IN THE SUPREME COURT
STATE OF NORTH DAKOTA
|Terence Barrett and Rachel Barrett,|
|Supreme Court No. 20120279|
|District Court No. 09-2010-CV-02587|
|Harry Gilbertson, d.b.a.,|
|Harry Gilbertson Construction,|
REPLY BRIEF OF PLAINTIFFS-APPELLANTS
APPEAL FROM THE JUDGMENT OF THE DISTRICT COURT ENTERED ON APRIL 30, 2012, AND THE DENIAL OF ATTORNEY FEES TO TERENCE BARRETT AND RACHEL BARRETT RELATING TO THEIR DEFENSE OF A SLANDER COUNTERCLAIM WHICH WAS DENIED TO THEM IN THE ORDER DENYING CROSS-MOTIONS FOR ATTORNEY'S FEES ENTERED MAY 16, 2012
CASS COUNTY DISTRICT COURT, EAST-CENTRAL JUDICIAL DISTRICT
HONORABLE WICKHAM CORWIN
|GARAAS LAW FIRM|
|Attorneys for Plaintiffs-Appellants|
|Office and Post Office Address|
|DeMores Office Park|
|1314 - 23rd Street South|
|Fargo, ND 58103|
|North Dakota ID # 03219|
TABLE OF CONTENTS
|ISSUES ON APPEAL||1|
|STATEMENT OF THE CASE|
|STATEMENT OF FACTS|
|LAW AND ARGUMENT|
|Standard of Review|
|The Barretts have established a breach of contract by Gilbertson|
|concerning the headroom of the basement.||2|
|Barretts' lawsuit is based on matters that contractually survived|
|The Barretts have established a breach of contract by Gilbertson|
|concerning construction defects that could be repaired.||4|
|Any duty that Barretts had to mitigate damages has been excused|
|because of Gilbertson's actions or positions||5|
|The trial court's finding of the market value of the building|
|is clearly erroneous.||7|
|In this case, one cannot rely upon market value alone to determine|
|The Barretts should have been awarded attorney fees relating to|
|Gilbertson's counterclaim for slander and emotional distress.||8|
TABLE OF AUTHORITIES
|North Dakota Cases|
|Coughlin Const. Co. Inc. v. Nu-Tec Industries, Inc., 2008 ND 163, 755 N.W.2nd 867|
|Fargo Foods, Inc. v. Bernabucci, 1999 ND 120, 596 N.W.2d 38|
|Rykowski v. Dickinson Public School District #1, 508 N.W.2d 348 (N.D. 1993)|
|N.D.C.C. Chapter 32-43|
|N.D.C.C. § 9-09-06|
ISSUES ON APPEAL
Appellants Terence Barrett and Rachel Barrett [hereafter, the "BARRETTS"] respectfully submit that the issues framed by Appellee Harry Gilbertson [hereafter, "GILBERTSON"] are fully embraced in the issues they presented in the Brief of Plaintiffs-Appellants.
STATEMENT OF THE CASE
GILBERTSON is satisfied with the BARRETTS' Statement of the Case.
STATEMENT OF FACTS
GILBERTSON does not dispute any part of the facts in the BARRETTS' account.
In his factual account, GILBERTSON dwells upon the preliminary negotiations that led to the parties' May 4, 2007, written contract. Paragraphs 5 through 12, inclusive, relate to the time period that precedes the May 4, 2007, contract date. GILBERTSON dwells on these events in his misguided attempt to suggest "[t]he storage space was an add on to the construction agreement and the Barretts got what they bargained for." Brief of Appellee, ¶ 33. The BARRETTS respectfully submit that the basement was not "an add on" but part of the parties' original May 4, 2007, contract as evidenced by the signed building specifications blueprint. Exhibit D203; Appendix pages, 146-148.
