Dave Kolb Grading, Inc. v. Terra Venture Bridgeton Project Joint-Venture

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No. 95-1721
No. 95-1788
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Dave Kolb Grading, Inc., *
*
Appellant/Cross-Appellee, *
*
v. *
*
Terra Venture Bridgeton Project * Appeals from the United States
Joint-Venture; American National* District Court for the
Insurance Co., a General * Eastern District of Missouri.
Partner; Bridgeton Development *
Company, a Kansas General *
Partnership; Jack W. Isley; *
L. Gary Turner; Larry D. Ross, *
*
Appellees/Cross-Appellants.*
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Submitted: January 11, 1996
Filed: June 4, 1996
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Before BOWMAN and JOHN R. GIBSON, Circuit Judges, and KYLE,* District
Judge.
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JOHN R. GIBSON, Circuit Judge.
Dave Kolb Grading, Inc., a grading contractor, appeals from the
judgment in its suit against Terra Venture Bridgeton Project Joint-Venture,
a real estate developer. Kolb sued to recover money due under a written
contract with Terra Venture, as well as additional moneys Kolb claimed
were due for extra work it performed
*The HONORABLE RICHARD H. KYLE, United States District
Judge for the District of Minnesota, sitting by
designation.
on Terra Venture's project. Terra Venture denied liability for the extra
work, which it says it did not authorize, and also asserted a set-off claim
for costs it incurred in settling a trespass claim that it contends Kolb
is responsible for. The magistrate judge1 awarded Kolb the entire amount
it had earned under the contract, denying Terra Venture's set-off claim,
but also denying Kolb's claim for the extra work. The court awarded Kolb
prejudgment interest and attorneys' fees under the contract. Kolb appeals
the court's denial of the extra work claim, and Terra Venture cross-appeals
the court's award of prejudgment interest and attorneys' fees. We affirm.
Kolb contracted with Terra Venture to do the site excavation and
grading for a shopping center in St. Louis County, Missouri. The contract
was a "lump sum" contract, meaning that it specified the work Kolb had to
do and the total price Terra Venture had to pay (as opposed to, say,
payment by the hour). The contract stated that no change order work would
be approved or paid for without advance written approval by Terra Venture,
in the form of the signatures of Terra Venture's management consultant, E.
B. Roberts, and its project manager, Kevin Fitzpatrick.
The contract turned out to be a money-loser for Kolb. The contract
called for performance within thirty-five working days, but it actually
took Kolb more than 230 days to complete its work. Bad weather caused
delays. Terra Venture failed to get timely approvals from municipal and
sewer authorities and easements from neighboring landowners. Terra
Venture's engineer also made frequent changes in the plans. The delays
resulted in Kolb having to do site excavation while other contractors were
already building on the site, which made Kolb's job more time consuming.
1
The Honorable Catherine D. Perry, United States District
Judge for the Eastern District of Missouri. Judge Perry was a
magistrate judge at the time she tried this case. The parties
consented to trial before a magistrate judge.
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During the course of Kolb's performance, the parties executed two
change orders for additional work by Kolb. The first change order was
executed in writing in advance of the work, as required by the contract.
Kolb then began a practice of filling out "hourly tickets" for work that
its job superintendent, Lee Moorman, considered to be "extra" or beyond the
scope of the contract. Moorman submitted these slips to Gene Bunton, who
represented Phillips Construction Company, the general building contractor.
Bunton had no authority to represent Terra Venture. Kolb then billed Terra
Venture for the work represented by the slips. Terra Venture objected that
the extra work had not been approved in advance, as the contract required,
and at first refused to pay the extra charges. However, Kolb threatened
to walk off the job if Terra Venture did not pay the charges, so Kevin
Fitzpatrick met with Kolb and agreed to pay a portion of the charges as
"change order two." At the meeting, Fitzpatrick warned Kolb that in the
future Terra Venture would not pay any extra charges that were not
authorized in advance in accordance with the contract.
Nevertheless, after change order two was approved, Kolb continued to
do work it considered to be beyond the scope of its contract obligations
without getting authorization from Terra Venture. Kolb eventually billed
Terra Venture an extra $188,602.13. (The original contract plus change
orders one and two amounted to $501,499.10.)
Terra Venture refused to pay for the extra work and also withheld
$88,112.81 of the amount due under the contract. Terra Venture had been
sued by a neighboring landowner for trespass; Terra Venture claimed that
the suit was the result of Kolb's activities on the neighbor's land and
relied on a clause in the contract giving it the right to indemnification
from any damages arising from Kolb's negligence. Terra Venture eventually
agreed to settle the trespass suit for $42,500, although the settlement had
not been consummated at the time of the trial in this case, because
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Terra Venture had not fulfilled its obligations under the settlement
agreement.
