Scharfenberg v. Kortes, [1956] SCR 273

Supreme Court of Canada

Scharfenberg v. Kortes, [1956] S.C.R. 273

Date: 1956-01-24

Hugo O. Scharfenberg (Plaintiff) Appellant;

and

Edith Kortes (Defendant) Respondent.

1955: November 1, 2; 1956: January 24.

Present: Rand, Kellock, Estey, Locke and Abbott JJ. Estey J. died before the delivery of the judgment.

ON APPEAL FROM THE SUPREME COURT OF ALBERTA; APPELLATE DIVISION

Contract—Agreement to build house—Interpretation—Evidence—Rectification—Substantial performance.

The appellant, who had some twenty years experience as a building contractor, signed a contract to build a house for the respondent. During the negotiations, prior to the signing, he had been supplied with a set of plans, which were later attached to the contract, supplying the data for finishing both the main floor and the basement of a one-storey building. The appellant testified that he quoted a price of $30,000 for the completion of the ground floor and basement and a price of $18,000 for the completion of the ground floor but only structural parts of the basement, and that the latter figure was agreed upon. The respondent denied that any other figure than $18,000 was ever mentioned.

The appellant claimed for a balance owing upon the contract and for a lien upon the land under the Mechanic's Lien Act. A claim for rectification of the contract was later made by the appellant. The defence was that the appellant had not completed the building as required by the agreement since, as admitted, the basement had not been finished. The trial judge rejected the claim for rectification, found that the contract had not been substantially performed and dismissed the action. This judgment was affirmed by the Court of Appeal.

Held (Locke J. dissenting) : The appeal should be allowed and a new . trial directed.

Per Rand, Kellock and Abbott JJ.: The evidence, which the appellant attempted to make at the trial to support the case that it would have been absurd for an experienced contractor to have agreed to "finish" the entire building at the price of $18,000, that ambiguities and uncertainties in the plan demonstrated that the actual contract was for the finish of the ground floor and rough structural completion of the basement only, and which would also have shown the amount of money required to finish the basement, should not have been rejected by the trial judge. That rejection was not material nor warranted. The evidence might have had a decisive influence on the mind of the trial judge in coming to an opinion on the veracity of the appellant, particularly in view of the fact that the reasons for judgment give no indication that the anomalies and inconsistencies in the plan and the evidence were given serious consideration. There is no doubt that its rejection operated to the serious detriment of the case for the, appellant.

Per Locke J. (dissenting): As the evidence of the respondent and the witness Hoffman had been accepted by the trial judge and the Appellate Division, the claim for rectification failed.

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The proposed evidence which, it was claimed, had been rejected was not properly tendered (Perm v. Bibby (1866) L.R. 2 Ch. 137). As the appellant had deliberately refrained from arguing the question as to the rejection of the evidence raised by his notice of appeal in the Appellate Division and the matter had accordingly not been considered in that Court, the point should be treated as abandoned or waived (Hamelin v. Bannerman (1901) 31 S.C.R. 534; Attorney General of Canada v. Ritchie Contracting Co. (1915) 52 S.C.R. at 92).

APPEAL from the judgment of the Supreme Court of Alberta, Appellate Division, affirming the dismissal of the action by the trial judge.

M. J. A. Lambert for the appellant.

J. W. K. Shortreed for the respondent.

The judgment of Rand, Kellock and Abbott JJ. was delivered by:—

Rand J.:—This appeal concerns a contract by which the appellant as contractor agreed to build a house for the respondent, the owner. Following preliminary discussions plans were prepared for the owner by a third person and the contractor was called in for a general examination of them with the owner and her stepson Hoffman who lived with her. Certain changes of a minor nature were made after which the contractor was furnished with a set on which to give a price. On their face they supply data for finishing both the main floor and the basement of a one-storey dwelling. The basement layout included bedrooms, bathroom, den, rumpus room, etc.

