Capital Coatings & Co. v. Browning Construction Co.

• Court: Court of Appeals of South Carolina
• Decided: January 8, 2003
• Docket: 2003-UP-021
• Status: Unpublished

Opinion

THE STATE OF SOUTH CAROLINA

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Capital Coatings & Co., Inc.,        Respondent/Appellant,

v.

Browning Construction Company & United States Fidelity & Guaranty Company,        Appellants/Respondents.

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Appeal From Horry County
J. Stanton Cross, Jr., Circuit Court Judge

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Unpublished Opinion No. 2003-UP-021
Submitted October 8, 2002 – Filed January 8, 2003

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AFFIRMED

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Brian P. Robinson, of Columbia, for respondent/appellant.

Robert L. Barnett, of Myrtle Beach, for appellants/respondents.

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PER CURIAM:  Capital Coatings & Company, Inc., (“Subcontractor”) sued Browning Construction Company (“Contractor”) alleging causes of action for breach of contract and quantum meruit.  Subcontractor also sued Contractor’s surety, United States Fidelity and Guaranty Company (“USF&G”) seeking attorney’s fees.  Contractor counterclaimed seeking damages for breach of contract and attorney’s fees.  The master-in-equity ruled in favor of Subcontractor finding Contractor breached the contract.  Both the Contractor and Subcontractor appeal.  We affirm.

FACTS/PROCEDURAL BACKGROUND

Contractor was the prime contractor hired to build North Myrtle Beach Middle School (“the School”).  On August 23, 1996, Contractor hired Subcontractor to paint the walls.  Preparation of the walls for painting, called “point-up work,” [1] was to be performed by another entity under Contractor’s supervision. 

On March 24, 1997, Subcontractor temporarily withdrew from the project claiming Contractor failed to prepare the walls properly for painting.  In response, Contractor terminated Subcontractor. 

Subcontractor notified USF&G of its claim for payment.  USF&G conducted an investigation by discussing the claim with representatives of Contractor. Contractor informed USF&G that Contractor did not pay Subcontractor because Subcontractor did not complete the project.  USF&G did not interview the project architect or any employee of Subcontractor.  Based on this information, USF&G denied Subcontractor’s claim.

Subsequently, Subcontractor sued Contractor seeking damages for breach of contract and recovery in quantum meruit.  Subcontractor also sued USF&G seeking attorney’s fees, claiming USF&G did not conduct a reasonable investigation pursuant to South Carolina Code Annotated section 27-1-15 (Supp. 2001).  Contractor counterclaimed, seeking damages for breach of contract and attorney’s fees. 

The case was referred to the master, who concluded: Contractor breached the contract by failing to adequately prepare the walls for painting; Subcontractor failed to mitigate its damages as to unused paint and was thus not entitled to the damages therefrom; and Subcontractor was not entitled to attorney’s fees from Contractor’s surety for failing to perform a reasonable investigation.

LAW/ ANALYSIS

A.          Contractor’s Issues on Appeal

1.                Subcontract

Contractor argues the master abused his discretion in ruling a written subcontract submitted to Subcontractor by Contractor did not form a part of the agreement between the parties.  We disagree.

A contract action is an action at law. Hofer v. St. Clair, 298 S.C. 503, 508, 381 S.E.2d 736, 739 (1989). In an action at law, tried without a jury, a judge’s findings of fact will not be disturbed unless found to be without any evidence which reasonably supports them.  Republic Nat’l Bank v. DLP Indus., Inc., 314 S.C. 108, 110, 441 S.E.2d 828, 829 (1994).  The existence of a contract is a question of fact.  Columbia Hyundai, Inc., v. Carll Hyundai, Inc., 326 S.C. 78, 82, 484 S.E.2d 468, 470  (1997); Small v. Spring Indus. Inc., 292 S.C. 481, 483, 357 S.E.2d 452, 454 (1987) (stating under the common law, the issue of existence of a contract is an issue of fact when its existence is questioned and the evidence is either conflicting or admits of more than one inference). 

