Example of Court Annexed Arbitration Opinion: Three

    This matter came before me for hearing.  Plaintiff appeared by its attorney, along with its president.  Defendant appeared in person.  The parties presented testimony and exhibits.  There were few objections made and none sustained.  All exhibits offered were admitted.

    This is a simple breach of contract case about a modest amount of  remodeling of a single family residence.  Unfortunately, an also modest dispute about workmanship has grown into this lawsuit. Even though the parties have so far kept their dispute within reasonable bounds, more money and human capital will have been expended on resolving the dispute than would have been expended if settled much earlier.  But that is what courts are for.

    Setting aside how I resolve the case below, both parties have to take some blame for how the case got here.  The accidental over billing by over $6,000 - twice - probably removed a substantial amount of trust.  On the other hand, it was not right for defendant not to pay the amounts not in dispute, that is, the undisputed contract price less a reasonable cost to cure.  Then, if a reasonable cost to cure is withheld, I think it is better practice to cure - as a practical matter it eliminates questions of motive.

    Plaintiff is a licensed construction contractor and asbestos abatement contractor.  Defendant owns his own home.  Plaintiff obtained a bid from and after e-mail communications, entered into a written contract with plaintiff [Despite the fact that plaintiff alleged there was an oral contract, complaint paragraph 3, the fact is that there was a written contract with one oral modification.  As such, plaintiff may not recover on an oral contract, but may recover on the written contract with the oral modifications].  The contract was for the defendant to remove popcorn type ceiling texture, resurface / retexture the ceilings, remove an ‘arch’ and repair the area from which it was removed, to remove flooring materials.  In its letter of July 31, plaintiff agreed that the $440 item for paint was not to be charged, Exhibit 13, page 2, and plaintiff appears not to be seeking that in its complaint.

    There was one agreed oral modification of the scope of work which was not priced and was billed on a time and materials basis - removal of particle board, molding and disposal.

    The asbestos abatement work was performed by plaintiff with its own forces.  The carpentry and drywall work was performed by subcontractors.

    After plaintiff’s work was complete, defendant had the work painted by another subcontractor.

    By July 13, defendant agreed that at least $6,022 was owed, Exhibit 10.

    By July 24, defendant agreed (assuming particleboard removal price is $790 which I find it is) that at least $7,187 was owed, Exhibit 12.

    By his e-mail of August 9, Exhibit 15, page 2, defendant agreed that $6,812 was owed.

    All three agreements were subject to the question of how to deal with the question of allegations of defective workmanship.

    There are three fundamental areas of dispute:

    first, whether the additional framing and sheetrock in the archway area is included in the ‘archway ceiling patch’, and
    second, who is responsible for the certain cracks, untextured areas and texture splatter in the ceiling, and
    third, if plaintiff has any responsibility, the economic consequences.

Price for removal of floor

    There was also a question of whether the $1,225, or the $850, price applied for the removal of the ceramic floor and underlayment in the kitchen, dining and family room.  This turns on whether that flooring had asbestos in it, presumably because of the additional cost for the means of removal and disposal.  It did, plaintiff’s exhibit 6, though it does elude me how one can know which method of removal and disposal to use when the sample analysis report is not completed until June 5, 2006 but the removal and disposal occurred on May 30 and 31.

    In  Exhibit 11 plaintiff says that it simply assumed that there was asbestos, thus taking the risk that if it turned out to be wrong it would only receive the lesser sum.  In defendant’s letter Exhibit 12, he says the on site workers did not take asbestos removal provisions.  I have not been asked to determine whether or not the plaintiff did in fact take the proper asbestos removal provisions or dispose of asbestos containing material correctly; only what the price should be for the removal of material that did in fact contain asbestos.  I suggest that internal business practices be reviewed to ensure that best practices are followed.

    In plaintiff’s complaint, and in plaintiff’s Exhibit 13, plaintiff only asked for $850 for the removal of the floor.  On balance, I am going to accept those as a concession that only $850 should be paid for this line item.

Scope of work

    I have no doubt that all of the work that was done was within the scope of the work which was agreed, whether in writing or orally.  The question is whether certain the additional work of ‘additional framing and sheet rock for archway’ was to be performed at the original price.

    Nothing prohibits parties from making oral modifications to written contracts.  However, such modifications must be proved by clear and convincing evidence, Bennett v. Farmers Ins. Co., 332 Or. 138, 149, 26 P3d 785 (2001).  I do not find that there was such a modification, by any standard of proof.

    A building contractor may undertake to perform work uncertain in quantity for a fixed price.

    In this case, removal of the arch was part of the original scope of work, Exhibit 1.  Repair where the arch was removed was an agreed extra, Exhibit 3, which was priced at $152.  When plaintiff priced the repair, plaintiff probably assumed the archway ceiling patch would be four to six inches wide.  Plaintiff probably assumed there would be adequate framing / backing to attach the new sheetrock strip.  The assumption was erroneous.  I was not told, but the ceiling joists probably ran a different direction than anticipated.  Plaintiff properly identified the solution; cut back the sheet rock to uncover nearby joists, add framing, and provide a larger patch.  However, short of the doctrine of impossibility, this increased cost is not a defense to the requirement of performance at the original contract price, Savage v. Peter Kiewit Sons' Co., 249 Or. 147, 432 P2d 519, 437 P2d 487 (1968).  A party cannot prevail merely because he made a bad bargain, Gregory v. Weber, 51 Or App 547, 626 P2d 392 (1981).  Defendant did not have to agree to pay  this additional cost.  Plaintiff’s costs to complete this work of $480, while reasonable, are a cost that it must bear. They hardly rise to the level of an intolerable economic burden.

