DocketNumber: No. ED 103878
Citation Numbers: 544 S.W.3d 214
Judges: Dolan
Filed Date: 2/14/2017
Status: Precedential
Modified Date: 1/21/2022
Penzel Construction Company, Inc. ("Penzel"), on the behalf of Total Electric, Inc. (Total Electric) through a liquidating agreement, brought a breach of contract action against Jackson R-2 School District ("the District") based on a breach of implied warranty for furnishing "deficient and inadequate plans and specifications" to Penzel for a construction project. The District brought third-party claims against Henthorn, Sandmeyer and Company ("Henthorn") and Warner-Nease-Bost ("WNB"). The District, Henthorn, and WNB (hereinafter collectively "Respondents") filed motions for summary judgment in July of 2015, and the trial court granted the motions on November 30, 2015. We reverse and remand for further proceedings consistent with this opinion.
*223I. Procedural and Factual Background
A. Factual Background
The District entered into a contract with WNB as architect to build an addition to the Jackson High School ("the Project") on October 10, 2005. Subsequently, WNB entered into a subcontract with Henthorn to produce electrical plans and specifications for the Project. During the bidding phase, the District furnished the plans and specifications ("the Plans") for the Project to Penzel, who in turn gave a copy of the Plans to Total Electric. Neither Penzel nor Total Electric noticed any errors in the Plans during the bidding process. Based on the Plans, Total Electric submitted a bid of $1,040,444 to Penzel to furnish and install electrical work for the Project. On September 15, 2006, the District entered into a contract ("the Contract") with Penzel to be a general contractor for the Project. In turn, Penzel entered into a subcontract ("the Subcontract") with Total Electric to provide electrical work on the Project based on the submitted bid. The District issued a notice to proceed to Penzel on September 18, 2006, requiring substantial completion of the Project within 550 days. Total Electric substantially completed its contracted work around May 27, 2009 and claims this sixteen month delay was the direct result of the Plans' defects and inadequacies.
B. Procedural History
The procedural history surrounding the Contract and the Subcontract is fairly complicated. It involves multiple parties and causes of action that are not relevant to this appeal.
In July of 2010, Penzel executed a liquidating agreement with Total Electric authorizing Penzel to prosecute Total Electric's claim for damages caused by its *224reliance on the Plans furnished by the District. Penzel filed its First Amended Petition on July 21, 2010 seeking recovery for Total Electric's damages, as well as damages for Penzel's markup for overhead and profit caused by the Plans' inadequacies and deficiencies.
C. Penzel's Petition
Penzel claims that, under the Spearin Doctrine, the District impliedly warranted that the Plans it furnished were adequate for completing the Project, and the District breached the Contract by providing inadequate and defective plans and specifications, which caused damages to Total Electric. Penzel alleges the Plans were defective in a number of material ways, including (1) the inadequate low voltage switching and wiring design affecting the gymnasium and some student areas; (2) incorrect kitchen drawings; (3) the failure of the plans and specifications to call for emergency ballasts; (4) incorporating a defective gymnasium lighting design; (5) the failure to depict all the water heaters and circulating pumps requiring wiring; (6) specifications calling for outdated products; (7) non-compliance with building codes; and (8) an incorrect depiction of some site electrical work as work to be performed by others.
Penzel further alleges that Total Electric's damages were compounded by the District's and WNB's slow response time in dealing with problems on the Project. Penzel stated that Total Electric notified Penzel by e-mail of various problems encountered with the Plans, and Penzel then forwarded the e-mails to the District and WNB. Total Electric alleges it would frequently have to wait several weeks, and "sometimes months," for a response. Moreover, oftentimes the responses did not resolve the initial issue. Penzel contends that the delayed, and often ineffective, responses caused inefficiencies for Total Electric, obligating it to pay workers for being at the work site without making progress on the Project. Accordingly, Total Electric was forced to pay for an increased total of labor hours to finish the Project, which significantly increased its cost. Total Electric also claims the deficiencies and delayed responses caused the company to incur higher hourly costs for manual labor due to trade labor wage escalation.
Initially, Total Electric created daily logs for the Project to track the deficiencies in the Plans and their associated damages. However, Total Electric stopped maintaining these logs as problems persisted. Total Electric claimed it was unable to specifically track the amount of damages and extra hours attributable to each delay or distribution because the "sheer volume and variety of interfering and disruptive events" made it highly impractical. Total Electric further stated that accurately tracking and categorizing the defects and corresponding damages would have required the company to "devote multiple professionals to tracking costs," which would further increase its costs.