Later, in submitting a price to the owner, the contractor says he mentioned two figures : one for the final completion of both ground floor and basement and the other for the completion of the ground floor but only structural parts— a rough finish—of the basement. The former is said to have been $30,000 and the latter $18,000. In the result it was agreed that the latter amount should be the contract price, and the dispute is whether the house was to be completed in its entirety or to the modified extent mentioned.

A written contract in simple form was drawn up which, generally, provided for the construction according to the plans, that the work should be prosecuted with diligence,

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and that payment would be made in three instalments of $4,000 each and a final instalment of $6,000 "on completion of the building". Clause 3 reads:—

The contractor covenants that he will well and sufficiently execute and perform in a thorough and. workmanlike manner the erection and completion of the said building, and will purchase, use and obtain the best of materials and labour that may be available to him as may be necessary in connection with the construction of the said building, and in particular but without restricting the generality of the foregoing, the Contractor agrees to use Number One materials throughout and to install standard double plumbing. "and to furnish & install the items listed in Schedule 'A' hereto."

Schedule "A" was as follows:—

1. Forced air furnace worth approximately $1,000.

2. One-half inch oak floor throughout except in the kitchen and bathroom'.

3. Rubber tile on floor of bathroom and kitchen. Plastic tile 4½ feet in kitchen and bathroom walls.

4. Colored toilet, bath and wash basin in bathroom and kitchen.

5. Thermopane windows in living room, dining room, front bedroom.

6. Asphalt red shingles on roof.

7. Fireplace in living room.

8. Mercury light switches throughout.

9. Single garage.

The contract was signed on May 15, 1953 and the work was begun about that time. On November 23 the contractor presented a bill for the final instalment plus certain extras which are not disputed; on some excuse, he was told to return in a few days. Three days later he was informed that the work had not been completed according to the contract although he contends that no mention then was made of the omission to finish the basement. A mechanics' lien was thereupon filed and in January, 1954, these proceedings were brought.

In the course of the trial the plaintiff offered the evidence of an architect to support the case that it would have been utterly absurd for an experienced contractor such as the appellant to have agreed to "finish" in the manner indicated the entire dwelling at the price of $18,000 and that ambiguities and uncertainties in the plan, including items in Schedule "A", demonstrated the actual bargain between the parties to have been not for the finish of the two floors but the finish of the ground floor and rough structural completion of the basement. That evidence would have led not only to the comparison of any reasonable range of price for the one degree of completion as contrasted with the other,

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but also the amount of money which it would have taken to finish the basement. On the objection of counsel for the respondent the evidence was rejected, and the question which meets us at the outset is whether that rejection was, in the circumstances, material and warranted.

In considering that question, there are certain indisputable and significant facts which should be mentioned. It will be seen that section 3 provides that the contractor will install "standard double plumbing". That may or may not be intended to include fixtures but light is thrown on this by Schedule "A". In item 2 we find that a one-half inch oak floor is to be laid throughout except in the kitchen and bathroom. Item 3 speaks of the floor of "bathroom and kitchen" and "kitchen and bathroom walls". Item 4 specifies the type of "bath and wash basin in bathroom and kitchen". The bathroom fixtures were chosen by the respondent and only one set selected. In these circumstances it is obviously striking that the singular "bathroom" is used through the Schedule and that only one set of fixtures was selected. Its effect seems, in fact, to define "standard double plumbing" as meaning what the contractor contends: the installation of the pipe system exclusive of fixtures.

Then, on the plan a four-inch concrete floor in the basement is specified. That, on its face, seems to me to exclude oak flooring which is claimed under the word in item 2 "throughout"; and no light is thrown on the method or practicality of placing oak over a concrete basement floor. In this aspect the word "throughout" in Schedule "A" is confined to the ground floor, as its ordinary signification in the context seems to indicate.

