Agreement’s Requirements for Equitable Adjustments and Increased
Reimbursables.
Early in its Order, the district court made two findings regarding the proper procedure for
requesting an equitable adjustment to Petra’s fee:
18. The parties agreed that in the event Petra’s services were materially affected
by significant changes in the size, quality, complexity, schedule or budget of the
project, Petra would be entitled to an equitable adjustment of [its] construction
management fee and [its] reimbursable expenses.
19. Prior to providing additional management services based on project
changes, Petra agreed to notify the City and receive the City’s approval for the
additional services.
Thereafter, the court concluded something notably different: that Petra was not required to seek
approval for providing the additional services, but that the City had a “contractual right to pre-
approve the request for equitable adjustment.” (Emphasis added.) This distinction frames the
City’s appeal. The City agrees with the latter finding, and argues that the CMA gave the City the
right to approve the budget, and not the services―in other words, that Petra had to provide notice
“of an intention to seek an increased [construction management] fee before providing any
additional services.” Various arguments flow from this: that Petra never represented its fees would
increase; that the City never approved any increased fees; that the CMA required the notice be
delivered, in writing, to designated city officials; and that the district court incorrectly found the
City waived, or was estopped to use, these various defenses.
In response, Petra argues that the CMA does not give the City the right to pre-approve any
fee adjustments. It contends instead that the CMA “imposes a mandatory obligation on the City to
pay an ‘equitable adjustment’ where the preconditions are satisfied.”
The dispositive issue regarding the adjustment to Petra’s fee is whether Petra was required
to provide notice and receive approval for additional services, or whether it was required to notify
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and receive approval for the increased fee. Based on the plain language of the CMA, it is evident
that Petra was only required to notify and receive approval for additional services. Furthermore,
substantial and competent evidence shows that the City was notified, and did so approve. Thus, we
find the district court correctly concluded that Petra complied with the CMA notice requirements,
and thus was entitled to an equitable adjustment of its fee and reimbursable expenses.
This Court has no “roving power to rewrite contracts in order to make them more
equitable.” Shawver v. Huckleberry Estates, L.L.C., 140 Idaho 354, 362, 93 P.3d 685, 693 (2004).
Thus, when weighing various interpretations of contracts, we consider the language of the
agreement as “the best indication of [the parties’] intent.” Straub v. Smith, 145 Idaho 65, 69, 175
P.3d 754, 758 (2007). This Court further “construe[s] the contract against the person who prepared
the contract.” Id.The language governing Petra’s ability to seek an equitable adjustment can be found in the
CMA. It states:
Changes in Construction Manager’s services (not involving a cardinal change to the
scope of the services) may be accomplished after the execution of this Agreement
upon Owner’s request or if Construction Manager’s services are affected by any of
the following:
(a) A change in the instructions or approvals given by Owner that
necessitate revisions to previously prepared documents or the
reperformance of previously performed services;
(b) Significant changes to the Project, including, but not limited to size,
quality, complexity, Owner’s schedule, budget or procurement method;
....
Except as otherwise set forth in this Agreement, if any of the above circumstances
materially affect Construction Manager’s services, Construction Manager shall be
entitled to an equitable adjustment in the Schedule of Performance, the
Construction Manager’s Fee and/or the not-to-exceed limits for reimbursable
expenses, as mutually agreed by Owner and Construction Manager. Prior to
providing any additional services, Construction Manager shall notify Owner of the
proposed change in services and receive Owner’s approval for the change. Except
for a change due to the fault of the Construction Manager, a change shall entitle
Construction Manager to an equitable adjustment in the Schedule of Performance,
Construction Manager’s Fee, and/or the not-to-exceed limits for reimbursable
expense as mutually agreed by Owner and Construction Manager.
(Emphasis added.)
Given that this Court looks first to the language of a contract, the CMA’s text resolves this
issue. It states that Petra “shall notify Owner of the proposed change in services and receive
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Owner’s approval for the change.” The City’s position is that the CMA required Petra to “advise[]
the City of its intention to seek an increased CM fee” before work began on the City Hall
basement, which was not a part of the initial Project and subsequently requested by the City.
However, this contention finds no support in the CMA. Per the agreement’s plain language, Petra
did not need to notify and receive approval for any increased fee, just for the “proposed change in
services.” Indeed, according to the agreement, where the change is made “upon Owner’s request,”
it would be superfluous to require subsequent notification to, and approval by, the City. Where the
City specifically requests a change, it is obvious that it approves of the change.
Additionally, the City’s proposed interpretation—beyond being contrary to the CMA’s
text—leads to a result that is commercially backwards as well. Petra is required to do “all things
necessary, appropriate or convenient to achieve the end result desired by the Owner.” Thus, the
City could ask Petra to build a basement, or provide any other additional services it would like, and
Petra would be bound to comply. Yet, under the City’s interpretation of the fee provision, it could
then simply deny Petra’s request for an additional fee, while enjoying the benefits conferred by
Petra, absent a prior agreement to an increase in the fee. This adjustment scheme seems hardly
equitable. See generally Climax, LLC v. Snake River Oncology of E. Idaho, PLLC, 149 Idaho 791,
796, 241 P.3d 964, 969 (2010) (“In its broadest and most general signification, equity denotes the
spirit and habit of fairness, justness, and right dealing which would regulate the intercourse of
men.”) The CMA’s text, as written, provides a much more sensible arrangement: Petra cannot, on
its own, provide additional unrequested services and rack up its fees—it must notify and receive
approval for all proposed changes. But once those additional services have been approved and
provided, it is entitled to an equitable adjustment. Indeed, the contract specifically provides that “a
change shall entitle Construction Manager to an equitable adjustment,” except where the change is
the fault of the Construction Manager. (Emphasis added).
The City argued at length in its briefing that Petra did not notify the City before requesting
an increased fee. However, the City never contends that it had no notice of any change in services.
Nor does the City argue that it did not approve of any of the changes Petra made. In fact, both
parties’ briefing, the district court’s findings, and the record indicate that all changes made to the
City Hall were done at the City’s behest, 1 eliminating the need for notice and approval.
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The City conceded in its brief that “it must be said that the City approved identified increases to costs of
construction” and Petra likewise argued that “[t]he City approved every contract, every change order, every
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Accordingly, there was substantial and competent evidence that the CMA’s change in services
requirements were satisfied. Therefore, we affirm the district court’s conclusion that Petra
complied with the CMA, and is entitled to an equitable adjustment of its construction management
fee and reimbursable expenses.
B. The district court’s award of a percentage-based equitable adjustment was proper.
The other issue flowing from the district court’s decision to award an equitable adjustment
was whether it was proper for the adjustment to be percentage-based. The City argues that by
awarding the equitable adjustment on a percentage basis, the district court “improperly used
extrinsic evidence, rather than employ[ing] the contractually defined methodology for establishing
specific increases.” Specifically, it contends that an adjustment to reimbursables would have to
adhere to Section 6.2.2 of the CMA, and reflect the hours spent providing the service, of which
Petra did not keep track. The City further argues by analogy that “[w]hile there is no specific
methodology” for calculating the increased construction management fee, if a fee adjustment is not
similarly based on actual hours worked then it is arbitrary and inequitable. With respect to
reimbursables, Petra argues that while Section 6.2.2 of the CMA requires proof of actual hours
worked, Section 7, the specific provision regarding equitable adjustments, does not. Petra further
contends that the 4.7% percentage-based adjustment is equitable, and not arbitrary, because that
same ratio was used in determining the amount of the original construction management fee, as
well as a subsequent change order. We agree and find that the district court’s use of a percentage-
based adjustment was proper.
The CMA states that, in the event of providing additional services, Petra is “entitled to an
equitable adjustment [to its] Construction Manager’s Fee and/or the not-to-exceed-limits for
reimbursable expenses.” However, it does not provide a method for calculating this adjustment—
just that it would be “as mutually agreed by Owner and Construction Manager.” By not specifying
how adjustments will be made when the parties cannot agree—such as during litigation—the
parties essentially left it to the district court to determine what the fee should be.
A 4.7% adjustment is equitable because it conforms with the parties’ prior course of
dealing. As noted by Petra, the original construction management fee, though stated in the CMA as
a fixed amount, was 4.7% of the original Project budget. Furthermore, a subsequent change order
contractor payment, and thus, the total cost of the Project, with full knowledge of the relevant and material facts.”
Both of these conclusions were supported by the findings of the district court.