To prove damages for Total Electric's electrical labor loss of productivity, Penzel sought to use the "total cost method" or "modified total cost method." Penzel contends it can prove the remaining four categories of damages-consisting of (1) additional project management and supervision costs, (2) wage escalation, (3) unpaid change order work, and (4) its electrical consultant's estimated fee-without relying on either total cost method.
Due to the complexity and volume of facts in this case, we will adduce additional facts as necessary under the relevant portions of the Discussion in Sec. III.
II. Standard of Review
Whether a court should grant summary judgment is purely an issue of law.
*225Storey v. RGIS Inventory Specialists, LLC ,
Our Court has articulated the standard a defendant-movant must meet to make a prima facie case on a motion for summary judgment:
A defendant, as the movant can establish a prima facie case for summary judgment by showing any of the following: (1) facts that negate any one of the elements of a claimant's cause of action; (2) that the non-movant, after an adequate period of discovery, has not been able to produce, and will not be able to produce, evidence sufficient to allow the trier of fact to find the existence of any one of the claimant's elements; or (3) that there is no genuine dispute as to the existence of each of the facts necessary to support movant's properly pleaded affirmative defense."
Storey ,
For the purposes of summary judgment, a "genuine dispute" exists if the record contains competent evidence of two plausible, but contradictory, accounts of essential facts.
Before addressing Penzel's points on appeal, we will address Respondents' joint motion to strike Penzel's statement of facts and dismiss this appeal. Rule 84.04(c) controls the contents for the statement of facts in appellant and respondent briefs, stating:
The statement of facts shall be a fair and concise statement of the facts relevant to the questions presented for determination without argument. All statements of facts shall have specific page references to the relevant portion of the record on appeal, i.e., legal file, transcript, or exhibits. If the matter cited is contained in the appendix, a page reference to the appendix shall be included.
The purpose of 84.04(c) is to "define the scope of the controversy and afford the appellate court an immediate, accurate, complete, and unbiased understanding of the facts of the case." In re Adoption of C.M. ,
*226III. Discussion
Penzel relies on the Spearin Doctrine to establish a breach of contract by the District. Before addressing whether Penzel has produced sufficient evidence to survive a motion for summary judgment, we must address whether its claim based on an implied warranty under the Spearin Doctrine constitutes an actionable theory of recovery in Missouri. This type of action has not previously been expressly accepted or rejected in our State. After examining Spearin and Missouri precedent, we believe Spearin claims are acceptable vehicles for bringing causes of actions based on deficient plans and specifications in construction projects involving a governmental entity-owner.
A. The Spearin Doctrine
" Spearin stands for the proposition that when a governmental entity includes detailed specifications in a contract, it impliedly warrants that [1] if the contractor follows those specifications, the resultant product will not be defective or unsafe, and [2] if the resultant product proves defective or unsafe, the contractor will not be liable for the consequences." Caddell Const. Co. v. United States ,
Spearin aligns with principles established by Missouri precedent. Ideker, Inc. v. Mo. State Highway Comm'n may be the most analogous case decided by our State's courts.
Syllogistically, where a governmental entity makes a positive representation of a material fact relied upon by a contractor in calculating its bid, which turns out to be false or incorrect after work is commenced and occasions additional expense, the contractor finds himself in the position of one who undertakes one contract but is confronted with performance of another. The governmental entity, pragmatically speaking, gets the benefit *227of another contract. If performance thereof by the contractor entails more expense than was calculated in submitting its bid, the governmental entity should bear the added cost rather than the contractor because the former is the beneficiary of necessary but unbargained for work resulting from its positive representation of a material fact which turned out to be false or incorrect.
At its core, a Spearin claim is a breach of contract action. See Spearin , 248 U.S. at 137-38,
B. Point I-Proof that the Plans were "defective" within the meaning of the Spearin Doctrine.
To establish a claim for breach of contract under Spearin , the plans and specifications must be defective or "substantially deficient." Caddell Const. Co. ,
1. Penzel's Witnesses
The admissibility of expert testimony is governed by § 490.065. Am. Eagle Waste Indus., LLC v. St. Louis County, Missouri ,
2. Is Expert Testimony Required?
The District contends that Penzel is required to produce "expert testimony" to establish the Plans were "defective." This argument is premised on the District's belief that implied warranty claims in Missouri "are considered fault-based claims." The District reasons that "within the context of design documents, 'fault' is established by proving that a design professional negligently prepared the design documents," which requires expert testimony. We disagree. The implied warranty in a Spearin claim is that the plans are free from significant defects; it is not simply a guarantee that a particular level of care and competency was used to create the plans. "When the government provides a contractor with defective specifications, the government is deemed to have breached the implied warranty that satisfactory contract performance will result from adherence to the specifications, and the contractor is entitled to recover all of the costs proximately flowing from the breach." Essex Electro Engineers,
Generally in Missouri, expert testimony is only required "when a fact at issue is so technical or complex that no fact-finder could resolve the issue" without it. Stone v. Mo. Dep't of Health & Senior Servs. ,
*229motions to exclude the testimony of Joseph Manzi or Myron Bernard.