A further item is of importance. The third instalment of $4,000 was to be paid "when the building has been plastered". A request for this payment was made shortly before or after the 1st of August but was refused on the ground that some of the work done was defective. This refusal was followed by a letter dated August 5 from solicitors of the contractor to the respondent which pointed out that by the terms of the contract she was "to pay $4,000 when the building has been plastered"; that Mr. Scharfenberg had informed them that "the plastering was completed several weeks ago"; and that "We are writing to remind you

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of the terms of the contract into which you entered …"; and it asked; for immediate payment. Evidently the respondent then had some communication with the solicitors and on August 11 a further letter was written to the effect that the contractor was unwilling to consent to any variation of those terms. It was again pointed out that according to the agreement the $4,000 was to be paid "when the building had been plastered" and it reiterated the completion of the plastering. The stepson Hoffman in his evidence said that sometime in July or "even in June" he had spoken to; the contractor about the plastering and was told, "don't you worry, I am. building the house". In spite of all of this!, the payment was made shortly after the receipt of the letter of August 11.

Another such circumstance is that the wires running through the concrete walls of the basement which held the construction forms together were only in part clipped off and the remaining four or five inches left as they were. The significance of this is that according to the contractor cutting was discontinued when Hoffman indicated that he would like to have them left to be used later in finishing the walls of the basement. If that request was made, it would tell strongly against the contention that the contractor was to plaster the basement walls. Mr. Lambert urged that it would be quite unreasonable to assume that when the contractor had finished plastering the walls on the ground floor he would discontinue that work, complete the ground floor 'and then weeks later return to finish plastering in the basement. At least this item of plastering shows beyond question that from the early part of July the understanding of the contractor in this respect was clearly indicated to the owner.

There were also on the plans two descriptions that remain yet to be explained if the contract is as urged by the respondent. One corner of the basement is on the plan described as "future rumpus room". To give the adjective "future" any meaning at all it is that the finishing was not intended at that time. This is supported by the absence of any mention of the room on Schedule "A". Then an area is marked "proposed bath". How that description can be reconciled with complete finishing, including fixtures, remains to be shown.

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The appellant, although, he has been a contractor in Edmonton for about thirty years, has not, as his evidence indicates, such an acquaintance with the English language as gives him facility in its use; on the other hand, both the respondent and her stepson appear to be quite at home with it. Since the plan and Schedule "A" furnished the data not only for a final completion of both floors but also for that of the ground floor and the partial construction of the basement, it does not require much imagination to appreciate how the contractor could have fitted his understanding of what had been agreed to be done into the inclusion of the plan in the contract. If evidence had been admitted to show the extreme unlikelihood of a bargain to build for $18,000 a finished house such as claimed, then obviously it might have had a decisive influence on the mind of the trial judge in coming to an opinion on the veracity of the contractor, particularly in view of the fact that the reasons give no indication that the anomalies and inconsistencies which I have, in part, mentioned, were given serious consideration. The evidence tendered should, in my opinion, have been admitted and that its rejection might have operated to the serious detriment of the case for the contractor I have no doubt.

I would, therefore, allow the appeal and direct a new trial. The appellant will be entitled to his disbursements of the appeal in this Court but otherwise there will be no costs in this Court or in the Court of Appeal. The costs of the first trial will be in the discretion of the judge presiding at the rehearing

Locke J. (dissenting):—The appellant, by the Statement of Claim, alleged that the defendant was indebted to him for a balance owing upon a contract dated May 15, 1953, for the erection of a house in the City of Edmonton, and claimed a lien upon the land for such amount under the provisions of the Mechanics' Lien Act of Alberta.

By the Statement of Defence the respondent pleaded that the plaintiff had not completed the building, as required by the agreement, and, in addition, claimed that there had been various defects in certain of the work which had been done. Particulars of the work called for by the contract which had not been done and of the alleged defective work were furnished by the respondent on demand. The

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unfinished work related almost entirely to the; basement of the dwelling. Upon this defence the appellant joined issue. :

At the opening of the trial before Macdonald J. the appellant obtained leave to amend the Statement of Claim by the addition of the following:—

3. (a) The Plaintiff says that the said contract to which were attached a certain set of plans inadvertently and by mistake incorporated certain plans for a finished basement whereas the Plaintiff says that the parties hereto had agreed verbally prior to the execution of the said contract that the basement would not be finished as shown in the said plans and would contain the bearing partitions only and roughed in double Plumbing and the Plaintiff asks that the said contract be rectified to correct the said mutual mistake.

