Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-02-04156/USCOURTS-ca8-02-04156-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 02-4156

___________

O'Brien & Gere Technical *

Services, Inc., a New York *

Corporation, *

*

Plaintiff/Appellee, *

*

v. *

*

Fru-Con/Fluor Daniel Joint *

Venture; Fru-Con Construction *

Corporation, a Missouri Corporation; *

Fluor Daniel, Inc., a California *

Corporation, *

* Appeal from the United States

Defendants/Appellants. * District Court for the Eastern 

* District of Missouri. 

____________________ *

*

Fru-Con/Fluor Daniel Joint *

Venture; Fru-Con Construction *

Corporation; Fluor Daniel, Inc., *

*

Third Party Plaintiffs, *

*

v. *

*

Reliance Insurance Company, *

a Pennsylvania Corporation, *

*

Third Party Defendant/ *

Appellee. *

Appellate Case: 02-4156 Page: 1 Date Filed: 08/26/2004 Entry ID: 1803633 
1

As the case caption indicates, the venture consisted of Fru-Con Construction

Corporation and Fluor Daniel, Inc. 

2

For ease in reading, round numbers are utilized where they do not affect the

analysis. 

2

___________

Submitted: November 20, 2003

Filed: August 26, 2004 (corrected 10/26/04)

___________

Before BYE, RICHARD S. ARNOLD, and SMITH, Circuit Judges.

___________

BYE, Circuit Judge.

This case illustrates the adage which counsels against going into business with

someone who has less money than you. 

The Procter & Gamble Company hired the Fru-Con/Fluor Daniel Joint Venture

(the Joint Venture)1

 as a general contractor to build a paper-manufacturing complex

in Cape Girardeau, Missouri. In April 1998, the Joint Venture hired O'Brien & Gere

(OBG) to design and build six buildings in the complex for the lump sum of $15.3

million. In April 1999, after the project had undergone many changes and delays and

the Joint Venture had paid OBG $21.82

 million, the Joint Venture terminated OBG

before it completed the work it had been hired to perform. OBG then brought this

diversity action and submitted the case on a quantum meruit theory, seeking to

recover the reasonable value of its services, which exceeded the contract price. The

Joint Venture counterclaimed alleging OBG had breached the contract. 

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3

The Honorable Carol E. Jackson, United States District Judge for the Eastern

District of Missouri. 

4

As discussed in Part III, the court deducted $1.4 million in back-charges from

the quantum meruit award. 

5

Because they were to house the actual manufacturing plants, Buildings 51 and

52 were apparently the most important and costly. The four other buildings were

warehouses or similar facilities.

3

The district court3

 ruled the parties abandoned the contract, awarded OBG $5.4

million in quantum-meruit damages,4

 and dismissed the counterclaim. On appeal, the

Joint Venture contends the court erred in finding the parties abandoned the contract

and in calculating the reasonable value of OBG's services. We affirm. 

I

A. Contract Formation and Early Departures from the Subcontract

On February 24, 1998, the Joint Venture sent OBG a request for proposal

(RFP) inviting it to bid on the design and construction of the six buildings. The RFP

had two important requirements. First, Buildings 51 and 52, which were to hold the

paper production equipment, had to be completed by January 1, 1999, the date Procter

& Gamble expected to start operating the plants.5

 Second, the RFP required bidders'

proposals to conform to certain seismic requirements.

On April 8, 1998, OBG submitted a proposal to do the work for $15.4 million.

Because of the Joint Venture's compressed timetable, OBG proposed holding a

kickoff meeting within a week of the project award to determine the weight and

location of Building 51, so OBG could then begin the design process.

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4

OBG's proposal also contained a section entitled Commercial and Technical

Clarifications and Exemptions. One commercial clarification was OBG's request the

Joint Venture eliminate the “pay when paid” provision, under which the Joint Venture

would become obligated to pay its subcontractors only after it was paid by Procter &

Gamble. Because of OBG’s limited cash-flow, OBG required payment within thirty

days of invoicing in order to support its continued work on the project.