Although electrical engineering is highly technical and complicated in general, most of the problems alleged by Penzel, and testified about by its witnesses, were simple enough for a layperson to understand. For example, testimony that the Plans omitted critical components, called for outdated or non-existent products, and failed to comply with building codes are issues a layperson without any technical training could understand. Accordingly, Penzel was not required to produce expert testimony to prove the Plans were substantially deficient.
3. Do either Joseph Manzi or Myron Bernard qualify as experts, and is their "expert testimony" permissible?
Even if expert testimony is not required , it is admissible "when the topic at issue is one with which lay witnesses and fact-finders are unfamiliar." Stone ,
For a witness to qualify as an expert under § 490.065, it must be shown that due to the witness's education or specialized experience, he "possesses superior knowledge" on a subject that persons without such education or experience would be incapable of forming an accurate opinion or drawing correct conclusions. Kell v. Kell ,
a. Qualifications of Joseph Manzi and Myron Bernard
It is uncontroverted that Joseph Manzi ("Manzi") does not consider himself an electrical engineer, he has never been educated or trained as an architect, and he cannot prepare architectural drawings. Nonetheless, "[t]he express language of [§ 490.065.1] makes it clear that a witness may be qualified as an expert based on something other than his education or license." Scott v. Blue Springs Ford Sales, Inc. ,
Myron Bernard ("Bernard") has more than sixty years of construction industry experience, which includes reading electrical plans and specifications and installing electrical work. Bernard has also "served as a Senior Vice President at Sachs Electric and a Senior Vice President at Guarantee Electric, two of the largest electrical contractors in the state of Missouri." Additionally, he has worked on several projects with electrical contractors, including projects managing construction projects in that field. Bernard also served as the President of the Engineers Club of St. Louis, "an organization that serves as the focal point of engineering activities in the St. Louis area."
Nevertheless, the District contends that Bernard is unqualified to testify about the electrical plans and specifications because he is not a registered architect, licensed electrician, or licensed engineer, and he has limited experience in reviewing electrical drawings. "As a general rule, any weaknesses in the factual underpinnings of the expert's opinion goes to the weight that testimony should be given and not its admissibility." Spalding v. Stewart Title Guaranty Company ,
b. The opinion testimony of Manzi and Bernard had an adequate factual basis
Expert opinions are only admissible if they are based on facts and data that are reasonably reliable and of the same type experts in the field would reasonably rely upon to form opinions and make inferences on the subject. McGuire v. Seltsam ,
Generally, the sources and bases of an expert's opinion affect the weight of the opinion, not its admissibility. Whitnell v. State ,
c. Penzel presented sufficient evidence to show that the Plans were "defective" within the meaning of Spearin
The District argues that even if Manzi and Bernard qualify as "experts" and their opinions have proper foundations, their testimony was insufficient to prove that the Plans were defective under the meaning of Spearin . We disagree. As previously noted, Manzi and Bernard were qualified to testify that the Plans were defective. Moreover, Penzel also provided testimony from lay witnesses who described why the Plans were deficient and the degree of difficulty involved with correcting the Plans' defects. Accordingly, Penzel presented sufficient evidence for a reasonable trier of fact to conclude the Plans were defective within the meaning of Spearin .
First, we will address the degree of defectiveness required to prevail in a Spearin claim. The District suggests that we adopt a government-owner friendly standard, such as the one applied in Dugan & Meyers Constr. Co. v. Ohio Dep't of Adm. Servs. ,
Effectively, the Spearin Doctrine places the risk of loss stemming from defective plans and specifications on the owner who renders the plans to the contractor. See Travelers Indem. Co. v. S.M. Wilson & Co. , No. 4:04 CV 01365 ERW,
Assuming Penzel could establish the District actually furnished deficient plans and specifications, we are aware that the most blameworthy parties may be the architect of the Project (WNB) or the subcontractor who produced electrical plans and specifications for the Project (Henthorn). As neither Total Electric nor Penzel is in privity with either of these parties, only the District would have the opportunity to prevail on a legal claim against the party truly at fault. Captiva Lake Investments, LLC v. Ameristructure, Inc. ,
Penzel has presented sufficient evidence for a reasonable trier-of-fact to conclude the District's plans were defective for purposes of bringing a Spearin claim. As aforementioned, Manzi and Bernard both qualify as "experts" under § 490.065. Bernard testified in his deposition that the District "did not present a complete, thorough picture of what was required... There were omissions in the documents that prevented the scope [of the Project] to be fully supplied and given to the contractor with which to make an estimate."