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based on the contaminated soil removal expressly calculated the construction manager fee
adjustment “at 4.7% of $422,000.” The parties agreed on the use of the 4.7% fee for the change
order. “The conduct of the parties to a contract and their practical interpretation of it is an
important factor when there is a dispute over its meaning.” Mountainview Landowners Coop.
Ass’n, Inc. v. Cool, 142 Idaho 861, 865, 136 P.3d 332, 336 (2006). Because the parties used this
percentage in prior dealings, it is reasonable, and equitable, to likewise use it as the factor for the
equitable adjustment. Moreover, the proper time for haggling over the adjustment metric was
during contract formation. As a sophisticated party, the City took a risk, ex ante, by not specifying
how the adjustment would be calculated. It could have drafted its own preferred metric, but for
whatever reason it did not. It thus cannot credibly argue now, ex post, that the adjustment chosen
by the district court is unsuitable. In any event, the district court’s percentage-based adjustment
conforms with the parties’ prior conduct and, thus, is proper. We therefore affirm.
C. The district court correctly declined to apply Section 8 of the CMA to Petra’s
counterclaim.
The City argues on appeal that Section 8 of the CMA, which governs claims, should apply
here and bar Petra’s counterclaim. It contends that because Petra knew it had a “claim” for an
equitable adjustment in January 2007, Petra should have given notice that complied with the
procedures detailed in Section 8. The City avers that because Petra did not comply with Section 8’s
notice procedures, Petra is not entitled to an equitable adjustment. The district court did not
consider this issue, but Petra argued in response that Section 7 is the specific provision addressing
changes and fee adjustments. It therefore contends that the more general claims procedure outlined
in Section 8 would not apply.
When contractual provisions conflict, “the interpretation of the written contract and of the
intent of the parties is a matter for the trial judge’s discretion.” Haener v. Ada Cnty. Highway Dist.,
108 Idaho 170, 173, 697 P.2d 1184, 1187 (1985). Moreover, “[i]t is well established that specific
provisions in a contract control over general provisions where both relate to the same thing.” Twin
Lakes Vill. Prop. Ass’n, Inc. v. Crowley, 124 Idaho 132, 138, 857 P.2d 611, 617 (1993).
Section 7 of the CMA provides the notice procedures for requesting an equitable
adjustment, as discussed at length above. However, the CMA subsequently provides a procedure
for making claims in the general sense:
In the event [of] any claim, dispute or other matter in question between Owner and
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Construction Manager arising out of or related to this Agreement or the breach
hereof (a “Claim”), Owner and Construction Manager shall first endeavor to
resolve the Claim through direct discussion. Claims must be initiated by written
notice. [] Construction Manager agrees that it shall submit a Claim to Owner by
written notice no later than twenty-one (21) calendar days after the event or the first
appearance of the circumstances giving rise to the Claim, and that such written
notice shall set forth in detail all facts and circumstances supporting the claim.
Section 8.2 then states that the parties must mediate their “Claims” before resorting to litigation.
We hold that Section 7, not Section 8, governs Petra’s request for an equitable adjustment.
Although the district court did not consider the conflict between these two provisions, it was within
its discretion to apply Section 7 instead of Section 8. Section 7 deals with equitable adjustments
specifically, and Section 8 deals with claims generally. Because Petra’s request was not some
freestanding claim, but a request for an equitable adjustment, our longstanding rule of
interpretation requires the application of the appropriate, adjustment-specific section. Id. More
fundamentally, the sole point of Section 7 is to establish the method for requesting equitable
adjustments. For Section 7’s existence to matter, Section 8 must not override it. We therefore
affirm the district court’s application of Section 7 to Petra’s request for an equitable adjustment.
Accordingly, Section 8 does not bar Petra’s counterclaim for an equitable adjustment to its fees.
D. The Idaho Tort Claims Act does not bar Petra’s counterclaim.
Prior to trial, the City moved for summary judgment, arguing that the Idaho Tort Claims
Act (ITCA) bars Petra’s claims. The district court ruled against the City and found that Petra’s
“cause of action didn’t accrue fully until February 24, 2009,” when its request for an equitable
adjustment was denied by the City. The court therefore reasoned that Petra’s subsequent request
for mediation, given on March 16, 2009, was timely for the purposes of the ITCA. The district
court therefore concluded that the ITCA would not bar Petra’s counterclaim. The City disagrees on
appeal, arguing that the notice period begins to run at the occurrence of the “wrongful act.” It
contends that the wrongful act was not the City’s denial of the adjustment, but rather, the actual
additional work that Petra provided months before. Petra agrees with the district court in its
response and argues that because “a claimant discovers his claim . . . only when he becomes
apprised of the injury,” Petra was unaware it had a claim until its request was actually denied. It
thus contends that its request for mediation was timely notice of its claim, and that the ITCA would
not bar the claim.
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Based on the text of the ITCA and Idaho precedent, we hold that the ITCA time limit began
to run not when Petra performed additional services, but when the City denied its fee request.
Petra’s notice was therefore timely, and its counterclaim is not barred by the ITCA.
Idaho Code § 50-219 provides that “[a]ll claims for damages against a city must be filed as
prescribed by [the ITCA].” The ITCA, in turn, states that:
All claims against a political subdivision [subdivision] arising under the
provisions of this act and all claims against an employee of a political subdivision
for any act or omission of the employee within the course or scope of his
employment shall be presented to and filed with the clerk or secretary of the
political subdivision within one hundred eighty (180) days from the date the claim
arose or reasonably should have been discovered, whichever is later.
I.C. § 6-906. Thus, parties seeking damages from a city must comply with the ITCA, which
requires notice of the claim within 180 days “from the date the claim arose or reasonably should
have been discovered.” Id.
Idaho case law sheds some light on the precise meaning of when a claim “arises” for the
purposes of the ITCA. In Mitchell v. Bingham Memorial Hosp., 130 Idaho 420, 942 P.2d 544(1997), we noted that “the statutory period begins to run from the occurrence of the wrongful act
even if the full extent of damages is not known at that time.” Id. at 423, 942 P.2d at 547.
Moreover, “[t]he statute does not begin running when a person fully understands the mechanism
of the injury and the government’s role, but rather when he or she is aware of such facts that
would cause a reasonably prudent person to inquire further into the circumstances surrounding
the incident.” Id. The Mitchell Court then applied this rule to a situation where a hospitalized
patient suffered an overdose that was initially blamed on hospital equipment, but was actually
caused by a nursing error. Id. We held that although there was initial confusion as to the source
of the patient’s overdose symptoms, the 180-day statutory period nonetheless began to run when
the symptoms began—in other words, the running of the clock was not tolled simply because the
plaintiff was misinformed as to the cause of her symptoms. Id. at 423–24, 942 P.2d at 547–48.
A subsequent case further clarifies the ITCA’s statutory clock and contains facts
strikingly similar to this case. Magnuson Properties P’ship v. City of Coeur d’Alene, 138 Idaho
166, 59 P.3d 971 (2002). In Magnuson, a developer engaged with the City of Coeur d’Alene for
its approval of a plan to subdivide some undeveloped property. Id. at 168, 59 P.3d at 973. As a
“condition of approval,” the City required that Magnuson extend a sewer line at the partnership’s
own expense and allegedly induced it to do so with a promise to reimburse it. Id. After
14
performing the work, Magnuson requested reimbursement from the City. In response, the “City
denied the existence of any agreement between” them and denied the request by a letter dated
August 13, 1996. Id. Magnuson subsequently sued the City for damages, which led this Court to
consider when the ITCA statutory period began to run. Id. at 168–70, 59 P.2d at 973–75. We
concluded that:
The record reflects that, at the very latest, Magnuson had knowledge of the City’s
August 13, 1996 letter on August 15, 1996, which places Magnuson’s February
18, 1997 notice beyond the 180-day period. The City’s letter denies the existence
of any agreement between the City and Magnuson and rejects Magnuson's request
for reimbursement. As of August 15, 1996, a reasonable and prudent person
would have knowledge of facts of a wrongful act, i.e., the City’s denial of and/or
breach of the alleged contract. Therefore, the 180-day notice period began on
August 15, 1996, and Magnuson failed to provide timely notice of its claim.
Id. at 170, 59 P.2d at 975.