Kolb sued Terra Venture for the money due under the contract, as well
as for the work it claimed was outside the scope of the contract. Terra
Venture denied liability for the extra work, but on the first day of trial,
offered to pay $38,560.11, which was the amount Terra Venture admittedly
owed under the contract, less the settlement amount and expenses for the
trespass suit.
The parties tried the case to the court. After Kolb closed its case,
the magistrate judge stated that Kolb had failed to put on any evidence
that Terra Venture had authorized the extra work. In its rebuttal Kolb
called a new witness, Jeff Kolb, whom it had not identified as a potential
witness in its pretrial list of witnesses. Kolb's lawyer asked Jeff Kolb:
Q: Well did you have any direct discussions or dealings with
Mr. Fitzpatrick regarding authorization to do extra work
sir?
A: Yes I did.
Q: Could you define when those occurred and where those
occurred?
Terra Venture's lawyer objected that this was improper rebuttal, since Kolb
was trying to patch a hole in its case in chief. The court explored the
issue thoroughly and concluded that there was prejudice to Terra Venture
in letting Jeff Kolb testify when he had never been identified as a
potential witness and therefore had never been deposed. The court excluded
the rebuttal testimony. Kolb made no offer of proof on the subject of
Terra Venture authorizing the additional work.
Since Kolb had failed to prove the extra work was authorized, the
court denied its claim for payment beyond the contract amount.
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The court found that Terra Venture objected to Kolb's practice of billing
for extras after it had already done the work, instead of getting advance
authorization. The court also found that much of the work Kolb
characterized as extra was actually within the scope of its obligations
under the lump sum contract, and that much of the work was properly
billable to other contractors, rather than to Terra Venture.
On the other hand, the court rejected Terra Venture's counterclaim
for the costs resulting from the trespass claim. The court found Terra
Venture had not established that Kolb's activities were the basis of the
trespass claim. The court also found that Terra Venture was to blame for
failing to get an easement on the neighbor's property.
Accordingly, the court entered judgment for Kolb in the amount of
$88,121.81, the amount owed under the contract.
The court supplemented this amount in a later order, awarding Kolb
attorneys' fees and prejudgment interest. Terra Venture claimed it did not
owe prejudgment interest because it had the right under the contract to
withhold payment until it had resolved the third-party trespass claim. The
court rejected this reading of the contract. The court reduced Kolb's
claimed attorneys' fees by 20% to eliminate fees attributable to the claim
for extra work, on which Kolb did not prevail.
I.
Kolb argues that it did not have to prove Terra Venture authorized
it to do the extra work. Kolb contends that Terra Venture became obligated
to pay for the work because it knew the work was being performed and it
acquiesced. Kolb cites Winn-Senter Construction Co. v. Katie Franks, Inc.,
816 S.W.2d 943 (Mo. Ct. App. 1991); H. B. Deal Construction Co. v. Labor
Discount Center,
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Inc., 418 S.W.2d 940 (Mo. 1967); and Julian v. Kiefer, 382 S.W.2d 723 (Mo.
Ct. App. 1964), in which parties waived the requirement in their contract
that change orders be written.
Two of the cited cases actually work against Kolb, because they
involve owners who explicitly gave oral change orders, Winn-Senter, 816
S.W.2d at 946; Julian, 382 S.W.2d at 729. Accord Gilmartin Bros., Inc. v.
Kern, 916 S.W.2d 324, 329 (Mo. Ct. App. 1995). Kolb failed to prove that
Terra Venture gave oral orders for the extra work.
H. B. Deal does involve, in part, a bank and escrowee's implicit
waiver of contractually required formalities by habitually paying change
orders without protesting the lack of such formalities. 418 S.W.2d at 950
(alternative holding). But the district court's factual findings in this
case distinguish it from H. B. Deal. In contrast to the escrowee in H. B.