Penzel also adduced deposition testimony from witnesses with personal knowledge and significant involvement in the Project. These lay witnesses attested to the volume and magnitude of the Plans' deficiencies. Phil Penzel, Penzel's president, corroborated Bernard's testimony. He testified that some of the specifications *233called for components that "didn't exist anymore." Phil Penzel also stated that "[t]here were numerous things left out of the electrical drawings," which required Total Electric to purchase additional items not reflected in the Plans. These new items created additional costs for Total Electric which it was unaware of at the time of the bid, and therefore these costs were not contemplated by Total Electric during its formulation of the bid on the electrical work.
Danny Miller, a principal of Total Electric and an operations manager, also explained why the Plans were inadequate. He testified that the Plans would call for incompatible parts, which would require multiple installations. He also added that tracking down the correct parts would be a tedious process due to slow response times from the District. Danny Miller explained that remedying situations where the wrong part was listed in the Plans would often increase labor installation costs by two to three times the expected amount.
Among other evidence, Penzel also proffered an e-mail in which WNB acknowledged that "the fact that the Drawings are not correct and are inconsistent causes a real problem." Respondents would have every chance to rebut this evidence or question its credibility at trial; however, Penzel has presented sufficient evidence for a reasonable trier of fact to find that the Plans were deficient and caused damages.
4. Conclusion to Point I
The record reflects Penzel has satisfied its burden under Rule 74.04 to create a genuine dispute as to the material fact of whether the Plans were defective under the meaning of Spearin , thereby breaching its implied warranty to Penzel that the Plans were adequate. The testimony of Manzi and Bernard meets the requirements of admissibility under § 490.065. Moreover, Penzel adduced admissible non-expert testimony from lay witnesses with personal knowledge about the Plans. The testimony proffered by Penzel provides a basis for a reasonable jury to conclude the Plans were defective, thus creating a genuine dispute about the Plans' suitability. Point granted.
C. Point II-Damages and the Use of the Total Cost Method and Modified Total Cost Method
In Penzel's second point on appeal, it argues that it provided sufficient evidence to establish damages with "reasonable certainty." In addition to making a prima facie case that a contract existed and the contract was breached resulting in damages, a plaintiff must provide an adequate basis for a jury to calculate damages with reasonable certainty . See Midwest Coal, LLC ex rel. Stanton v. Cabanas ,
Penzel proposes we allow some of the alleged damages to be calculated using either (1) the total cost method ("TCM") or (2) the modified total cost *234method ("modified TCM"). This is an issue of first impression in Missouri, as no reported Missouri case has expressly accepted or rejected either approach. Accordingly, we will examine similar cases from other state courts and federal courts for guidance. Schembre v. Mid-Am. Transplant Ass'n ,
This raises two especially significant questions: (1) would our State's goal to put the non-breaching party in the position he would be in absent the breach be promoted or undermined by allowing the use of either method? and (2) does either method comport with Missouri's well-established requirement to prove the amount of damages with reasonable certainty? See Ideker ,
1. Introduction to the Total Cost Method and Modified Total Cost Method
The TCM allows a contractor to calculate his damages by subtracting his amount bid (or the "contract price") from the total cost he incurred to fulfill its contractual obligations. Sunshine Constr. & Eng'g, Inc. v. United States ,
The modified total cost approach primarily operates in the same manner as the total cost method. However, whereas the calculation under the TCM is the end *235point under that approach, the calculation is merely a starting point under the modified TCM, which can then be reduced by any additional costs attributable to the plaintiff's own errors. Dillingham-Ray Wilson v. City of Los Angeles ,
2. Missouri Policy on Contract Damages
"Generally in breach of contract cases, our goal is to award plaintiffs a sum that would put them in the same position as if defendant had fulfilled his obligations under the contract[.]" Dubinsky v. U.S. Elevator Corp. ,
The goal of the modified TCM and the goal of Missouri contract law are consistent: both seek to place the non-breaching party in the same position he would be in absent the breach, while only penalizing the breaching party to the extent he is responsible for the non-breaching party's damages. See id ;see also Gateway Foam Insulators, Inc. v. Jokerst Paving & Contracting, Inc. ,
3. The Reasonable Certainty Requirement
Although the modified TCM theoretically harmonizes with Missouri contract law, it should only be used as a framework for calculating damages if the plaintiff can present sufficient evidence to prove the damages with reasonable certainty under the method. See Ameristar Jet Charter ,
We should note "the modern emphasis on the requirement that damages be shown with certainty is on the fact of damages and not on the particularized amount." Gasser v. John Knox Village ,
4. The Total Cost Method
There is much more extensive case law discussing the TCM than the modified TCM, but given the high degree of similarity, it can provide guidance in our reasonable certainty analysis. Courts understand the inherent uncertainty in using the TCM; consequently, courts often require plaintiff-contractors to satisfy a four-prong test that helps ensure reliability before allowing recovery under the TCM. Cavalier Clothes ,
5. The Modified Total Cost Method
Compared to the rigid all-or-nothing approach of the TCM, the modified TCM is more nuanced. The modified TCM offers flexibility by allowing for adjustments to the total calculation of damages under the total cost method.