(a.a.) An Order of this Honourable Court directing that the certain contract dated the 15th day of May, 1953, be rectified to delete any plans for a finished basement as shown in the plans attached to the said contract. ,

The Statement of Defence contained a general denial of the allegations of fact in the Statement of Claim and upon these issues the action was tried.

The appellant has had twenty years' experience as a building contractor in the Edmonton District. Shortly prior to May 15, 1953, the parties entered into negotiations for the erection of a house upon the respondent's property. During most of the negotiations the respondent was represented by her adopted son, Hubert Hoffman. The learned trial judge accepted the evidence of the respondent and Hoffman, in preference to that of the appellant, and, accordingly, it is their version of what took place that is to be considered.

After some preliminary discussions, the appellant introduced Hoffman to a Mr. MacDonald, an employee of the City of Edmonton, who, the appellant had suggested, was a suitable person to prepare a plan. Upon the information given to him by Hoffman, MacDonald prepared plans for a one storey house, with a basement, the latter to contain two bedrooms, a den or study, a bathroom, what was called a rumpus room, a utilities room where the furnace was to be placed, and at least two other rooms which bore no designation. Upon receiving this, the parties and Hoffman met at the respondent's home, went over the plans in detail, and, upon one of the blue prints taken from them, marked in the appellant's presence certain changes which, it was agreed,

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were to be made. The appellant said that he would consider the plans and give an estimate of the price for which he would construct the building and, two days afterwards, Hoffman says that he came and quoted the figure of $18,000. . The appellant suggested that they have an agreement drawn by a solicitor he knew. The respondent and Hoffman were strangers in Edmonton and did not know any solicitor and agreed to this. The appellant went alone to Mr. J. H. Jamieson, a member of a well known Edmonton firm, taking with him a copy of the blue prints upon which the agreed changes were marked, and instructed him to draw the agreement.

According to Hoffman, it was on May 11 that he and the respondent went to Mr. Jamieson's office and read the draft agreement which had been prepared. The agreement, as drawn, required the appellant as contractor, inter alia, to:—

provide all materials and perform all the work mentioned in the specifications and shown in the drawings and details supplied by the owner.

the contract price to be the sum of $18,000 and the building to be completed by October 1, 1953. No specification had been prepared. There were certain discussions between the parties in the solicitor's presence but the matter was not then concluded and the respondent and Hoffman left taking the draft agreement home to-be studied. Some two days after, Hoffman says he went with the respondent to Mr. Jamieson's office and there met again Scharfenberg and a discussion took place in regard to certain changes which the respondent wished to have made. Hoffman had made a list of these and the details were taken down by Mr. Jamieson after they had been agreed to by the appellant. The respondent returned alone to the solicitor's office on May 15. A change had been written into clause 3 of the draft in pen and ink, requiring the contractor to furnish and install the items listed on a page described as Schedule A, which was attached. These included a forced air furnace worth approximately $1,000 and eight other changes or additions to the plans. In the presence of Mr. Jamieson, the parties then signed the agreement upon which the action was brought and the blue prints, being the "drawings" referred to in it.

The appellant gave evidence that when he received the plans he gave an estimate of $30,000 to build the house, this

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including the entire work indicated. According to him, the respondent and Hoffman said this was too much. He then claims to have said to them that the property was in a one family zone and that he could not "build a suite" (referring to the basement rooms) and that it was then agreed that he would build only the first floor shown on the plans and "roughed in double plumbing" in the basement. The respondent and Hoffman both flatly denied this and said that no figure other than $18,000 was ever mentioned during the negotiations. According to both the respondent and Hoffman, their only discussion with the appellant during the negotiations was for a price for all of the work indicated by the plans, evidence which the learned trial judge, after hearing the witnesses, has accepted, a finding that has been affirmed on appeal. While, in view of this, it is unnecessary in my opinion, to consider further the evidence bearing upon these questions of fact, it may be noted that the appellant can read, and that he himself gave instructions to Mr. Jamieson for the drawing of the agreement, in the absence of the respondent, that Hoffman and the respondent were in the solicitor's office twice discussing the matter with the appellant in his presence, and the respondent alone, on the day that the agreement was signed, again in the presence of the appellant, and that Mr. Jamieson was not called as a witness by the appellant to support the contention that there had been some mistake. It may be added that the statement that there was any difficulty in getting a building permit from the City for the house as shown on the plans, if ever made, was shown to be untrue.