On April 14, 1998, the parties met to discuss the project and OBG's

clarifications. Two days later, OBG submitted its Best and Final Offer (BAFO),

which stated new technical clarifications. As a result of the technical clarifications

discussed on April 14, the bid price rose to $15.8 million, which OBG then agreed to

discount to $15.3 million, the final contract price. 

The next day, April 17, 1998, the Joint Venture sent OBG a Notice to Proceed,

which stated (1) the scope of the work would be according to the documents recently

exchanged and discussed, and (2) the official subcontract would be issued within

fourteen working days and was effective as of the date of the Notice. OBG

understood the “recently exchanged documents” to include the Joint Venture's RFP,

OBG's own original proposal, and OBG's BAFO. James Fox, OBG's project

manager, executed the Notice and entered into contracts with sub-tier contractors.

On April 27, 1998, the Joint Venture forwarded OBG eleven new drawings for

Buildings 51 and 52. On May 11, while the Joint Venture had yet to send the official

subcontract, the Joint Venture dropped Building 76 from OBG's scope of work.

Between this date and the date they executed the subcontract, July 6, OBG bid for a

new building, 75. Though OBG started work on Building 75 on July 13, it could not

submit invoices until September, when the Joint Venture executed the $7 million

subcontract modification adding the Building to the scope of the work. 

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5

On July 1, 1998, the Joint Venture sent the official subcontract to OBG.

Although the parties had already changed significant aspects of the agreement by

dropping building 76 and adding 75, the subcontract substantially restated the Joint

Venture's Request for Proposals.

On July 6, 1998, Mr. Fox signed and returned the subcontract. In his cover

letter, he noted the subcontract had not “incorporated all previously communicated

and agreed upon comments. To avoid further delays in subcontract execution and

release of payment . . . [OBG] has executed the Subcontract based upon incorporation

of . . . changes . . . by hand and initialed.” He also stated milestones would follow in

a separate document and crossed out the milestone dates in the body of the contract.

B. Design and Performance Delays

Neither party disputes the district court's finding both parties created delays

through faulty design and performance. First the design delays. The parties agreed

to use an expedited “design-build” process on the two most important buildings in the

complex, 51 and 52, which would be the site of the manufacturing plants. Once

Building 51's design was complete, Building 52's was to follow shortly with only

minor modifications. Early on, however, the Joint Venture made frequent changes

to Building 51's equipment loads by changing the location and quantity of equipment

components the Building would support. OBG's engineers could not finalize the

design for Building 51 until the Joint Venture could identify the proper equipment

loads.

OBG's own design flaws compounded the problem. Most critically, OBG's bid

had understated the amount of steel and concrete needed to meet the RFP's seismic

specifications meant to prevent building drift in the event of an earthquake. Also,

because the Joint Venture's initial drawings specified column lines could not be

moved without permission, OBG assumed the Joint Venture had arrived at the proper

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6

distances between buildings, although the subcontract stated that the Joint Venture's

drawings represented a “conceptual phase.”

As a result of the design flaws, Building 51's equipment-load requirements rose

from the 800 tons indicated in the RFP to 1,500 tons. The amount of steel and

concrete increased proportionally. While OBG had proposed using 790 tons of steel,

for example, it actually used 1,600 tons to complete the building. In time, OBG

admitted only 250 of the additional 810 tons could be attributed to the Joint Venture's

increased equipment loads. The rest were attributable to OBG's design flaws.

There were also delays in performance. The contract called for completion of

the project by April 20, 1999. When OBG was fired on April 9, 1999, none of the

buildings had been completed and construction on Building 61 had not begun.

Again, the parties appear not to dispute they both had a part in causing delays.

Starting with the eleven changes it forwarded to OBG on April 27, 1998, the

Joint Venture made eighty changes to Building 51's design elements, including the

weight and location of the mezzanines and the number, weight, and size of air

handling units on the roof. These elements affected the structural design. As a result,

within a four-month period through the summer of 1998, OBG had to reissue its

“Issued For Construction” drawings for Building 51's foundation eight times and for

its roof plan ten times. 

