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Perception v. Stephen Bell and Marilee Bell

June 29, 2011

PERCEPTION CONSTRUCTION MANAGEMENT, INC., PLAINTIFF-RESPONDENT,
v.
STEPHEN BELL AND MARILEE BELL, HUSBAND AND WIFE, DEFENDANTS-APPELLANTS, AND WELLS FARGO BANK, N.A., DEFENDANT.



Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Valley County, Hon. Michael R. McLaughlin, District Judge.

The opinion of the court was delivered by: Horton, Justice.

2011 Opinion No. 76

Stephen Kenyon, Clerk

The district court grant of summary judgment dismissing the Bells' counterclaims without prejudice is affirmed. The ruling of the district court excluding evidence of construction defects is reversed and the judgment is vacated. The case is remanded to the district court for proceedings consistent with this opinion.

Stephen and Marilee Bell (the Bells) hired contractor Perception Construction Management, Inc. (PCM) to build a log home. The parties' relationship deteriorated, and the Bells terminated the contract before construction was complete. The Bells refused to pay final invoices, and PCM filed suit to enforce a lien for the amounts claimed to be due. The Bells filed several counterclaims, including construction defect and breach of contract.

PCM moved for an expedited trial on the claim of lien, and the district court bifurcated the claims. At the expedited trial, the Bells attempted to present testimony from an architect and a plumber, each of whom was prepared to testify as to PCM's defective workmanship. The district court excluded the testimony, ruling it admissible only as to the Bells' bifurcated construction defect and breach of contract counterclaims. The district court found that PCM had prevailed on its claim of lien and awarded PCM damages in the amount of $42,351.95 plus prejudgment interest. The district court found PCM to be the prevailing party and determined that it was entitled to an award of attorney fees and costs. The district court later granted PCM's motion for summary judgment, dismissing the Bells' counterclaims for construction defects and breach of contract because the Bells did not provide timely notice under the Notice and Opportunity to Repair Act (NORA), I.C. §§ 6-2501 to -2504. The court eventually awarded PCM $152,998.04 for the sums due under the claim of lien, accrued interest, attorney fees and costs.

The Bells appeal, asserting that the district court erred in its exclusion of evidence relating to their defenses against the lien claim, in its determination of the amount due under the claim of lien, in the award of attorney fees and costs and in its grant of summary judgment on the basis of NORA. We vacate the judgment and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

On September 25, 2007, PCM and the Bells executed a "cost plus" contract for the construction of a log home. Under the contract, the Bells were required to pay monthly invoices in full within ten days of PCM's submission of an invoice. The contract also required the Bells to provide, within five days of invoice submission, detailed written notice of any objection to charges contained therein. The Bells were responsible for costs of construction as well as a contractor's fee equal to ten percent of those costs. The Bells agreed to pay burdened rates of pay for PCM employees, which covered overhead costs associated with employment relating to their construction project. These burdened wages were calculated by adding to the actual wage a standard payroll burden and an additional burden that together amounted to approximately fifty percent of the actual wage. PCM contends that pre-contract estimates prepared by the parties to obtain financing set the rate of compensation for supervisory services at $60.00 per hour. Jeff Neubert (Neubert) performed both supervisory and construction services on behalf of PCM. Regardless of his role, Neubert's actual wage was $25.00 per hour. When Neubert acted as supervisor, the Bells were charged $60.00 per hour, but they were charged $37.39 per hour when he worked in non-supervisory roles.

Construction began, and the Bells paid their initial invoices. However, they paid only a portion of the fifth invoice, and did not pay the sixth or seventh invoice. The Bells disputed some, but not all, of the charges they refused to pay. They did not initially dispute Neubert's $60.00 per hour supervisory wage. Before PCM issued the seventh invoice, the Bells terminated the contract and hired another contractor. On March 19, 2008, PCM recorded a claim of lien for $113,312.94 against the Bells' property. PCM ceased its work at the Bells' property on March 22, 2008. PCM filed suit to foreclose its lien, and the district court granted PCM's motion for an expedited hearing pursuant to Idaho Code § 45-522(2).

The Bells filed an answer and counterclaim which included claims for breach of contract and breach of the implied covenant of good faith and fair dealing. The district court bifurcated the proceedings to conduct an expedited hearing on PCM's claim of lien. During the expedited hearing, the Bells attempted to defend on the basis that PCM did not perform the construction contract in a workmanlike manner, and therefore the claim of lien was unenforceable. To that end, they attempted to present the testimony of an architect and a plumber. PCM objected that the evidence was "just a wolf disguised in sheep's clothing. It's nothing more than a counterclaim. And it's intended to be identified as an offset. . . ." The district court ruled that "this is an equitable proceeding. It's a proceeding . . . limited to the issue of the amount found due and owing on a lien." The court thus limited the architect's testimony to whether the amount PCM claimed in its lien was reasonable. Based on the court's ruling, PCM did not present testimony from the plumber. The district court held that the Bells had acknowledged the $60.00 per hour rate for supervisory services and that because they failed to provide PCM with a timely written objection to those charges, the Bells had waived the right to object thereto. The district court found that PCM had prevailed on its claim of lien and awarded PCM damages in the amount of $42,351.95 plus prejudgment interest. The Bells moved for reconsideration and for a new trial, which motions the district court denied.

On June 8, 2009, the district court granted PCM's motion for summary judgment and dismissed the Bells' counterclaims without prejudice because the Bells failed to provide timely notice as required by NORA.

On appeal, the Bells contend that the district court's evidentiary ruling was an abuse of discretion. They dispute the court's lien valuation and contend that the order granting summary judgment was improper because it precluded them from presenting evidence that PCM failed to perform in a workmanlike manner. We reverse the district court's evidentiary ruling, vacate ...


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