Although both approaches have some flaws, the modified TCM helps solve some of the inherent problems of the traditional TCM that can lead to skewed and inequitable damages calculations. Servidone Const. Corp ,
Unlike the TCM, the modified TCM allows for adjustments to (1) the original contract price (the amount of the contractor's accepted bid), (2) the total cost of performance, or (3) both. See
6. An Example of Applying the TCM and Modified TCM to the Same Situation
Here is a relatively simple example of calculating damages under the TCM and the modified TCM. Once again, assume a project would generally cost a plaintiff-contractor $1,500,000 without a breach in the contract, and due to the non-breaching plaintiff-contractor's bidding error, he made a $1,000,000 bid that the owner accepted. Absent a breach, the plaintiff-contractor would anticipate a $500,000 loss, and the defendant-owner would expect to pay $1,000,000 for the contractor's performance. Additionally, assume the defendant-owner provided deficient plans and specifications to the plaintiff-contractor that contributed to an additional $300,000 for the contractor, creating a total cost of $1,800,000 to complete the project.
In this scenario, before obtaining any legal recovery, the plaintiff-contractor would have an $800,000 loss on the transaction ($1,800,000 actual costs minus $1,000,000 bid), $500,000 of which was caused by his own fault for underbidding and $300,000 of which the defendant-owner caused by furnishing deficient plans. Consequently, the plaintiff-contractor would actually be placed in the position he bargained for by receiving $1,300,000 from the defendant-owner (the initially agreed upon price of $1,000,000 plus $300,000 for additional costs the defendant-owner is at fault for creating), resulting in a net loss of $500,000 for performing under the contract. Naturally, the breaching defendant-owner would also be placed in his rightful position by paying $1,300,000 to the plaintiff-contractor for his performance under the contract.
Accordingly, to place each party in his proper position, we would want to calculate damages using an approach that would result in the defendant-owner being liable to the plaintiff-contractor for $300,000 in damages (in addition to the $1,000,000 agreed to upon acceptance of the plaintiff-contractor's bid). The modified TCM would yield this exact result. However, in a successful Spearin claim where damages are calculated using the traditional TCM, the breaching defendant-owner would be penalized an extra $500,000 stemming solely from the plaintiff-contractor's bidding error, in turn creating a $500,000 windfall for the plaintiff-contractor. This example illustrates why the modified TCM is far more aligned with Missouri contract principles.
7. Applying the Four-Factor Test of the Modified Total Cost Method and Reasonable Certainty
As discussed infra in Sec. III(D), the four-factor test allows the plaintiff to establish a causal connection between the breach and his additional expenses, in circumstances in which it is impossible or impractical to allocate a cost to each defect, and (1) the plaintiff's bid is reasonable; (2) the additional costs to complete the project are reasonable; and (3) the *239owner is solely at fault for the damages. Once these three elements are established, it naturally follows that the plaintiff's damages will be accurately represented by subtracting the bid price from the total cost of the project. Moreover, to the extent the plaintiff fails to show all of these factors, the total damages can be adjusted downward to reach an equitable amount. Accordingly, we believe the modified total cost method can be used to calculate damages in Spearin claims, but only when it adheres to Missouri's reasonable certainty requirement, which is contingent on the facts of the particular case.