Here, like in Magnuson, a developer requested payment from a city. Furthermore, the
cities in both cases denied the fee request via letter. The Magnuson Court did not conclude that
the statutory period began when Magnuson performed the work, or when it was told it would be
reimbursed. Rather, we held that the letter of denial was the trigger. Thus, the City’s contention
that the statutory period began running when Petra performed the work is incorrect. The 180-day
statutory period began running when the City denied Petra’s fee request. And because Petra’s
request for mediation was within those 180 days, we hold that the ITCA does not bar Petra’s
claim.
E. Petra was not the City’s fiduciary.
Another issue raised below is whether Petra and the City had a fiduciary relationship. The
district court concluded that the parties did not have a fiduciary relationship and, alternatively, if
Petra did have a fiduciary duty, it fulfilled that duty. The City contends on appeal that the
language of the CMA—particularly, its reference to the parties’ mutual “trust and confidence”—
created a fiduciary relationship. The City’s contention, which it attempts to buttress with case
law, is that “[t]he common use or settled meanings of the terms ‘trust and confidence’ are those
used to describe a relationship [that] is fiduciary in nature.” Petra responds that “mere respect for
another’s judgment or trust” does not create a fiduciary relationship. It further points out that had
the parties intended to make Petra a fiduciary, they could have simply said so. Because our
15
State’s precedent lends little support to the City’s arguments here, we hold that Petra was not a
fiduciary.
Establishing a claim for breach of fiduciary duty first requires a finding that a fiduciary
relationship exists. Beaudoin v. Davidson Trust Co., 151 Idaho 701, 705, 263 P.3d 755, 759
(2011). Whether a fiduciary relationship exists is a matter of law over which this Court exercises
free review. Id. Generally speaking, where one party is “under a duty to act or to give advice for
the benefit of the other upon a matter within the scope of the relation,” a fiduciary relationship
exists. Id.These general rules have been fleshed out by Idaho case law. In High Valley Concrete,
L.L.C. v. Sargent, 149 Idaho 423, 428, 234 P.3d 747, 752 (2010), this Court reiterated many of
the prior decisions regarding this issue and, in doing so, noted that fiduciary relationships are
“commonly characterized by one party placing property or authority in the hands of another, or
being authorized to act on behalf of the other.” We then elaborated:
The term fiduciary implies that one party is in a superior position to the other and
that such a position enables him to exercise influence over one who reposes
special trust and confidence in him. . . . As a general rule, mere respect for
another’s judgment or trust in this character is usually not sufficient to establish
such a relationship. The facts and circumstances must indicate that the one
reposing the trust has foundation for his belief that the one giving advice or
presenting arguments is acting not in his own behalf, but in the interests of the
other party.
Id. (quoting Idaho First Nat’l Bank v. Bliss Valley Foods, Inc., 121 Idaho 266, 278, 824 P.2d
841, 853 (1991)). The Sargent Court then cautioned that a fiduciary relationship “does not exist
when parties are dealing with one another at ‘arm’s length,’” stating, “Idaho law establishes that
no fiduciary duty ordinarily arises between parties to an arm’s length business transaction.” Id.We concluded by favorably quoting a Court of Appeals decision that listed “examples of
relationships from which the law will impose fiduciary obligations on the parties”:
[M]embers of the same family, partners, attorney and client, executor and
beneficiary of an estate, principal and agent, insurer and insured, or close friends.
All the evidence presented in this case shows that Mitchell and Barendregt shared
none of these relationships, but were parties who entered into an agreement at
arms [sic] length.
Id. (quoting Mitchell v. Barendregt, 120 Idaho 837, 844, 820 P.2d 707, 714 (Ct. App. 1991)).
16
With that framework in mind, an examination of the relationship between Petra and the
City must begin with the agreement between the parties. And, despite the City’s claims, the
parties’ agreement does not create a fiduciary relationship. In the CMA, the parties agreed that
Petra “acknowledges and accepts the relationship of trust and confidence established with Owner
by this Agreement and that this relationship is a material consideration for Owner entering into
this Agreement.” The City points to this “trust and confidence” phrase as the sole evidence of the
duty. However, no Idaho cases hold that simply using those words will create such a relationship.
Indeed, although the Sargent Court identified “trust and confidence” as being factors in the
analysis, they were not the only factors. As we noted, a fiduciary relationship also depends on
one party having a superior position, the other party reposing a “special trust,” and most
importantly, the trusting party believing—with good reason—that the other party is not acting in
its own interests. Moreover, we cautioned in Sargent that “mere” respect for another party’s
judgment or trust in their character is typically not enough to create a fiduciary duty.
Here, the City has not shown that this agreement meets the criteria for creating a
fiduciary duty. It does not claim that Petra was in a superior position, or that it reposed a
“special” trust in the construction manager, beyond mere trust in its judgment. Nor does the City
claim it had good reason to believe, let alone that it actually did believe, that Petra was acting in
anyone but Petra’s interests. Petra and the City were not relatives, partners, best friends, or any
of the class of fiduciaries identified in Sargent. Indeed, the City has offered no evidence or
argument that the deal between the two was anything but a business transaction, occurring at
arm’s length. And the single criterion proffered by the City in its argument—trust between the
parties—was singled out by the Sargent Court as being generally insufficient to create a duty.
We accordingly uphold the district court’s conclusion that Petra was not the City’s fiduciary.
F. The district court erred in holding that Petra did not breach the parties’ agreement,
as both Petra’s overcharging, and its failure to secure a performance bond, were
breaches of the contract. However, these breaches were not material, and the City
suffered no harm from the failure to secure a bond. The district court correctly
concluded that no other breaches occurred.
Beyond Petra’s counterclaim for an equitable adjustment, the second major issue in this
matter is the City’s allegation that Petra breached the parties’ agreement. The City alleged
numerous breaches on appeal, ranging from overcharging and bonding issues to the scheduling
of the Project, all of which are dealt with below. We conclude that: 1) Petra breached the parties’
17
agreement by overcharging the City and by failing to secure a payment and performance bond;
2) these two breaches were not material, and the bond-related breach caused no damages; 3) the
district court correctly concluded that the City is entitled to an equitable reimbursement for the
overcharges, as detailed in Section G, infra; and 4) the district court correctly concluded that the
City’s other allegations of breaches are without merit.
1. Standard of Review.
Our posture for reviewing a district court’s findings with regard to alleged contract
breaches is stated in Borah v. McCandless, 147 Idaho 73, 205 P.3d 1209 (2008):
Generally, unless the facts presented are undisputed, whether there was a breach
of the terms of a contract is a question of fact. . . . Whether such a breach is
material is also a factual question.
Id. at 79, 205 P.3d at 1215 (citations omitted). Unless the district court’s findings of fact are
clearly erroneous, those findings will not be set aside. Shore, 146 Idaho at 907, 204 P.3d at 1118.
Consequently, “even if the evidence is conflicting, if the findings of fact are supported by
substantial and competent evidence this Court will not disturb those findings on appeal.” Id.
2. Overcharging.
The district court found that “Petra charged [the City] for a number General Condition
Reimbursables that were in some cases not provided for in the CMA or which exceeded the
limits for such reimbursables,” and that the City paid “some if not all of these charges.” It
concluded that this was inequitable and that the City was thus entitled to a refund. But the court
did not find that this was a breach—its opening conclusion of law was that the “City has failed to
prove its breach of contract claim against Petra.” The City argues on appeal that overcharging is
not only a breach, but a material breach. Petra’s response does not address why overcharging
would not be a breach. Rather, it simply characterizes the overcharging as “inadvertent.”
We find that overcharging was clearly a deviation from the parties’ agreement. Thus,
though it may not have been material, it was a breach nonetheless. We therefore conclude that
the district court erred by not finding that Petra’s overcharging was a breach.
A breach of contract is the “[f]ailure, without legal excuse to perform any promise which
forms the whole or part of a contract.” Fox v. Mountain W. Elec., Inc., 137 Idaho 703, 711, 52
P.3d 848, 856 (2002) (quoting BLACK’S LAW DICTIONARY 188 (6th ed. 1990)). A material
breach, on the other hand, is “more than incidental and touches the fundamental purpose of the
18
contract, defeating the object of the parties entering into the agreement,” and will allow the non-
breaching party to rescind the contract. Borah, 147 Idaho at 79, 205 P.3d at 1215; see also Ervin
Const. Co. v. Van Orden, 125 Idaho 695, 699–700, 874 P.2d 506, 510–11 (1993).