If there is a disagreement about facts between the BARRETTS and GILBERTSON, it concerns the basement headroom height and whether the space below ground would be habitable. Brief of Appellee, ¶ 33. The signed building specifications called for thirteen risers. With a typical riser of 7.5 inches, the basement called for in the plans would have sufficient headroom to be either occupiable or habitable. Transcript on Appeal, pages 57-61. When entering the contract, it was Terence Barrett's belief that an unfinished basement would be built, but if the BARRETTS' wanted an extra room they could do so in the basement. Transcript on Appeal, page 44. GILBERTSON points to nothing in the controlling written contract, the trial testimony, or the trial exhibits that would dispel Terence Barrett's belief that the basement would be occupiable or habitable.
LAW AND ARGUMENT
Standard of Review
The BARRETTS believe that most issues facing this Court involve a question of law or a mixed question of fact and law. GILBERTSON does not challenge the facts that the BARRETTS present, merely the legal effect of the settled facts.
1. The Barretts have established a breach of contract by Gilbertson concerning the headroom of the basement.
Without any factual issue, GILBERTSON installed the BARRETT basement with a headroom height of six feet two inches (6'2"). Whether GILBERTSON breached his duty to the BARRETTS concerning the headroom height, for the basement, involves the interpretation of the parties' contract to determine its legal effect. This involves a question of law. Fargo Foods, Inc. v. Bernabucci, 1999 ND 120, ¶ 13, 596 N.W.2d 38. GILBERTSON does not challenge the BARRETTS' position that a typical stairway riser is 7.5 inches high. GILBERTSON recognizes that the agreed blueprints called for thirteen risers. Brief of Appellee, ¶ 30. Thirteen risers of typical 7.5 inches height would provide an habitable basement with seven foot (7') headroom clearance. Appendix of Brief of Plaintiffs-Appellants, page 35. Based upon the blueprints that were agreed to by both contracting parties, it is reasonable for the BARRETTS to assume that GILBERTSON would be constructing a basement that could one day be habitable. It is respectfully submitted that inclusion of thirteen (13) risers in the agreed blueprints evidences the parties' mutual intent to have sufficient headroom to have a habitable basement.
GILBERTSON, alone, was in charge of the layout of the truss system installed for the basement area. Transcript on Appeal, page 401. It is respectfully submitted that GILBERTSON, as the builder, is solely responsible for building a foundation at the required depth to accommodate seven feet (7') of headroom clearance for the basement as expressed for thirteen (13) risers from floor to floor. A contract must be interpreted in a reasonable manner. It is unreasonable to suggest that the parties' agreed blueprints would have provided for a totally unique headroom height never seen by an architect with over thirty years experience. Transcript on Appeal, page 68.
2. Barretts' lawsuit is based on matters that contractually survived the closing.
The District Court's interpretation of the Final Settlement Offer of October 3, 2007, [Appendix, page 81] to be a mutual release involves a question of law. Even GILBERTSON testified he intended the written one year warranty to remain in effect after the parties' closing, covering matters that included structure and foundation. Transcript on Appeal, pages 386-387. William Kuzas testified the BARRETTS did not indicate that they would be waiving any of their rights to a one-year warranty in the discussion that led to the Final Settlement Offer. Transcript on Appeal, page 252. There is no wording in the Final Settlement Offer that waives the one year warranty [Appendix to Brief of Plaintiffs-Appellants, page 17] for "any work or materials" provided in the parties' Construction/Purchase Agreement. Further, the Final Settlement Offer does not have any wording that mentions the height or headroom of the basement. A written contract can be only altered by another written contract, or an executed oral agreement. N.D.C.C. § 9-09-06. The evidence in this case does not reveal a written contract, nor an executed oral contract, where the BARRETTS have released or waived their claim arising from the construction of a basement with only six foot two inch (6'2") headroom. Nothing within the trial testimony suggests the BARRETTS and GILBERTSON had a meeting of the minds concerning a waiver or release of their claim arising out of the headroom height without a meeting of the minds there cannot be a mutual release.
Because the Final Settlement offer does not have any language that can be construed as a release or waiver of the basement headroom claim, GILBERTSON attempts to use the acceptance of the deed [a reconveyance] by the BARRETTS as a release. Construction/Purchase Agreement ¶ 17 does not release the BARRETTS' claim.