As an appellate court reviewing the grant of summary judgment in favor of the defendant, we will only consider whether there is sufficient evidence to create a genuine dispute as to the existence of a material fact; "[t]he propriety of summary judgment is purely an issue of law," not fact. See ITT ,
D. Point III-The Four-Factor Test
Penzel contends that the trial court erred in granting summary judgment because it presented competent evidence to satisfy the four-factor test and Missouri's reasonable certainty requirement, thereby creating a genuine issue of material fact and making summary judgment inappropriate. In assessing the sufficiency of a plaintiff's evidence to prove damages with reasonable certainty and the viability of the modified TCM, courts generally examine four factors: "(1) the nature of the particular losses make it impossible or highly impractical to determine them with a reasonable degree of accuracy; (2) the plaintiff's bid or estimate was realistic; (3) its actual costs are reasonable; and (4) it was not responsible for the added expenses." Cavalier Clothes ,
1. First Factor: The Impracticality or Impossibility of Proving Actual Losses Directly
For a plaintiff to satisfy the first factor (which many courts consider a requirement as discussed supra in Sec. III(C)(5)), generally, he must present proof that no other feasible means for calculating damages exists. See Moorhead Const. Co. v. City of Grand Forks ,
For example, in Cavalier Clothes , the trial court found that it "appear[ed] impossible for [the plaintiff] to prove the amount of its actual losses directly with reasonable accuracy[.]"
Although Missouri requires plaintiffs to prove their amount of damages with "reasonable certainty," the degree of certainty required to meet this standard is balanced against our State's goal to place the parties in an equitable position. This may be most apparent in cases involving lost profit damages. For example, in Ameristar Jet Charter , the Supreme Court of Missouri noted:
In some cases, the evidence weighed in common experience demonstrates that a substantial pecuniary loss has occurred, but at the same time it is apparent that the loss is of a character which defies exact proof. In that situation, it is reasonable to require a lesser degree of certainty as to the amount of loss, leaving a greater degree of discretion to the court or jury. This principle is applicable in the case of proof of lost profits.
One of the ironic things about loss of productivity claims is that often the very factors that produce the loss of productivity can also serve to preclude the accurate and precise record-keeping that would constitute evidentiary certitude. The disruptions, impacts, need for acceleration, lack of information or decisions by the government and the schedule disruptions make it more difficult to track the specific causes and effects of the situation. These factors necessitate increased management attention to getting the work performed and increase disorganization of the contract work... [g]enerally, accounting and project records do not isolate the costs for productivity losses separately from the other costs of the project because the work affected by the loss of productivity is intregal with the base contract work. There is no precise way to separate the normal or base work that is performed by an employee from the inefficient portion of the work... the base work and the inefficiency component are intertwined to an extent that prohibits a clear delineation between them.
Thomas E. Shea, Proving Productivity Losses in Government Contracts , 18 Pub. Contract L.J. 414 (1989).
In the instant case, Penzel contends that tracking its damages was impossible, or at least impractical, because of the pervasive nature of the defects and the District's untimely responses to address problems with the Plans. Penzel claims the Plans were defective in a number of material ways, including (1) the inadequate low voltage switching and wiring design affecting the gymnasium and some student areas; (2) the incorrect kitchen drawings; (3) the failure of the plans and specifications to call for emergency ballasts; (4) incorporating a defective gymnasium lighting design; (5) the failure to depict all the water heaters and circulating pumps requiring wiring; (6) specifications calling for outdated products; (7) non-compliance with building codes; and (8) an incorrect depiction of some site electrical work as work to be performed by others.
In his deposition, Penzel's expert witness Manzi conceded that tracking costs may not have been impossible, but he opined that it would not have been "reasonable or possible" to do so without "an incredible cost controlled group of people on-site, almost doing [a] time study." Manzi explained why matching each cost and *241defect would be extremely difficult in a report he created:
Cumulative impact costs are those costs attributed to the compound, disruptive effect of multiple changes and problems. Cumulative impact costs are often not directly associated with the events and issues that gave rise to the original change. Due to the complexity and cumulative impacts, the costs are not readily subject to collection utilizing standard cost accounting methods and are not readily subject to evaluation or computation in the same fashion as normal change order work. In fact, it would be extremely difficult to itemize and account for the cost of each disruptive impact given the fact that the impacts were so numerous and cumulative in nature.
Manzi's testimony provides evidence that the damages Total Electric allegedly suffered are "of character which defies exact proof." See Ameristar Jet Charter ,
2. Second Factor: The Reasonableness of the Contractor's Bid
The second factor in assessing the viability of using the modified TCM is determining whether a plaintiff-contractor can prove, by a preponderance of the evidence, that the bid he made was reasonable. Cavalier Clothes ,
The typical starting point for analyzing the bid's reasonableness is examining the bids of other contractors for the same project.
The District argues that Penzel's "sole evidence to establish [that Total Electric's bid was reasonable] is Mr. Manzi's conclusion 'Total Electric's bid was competitive and reasonable.' " This contention ignores the underlying premises for Manzi's conclusion. The proximity between Total Electric's adjusted bid and the next lowest bid (3.3%) supports Manzi's conclusion. See Neal & Co. v. United States ,
Moreover, using a rational process to formulate a bid helps support a finding that a bid is reasonable.