OBG also experienced delays in completing the steel erection. Its erection subtier contractor was one month late in starting, the sub-tier contractor maintained a

smaller crew than anticipated, and steel was late in arriving. Other delays were

caused by OBG's defective doweling and use of defective anchor bolts.

Finally, an unanticipated delay occurred when OBG discovered poor subsoil

and pre-existing fire lines which the Joint Venture had failed to designate in its

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6

Indeed, though the Joint Venture was concerned about the number of changes

it was passing on, OBG did not seek schedule extensions with respect to a majority

of the changes. 

7

If the parties could not reach an agreement as to price, then OBG would be

paid on a costs and materials basis for the change. 

7

conceptual drawings. Because of these conditions, a 300-foot-long retaining wall,

which OBG had agreed to build as work outside the scope of its bid, had to be

redesigned and made much larger. Due to the delays in completing the wall, the

construction of Building 51 had to be resequenced, with the dry-in date reset for

October 15. Despite the many delays and disputes, OBG eventually missed the

deadline for this critical first building by only two days.6

C. Changes in the Scope of Work

Through Paragraph 3.0, the subcontract required OBG to make changes to its

scope of work whenever it received written instructions for changes from the Joint

Venture. Although OBG had to “promptly proceed in compliance with such written

instructions,” it could not collect on any increase in costs from the change until the

parties had agreed to the price in writing.7

 The merger clause, moreover, required

modifications to the subcontract be in writing; otherwise, they were not enforceable.

Thus, the two provisions – Paragraph 3.0 and the merger clause – created a lag

between OBG's performance of changes and its receipt of payment for those changes:

OBG was required immediately to comply with the Joint Venture's written

instructions but it had to wait for the parties to agree to a price and then reduce the

agreement to writing before it could receive payment. Naturally, these delays

exacerbated OBG's cash-flow problems, and the possibility always lurked the parties

might not agree on the price of a change after even after OBG had already completed

the work. 

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8

The parties contemplated that, once a COR was approved, a subcontract

modification would be issued for signature. To reiterate, the Joint Venture would not

release payments without a signed subcontract modification. At trial, the Joint

Venture asserted that only a modification created an enforceable agreement, while

OBG asserted the approved COR was binding.

9

OBG submitted COR 28 with a price of $616,000. The Joint Venture does not

argue that $1.8 million price for the Building 51 acceleration was inflated. Thus, it

appears OBG indeed did spread out the costs of acceleration among other CORs. On

the other hand, the district court found evidence that OBG had also inflated the Big

Six to cover some $300,000 in extra costs it incurred in redoing defective work.

8

The change process itself is the subject of much dispute. Whenever OBG

determined it was required to perform work outside the scope of its base, it sent the

Joint Venture a Potential Change Orders form (PCO). If the Joint Venture agreed the

PCO order was a change to the scope of the contract, or if the Joint Venture wanted

to initiate such a change, the Joint Venture sent OBG a Change Order Request

(COR). During the course of the project, OBG sent the Joint Venture 111 PCOs, and

the Joint Venture sent OBG 89 CORs.8

 

The parties' disagreement came to a head as they tried to negotiate the costs to

accelerate the dry-in date for Building 51. On July 16, 1998, the Joint Venture issued

COR 28 and asked OBG to provide pricing to accelerate the partial dry-in date to

October 15. On August 12, OBG submitted a proposal in response to the COR,

indicating it could complete the acceleration for $2.1 million, a sum it later reduced

to $1.8 million. OBG alleged the Joint Venture instructed it to spread this sum across

five other open CORs, which, together with COR 28, became known as the Big Six.

The Joint Venture, of course, denied giving the directive and argued OBG drastically

underbid the contract and was attempting to make up the costs by submitting inflated

CORs.9

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9

On August 25, 1998, the Joint Venture signed the Big Six for a total amount

of $2.9 million, and in September, it prepared the corresponding subcontract

modifications. However, it never issued them. Instead, the Joint Venture wrote a

letter to all its subcontractors announcing that its representatives could approve

changes of no more than $5,000.