The implied warranty of workmanlike performance

    Every contract for services contains an implied warranty of workmanlike performance.  American Petrofina v. D & L Oil Supply, 283 Or 183, 194, 583 P2d 521 (1978). 

    On the other hand, the contractor is not liable for defects caused by latent conditions in the work site.

    This house was built in 1972.  Although there is conjecture, there is no evidence of any activity by the defendant which would have caused the cracks.  There was no evidence that the house was settling, and from my experience and observation owning, buying and selling old houses and as a lawyer working with the real estate and construction industries, while sheet rock cracks may be caused by drying, that happens in the first year or two after construction, and while they may occur from settling, that happens in the first five years after construction.  I conclude that the cracking shown in the defendant’s photos is caused by normal stresses in the house, or phrased another way, defendant has not proved by a preponderance of the evidence that the underlying stresses in the house are plaintiff’s fault.

    That however does not mean that the plaintiff bears no responsibility for the cracks.
    The plaintiff’s testimony is that the way to correct the cracks is to fill them with latex caulk and localized retexture and painting.   Alternatively, another way is to add more tape and mud and retexture and paint.

    On the other hand, defendant submits that the entire ceiling should be retextured and repainted, at a cost of $3,270 for the texturing and $500 for painting.  This work has not been done.  While the law does not require an owner to have repaired damage before a contractor will be liable for the cost of repair of defective work, as a lawyer in this industry representing both homeowners and contractors, I believe the better practice for owners is to repair if they have the funds.  This reduces the risk that an award will be made based on the cost of repairs and then the repairs will not be made.  In this case, defendant had the funds because he had not paid plaintiff.

    As I interpret the evidence, the best way to repair the cracks is to make local repairs, whether that requires removing some mud or simply putting more on.

    This begs the question, however, of: What was the right way to do the work in the first place?, because plaintiff had a duty to do it right in the first place.  The testimony was that when a popcorn finish is applied, typically the work at the sheetrock seams is less finished, because it will be hidden by the popcorn.  Therefore, the seams need to be improved before the brocade finish is applied.  Mud is applied along the seams before the new texture.  It seems to me that the same tape which is contemplated to be applied now to reduce the likelihood of the cracks reappearing could have been applied, at an extremely modest cost, by plaintiff’s drywall subcontractor.  If this had been done right the first time, the problems now being encountered would not be occurring.  In other words, I find that the sheet rock repairs were not performed in a workmanlike manner.

    I also find that the repairs on the walls where the arch was removed were not performed in a workmanlike manner.  Those sheet rock patches should have been finished so that the final result was smooth / flat to the neighboring walls.  While perfection is not required, I have seen enough, and done enough, sheet rock patches, to know that a better job could have been done without a great deal of effort.

    What are the damages?  I don’t think that the entire ceiling needs to be repaired.  Some of the shortest cracks probably can be dealt with using the method proposed by plaintiff.  Understanding that I did not award the amount claimed by plaintiff for the repair at the archway, the plaintiff billed $1,320, $152 and $480 - a total of $1,952 - for all the sheetrock work in the entire house, including that framing.  Taping would not have cost more than another $100 in labor and materials. 

    Whether I compensate plaintiff and then deduct for the cost of the repairs, or simply reduce the amount payable to the plaintiff to the value of the work that was done right, the result is the same.

    I award plaintiff a net $1,200 offset against the contract price.  Had the drywall subcontractor been a party to this case, I tentatively would have assigned this expense to the drywall subcontractor, although I acknowledge that I did not hear the drywall subcontractor’s explanation.  However, because these parties have a contract with each other, as between them, plaintiff is responsible for the defective work of its subcontractor.

    I have absorbed issues relating to the texturing under the light cover, near the doorbell, and splatter issues into the above offset.

    With regard to the painting, plaintiff did not perform the painting in the first place, but could reasonably have expected that defendant would paint, and reasonably could have expected that if its work was not performed in a workmanlike  manner, the plaintiff would have to repaint.  Like the other repair work, this work has not been done.  I don’t know that it will be.  Also, if it is done, it is not of such a specialized nature that defendant could not do it himself, buying the same paint that was used before, brushes, drop cloths and rollers.  I award $250 on the counterclaim in respect of the need to repaint.

    Plaintiff is the prevailing party and is entitled to costs, being the filing fee, expense of service, and statutory prevailing party fee.  I require each party to bear their half of the arbitrator fee.  If that is not considered a proper approach, then I would reduce plaintiff’s award by $300.  Even though plaintiff wins, plaintiff was not entirely in the right.

    Therefore, my award is as follows:

on plaintiff’s complaint: 

a)    asbestos removal etc., $3,140
b)    application of texture, $1,320
c)    demolition, $120
d)    remove ceramic floor, $1225
e)    patch ceiling, $152
f)    carpet removal, $440
g)    remove particle board and base, $790

Total: $7,187

on defendant’s counterclaims:

h)    drywall repair, $1,200
i)    painting, $250

Total: $1,450

Subtotal award to plaintiff: $5,737

    I am not awarding pre-judgment interest.  Interest will run at 9% per annum from entry of judgment by the court.

    Plaintiff has submitted a cost bill at my request.  Technically defendant has fourteen days to object, ORCP 68C(4)(b).  All the items are appropriate.   Under ORCP 68B “unless the court otherwise directs” I have the authority not to award particular items of costs.  Per the discussion above, I award all the costs requested except the arbitrators fee. Thus the  cost award is $331.  Each party bears their own portion of the arbitrators fee.

    Total award to plaintiff is $6,068.  I have submitted my award to the court, with copies to you.  This opinion does not go to the court.  I assume that you will receive notice from the court of the filing of the award and the time you have to object, etc.

    Please find attached my invoice showing time and expenses.