In this matter, the CMA plainly spells out the parties’ agreement with regard to General
Conditions reimbursables: “Owner shall reimburse Construction Manager for the ‘general
conditions’ items designated for procurement by the Construction Manager under the
Construction Management Plan at the cost thereof incurred by the Construction Manager.” The
resulting analysis is not complicated: if a breach is a failure to perform part of a contract and
Petra charged the City for reimbursables beyond what was allowed by the contract, then the
conclusion that Petra breached the CMA is a syllogism. It is problematic here, however, that the
district court failed to exactly identify what those overcharges were. But, given that Petra does
not dispute that overcharges occurred, 2 this factual point has been conceded. We accordingly
find that the undisputed overcharges made by Petra, in contravention of the parties’ deal, was a
breach.
Despite the district court’s erroneous conclusion that Petra had not breached the parties’
contract, we find the error to be harmless. I.R.C.P. 61 provides, in relevant part:
No error or defect in any ruling or order or in anything done or omitted by the
court or by any of the parties is ground for granting a new trial or for setting aside
a verdict or for vacating, modifying, or otherwise disturbing a judgment or order,
unless refusal to take such action appears to the court inconsistent with substantial
justice. The court at every stage of the proceeding must disregard any error or
defect in the proceeding which does not affect the substantial rights of the parties.
Before the district court, in both its written closing argument and Proposed Findings of
Fact and Conclusions of Law, the City argued that Petra had materially breached its contract,
“wholly excusing” the City from Petra’s claims for an equitable adjustment to the construction
manager fee and/or additional reimbursable expenses. Petra correctly cited pertinent authority for
the proposition that a party cannot insist upon the performance of a contract or a provision
thereof when that party has materially breached the contract. See, e.g., Afton Energy, Inc. v.
Idaho Power Co., 122 Idaho 333, 344, 834 P.2d 850, 861 (1992); J.P. Stravens Planning
Associates, Inc. v. City of Wallace, 129 Idaho 542, 545, 928 P.2d 46, 49 (Ct. App. 1996).
2
Petra even styles an argument heading in its brief: “The District Court Correctly Calculated the Amount of
Overcharge.”
19
The district court did not expressly address the City’s claim that a material breach of the
contract excused its performance. In such circumstances, we consider whether the district court
made implicit factual findings and whether such implicit findings were supported by substantial
and competent evidence. Borah, 147 Idaho at 79−80, 205 P.3d at 1215−16 (2009); Walker v. Am.
Cyanamid Co., 130 Idaho 824, 830, 948 P.2d 1123, 1129 (1997); Nordstrom v. Diamond Int’l.
Corp., 109 Idaho 718, 722–23, 710 P.2d 628, 632–33 (1985).
The district court made the following conclusion: “To the extent there were General
Condition Reimbursables that exceeded the budgeted limits or were otherwise improperly
charged to and paid by the City, the aggregate amount of such overpayments was $52,000.00 and
increased the cost of the project by less than 1%.” Similarly, the district court found that “[t]he
grand total by which Petra’s errors and/or omissions increased the cost of the project was less
than 1%.” These conclusions are evidently the district court’s response to the City’s claim that
Petra’s breaches were sufficiently material as to warrant excusing the City from any further
obligations under the parties’ contract.
Substantial and competent evidence supports the district court’s implicit determination
that Petra’s overcharging was not a material breach. A material breach “defeat[s] the object of
the parties entering into the agreement,” and here, the City ultimately got what it wanted―a city
hall building. And although there is a dispute over the amount of the overcharges, 3 even
assuming that the overcharges totaled the maximum amount alleged by the City—$223,775.76—
this would only be 1.03% of the total project price. Thus, even assuming the worst, the breach is
incidental and not material.
In sum, we hold that Petra’s overcharging the City was not a material breach of the CMA,
but was a breach nonetheless, and reverse the district court’s conclusion to the contrary.
3. Payment and Performance Bonds.
With regard to Petra providing a payment and performance bond for the Project, the
district court found that the City had the right to demand that Petra obtain a bond, but that it
declined to exercise this right. The court concluded that, instead, “Petra provided the City a
$2 million errors and omissions liability insurance policy” and this was consistent with their
agreement. The City argues on appeal that because Petra agreed to comply with all laws
applicable to the Project, and because I.C. § 54-4512 required Petra to post a payment and
3
Discussed more fully in Section G, infra.
20
performance bond, Petra’s failure to secure a bond was a material breach of the agreement. The
City’s reply brief then introduces a related argument―that substitution of the errors and
omissions policy, in light of the statutory requirement for a bond, results in an illegal contract. 4
Petra’s response is that the district court correctly concluded that the “onus [was] on the City” to
request a performance bond and, because the City did not, there was no material breach. In any
event, Petra contends that because the City provided no evidence it suffered any damage from
having insurance, as opposed to a bond, the City has “no legitimate claim to reversible error.”
The generally stated rule regarding illegal contracts is that:
An agreement which cannot be performed without a violation of the law is illegal
and void, whether or not the parties knew the law. However, under some
authority, where a contract could have been performed in a legal manner as well
as in an illegal manner, it will not be declared void because it was in fact
performed in an illegal manner, at least if the performance is not seriously
injurious to the public order. Nor will a contract be declared void because it might
have been performed in an illegal manner, since bad motives are never to be
imputed to any person where fair and honest intentions are sufficient to account
for his or her conduct.
17A AM. JUR. 2D Contracts § 228 (footnotes omitted). Put differently, “a contract [that] cannot
be performed without violating applicable law is illegal and void.” Id. at § 229.
This Court has similarly found that “[a]n illegal contract is one that rests on illegal
consideration consisting of any act or forbearance which is contrary to law or public policy.”
Quiring v. Quiring, 130 Idaho 560, 566, 944 P.2d 695, 701 (1997). Furthermore, contracts
prohibited by law are illegal “and hence unenforceable.” Id. This Court has also held that
contracts that are “made for the purpose of furthering any matter or thing prohibited by statute . .
. [are] void. This rule applies to every contract which is founded on a transaction malum in se, or
which is prohibited by statute, on the ground of public policy.” Porter v. Canyon Cnty. Farmers’
Mut. Fire Ins. Co., 45 Idaho 522, 525, 263 P. 632, 633 (1928). This Court has further stated that
“if [a] contract is not separable and if any of its elements are tainted with illegality, albeit slight,
the plaintiff cannot recover.” Trees v. Kersey, 138 Idaho 3, 9, 56 P.3d 765, 771 (2002). Finally,
we have held that “a contract will be enforced even if it is incidentally or indirectly connected
with an illegal transaction provided it is supported by an independent consideration so that the
4
The City also inexplicably notes that the allegedly illegal provision “is expressly severable by reason of Section
10.18 of the CMA.” By contending that “[a]ny agreement [such as this] is void,” and then pointing out the contract
language stating that the agreement “shall not be affected” by unenforceable provisions, the City is essentially
arguing against itself at this point.
21
plaintiff will not require the aid of the illegal transaction to make out his case.” Vancil v.
Anderson, 71 Idaho 95, 102, 227 P.2d 74, 77 (1951).
The statute at issue here provides:
A licensed construction manager or firm providing public works construction
management services shall be required to post a payment and performance bond
or bonds in the amount of the total construction management contract to secure
the construction manager’s obligations thereunder.
I.C. § 54-4512. The CMA states that “[i]f and when requested by Owner, Construction Manager
shall provide Owner with a payment and performance bond or bonds in the amounts requested
by Owner to secure the construction manager’s obligations hereunder” and that “Construction
Manager shall provide errors and omissions liability insurance on an aggregate limits ‘claims
made’ basis in an amount not less than Two Million Dollars ($2,000,000).” Further, the CMA
provides, “Construction Manager shall perform all of Construction Manager’s services in
compliance with all applicable laws, ordinances, rules, regulations or orders of any public
authority having jurisdiction over the Project.”
With respect to I.C. § 54-4512, both parties violated its requirement to provide a
performance bond. The parties’ disagreement here centered on the statute’s wording. It arguably
is telling construction managers that they “shall” obtain a bond, or, alternatively, that owners
“shall require” construction managers to obtain a bond. Our reading is that it requires both the
construction manager and the owner to ensure that the manager is bonded. Parties cannot, as they
attempted here, get around this requirement by contract.
But Petra’s failure to obtain a performance bond does not void the entire agreement
between the parties. As noted, the general principle is that an illegal contract is one “which
cannot be performed without a violation of the law.” But here, the CMA gave Petra the option to
secure a bond and provided a contractual mechanism for doing so. The CMA was thus fully
capable of being performed without violating I.C. § 54-4512—the parties simply failed to do so.
