$334,554 Awarded to Owners of Uncompleted Log Home

Source: Montana Law Week

James & Tammy Helsper contracted with Beartooth Custom Builders (BCB) in 7/07 for construction of a log home in Carbon Co. The “Price” clause states:

The price for the work agreed upon is $501,649 to be paid as follows: COST PLUS A FIXED FEE: Owner pays builder for all costs, but the fee for overhead and profit is a fixed amount. The balance to be paid bimonthly on an as earned basis and itemized bills are submitted. Fixed fee of $44,472 is included in the total price. Price includes Allowances that are listed in “others” column in the Standard Estimate project attached to this contract.

Gary Hopper prepared an estimate which included the statement, “We agree to do the above estimated work for the price of $501,649.” Duration of the job was set as “7 mos.” By 3/08 BCB was projecting a “finished number” of roughly $676,000, and also informed Helspers that it had underestimated its management fee by $15,105. BCB filed a construction lien 3/7/08 claiming an “estimated” unpaid $77,933. It did not give Helspers 7 days notice of intent to suspend performance or terminate the contract. Helspers offered to release $16,781 to pay subcontractors. On 3/14 Helspers gave 10 days notice of intent to terminate the contract and to request removal of the lien. Beartooth sued Helspers. Helspers counterclaimed. The matter is before the Arbitrator pursuant to a “Conflict Provision” in the contract.

BCB is not entitled to recover on its claim for breach of contract and, by inference, any entitlement to foreclose on its lien, because it failed to comply with §28-2-1117 requirements to give written notice at least 7 calendar days before intended suspension of performance or contract termination. Thus BCB is denied any recovery.

BCB is liable to Helspers for negligence and breach of contract. I do not find that the covenant of good faith & fair dealing applies; if it did, it would not materially affect damages. Beartooth engaged in unfair or deceptive acts, and the damages are the same as for breach of contract and unlawful practices — actual damages.

Helspers are awarded the cost of consultant Wes Krivonen’s $603.30 expense because it was a prerequisite for their determination of what would be required to correct or complete construction.

The negotiated contract price, excluding add-ons, was $501,649. Owner add-ons should not be included for the reason that such costs, if any, were passed-through to Helspers, and therefore their value does not materially affect my determination as to the contract price. The contract was 75% complete when Beartooth gave notice of its intent to terminate. Thus the amount owed by Helspers should have been $376,237 (75% of $501,649). They paid invoices totaling $409,846, an overpayment of $33,608, which they are entitled to recover. The cost of completion of the remaining 25%, had it been performed according to agreement, would have been $125,412. Such cost would have included labor, landscaping, and cleanup, for which I make no separate award.

I have no basis on which to compute an award for loss of warranty. That is not to say it does not have some value, but absent a method of determining such value I will treat the loss of peace of mind arising from a warranty in my emotional distress award.

BCB negligently constructed and its principals negligently supervised construction of the home. Because it failed to complete within the time set in the contract, Helspers lost the opportunity to convert from a construction loan to permanent financing. By reason of BCB’s lien, Helspers were prevented from obtaining permanent mortgage financing.

Their computation of interest from 3/08-11/08 assumes a 15-year and a 30-year mortgage. I have averaged the estimated interest expense and find that the additional interest was $4,040.

Delay in completion delayed Helspers’ move into their new residence. Damages shall include, absent proof or argument to the contrary, $8,680.

Because Helspers are entitled to damages for negligence, including emotional distress, I make no award for breach of contract for Ms. Helsper’s services as a general contractor, loss of her opportunity to pursue schooling, or mileage reimbursement. Those items will be considered in my award for negligence.

While BCB’s actions may have been dilatory, disorganized, unresponsive, negligent, or worse, I do not find that they were characterized by actual fraud or actual malice, and therefore deny Helspers’ claims for punitives or treble damages under the CPA.
BCB’s negligence includes negligent construction, negligent contract administration, negligent supervision of employees, negligent assertion of a construction lien, and delay in providing invoices and other supporting documentation. As a result, Helspers suffered unreasonable delay, investment of time & effort performing the work which BCB undertook to perform, lost opportunity whether in lost opportunity to pursue school, loss of favorable interest, and additional emotional distress and aggravation. Although I made no damages award for time & travel, the amounts claimed are evidence of the degree of their stress and aggravation. I award $75,000 as tort damages.

Helspers shall recover $247,343.30 by reason of their counterclaim (amended to $256,378.30).

Helspers request $56,943 attorney fees for Todd Shea and $3,707 for Jeff Turner, $4,517.50 paralegal fees, $1,721.22 costs, $3,800 future anticipated attorney fees, $21,114 expert fees for Chuck Graden, and $537.50 for video by J.W. Services, total $92,340.65. BCB requests that attorney/paralegal fees be limited to $55,981.58 because Helspers did not prevail on claims relating to bad faith, piercing the corporate veil, or Nees’s and Maxwell’s subsequent arrest (which the Arbitrator found lacked proof of a causal connection to Helspers’ claimed damages). Helspers’ counsel responds that work on issues related to amending the complaint and considering the effect of criminal charges amounted to no more than 1.3 hours. Both parties have submitted expert opinion reports of respected counsel. Applying the JTL (Mont. 2010) attorney fee factors, Devoe (Mont. 1990) interlocking issues factors, §25-10-304 to paralegal fees, Talcott (Mont. 2006) to “fees for fees,” Witty (Mont. 1986) to “expert witness fees,” Treweek (Mont. 2004) to a consultant’s fees for investigating construction defects and proposing remediation, and Thayer (Mont. 1990) to travel expenses and hotel bills incurred by experts, video recording cost, and an expert’s review of work papers and consultation with another firm results in an award of $76,989.02 as damages, statutory fees, and costs (amended to $78,176.02).

Helspers’ counsel states that “Helspers have understood that they were not going to receive a bill for the costs of the Arbitration.” The Arbitrator submitted an Arbitration Agreement and Discovery Schedule stating:

The Arbitrator’s fee shall be charged on an hourly basis and shall be divided equally between the parties. The Arbitrator shall provide a monthly bill to the parties. The Arbitrator’s fees are as follows: $195 per hour.

Regrettably, the Arbitrator did not submit a monthly bill. Neither is he satisfied with the timeliness of his findings & conclusions. Because of that, the Arbitrator submits that an appropriate charge for his services is $10,000. Each party shall be responsible for half the cost of arbitration, or $5,000 each.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s