It may further be noted that both the respondent and Hoffman were in touch with the work as the building progressed and both questioned the appellant as to when he was going to do the work called for in the basement. Hoffman asked him as to this several times from June onward, but the only answer made to him was that he was not to worry as the appellant was building the house. Mrs. Kortes says that she also asked him specifically when he was going to finish the basement, to which he replied:—"I will see",

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or some such phrase, and she says that at no time did he tell her that he was not going to do the work called for by the plan. All this is completely inconsistent with the appellant's story. To this evidence there was no answer as the appellant did not give evidence in rebuttal.

That there was a material part of the work called for by the plans which had not been completed at the time the action was commenced and which the appellant declined to complete is admitted. Of the work required to be done in the basement, only what the appellant referred to as the bearing partitions were erected. In addition, there was what he referred to as "roughed in double plumbing." Asked as to what was meant by standard double plumbing, the term employed in the contract, he said that it included a bath, toilet and a basin. The walls of the various rooms, the closets in the bedrooms and the den or study and the doors were not built and none of the lathing and plastering, which the appellant admitted were indicated by the plans was done.

The learned trial judge found that the claim for the rectification of the agreement failed, that the appellant had not substantially performed the contract, and dismissed the action. Upon the later point, he applied, properly in my opinion, the principle referred to in the judgment of our brother Cartwright in Fairbanks Soap Company v. Sheppard 1. In a short judgment delivered by Johnson J.A. for the Appellate Division, agreeing, after consideration of the evidence, with the findings of the learned trial judge, the appeal was dismissed.

As to the claim for the rectification of the agreement, the matter does not appear to me to admit of argument when, as here, the evidence of the respondent and Hoffman as to what took place during the negotiations which led up to the signing of the agreement has been accepted. The learned trial judge, in considering the evidence necessary to support such a claim, referred to a passage from the

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judgment of Duff J., as he then was, in The Ship M. F. Whalen v. Point Anne Quarries Ltd. 2, where the following language, taken from the judgment of Sir W. M. James in MacKenzie v. Coulson 3, was adopted, reading:—

that it is always necessary for the plaintiff to show that there was an actual concluded contract antecedent to the instrument which is sought to be rectified … It is impossible for this court to rescind or alter a contract with reference to the terms of the negotiation which preceded it.

There was no such proof in the present matter, in the opinion of the learned trial judge and of the learned judges of the Appellate Division.

A point which arose during the argument of this appeal remains to be considered, touching what was then said to be a wrongful rejection of evidence tendered by the appellant. Upon this ground a new trial is sought. The appellant called an architect, James B. Bell, who had examined the plans and the building as constructed. Counsel for the plaintiff at the trial said that he wished to show by the witness the cost of the house as it stood and "that the house is a house without a completed basement." Later, he said that:—

my question now would be limited to that particular phase of the cost of this house and the cost of building the house according to the letter of those plans as corroboration of the position taken by the plaintiff.

Both of these statements appear to me to be lacking in clarity. When the learned trial judge said at once that he did not see that the suggested evidence would be relevant, counsel for the plaintiff made no attempt to explain the ground upon which he contended that it was and dropped the matter. Some explanation of the nature of the proposed evidence and of its suggested relevancy may perhaps be found in the Notice of Appeal given by the plaintiff in appealing to the Appellate Division. Of the seven grounds of appeal given, the fifth alone complains of the wrongful rejection of evidence and reads:—

That the learned trial judge erred in failing to accept evidence as to the interpretation of the contract.