Deal, Terra Venture did not habitually ignore the requirements of advance
written authorization for change orders. The magistrate judge found that
Terra Venture protested Kolb's failure to comply with this formality and
warned Kolb that it would not pay such orders.2 Even if we accept Kolb's
argument that evidence of explicit authorization was not necessary to its
case, the magistrate judge's findings rule out implicit acquiescence by
Terra Venture. Kolb does not argue that the findings are clearly
erroneous, and we hold
2
The court stated:
Defendants' project manager, Kevin Fitzpatrick,
testified that he authorized payment for change order 2
only after Kolb had threatened to walk off the job and
had in fact not shown up on the job for two days. He
testified that he flew to St. Louis, met with
representatives at Kolb, and explained in detail that
any further work done without authorization by the
partnership would not be paid, but that he would at
this time agree to pay a portion of the extra work
already done. The Court finds this testimony credible.
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the findings to be well supported in the record.
II.
Kolb's second argument is that the magistrate judge erred in
excluding Jeff Kolb's testimony. Kolb contends that Jeff Kolb would have
said Terra Venture orally authorized the extra work. There are three
reasons to affirm the court's exclusion of this evidence: Kolb made no
offer of proof, see Strong v. Mercantile Trust Co., 816 F.2d 429, 432 (8th
Cir. 1987), cert. denied, 484 U.S. 1030 (1988); the proposed testimony was
properly part of Kolb's case in chief, but it was offered as rebuttal, see
Gossett v. Weyerhaeuser Co., 856 F.2d 1154, 1156 (8th Cir. 1988); and Kolb
did not list Jeff Kolb as a potential witness in its pretrial filings, see
Marti v. City of Maplewood, 57 F.3d 680, 683-84 (8th Cir. 1995). The
magistrate judge heard argument and concluded that excusing Kolb from
compliance with its duty to disclose witnesses would prejudice Terra
Venture, since Terra Venture had never deposed Jeff Kolb. The ruling was
well within the court's discretion.
III.
Terra Venture contends that the magistrate judge erred in awarding
Kolb attorneys' fees and prejudgment interest. Terra Venture argues that
the contract entitled it to withhold payment until it had resolved "claims
filed by third parties," that the trespass case was such a claim, and that
the trespass case was not finally settled at the time this case was tried.
Terra Venture argues that attorneys' fees and interest would only accrue
after payment was due. Since payment never became due, Terra Venture
asserts it should not be liable for fees and interest.
This argument is disingenuous. Terra Venture admits there was a
settlement agreement in the trespass case about three months
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before trial of this case, yet Terra Venture did not tender even the amount
it admitted it owed until the first day of trial. Terra Venture says there
was a settlement agreement, but the settlement had not become final. There
was evidence at trial that the delay was attributable to Terra Venture's
failure to perform its duties under the settlement agreement. If Terra
Venture could delay indefinitely its obligation to Kolb by merely failing
to fulfill its duties under the trespass settlement, Kolb's rights under
the contract would be illusory. Therefore, even assuming that the trespass
case would toll Terra Venture's payment obligation for some time, Terra
Venture cannot avoid liability for Kolb's collection expenses by simply
drawing out the settlement process in the trespass claim.
Alternatively, Terra Venture argues that even if we conclude the debt
became due at some point, Terra Venture should only owe interest for the
three-month period after it reached a settlement agreement in the trespass
case. The magistrate judge rejected Terra Venture's argument that the
trespass suit was the kind of third-party claim that would entitle Terra
Venture to withhold payment. The court held that the trespass suit
resulted from Terra Venture's "haphazard conduct of its development"--that
is, its failure to obtain easements, as required by section 8.2 of the
contract. The contract language permitting Terra Venture to withhold
payment is vague, referring only to "claims filed by third parties,"
without specifying what kind of claims. On the other hand, the contract
elsewhere describes in detail the circumstances under which Kolb would be
required to indemnify Terra Venture. We construe the contract to allow
Terra Venture to withhold payment only in response to third-party claims
for which Terra Venture is entitled to indemnification from Kolb. Any
other reading would place Kolb entirely at Terra Venture's mercy by
permitting Terra Venture to withhold payment because of suits for which the
Kolb was not responsible. The court held that Kolb was not liable to
indemnify Terra Venture for the trespass suit. Terra Venture has
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not appealed that ruling. Therefore, we hold that payment was due under
the contract despite the pendency of the trespass suit. We affirm the
magistrate judge's award of prejudgment interest and her conclusion that
Kolb was entitled to attorneys' fees.
Terra Venture also appeals the magistrate judge's determination of
the amount of attorneys' fees. Terra Venture argues that the court did not
properly reduce the requested fees to eliminate fees for the extra work
claim on which Kolb lost. To the contrary, the magistrate judge's opinion
shows that she did adjust the award to eliminate fees incurred on the extra
work claim. The court's factual findings are not clearly erroneous.
We affirm.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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