The only persons saying the Final Settlement Offer constituted BARRETTS' waiver, or release, were the trial judge and GILBERTSON's attorney. Neither of them were parties, and their position is without evidentiary and legal support.
3. The Barretts have established a breach of contract by Gilbertson concerning construction defects that could be repaired.
Under the warranty GILBERTSON provided to the BARRETTS, it does not matter whether a construction defect is labeled a cosmetic defect or labeled a defect in the material that was used in the construction process. GILBERTSON warranted that he would "promptly correct any work or materials failing to comply with the specifications of the blueprints or which are otherwise defective so long as the [sic.] reported to Seller in writing within 12 months from the Date of closing." Appendix of Plaintiffs-Appellants, page 17. Prior to litigation, GILBERTSON acknowledged over forty (40) items that needed to be corrected. Appendix of Plaintiffs-Appellants, pages 126-127. GILBERTSON did not honor his contractual duty to "promptly" correct these items. GILBERTSON breached his contractual duties to the BARRETTS.
The BARRETTS' complaints of cosmetic defects [or material defects] were not in dispute. There is no question that GILBERTSON did not repair the defects that even he acknowledged existed before litigation. GILBERTSON now argues that the BARRETTS never intended to let him make the necessary repairs. Brief of Appellee, ¶¶ 39, 45-48. The trial court did not make this finding. The trial court merely determined that "Gilbertson was never given an opportunity to fix them." Appendix, page 152. The trial testimony at trial does not suggest that the BARRETTS never intended to let GILBERTSON make necessary repairs, as now argued by GILBERTSON. Terence Barrett testified that the house was not complete at closing and he had expected GILBERTSON to come back for further work. Transcript on Appeal, page 127. GILBERTSON had inspected the house on April 10, 2008. At that time, GILBERTSON was to provide a response to BARRETTS' punch list by informing the BARRETTS how he intended to fix the discrepancies. Terence Barrett's trial testimony establishes the BARRETTS' intent to allow GILBERTSON to fix each discrepancy under the supervision of another contractor. Transcript of Trial, pages 155-156.
4. Any duty that Barretts had to mitigate damages has been excused because of Gilbertson's actions or positions.
In ¶ 53 of the Brief of Appellee, GILBERTSON writes:
Their authority stands for the proposition that a non-defaulting party need not accept a modified contract in mitigation of its damages. Stanspec Corp. v. Jelco, 464 F.2d 1184 (10th Cir. 1972). In his case, however, by May 2008, Gilbertson through his counsel was trying to reach a global resolution of outstanding claims by Barretts and sought a release once bullet items were "fixed". Barretts were not relieved of their obligation to allow Gilbertson the opportunity to enter the property.
These words show that GILBERTSON does not understand that the "mitigation of damage" issue is an affirmative defense to be proven by him. Gilbertson cannot rely upon that affirmative defense, as a matter of law, unless he first establishes that his proffered performance was not modifying the parties' contract. As a matter of law, GILBERTSON cannot establish this affirmative defense. He did not act "promptly" as required by the contract. Not responding until late September, 2008, to the BARRETTS' May 14, 2008, letter four (4) months' time is not a prompt act, and it is a modification of the contract. Requiring a release of the BARRETTS is also a modification of the contract.
Further, GILBERTSON offered no evidence that the BARRETTS could avoid the damages they sought. The failure to mitigate damages only extends to damages that could have been avoided by the BARRETTS. Coughlin Const. Co. Inc. v. Nu-Tec Industries, Inc., 2008 ND 163, ¶ 12, 755 N.W.2nd 867. The undisputed facts establish that the BARRETTS [who are the injured parties] received a building that had substantial cosmetic defects that needed repair, and a basement that did not conform to the contract. Neither GILBERTSON, nor the trial court when issuing its decision, attempted to explain and quantify what damages the BARRETTS, with reasonable effort, could have avoided. Certainly the damages the BARRETTS sought for the basement could not have been avoided by them. To obtain the contract required headroom, it would cost more to rip out the basement and replace it than was diminishment in market value of the building.