On August 23, 1996, Contractor and Subcontractor signed an Acceptance of Estimate Bid (“the Agreement”).  Pursuant to the Agreement, Contractor was responsible for preparing the walls of the School for paint, and Subcontractor agreed to paint and damp-proof the walls.  Additionally, the Agreement specified walls should not be painted until being adequately prepared.  Moreover, Dexter A. Weaver, an officer, director, and shareholder of Subcontractor, testified the Agreement was the contract between the parties. 

Approximately five months after Subcontractor began working, Contractor submitted a proposed subcontract (“subcontract”) to Subcontractor.  Neither Subcontractor nor Contractor signed the Subcontract.

Donald Browning, the president of Contractor, testified the subcontract was not signed because it was subject to negotiation.  Furthermore, Browning wrote a letter to Subcontractor stating the payment arrangements in the Agreement controlled because the subcontract was never signed.

“It is well settled in South Carolina that in order for there to be a binding contract between parties, there must be a mutual manifestation of assent to the terms.”  Edens v. Laurel Hill, Inc., 271 S.C. 360, 364, 247 S.E.2d 434, 436 (1978); Hughes v. Edwards, 265 S.C. 529, 535, 220 S.E.2d 231, 234 (1975) (“For a contract to arise there must be an agreement between two or more parties.”). 

The master ruled the subcontract forwarded by Contractor to Subcontractor five months after the Acceptance of Bid was signed did not constitute the agreement between the parties because the document was unsigned and there was no meeting of the minds as to its terms.  We conclude the aforementioned evidence is sufficient to support that determination. [2]   Therefore, the Master did not abuse his discretion.

II.              Breach of Contract

Contractor argues the master erred in finding: Contractor failed to provide a sufficient area for Subcontractor to work; Contractor failed to properly coordinate the work of its subcontractors; Subcontractor was at all times ready, willing, and able to perform the painting; and Subcontractor did timely perform.  We disagree.

A contract action is an action at law. Hofer, 298 S.C. at 508, 381 S.E.2d at 739. In an action at law, tried without a jury, a judge’s findings of fact will not be disturbed unless found to be without any evidence which reasonably supports them.  Republic, 314 S.C. at 110, 441 S.E.2d at 829.

Contractor and Subcontractor signed the Agreement on August 23, 1996.  The Agreement provided Contractor was responsible for preparing the walls of the School for paint, and Subcontractor agreed to paint and damp-proof the walls.  Additionally, the Agreement specified walls should not be painted until they were adequately prepared. 

According to Subcontractor, in December 1996, Subcontractor painted one wing of the School at the direction of Contractor.  The project architect subsequently rejected the work because the walls had not been adequately prepared before painting.  Subcontractor subsequently repainted the walls, and Contractor refused to pay a portion of the costs. 

On January 27, 1997, Subcontractor notified Contractor it was temporarily withdrawing from the job claiming the Contractor was violating the Agreement by failing to timely prepare the walls for painting.

On January 31, 1997, the project architect wrote a letter to Contractor stating Contractor was not adequately supervising the preparation of the walls.  The architect noted that Subcontractor was being asked to paint walls that were not properly prepared.  At trial, the architect reaffirmed this in his testimony.

On February 3, 1997, Contractor and Subcontractor held a meeting with the architect in which the standard for preparing the walls was clearly established.  However, Subcontractor testified that Contractor continuously failed to prepare the walls in a timely manner.  According to Subcontractor’s testimony, there were days when painting crews were sent home because no walls were ready to be painted.  Additionally, there were days when painting crews were not sent because there was no work for them. 

Joan Hawthorne, a painter hired by Contractor after Subcontractor’s termination, reported numerous problems with the preparation work. She testified every room of the school needed additional preparation work.

Furthermore, the project architect testified Subcontractor had enough painters on the job to paint the areas that were ready to be painted.  Additionally, Contractor admitted that Subcontractor was not obligated to have a specific number of painters on the job when there was not work for the painters. 