This is not what was suggested to the learned trial judge at the time and he, accordingly, had not ruled as to whether it was admissible for this purpose. We are informed that

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no question as to the improper rejection of evidence was argued before the Appellate Division. There is no reference to any such question in the reasons for judgment delivered by Mr. Justice Johnson to that, apparently, the matter was not considered. Had the question been argued and the suggested evidence found to be admissible, no doubt the court would have considered the application of Rule 604 of the Supreme Court of Alberta which provides, inter alia, that a new trial shall not be granted on the ground of the improper rejection of evidence unless, in the opinion of the court, some substantial wrong or miscarriage has been thereby occasioned.

The argument advanced on behalf of the appellant before us, if I correctly appreciate it, is that the evidence proposed to be given was to show that the cost of completing the entire work shown on the plans was so much in excess of the contract price of $18,000 that no experienced contractor would have agreed to do so for that amount, and not, as suggested in the Notice of Appeal, as an aid to the interpretation of the blue prints. If this was what was intended at the time, it does not appear to have been made clear to the presiding judge. Had it been admitted on the suggested basis, I think it is most probable that the defendant would have called evidence on the point.

On the argument before us, counsel for the appellant was asked if it was his opinion that the evidence that was rejected would have had any effect upon the judgment of the trial judge as to the veracity of the witnesses. He candidly stated that, in his opinion, it would not. Had the question, which was clearly considered to be not worth arguing before the Appellate Division, been raised there and had such a question been asked of counsel, no doubt the same answer would have been given, with the result that the Appellate Division, I would expect, would have applied Rule 604.

In Penn v. Bibby 4, where the defendant had not been permitted at the trial to cross-examine some of the plaintiff's witnesses upon matters which, it was contended, were relevant, Chelmsford L.C. said in part:—

In order to ground this objection, however, the question proposed to be put should have been formally tendered to the Judge, and rejected by him as inadmissible. Now, it appears that his Honour was never distinotly

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requested to admit any specific question, but from some cursory remarks it is assumed that he would not have permitted a particular line of cross-examination.

This, however, is not sufficient. The Judge should have an opportunity of deciding upon some distinct question, and have refused to allow it, before there can be a motion made for a new trial on account of the rejection of evidence.

In my opinion, this principle is applicable in the present matter. I do not think that the nature of the proposed evidence was adequately explained to the learned trial judge to enable him to rule upon its admissibility. Nor was any distinct question put to the witness upon which he was asked to rule.

I am further of the opinion that where litigants deliberately refrain from arguing questions such as this before the Appellate Court of the Province, it should not be open to them to raise the question in this Court. The failure to argue the question as to the rejection of evidence raised by the fifth ground of the Notice of Appeal to the Appellate Division was obviously deliberate. Had the matter been argued, we would have had the advantage of having the opinion of the Appellate Division as to whether, in their judgment, the matter was one for the application of Rule 604. The course followed in this case has deprived us of that advantage. In Hamelin v. Bannerman 5, where an appellant sought to raise for the first time in this Court an objection that arbitration and award were conditions precedent to the right to bring an action for damages, Taschereau J.; whose judgment was concurred in by Sir Henry Strong C.J., Sedgwick and Davies JJ., said that, as the matter had not been mentioned in the factums filed in either court, the point must be considered as abandoned. The improper rejection of evidence is not one of the errors alleged in Part 4 of the appellant's factum in this Court, though the matter is briefly mentioned in the following written argument. In my opinion, this is a case for the application of| the same principle and the point should be

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considered as abandoned or waived. See also Attorney General for Canada v. Ritchie Contracting Company [(1915) 52 S.C.R. at 92)], Fitzpatrick C.J.

I would dismiss this appeal with costs.

Appeal allowed; new trial directed.

Solicitors for the appellant: Lindsay, Emery, Ford, Massie, Jamieson & Lambert.

Solicitors for the respondent: Shortreed & Shortreed.