As the dispute over the Big Six swelled to a crisis, the parties held meetings on

October 21 and 23, 1998, at which OBG informed the Joint Venture it would not

perform work on change orders until the written subcontract modifications were

issued. In response, the Joint Venture reminded OBG of its contractual obligation to

comply with written instructions regarding changes and stated that OBG's refusal

would place it in default. Consequently, OBG continued performing work on the

disputed work changes. 

At the meetings, it also became clear the parties disagreed about the point from

which to measure scope-of-work changes: OBG insisted changes should be measured

from the drawings in place on April 17, 1998, the date of the Notice to Proceed. The

Joint Venture wanted to measure changes from the 30% drawings OBG issued on

May 20, 1998. Like the Big Six, this issue was never resolved.

D. Impasse and Exhibit A

Having reached an impasse, the parties established teams of negotiators to

examine the scope-of-work and change-order issues. The teams met through January

and February 1999 and had minimal success. During this same period, the parties

also executed Subcontract Modifications 002 through 007 in the total amount of

$1.25 million. Through Exhibit A to these modifications, OBG attempted to proceed

with the work even while protecting the right it claimed to be paid for the other,

disputed changes and delays: 

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10

EXHIBIT A

This Contract Modification is entered into by the parties with the

understanding that the Contractor [OBG] has made certain claims

against the Company [the Joint Venture] for delays, accelerations, and

schedule impacts occurring prior to the date of this Contract

Modification . . . . and certain claims against the Company for scope of

work changes and extra work that are not covered by this Contract

Modification, all of which remain unresolved and open . . . . and with

respect to which both parties hereto fully reserve and retain all of their

respective rights, positions, defenses and arguments.

Thus, the parties proceeded with the work although they could not resolve their

disputes. Ironically, even in signing the Modifications, the parties could not agree to

the incorporation of Exhibit A. All the contract modifications contained a recitation

that OBG agreed to perform the modification work “in accordance with all of the

terms and conditions of the [subcontract].” Moreover, the Joint Venture

representative did not initial Exhibit A, and instead wrote, “the Company rejects all

changes to this contract modification form which was agreed to in the original

subcontract.” 

E. Subcontract Amendment and Escrow Fund

By the time the disputes over changes and scope of work came to a head in

October 1998, OBG was experiencing cash-flow problems and was struggling to pay

its sub-tier contractors. In an effort to keep the sub-tier contractors on the job, the

Joint Venture and OBG executed an Amendment to the Subcontract on November 20,

1998. The Joint Venture agreed to make advance payments of up to $4 million in

exchange for OBG's completion of new milestone dates. OBG received an advance

of $1 million upon execution of the Amendment and another advance of $1.7 million

in December 1998 when it achieved some of the amended milestones. OBG did not,

in the end, meet all the new milestones, and the Joint Venture later learned OBG used

the advance payments to satisfy its loans before paying its sub-tier contractors.

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The Amendment acknowledged OBG's “cash flow problems have arisen as a

result of both parties' delays in the timely resolution of Subcontractor's change orders

which have produced corresponding delays in Subcontractor's invoicing and

payments.” The Amendment also contained a pledge by both parties that they would

“continue negotiating their respective claims in good faith” and that “the parties shall

conduct a meeting on or before December 3, 1998 to establish a procedure for the

timely resolution of all change orders.”

In March 1999, in yet another attempt to pay OBG's subcontractors, the Joint

Venture agreed to place $5.3 million in escrow on the condition OBG's surety,

Reliance Insurance, do the same. Reliance agreed. But, unbeknown to the Joint

Venture, Reliance delayed establishing its fund until it renegotiated a priority-ofinterest agreement with OBG's loan holder. Meanwhile, and without the Joint

Venture's knowledge, OBG offered its sub-tier contractors settlement packages of

fifty to sixty cents on the dollar. Upon learning of the settlement offers, the Joint

Venture became more concerned the sub-tier contractors would quit, and this concern

became another factor in its decision to terminate OBG. 