As previously noted, the District will have an opportunity to discredit Manzi's testimony or present its own evidence of the bid's unreasonableness at a trial; nonetheless, Penzel has presented sufficient evidence for a fact-finder to conclude Total Electric's bid was not unreasonably low. Moreover, even if the jury concludes Total Electric's bid was unreasonably low, it can reduce the damages calculation by the amount a "reasonable contractor's bid" would exceed Total Electric's bid. By allowing for the bid to be adjusted if the jury concludes the bid was low, it empowers the jury to calculate an award that accurately reflects the amount of damages it concludes Penzel actually suffered from the breach-the amount that the jury believes will place each party in the position they would have been in absent the breach.
In light of the evidence proffered by Penzel, we find it has presented sufficient evidence to support a jury's finding that Total Electric's bid on the Project's electrical work was reasonable. If the jury concludes Total Electric's bid was reasonable, it provides support for the conclusion that the total amount of its damages is equal to the total costs allocated to the Project, less the amount anticipated (plus any built-in profit margin) absent the breach. Such a finding would also help ensure the jury has an adequate basis to calculate damages with reasonable certainty.
3. Third Factor: The Reasonableness of the Contractor's Costs
The third factor in our modified TCM analysis focuses on the reasonableness of Total Electric's costs to fulfill its duties under the Subcontract. A plaintiff-contractor is required to provide "some reasonably accurate evidence of the various costs involved." E.C. Ernst, Inc. v. Koppers Co. ,
Total Electric also relied on Manzi's expert testimony to establish that its actual costs to complete the Project were reasonable. Manzi prepared a spreadsheet that calculated the sum of Total Electric's materials, labor, and other job expenses. The District's main argument against Manzi's conclusion is that the sum was based on total labor hours and cost of materials that were not separately allocated between (1) the cost associated with the original work under the Contract; and (2) the additional work caused by the District's alleged breach. Once again, evidence that would allow the District to separate these costs with more certainty is the same evidence that it argues is unavailable, which is the reason Penzel proposed using the modified TCM. Instead, if the fact-finder believes the bid was reasonable and the total cost calculated was reasonable, the amount of "additional costs" caused by the breach can easily be reverse-engineered by taking the difference between Total Electric's total cost and its bid, using the bid as a proxy for its costs allocated to the originally agreed upon work. The District will have the opportunity to contest the reasonableness of Total Electric's costs by presenting its own evidence and/or discrediting Penzel's witnesses. Nonetheless, Penzel has provided an adequate evidentiary basis for a fact-finder to measure the appropriate inputs in the modified TCM equation if it finds the District is liable for breach of contract. Looking strictly at the evidence adduced to support that Total Electric's actual costs were reasonable, we find Penzel provided sufficient evidence to find the actual costs reasonable.
4. Fourth Factor: The Contractor's Lack of Responsibility for the Additional Costs
The final factor examines whether the plaintiff-contractor bears some of the blame for the delays and the associated additional costs incurred. Penzel presented evidence through testimony that the Plans' deficiencies were the sole cause of its additional costs. Both Danny and Rodney Miller had personal knowledge of the Plans and Total Electric's work on the Project, and both testified about the numerous problems they encountered because of the Plans' inadequacies. See Sec. III(B)(3)(c) for discussion of Danny Miller's testimony; see Sec. III(D)(3) for discussion of Rodney Miller's testimony.
The District states "[t]he evidence presented in the underlying matter shows [Total Electric] contributed to the delays, and [Total Electric] failed to apportion the overages between [Total Electric and the District] as required under the total cost method." However, a reasonable finder of fact could disagree with the District's contention and find Total Electric faultless. Both of the Millers also testified to counter the District's assertion that some of the delays and inefficiency costs were attributable to other factors, the two primary causes being (1) damage to a building's roof that delayed performance between *244January 2008 and June 2008, and (2) "inappropriate levels of manpower for certain trades, especially masonry." Danny and Rodney Miller testified that even though the masonry work specifically was delayed, it did not affect Total Electric's overall timeline because there were always ample areas Total Electric could have worked on if the Plans were adequate or the District had timely responded to Total Electric's inquiries to resolve the issues created by the Plans' deficiencies. Moreover, even if a fact-finder concludes Total Electric contributed to some of its delay damages, that finding alone will not preclude it from recovering a portion of its delay damages with reasonable certainty.