Further, there is no evidence that this agreement was “made for the purpose of furthering any
matter” prohibited by statute, or that it was “founded” on something illegal. The parties’ goal
was to construct a building, not to circumvent the State’s performance bond statute. The
principle from Kersey—that even slight illegality will taint a non-separable contract—would not
apply here because the CMA in fact had a severability clause.
22
Our holding in Farrell v. Whiteman, 146 Idaho 604, 200 P.3d 1153 (2009), wherein we
found an architectural agreement illegal, would not apply to these facts. In Farrell, the statute
explicitly required licensing not just for practicing architecture, but for offering to practice. A
mere offer to provide unlicensed architectural services would thus be illegal and, consequently,
an agreement between an unlicensed architect and a client was necessarily void. Idaho Code §
54-4512, on the other hand, gives no time frame for securing a bond—it only provides that
construction managers must post one while providing services on public works projects. We
offer no opinion as to the most commercially sensible time for a construction manager to obtain a
performance bond. However, we think it is obvious that I.C. § 54-4512 does not require
construction managers to be bonded before the contract is even formed. Thus, when the parties
executed the CMA, it was a completely legal agreement, which only later was performed in
violation of the bonding statute. This is in contrast to the situation in Farrell, where the services
were rendered “pursuant to an illegal contract” because the contract violated the statute from the
moment it was executed—it was impossible to legally perform. Farrell, 146 Idaho at 610, 200
P.3d at 1159. The statutory violation here is wholly different and will not render void a legal
agreement that could have been performed legally.
However, the CMA did require Petra to comply with all applicable laws in performing its
services. Because Petra’s failure to obtain a bond violated a state statute, this was a breach of the
CMA. That being said, there is no evidence that the default affected the parties or the Project in
any way. The City reinforces this point by failing to support its argument that the breach was
material and not adducing any evidence that the lack of a bond damaged it. We hold that Petra’s
failure to secure a bond was a breach of the CMA, and the district court’s conclusion to the
contrary was error. However, we affirm the district court’s finding that the failure to obtain a
bond was harmless with respect to the City.
4. Inspection, Rejection, and the Substantial Completion Process.
The City further alleges that Petra breached the parties’ agreement by failing to inspect
various contractors’ work, failing to reject deficient work, and failing to comply with the
substantial completion procedures. The district court concluded that Petra agreed to observe, but
not inspect, contractors’ work, and to reject that which was not compliant. But the court also
found that Petra did not guarantee the contractors’ work. Instead, it found that each contractor
agreed to, and did, give the City a warranty. With respect to the substantial completion process,
23
the district court found that Petra met its duty by asking “[the Architect] to issue a certificate of
substantial completion, but [the Architect] did not do so.” The court determined that Petra met its
duty to observe and kept the City well informed, and it thus concluded that:
Petra and [the Architect] worked together to develop punch lists of items that
needed to be corrected and all items were corrected. [] Any items remaining after
the punch list items were closed out were warranty items. [] Every prime
contractor gave the City a warranty for their workmanship and materials.
The City contends on appeal that the CMA required Petra, and the Architect, to do all
things necessary, appropriate or convenient to achieve the City’s ends. With respect to
substantial completion, the City argues, “Petra and the Architect . . . each had the express,
affirmative duty to certify in writing when the work under each of the 52 contracts . . . was
sufficiently complete in accordance with the Contract Documents.” Additionally, the City claims
that Petra had a duty to inspect the contractors’ work, and had to certify in writing that the work
complied with the contract documents. Finally, the City alleges that the CMA bound Petra to
require the Architect to certify substantial completion and that, when the Architect did not,
“Petra did nothing.” This, it argues, was “yet another material breach.”
Petra responds that the Project was substantially complete in fact—that the City issued
certificates of occupancy, conducted city business within the new building, and so on. It further
contends that, although the Architect failed to issue a certificate of substantial completion, that
failure caused no real harm, as all the contractors warranted their work in the typical fashion.
Finally, with regard to Petra’s alleged duty to observe or inspect the work, Petra avers that it
fulfilled all its duties through the extensive punch list process that the parties went through,
“including addressing non-conforming work.”
Three intertwined issues are implicated here: 1) whether Petra had a duty to inspect the
various contractors’ work; 2) the scope of Petra’s duty with regard to the Architect and issuance
of certificates of substantial completion; and, 3) whether Petra properly rejected work that did
not conform to the contract requirements. These issues relate solely to the parties’ relationships
with one another and are thus controlled by the contract documents. To begin with, the CMA
states, “[t]he general scope of Construction Manager’s responsibilities is to do all things, or,
when appropriate, require Architect and each Contractor to do all things necessary, appropriate
or convenient to achieve the end result desired by Owner.” It additionally provides that
24
“Construction Manager shall carefully observe the Work of each Contractor whenever and
wherever necessary, and shall, at a minimum, observe Work at the Project site no less frequently
than each standard workday.”
The A201, which is expressly incorporated into the CMA, says “[t]he Construction
Manager will, for the benefit of the Owner, determine that the Work is being performed in
accordance with the requirements of the Contract Documents, will keep the Owner informed of
the progress of the Work, and will guard the Owner against defects and deficiencies in the
Work.” It goes on to state that the “Construction Manager . . . and Architect will not have control
over or charge of and will not be responsible for construction means, methods, techniques, [etc.]
in connection with the Work, since those are solely the Contractor’s responsibility as provided in
Section 3.3, and neither will be responsible for the Contractor’s failure to carry out the Work in
accordance with the Contract Documents.” (Emphasis added.) However, Petra did have an
obligation to “reject, in writing, any Work of a Contractor that is not in compliance with the
Construction Documents unless otherwise directed by the Owner in writing.”
With respect to the substantial completion process, the A201 defines “substantial
completion” as “the stage in the progress of the Work as certified in writing by the Construction
Manager and Architect, when the Work or designated portion thereof is sufficiently complete in
accordance with the Contract Documents so the Owner can occupy or utilize the Work for its
intended use.” Regarding the proper procedure for substantial completion, the A201 provides
generally that the “Construction Manager will assist the Architect in conducting inspections to
determine the dates of Substantial Completion and final completion, and will receive and
forward to the Architect written warranties and related documents required by the Contract and
assembled by the Contractor.” The A201 then outlines in detail the Construction Manager’s
duties during substantial completion:
When the Contractor considers that the Work, or a portion thereof which the
Owner agrees to accept separately, is substantially complete, the Contractor and
Construction Manager shall jointly prepare and submit to the Architect a
comprehensive list of items to be completed or corrected. The Contractor shall
proceed promptly to complete and correct items on the list. Failure to include an
item on such list does not alter the responsibility of the Contractor to complete all
Work in accordance with the Contract Documents. Upon receipt of the list, the
Architect, assisted by the Construction Manager, will make an inspection to
determine whether the Work or designated portion thereof is substantially
complete. If the Architect’s inspection discloses any item, whether or not included
25
on the list, which is not in accordance with the requirements of the Contract
Documents, the Contractor shall, before issuance of the Certificate of Substantial
Completion, complete or correct such item upon notification by the Architect. The
Contractor shall then submit a request for another inspection by the Architect,
assisted by the Construction Manager, to determine Substantial Completion. . . .
Warranties required by the Contract Documents shall commence on the date of
Substantial Completion of the Work . . . .
(Emphasis added.)
There is substantial evidence in the record to support the finding that Petra complied with
the various obligations set forth in the foregoing language. With respect to the substantial
completion process, neither the CMA nor the A201 place a duty on Petra itself to submit
certificates of substantial completion. Rather, the Architect was the person obligated to submit
the certificates, and Petra agreed in the CMA that it would “require” the Architect to do so. And,
Petra did require the Architect to issue certificates—the Architect simply failed to do so. Because
it is undisputed that Petra asked the Architect to issue the certificates, Petra did not breach the
agreement just because the Architect failed to live up to its own contractual obligation.
Furthermore, the City never explains what damage it suffered from the Architect’s failure to
issue certificates. In fact, the CMA states that substantial completion is the stage of the deal in
which the City beneficially occupies the building, and the A201 provides that following
substantial completion, the owner will receive its warranties. Here, both of these things occurred.