On March 24, 1997, Subcontractor notified Contractor it was temporarily withdrawing from the project, claiming Contractor was not performing its duty to assure proper preparation of the walls in a timely manner.  Contractor then notified Subcontractor it was terminated.

Based upon the above evidence, the master found the Contractor failed to provide a sufficient area for Subcontractor to work and failed to properly coordinate the work of its subcontractors.  The master concluded Subcontractor was at all times ready, willing, and able to perform the painting, and Subcontractor timely painted the walls.  This evidence is sufficient to support these conclusions, and we hold the Master did not abuse his discretion in so ruling.

III.           Admissibility of Evidence

Contractor argues the master erred in excluding photographic evidence of Subcontractor’s painting work at another, unrelated location as proof of Subcontractor’s standards for wall preparation.  We disagree.

“A trial court’s decision to exclude evidence will not be disturbed on appeal absent an abuse of discretion amounting to an error of law.”  Elledge v. Richland/Lexington Sch. Dist. Five, 341 S.C. 473, 477, 534 S.E.2d 289, 290 (Ct. App. 2000).  “To warrant reversal on appeal, a party must show both the error of the court’s ruling and resulting prejudice.”  Id.  “Determination of the relevancy of a photograph as evidence is a matter largely within the trial court’s discretion.”  Ward v. Epting, 290 S.C. 547, 556, 351 S.E.2d 867, 873 (Ct. App. 1986) (citing Elliott v. Black River Elec. Coop., 233 S.C. 233, 259, 104 S.E.2d 357, 370 (1958)).

Evidence of similar accidents, transactions, or happenings is admissible where there is some special relationship between them tending to prove or disprove some fact in dispute. JKT Co. v. Hardwick, 274 S.C. 413, 416, 265 S.E.2d 510, 512 (1980). 

Prior to this project and litigation, Subcontractor painted a Wal-Mart.  Contractor attempted to introduce photographs of the Wal-Mart to prove the standards for wall preparation acceptable to Subcontractor. However, the Contractor failed to present evidence establishing a relationship between the Wal-Mart job and the School job.  Furthermore, there was no foundation from which a reasonable comparison could be made between the two jobs.  The Contractor presented no evidence demonstrating the contracts, specifications, or standards for the work at the Wal-Mart were similar to the School.  Based on the lack of foundation, the master excluded the photographs, ruling Contractor failed to prove the photographs were relevant.  Given the lack of foundation for this evidence, we find no abuse of discretion in this ruling.

IV.           Liability of Subcontractor and its Predecessor

Lastly, Contractor argues the Master erred in failing to find the partners in Subcontractor’s predecessor individually liable.  We need not reach this issue because the Master did not impose liability on Subcontractor. 

B.          Subcontractor’s Issues on Appeal

I.                  Attorney’s Fees

Subcontractor argues the master erred by denying its claim for attorney’s fees because USF&G failed to conduct a reasonable investigation as required by South Carolina Code Annotated section 27-1-15.  We disagree. 

A bond action is an action at law.   Anderson v. Aetna Cas. & Surety Co., 175 S.C. 254, __, 178 S.E.2d 819, 826 (1934). In an action at law, tried without a jury, a judge’s findings of fact will not be disturbed unless found to be without evidence.  Republic, 314 S.C. at 110, 441 S.E.2d at 829.

Section 27-1-15 states,

Whenever a contractor . . . has expended labor, services, or materials under a contract for the improvement of real property . . . and just demand has been made . . . under the terms of any regulation, undertaking, or statute, it is the duty of the person upon whom the claim is made to make a reasonable and fair investigation of the merits of the claim . . . . If the person fails to make a fair investigation . . . he is liable for reasonable attorney’s fees and interest . . . .

(emphasis added).