The fact-finder is in the best position to determine what factors caused delays and to what extent, especially when the evidence exclusively relies on witnesses' testimony where assessing credibility is crucial. See Neb. Pub. Power Dist. v. Austin Power, Inc. ,
5. Conclusion to Point III
We find there is sufficient evidence for a reasonable jury to determine, with reasonable certainty, the fact of damages and the amount of damages. "[A]ny evidence in the record that presents a genuine dispute as to a material fact defeats the movant's prima facie showing [that he is entitled to judgment as a matter of law]." ITT ,
E. Point IV-Prejudgment Interest under Missouri's Prompt Payment Act
Missouri's Prompt Payment Act under § 34.057
We do not reach a conclusion on the merits of Penzel's prejudgment interest request in this case. For a plaintiff to be entitled to interest under the Prompt Payment Act, there must be an unpaid amount of money actually owed to the plaintiff, which is a determination properly made by the trial court on remand. See *245KCRE, Inc. v. Robb ,
IV. Conclusion
After examining Spearin in relation to Missouri precedent, we find a Spearin claim is an acceptable vehicle for bringing a cause of action in Missouri. However, we reiterate that we only expressly adopt the use of Spearin when all of the following circumstances are present: (1) there is a dispute between a contractor (or subcontractor with a valid liquidating or "pass-through" agreement) and a governmental entity; (2) arising from a construction contract; (3) where the governmental entity furnishes inadequate or deficient plans and specifications for work to be performed by the contractor under the parties' agreement; and (4) these deficiencies cause additional costs for the contractor.
The label of "the modified TCM" is just that, a label. Our stance is simple: a plaintiff may meet his evidentiary burden for proving damages in a breach of contract case when he presents "competent and substantial evidence" to establish an adequate basis for calculating a rational estimate of damages. Best Buy Builders ,
Penzel has presented evidence using multiple lay witnesses and expert witnesses to establish that the District breached the Contract, the breach resulted in damages, and that amount of damages can be calculated with reasonable certainty. We find this evidence sufficient for a reasonable jury to find Penzel established every element of a breach of contract claim (based on an implied warranty pursuant to Spearin ) and provide an "adequate basis" for a jury to calculate damages with reasonable certainty.
After reviewing the record, we find there exists a genuine dispute of material fact as to whether Penzel can prove the District breached its contract based on the Spearin Doctrine and establish damages with reasonable certainty. Penzel has adduced sufficient evidence for a reasonable *246jury to find in its favor on this claim. Accordingly, the District was not entitled to summary judgment as a matter of law, and the trial court erred in granting the combined motions of the District, WNB, and Henthorn. Rule 74.04; ITT ,
For the foregoing reasons, we reverse and remand the trial court's judgment for further proceedings consistent with this opinion.
Sherri B. Sullivan, P.J., concurs.
Roy L. Richter, J., concurs.
On October 5, 2009, Penzel filed a petition against (1) the District, (2) Missouri United School Insurance Counsel ("MUSIC"), and (3) WNB. This petition included four counts. On July 21, 2010, Penzel filed its First Amended Petition, which included six counts. Three of the six counts were voluntarily dismissed by Penzel. Two counts against MUSIC have been addressed by the court; the trial court granted MUSIC's motion for summary judgment, and our Court affirmed it on appeal on March 25, 2014. Drury Co. v. Mo. United School Ins. Counsel ,
In U.S. v. Spearin , the United States Supreme Court found that the government offered a warranty "implied by law" to the contractor that the plans it rendered to him would be adequate for him to perform the work bargained for in their contract.
The third-party claims were for "negligence, contribution, and implied indemnity," seeking to hold Henthorn and WNB liable if the District was found liable in the action on appeal.
All references to Rules are to Missouri Supreme Court Rules (2015).
All statutory references are to RSMo 2000, unless indicated otherwise.
However, this does not mean the contractor does not have any obligations in every circumstance. For example, the United States Court of Federal Claims has imposed a "duty to inquire as to inconsistent specifications" and ambiguities if the plan includes "obvious or glaring defects." Metric Const. Co. v. United States ,
The only exception is unpublished district court opinions, which offer no persuasive value. Vill. at Deer Creek Homeowners Ass'n Inc. v. Mid-Continent Cas. Co. ,
In the Court of Federal Claims, from which Servidone was appealed from, civil cases that proceed on the merits do not provide jury trials, instead "a single judge" will be the sole finder of fact and decide the case. See
Whenever there are no "equitable adjustments" to be made for the plaintiff's own errors, however, the calculation using the TCM or the modified TCM should reach the same result.
§ 34.057, RSMo Cum. Supp. 2014.