Regarding inspection and rejection, Petra had a duty to “assist the Architect in conducting
inspections.” But, despite the City’s averments, Petra had no express duty to inspect. A duty to
assist another party does not necessarily mean one must do the other’s work for them—
assistance can be provided in myriad ways. Furthermore, Petra did indeed have a duty to
“observe” the Project, but the verb choice here is telling. One assumes that the City, as drafter of
the contract, could have written “inspect” with respect to Petra’s obligation, just as it did for the
Architect. The deliberate choice of a more passive verb suggests that Petra had a lesser duty than
the Architect. Petra was obliged to observe the work and assist the Architect, but was not
required to inspect the work.
Petra was not responsible for any contractor’s failure to perform its work. That being
said, Petra clearly did have an obligation to reject contractor work that did not comply with the
contract documents. But substantial and competent evidence supports the district court’s
conclusion that Petra rejected, and caused to be corrected, all the work that did not conform to
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the contract, and that any remaining errors were warranty items, and thus the responsibility of the
contractors.
Petra was obliged to reject and correct items through a punch list process, and as the
work was heading to completion in the summer of 2009, correspondence from both parties
shows that a dwindling amount of punch-list items were left for correction. Final punch lists
were subsequently closed out by the City’s building inspectors. Indeed, Ed Ankeman, the city
building inspector who signed the final punch list, testified that his signature meant that an item
“was either repaired, replaced, or corrected in a satisfactory manner.” Petra Project manager Tom
Coughlin similarly testified that “a final punch list was narrowed down” and that any
“outstanding items . . . were completed.” And, the City’s own purchasing agent admitted in an
email to Petra, following the punch list process, that any remaining items were warranty items—
the responsibility of the contractors.
In sum, substantial and competent evidence supported the district court’s conclusion that
Petra fulfilled its duties with regard to observation, rejection, and correction of nonconforming
work, and that any remaining items were warranty items. Still, because the City belabored this
issue at length, it is worth specifically addressing the various damage claims it made. In each
instance Petra met its obligation, or the claimed error was a warranty item.
a. Masonry.
The City alleged multiple instances of deficient and defective masonry, which it claimed
totaled over $1.2 million worth of damage and which Petra failed to reject and correct. The
district court conceded that the masonry was indeed flawed in some places, but it nonetheless
tended to believe Petra’s expert, who stated that the cost to remedy it would amount to $6,000.
The district court concluded that the mason “warranted its workmanship” and, thus by
implication, Petra was not responsible for it.
Substantial and competent evidence supports the district court’s conclusion that the
masonry defects are a warranty item. The masonry was substantially completed on May 18,
2008. The contractor completed two punch lists for the masonry veneer, one of which was
approved by the City and the Architect. The mason warranted its work, and, crucially, witnesses
testified at trial that any remaining flaws indeed fell under that warranty. This Court will not
disturb a district court’s findings supported by competent and substantial evidence, even if
27
conflicting evidence exists. Thus, the district court’s finding that the masonry defects were not
Petra’s responsibility will not be disturbed.
b. Western Roofing.
The City contends that the roof leaked “immediately upon installation” and “continues”
to leak. The district court concluded that the roof’s punch list was completed and warranties for
it were issued. Further, it found that “any damage to the roof that was caused during construction
was repaired at no cost to the City” and that “new” damage occurred subsequent to the parties’
inspections of the roof.
Substantial and competent evidence shows that the roof damage is either a warranty item,
and therefore the responsibility of the contractor, or was intentionally caused by a third party,
and thus is not Petra’s responsibility. Damage did occur to the roof during construction, but this
was repaired at no cost to the City. Following construction, the Architect inspected the roof
twice, and Petra closed out the associated punch list. Western Roofing, the contractor that
installed the roof, and Versico, the contractor that designed the membrane material that covered
it, both gave warranties for their work. Four months after the warranties were issued, new
damage was discovered—one witness testified that the roof membrane was cut, “like somebody
had taken a knife or a razor blade and cut some of the membrane.”
In sum, whether the roof damage was a warranty item or intentionally caused, substantial
and competent evidence supports the district court’s conclusion that Petra is not responsible for
it.
c. Buss Mechanical.
The City claims on appeal that Petra “knowingly allowed [Buss Mechanical] to install the
wrong materials in the building.” It contends that Buss installed the wrong kind of piping and,
when Petra discovered it, “[n]ot only did Petra fail to reject to improper substitution of plastic for
cast iron, it knowingly allowed the PVC to be used, and did nothing.” It provides no citation to
the record for this last contention.
Petra, on the other hand, does point to the record, which shows that when Petra
discovered Buss Mechanical’s error, it issued a “daily repair corrective notice” to substitute the
correct pipe. This Court will not consider an argument not supported by cogent argument or
authority. Liponis v. Bach, 149 Idaho 372, 374, 234 P.3d 696, 698 (2010). Thus, because the City
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does not support its contention that Petra knowingly allowed installation of the wrong pipe and
did nothing in response, we will not entertain this argument.
d. HVAC.
The City’s arguments regarding Petra’s duties with respect to the HVAC system are
similarly unavailing. The City contends that the “Contract Documents” obligated Petra to obtain,
review, and approve a Test Adjust and Balance Report, demonstrating that the HVAC system
met all performance requirements. The problem with this assertion is that the contract does not
actually say that Petra must do this. The Construction Management Plan—which was not
incorporated into the CMA—alone states that the construction manager will “[s]ubmit
test/adjust/balance records,” and the City does not dispute that Petra did exactly that. Substantial,
competent evidence shows that the records were submitted and that there was no “reason to
retest and rebalance the HVAC system.” Thus, the district court’s conclusion that “complaints
that the City has with . . . the HVAC system are more likely than not the result of operator error,”
rather than Petra’s actions, will not be disturbed.
e. Miscellaneous Alleged Items.
The City cites various other instances where, it alleges, Petra failed to inspect or reject
deficient work. It argues that the water feature, the floor access panels, and the mayor’s office
were all defective and deficient and should have been rejected or repaired by Petra. The district
court, however, found that any errors here were the result of design flaws, improper installation,
or were simply warranty items, respectively. All of these findings were supported by substantial,
competent evidence. Thus, the district court’s findings regarding these items, and its conclusion
that Petra was not liable for their correction will not be disturbed.
5. Liquidated Damages.
The City also argues that Petra breached the parties’ agreement with respect to liquidated
damages. But, because the City provides virtually no authority to support this issue, the Court
will not consider it. We “will not consider issues cited on appeal that are not supported by
propositions of law, authority or argument.” Woods v. Sanders, 150 Idaho 53, 60, 244 P.3d 197,
204 (2010). Put another way, even if “an issue is explicitly set forth in the party’s brief as one of
the issues on appeal, if the issue is only mentioned in passing and not supported by any cogent
argument or authority, it cannot be considered by this Court.” Bach, 149 Idaho at 374, 234 P.3d
at 698.
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Although the City is obligated to support its contentions with propositions of law,
authority, and argument, here it achieves the somewhat dubious trifecta of lacking all three. The
City states that “as a matter of [agency] law, Petra had a duty to enforce all provisions of each
Prime Contract, including the liquidated damages provisions”—but then cites no law to that
effect. It then contends that “each of the 52 Prime Contracts . . . contained the same liquidated
damages provision”—but provides not one cite to the record, let alone 52. Finally, the City
argues that Petra had “an express contractual duty to advise the City when the liquidated
damages provision had been triggered”—but does not point to contract language which so states.
This final omission, unhelpful though it may be, exists for good reason―we find no contractual
provision that expressly requires Petra to do so. Indeed, although the prime contracts do allow
the City to assess liquidated damages, it just provides this as an option. Thus, even the City itself
had no duty to enforce the provision, just the ability.
At one point in its briefing, the City expressed its familiarity with “the more than 160,000
pages” that comprise this case’s record. One can only presume, then, that if points of authority
are conspicuously missing from its argument, they must simply not exist. In any event, this Court
is not required to go fishing through the record on counsel’s behalf. Instead, we simply do not
consider this unsupported argument on appeal.
6. The Project Schedule.
Another breach alleged by the City pertains to the Project schedule. On this point, the
district court concluded that Petra timely completed its work and that the City moved into
Meridian City Hall “within the originally contemplated eighteen month construction time
estimate.” On appeal, the City argues that the CMA contained a “time-is-of-the-essence” clause,
so failure to adhere to the contract’s timeframe is a material breach. Petra responds that the CMA
provides for two phases of construction—preconstruction and construction—and that the
construction time of 17.4 months complied with the CMA requirements. Petra fails to address
whether the preconstruction phase was similarly timely and compliant.