5. The trial court's finding of the market value of the building is clearly erroneous.
GILBERTSON, in ¶ 63 of the Brief of Appellee, recognizes that the real property should be subtracted from William Triebwasser's $370,000.00 appraisal when he states, "Discounting the real property from a market comparable analysis, the property structure still has a value of $315,000." GILBERTSON recognizes that the BARRETTS paid $326,882.35 for the building. Brief of Appellee, ¶ 63. The BARRETTS submit that this is a concession by GILBERTSON that the trial court was clearly erroneous in its determination of the market value of the building and the resulting damages for the injury suffered by the BARRETTS because of the failure to build to contract specifications. Based upon the diminishment of market value, GILBERTSON's statement is a concession that BARRETTS have suffered at least $11,882.35 in damages [$326,882.35 less $315,000.00 equals $11,882.35] based upon the diminishment of market value alone for the repairs that could not be repaired at reasonable cost.
The BARRETTS and GILBERTSON differ in how they have interpreted Triebwasser's appraisal and testimony. Triebwasser determined a $315,000.00 market value of the building with a partial basement with normal headroom. Triebwasser's written appraisal suggested that a partial basement has $10,000.00 market value greater than a crawl space. Appendix of Appellee, page 9. Treibwasser's testimony at trial suggests that there should be $5,000.00 to $10,000.00 deduction from the appraisal for the difference between a crawlspace and a partial basement. Transcript, page 35. Based upon their reading of the appraisal, and their interpretation of Triebwasser's testimony, the BARRETTS suggest that the evidence reveals the market value of the building - with the defects that cannot be repaired is from $305,000.00 to $310,000.00. For that reason, the BARRETTS are of the belief that they have established damages for the matters that cannot be repaired of $16,882.35 to $21,882.35.
The BARRETTS also note that the trial court determined Triebwasser's appraisal to be the "best and most credible evidence offered as to the value of the structure." Appendix to Brief of Plaintiff-Appellants, pages 151-152. The trial court did not find the written appraisal of the market value to be unreliable, as GILBERTSON now argues to this Court. Brief of Appellee, ¶ 65. The trial court merely misinterpreted what was presented to it by the appraisal and the testimony of the appraiser.
6. In this case, one cannot rely upon market value alone to determine damages.
GILBERTSON adds nothing to the discussion as to whether the BARRETTS are limited to the diminishment of market value alone as their damages. Again, the BARRETTS assert that a market value approach alone to damages would not produce a fair and just result. It would render GILBERTSON's warranty meaningless and not fully compensate the BARRETTS, the injured parties.
7. The Barretts should have been awarded attorney fees relating to Gilbertson's counterclaim for slander and emotional distress.
In North Dakota, GILBERTSON did not have a separate cause of action for emotional distress arising out of an allegedly slanderous statement. Rykowski v. Dickinson Public School District #1, 508 N.W.2d 348 (N.D. 1993). Since GILBERTSON's counterclaim for emotional distress stemmed from an allegedly slanderous statement, the claim fell when GILBERTSON failed to comply with the Uniform Correction or Clarification of Defamation Act, found in Chapter 32-43 of the North Dakota Century Code. No reasonable person can believe a court can render judgment based upon a slanderous statement when that person fails to comply with statutory duties to maintain that form of action. The trial court abused its discretion when it failed to award BARRETTS reasonable attorney fees incurred in their defense of GILBERTSON's frivolous counterclaim.
The judgment below should be reversed with instructions to award the BARRETTS their damages together with reasonable attorney fees relating to their defense of a frivolously asserted counterclaim.
Respectfully submitted this 28th day of November, 2012.
|Garaas Law Firm|
|Attorneys for Plaintiffs-Appellants|
|Office and Post Office Address:|
|DeMores Office Park|
|1314 23rd Street South|
|Fargo, North Dakota 58103|
|Telephone: (701) 293-7211|
|North Dakota Bar ID # 03219|