A party seeking attorney’s fees under section 27-1-15 has the burden of presenting prima facie evidence demonstrating the surety failed to make a fair and reasonable investigation.  Moore Electric Supply Company, Inc. v. Ward, 316 S.C. 367, 374, 450 S.E.2d 96, 100 (Ct. App. 1994).

Evidence demonstrating a principal presented a surety with a viable defense for non-payment is sufficient to support a finding of a fair and reasonable investigation pursuant to section 27-1-15.  Id. at 375, 450 S.E.2d at 100.

USF&G was Contractor’s surety for the construction project.  Subcontractor notified USF&G of its claim for payment.  USF&G conducted an investigation by discussing the claim with representatives of Contractor. Contractor informed USF&G that Contractor did not pay Subcontractor because Subcontractor did not complete the project.  USF&G did not interview the project architect or any employee of Subcontractor.  Based on this information, USF&G denied Subcontractor’s claim.

Subcontractor argues it established a prima facie case pursuant to Moore, demonstrating USF&G failed to conduct a fair and reasonable investigation because it failed to interview employees of Subcontractor or the project architect.  Therefore, Subcontractor argues the burden shifted to USF&G, and USF&G failed to demonstrate it conducted a fair and reasonable investigation because it failed to present any evidence of an investigation. 

Assuming Subcontractor established a prima facie case, this argument is still without merit.  Subcontractor presented USF&G with a claim for payment.  USF&G interviewed Contractor, which remained in charge of the project.  Contractor claimed Subcontractor had been terminated based upon its failure to perform the subcontract.  Clearly, even under Subcontractor’s view of the facts, the painting had not been completed.  Furthermore, the degree of wall preparation necessary to meet the contract specifications, as well as the timeliness of the work and adequacy of Subcontractor’s painting crew, was factually disputed throughout the trial.

Based upon this evidence, the master determined Contractor had a viable defense to Subcontractor’s claim and this evidence formed the basis of USF&G’s refusal to pay Subcontractor’s claim.  Even though the master ultimately decided these issues adversely to Contractor, the master concluded USF&G’s decision to deny the claim after an investigation limited to interviews with its insured was not unreasonable under these circumstances.  Given our limited scope of review, we conclude the evidence is sufficient to support the master’s conclusion.

II.              Cost of Paint Supplies

Subcontractor next argues the master erred in ruling it was not entitled to recover the cost of paint supplies purchased for the school project because it failed to mitigate its damages.  We disagree.

An injured party is required to do that which an ordinary, prudent person would do under similar circumstances to mitigate his damages.  See DuBose v. Bultman, 215 S.C. 468, 471, 56 S.E.2d 95, 96 (1949).

Following Subcontractor’s termination, Subcontractor still possessed surplus paint. The paint was made especially for the project.  Subcontractor did not attempt to sell the paint, nor did it offer to sell it to Contractor to complete the project.  Instead, the Subcontractor paid $800.00 to have a service dispose of the surplus paint without attempting to sell it. 

We conclude the Subcontractor’s failure to market the paint to third parties or to Contractor is sufficient evidence to support the Master’s conclusion that Subcontractor failed to mitigate its damages.  Therefore, we find no abuse of discretion.

CONCLUSION

Based on the foregoing reasons, the decision of the master is

AFFIRMED.

Hearn, C.J., Goolsby, and Howard, JJ., concur.

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[1] “Point-up work” is the preparation of the walls to receive paint.  It includes filling the holes, removing excess mortar, grinding the joints, and pointing up chipped and broken corners.

[2] Contractor also argues the master erred when it:  (1) found Subcontractor was justified in abandoning its work because the subcontract did not allow for abandonment; 2) found Contractor breached the agreement by terminating Subcontractor; (3) failed to award attorney’s fees to Contractor because the subcontract entitled Subcontractor to such fees; and (4) found Contractor was justified in abandoning the job.  However, these arguments assume the subcontract was the agreement between the parties.  Because we hold sufficient evidence exists to find no subcontract existed between Subcontractor and Contractor, we need not address these issues.