The CMA does provide upfront that “[t]he time limits established by the Project Schedule
are of the essence and shall not be exceeded by the Construction Manager without Owner’s prior
written consent or as permitted in Section 5.2 below.” Section 5.2 then goes on to detail the
various circumstances that might justify a delay to the Project, and for which the work schedule
will be “equitably adjusted.”
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Despite this language regarding scheduling, the CMA never explicitly sets forth a Project
timeframe. Instead, in a section discussing reimbursable expenses, it provides the following:
If the size (i.e., 80,000 square feet), complexity (i.e., four story, surface parking),
Owner’s schedule (i.e., six months Preconstruction Phase Services, eighteen
months Construction Phase Services), . . . and/or bidding process (i.e., two bid
packages, no rebids) materially changes, Owner and Construction Manager agree
that the not-to-exceed limits set forth below shall be adjusted up or down
accordingly . . . .
Thus, the CMA implies that preconstruction will last for 6 months and that construction will last
for eighteen months, but it gives no indication of when these timeframes begin, or whether they
were meant to run concurrently.
Given the fuzziness of the timeframe set forth by the CMA, there is substantial and
competent evidence that Petra complied with it. Preconstruction services started on July 5, 2006,
and ended on January 1, 2007—well within the six month limit. Similarly, the construction phase
started on May 7, 2007, and ended on October 15, 2008, which was within eighteen months. The
City’s argument regarding the time-is-of-the-essence clause would not change this, as the clause
is immediately followed up by a provision detailing how the parties could adjust the Project
schedule and providing mechanisms for dealing with delays. Thus, the extra-jurisdictional
authority cited by the City, in which that contract expressly “provide[d] that ‘time is of the
essence for every provision of the agreement,’” is distinguishable from the agreement here. See
Vienna Metro LLC v. Pulte Home Corp., 786 F. Supp. 2d 1076, 1082 (E.D. Va. 2011).
Although there is some conflicting evidence regarding the Project schedule, substantial
and competent evidence supports the district court’s conclusion that Petra timely completed its
work. Thus, we affirm the district court’s conclusion that Petra did not breach the party’s
agreement with respect to the Project schedule.
G. The district court’s calculation of the damage offset, attributable to Petra’s
overcharge, was proper.
As noted above, Petra’s overcharges were a breach of the parties’ agreement. Although
the district court did not find that a breach occurred, it nevertheless concluded:
92. Petra charged Meridian for a number of General Condition Reimbursables
that were in some cases not provided for in the Construction Management Plan or
which exceed the limits for such reimbursables. Meridian paid some if not all of
these charges.
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93. It is exceptionally difficult and time consuming, if not impossible, to
calculate precisely the amount of General Condition Reimbursables Meridian
overpaid Petra.
94. It would be inequitable to allow Petra to retain that money.
95. While the amount is somewhat imprecise, the Court has calculated with
reasonable accuracy and without resorting to speculation that the sum total of the
overpayments was $52,000.00.
The City challenges this determination on appeal and alleges that the overcharge figure is
“speculative and arbitrary” and the result of “nothing more than guesswork” on the part of the
district court. It then performs its own calculations, with references to the record, and arrives at a
total of $223,775.76 worth of overcharges. Petra responds by citing Browning v. Ringel, 134
Idaho 6, 14, 995 P.2d 351, 359 (2000), for the proposition that a trial court need not “provide a
lengthy discussion on every . . . specific factual issue” in a matter. Thus, Petra argues, the district
court’s overcharge figure is correctly calculated, and adequately supported.
It is the province of the district court—and not this Court—“to weigh conflicting
evidence and testimony and to judge the credibility of the witnesses.” Beckstead v. Price, 146
Idaho 57, 61, 190 P.3d 876, 880 (2008). Accordingly, “[a] trial court’s findings of fact in a bench
trial will be liberally construed on appeal in favor of the judgment entered, in view of the trial
court’s role as trier of fact.” Id. With respect to its findings, “the trial court is not required to
provide a lengthy discussion on every single piece of evidence and every specific factual issue
involved in the case.” Browning, 134 Idaho at 14, 995 P.2d at 359 (2000). Applying this rule in
Browning, the Court determined that the district court’s findings of fact there were “more than
sufficient”:
The [district] court examined all the evidence, both testimonial and documentary,
made reasonable inferences from that evidence and then drafted detailed findings
of fact and conclusions of law based on that evidence after having reviewed both
parties’ proposed findings and conclusions. The court’s findings of fact and
conclusions of law are sufficient to fulfill the purpose of I.R.C.P. 52(a) which is
“to provide the appellate court with a clear understanding of the trial court’s
decision so that it may determine whether the trial court applied the proper law in
reaching its ultimate judgment.”
Id. (quoting The Highlands, Inc. v. Hosac, 130 Idaho 67, 70, 936 P.2d 1309, 1312 (1997)).
Here, despite the district court’s admission that its overcharge calculation was
“imprecise,” we affirm. The district court was not required to make its calculation with utmost
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precision—instead, its only charge was to provide this Court with a clear understanding of its
decision, such that we can conclude that it properly applied the law. We conclude that it did.
Though the district court does not share its exact figures on this one point, the depth of
detail contained throughout its opinion makes it clear to us that the court properly applied long-
accepted rules regarding damages. The district court generated over 22 pages of meticulous
factual findings in its opinion, which leaves us with a clear understanding of how it applied the
law. We understand that the court calculated, as best it could, the amount which the City was
overcharged. This amount reflected the loss suffered due to Petra’s breach. The court then
compensated the City by reducing Petra’s damage award accordingly. This comports with very
basic contract law principles. See, e.g., Hummer v. Evans, 129 Idaho 274, 280, 923 P.2d 981, 987
(1996) (noting that “the measure of damages is such as will compensate for the loss suffered as
the result of a breach of contract”). We conclude that the district court did not “resort[] to
speculation,” and properly calculated the offset, despite the lack of comprehensive bookkeeping.
H. The district court did not err in allowing the testimony of Tim McGourty.
The City alleges error on appeal regarding the trial testimony of Tim McGourty.
McGourty is the President of TMC, which was the masonry contractor for the Project. In
allowing McGourty’s testimony regarding the masonry, the district court treated him as a “fact
witness,” and not an expert, because McGourty was testifying as to the amount of an estimate
that he had previously prepared. The City poses several arguments on appeal: that McGourty was
not a fact witness, but an expert witness, and thus should have been disclosed; that McGourty
was a lay witness offering an opinion that was not based on “perceptions”; and that the court
failed to exercise any reason in allowing his testimony. Petra responds in agreement with the
district court, arguing that McGourty and an estimator prepared an estimate of the masonry
repairs and that “[t]he Court properly allowed him to provide ‘factual testimony’—what he did;
what he prepared; what it was based on; what the estimate was.”
The decision “to exclude undisclosed expert testimony pursuant to I.R.C.P. 26(e)(4) is
committed to the sound discretion of the trial court.” Schmechel v. Dillé, 148 Idaho 176, 180,
219 P.3d 1192, 1196 (2009). “The test for determining whether a district court abused its
discretion is: (1) whether the court correctly perceived that the issue was one of discretion; (2)
whether the court acted within the outer boundaries of its discretion and consistently with the
legal standards applicable to the specific choices available to it; and (3) whether it reached its
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decision by an exercise of reason.” Id. at 181, 219 P.3d at 1197. Concerns are heightened when
expert testimony is involved, as this Court noted in Radmer v. Ford Motor Co., 120 Idaho 86,
813 P.2d 897 (1991):
In cases [involving expert testimony], a prohibition against discovery of
information held by expert witnesses produces in acute form the very evils that
discovery has been created to prevent. Effective cross-examination of an expert
witness requires advance preparation . . . Similarly, effective rebuttal requires
advance knowledge of the line of testimony of the other side. If the latter is
foreclosed by a rule against discovery, the narrowing of issues and elimination of
surprise which discovery normally produces are frustrated.
Id. at 89, 813 P.2d at 900 (quoting Advisory Committee Notes, Rule 26, Fed. Rules Civ. Proc.,
28 U.S.C.A.).
Given that McGourty was not an expert witness, it was within the district court’s
discretion to admit his testimony. As pointed out by the district court, McGourty was not
offering an expert opinion, or a lay opinion—he was simply testifying that he went to the job
site, inspected it, and prepared an estimate of a certain amount. Thus, the intensified concerns
regarding undisclosed expert opinions would not be triggered here. Furthermore, the record
suggests that the delay in disclosing McGourty was due to the City’s own tardiness in revealing
its evidence regarding damages. In any event, the choice to exclude was left to the district court’s
sound discretion, which it properly exercised. First, the court recognized it had the discretion to
exclude by reserving a ruling on the City’s motion until trial, where it would consider whether
McGourty was not a “fact witness[], but rather [an] expert witness.” Second, the court acted
consistently with the Idaho Rules of Evidence, which distinguish between witnesses who have
“personal knowledge” versus expert or lay witnesses offering opinions. Compare I.R.E. 602,
with I.R.E. 702, and I.R.E. 701. Lastly, the court reached its conclusion by an exercise of
reason—it determined that because McGourty was testifying regarding facts that he had personal
knowledge of, he was not an expert and was not offering an opinion. Therefore, allowing his
testimony was proper. Consequently, we hold that the district did not err in allowing McGourty
to testify.
I. The district court did not err by disregarding the City’s damages evidence.
In assessing the various damage amounts alleged by City experts, the district court found
that “damages attributed to Petra were speculative.” The City contests this on appeal, arguing
that the court was required to expressly find that City damage experts were not credible, or that
34
they gave improbable testimony, in order to conclude their testimony was speculative. This issue
can be quickly disposed of as irrelevant because the City was unable to establish liability on the
part of Petra for any of its damage claims. In order for the issue of damages testimony to be
relevant, a party must be able to establish liability. We have upheld the district court’s
determination that Petra is not liable to the City on its myriad damage claims and, therefore, we
need not address this issue.
J. The district court did not err in not allowing the City to amend its Complaint.
The City asserts that the district court erred in not allowing the City to amend its
Complaint to add additional claims. In ruling on the City’s Motion to Amend, the district court
held that:
[T]he Court is not persuaded that the evidence found in the record is sufficient to
provide Meridian a reasonable likelihood of proving the fraudulent and
outrageous behavior that evidence a bad act and bad intent required by the case
law and the statute. Therefore, Meridian’s Motion for leave to file a First
Amended Complaint to add a claim for punitive damages is DENIED.
The City alleges that the district court incorrectly applied the above standard, which it argues is a
“summary judgment” standard, rather than a more liberal “motion to amend standard.” Petra
responds that the district acted within its “proper discretion,” but that, even if it did not, the error
was harmless because “the City does not refer to any evidence to support its fraud and related
theories.”
Trial courts must exercise “[g]reat liberality . . . in permitting amendments to pleadings.”
Markstaller v. Markstaller, 80 Idaho 129, 134, 326 P.2d 994, 997 (1958). That being said, “[a]n
application to amend a pleading is directed to the sound discretion of the court.” Id. This Court
has further explained that “[g]ranting or refusing to grant persmission [sic] to amend a pleading
is largely a matter of discretion of the trial court, and, unless the exercise of such discretion
deprives a party to the action of some substantial right, it is not error.” Id. (quoting Cady v.
Keller, 28 Idaho 368, 154 P. 629, 631 (1916)). The Markstaller Court noted that, there, “the
complaint [was] capable of being amended to state facts sufficient to constitute a cause of action
[and] a refusal to grant permission to amend would deprive appellant, a party to the action, of a
substantial right” and, therefore, this Court allowed amendment. Id. at 135, 326 P.2d at 997.
Here, the district court did not err in not allowing the City to amend its Complaint. The
City averred that the district court was required to apply a “liberal” standard in reviewing its
35
motion. This is not entirely accurate. The district court was required to deploy liberality, but the
ultimate decision of whether to grant or deny was at its sound discretion. The City alleges
essentially that the district court did not consider each of the proposed claims fully enough, but it
does not explain why such an approach would be an abuse of discretion. More fundamentally,
the City also fails to allege what substantial right the district court’s decision deprived it of, or
what harm resulted therefrom. The district court did not err by not granting the City permission
to amend its Complaint.
K. The district court did not err in awarding attorney fees.
The CMA states that, “in the event of any controversy, claim or action . . . the prevailing
party will be entitled to receive from the other party all costs, damages, and expenses, including
reasonable attorneys’ fees.” The City argues on appeal that the district court erred in granting
attorney fees to Petra. It first contends that Petra should not have prevailed in the first place and
thus should not have won fees. It then argues “the [district court] erred . . . as a result of its
failure to perform any of the analysis required by Rule 54” and instead “[appeared to rely]
exclusively upon the Contract as the basis for the award of the entirety of the fees and costs
claimed by Petra.” Petra responds that the award of costs and fees was proper and conformed to
the requirements of Rule 54. The district court found that Petra was the prevailing party, and,
absent a “rare” case of abuse of discretion, this Court will not disturb that finding on appeal.
Crump v. Bromley, 148 Idaho 172, 173, 219 P.3d 1188, 1189 (2009).
The City’s lack of effort in making this argument is noteworthy. It contends that Rule
54(e) requires the district court to perform an analysis, but does not state what the analysis is. It
then states that the district court did not “perform any of the analysis required by Rule 54,” but
cites to no record authority to support that claim. It argues that “it appeared that the [district
court] relied exclusively upon the Contract as the basis for the award” and that the district court
“did not engage in any of the required analysis”—and for both points, provides no authority
whatsoever.
Per Woods and Bach, this Court need not consider unsupported arguments on appeal.
However, even if the City had properly presented the argument that the district court was
required to consider Rule 54(e)(3) factors, the record shows that the district court did consider
them. Rule 54(e)(3) states that:
36
In the event the court grants attorney fees to a party or parties in a civil action it
shall consider the following factors in determining the amount of such fees:
(A) The time and labor required.
(B) The novelty and difficulty of the questions.
(C) The skill requisite to perform the legal service properly and the experience
and ability of the attorney in the particular field of law.
(D) The prevailing charges for like work.
(E) Whether the fee is fixed or contingent.
(F) The time limitations imposed by the client or the circumstances of the case.
(G) The amount involved and the results obtained.
(H) The undesirability of the case.
(I) The nature and length of the professional relationship with the client.
(J) Awards in similar cases.
(K) The reasonable cost of automated legal research (Computer Assisted Legal
Research), if the court finds it was reasonably necessary in preparing a party's
case.
(L) Any other factor which the court deems appropriate in the particular case.
I.R.C.P. 54. Not only did the district court expressly refer to Rule 54(e) in its holding awarding
fees, but its justification for doing so was comprised entirely of the above factors:
The CMA clearly states that attorneys’ fees must be reasonable in order to be
awarded. Petra seeks $1,275,416.50 in attorneys’ fees, and the Court finds these
fees to be reasonable. This case was litigated for more than two years. It involved
more than a dozen vigorously contested pre-trial motions. The trial lasted fifty-
nine (59) days. Petra’s lead attorneys, Mr. Walker and Ms. Klein, are experienced
litigation attorneys, having practiced law for thirty-five (35) years and thirteen
(13) years, respectively. Their fees are consistent with similarly experienced
attorneys in this jurisdiction. The range of issues presented and defended was
exhaustive, and often required both parties to work within confined time frames.
For all these reasons, the Court finds the requested attorneys’ fees were both
reasonable and reasonably incurred.
Thus, beyond being spectacularly unsupported, the City’s arguments on this issue are simply
wrong. Consequently, we will not disturb the district court’s award of fees.
L. As prevailing party, Petra is entitled to attorney fees on appeal.
Both parties argue entitlement to attorney fees on appeal. This Court determines
prevailing party status “from an overall view, not a claim-by-claim analysis.” Crump, 148 Idaho
at 174, 219 P.3d at 1190 (quoting Shore, 146 Idaho at 914, 204 P.3d at 1125). Furthermore, if
“both parties are partially successful, ‘it is within the court’s discretion to decline an award of
attorney fees to either side.’” Id.37
We hold that from an overall view Petra is the prevailing party. The City brought a wide
range of claims on appeal, the vast majority of which were unavailing. And, although two of the
district court’s rulings are reversed in the City’s favor, they are minor issues. We have left intact
practically all of the district court’s findings and conclusions and not modified any of its
monetary awards. We consequently find that Petra is the prevailing party on appeal.
The CMA executed by the parties provided that the prevailing party would be entitled to
attorney fees. Thus, we grant Petra its attorney fees on appeal.
IV.
CONCLUSION
We affirm the judgment and award Petra costs and attorney fees on appeal.
Chief Justice BURDICK, and Justices EISMANN and HORTON, Justice Pro Tem
KIDWELL CONCUR.
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