F. Termination

Pursuant to the subcontract, the Joint Venture withheld the January and

February 1999 progress payments because OBG had failed to reach the agreed-to

goals. The Joint Venture then fired OBG in early April 1999.

II

The parties to this diversity action agree Missouri substantive law applies. In

Missouri, “the decree or judgment of the trial court will be sustained by the appellate

court unless there is no substantial evidence to support it, unless it is against the

weight of the evidence, unless it erroneously declares the law, or unless it erroneously

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12

applies the law.” Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. 1976) (defining

standard applicable to bench trials). In this appeal, the Joint Venture argues the

district court's judgment finding abandonment of the contract was against the weight

of the evidence. 

Under Murphy, the reviewing court sets aside the judgement as against the

weight of the evidence only if it firmly believes the judgment is wrong. Id. ; Lucent

Techs., Inc. v. Mid-West Elecs., Inc., 49 S.W.3d 236, 241 (Mo. Ct. App. 2001). This

standard of review shows “great deference” to the findings of a trial judge. Alltype

Fire Prot. Co. v. Mayfield, 88 S.W.3d 120, 123 (Mo. Ct. App. 2002).

A. Abandonment of the Contract

Under Missouri law, recovery in quantum meruit is generally limited to the

agreed-upon price for the goods and services; the contract price does not limit

recovery, however, where the parties abandon the contract. Holland v. Tandem

Computers, Inc., 49 F.3d 1287, 1288-89 (8th Cir. 1995). Because OBG already

received payment ($21 million) in excess of the contract price ($15.3 million), OBG

can only recover in quantum meruit if the evidence supports a finding the parties

abandoned the contract.

“An abandonment may be accomplished by express mutual consent or by

implied consent through the actions of the parties.” Schwartz v. Shelby Constr. Co.,

338 S.W.2d 781, 788 (Mo. 1960). “Abandonment can be shown by acts and conduct

consistent with the intent to abandon,” and the district court may discount contrary

testimony that no abandonment existed. Land Improvement, Inc. v. Ferguson, 800

S.W.2d 460, 464 (Mo. Ct. App. 1980). Proof of abandonment must be made by clear,

unequivocal, and decisive evidence, and must manifest the parties' actual intent to

abandon contract rights. McBee v. Gustaaf Vandecnocke Revocable Trust, 986

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13

S.W.2d 170, 173 (Mo. 1999). The Joint Venture argues the evidence shows the

parties continually manifested an intent to be bound by the subcontract. 

In this case, reviewing the district court's judgment with the deference due to

it under Missouri law, we cannot say we are left with a firm belief the judgment is

wrong. See Murphy, 536 S.W. 2d at 32 (“Appellate courts should exercise the power

to set aside a decree or judgment on the ground that it is 'against the weight of the

evidence' with caution and with a firm belief that the decree or judgment is wrong.”).

In other words, OBG presented clear substantial evidence the parties manifested an

intent to abandon their rights under the contract. 

Most fundamentally, the parties could not keep up with the extremely tight

construction schedule they set for themselves. Contrary to their expectations in

reaching an agreement, the kickoff meeting, subcontract execution, and first

modification were each delayed by several precious weeks or more. Later, defective

designs and performance by both parties caused further delays, which in turn had a

detrimental domino effect in two ways: They set back the cumulative work schedule,

and they exacerbated OBG's precarious cash-flow position, which in turn forced OBG

again to postpone work. In short, the project progressed at a different pace from that

contemplated by the subcontract; the parties departed from the contract milestones,

even after they were amended.

Second, the actual job became substantially different from the contract job.

The scope, quantity, and frequency of changes are factors in a court's finding the

parties abandoned a contract. See Schwartz, 338 S.W.2d at 788-90. As to Building

51 alone, there were eighty changes to the equipment locations, and several changes

to the equipment load, which was ultimately doubled. There were similarly frequent

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14

changes to the number, size, and weight of air handling units on the roof, duct work,

pipe racks, and other components. Such changes affected the structural design which

was continually revised and delayed. OBG reissued the “Issued for Construction”

drawings for Building 51's foundation eight times and for its roof plan ten times in

four months. Similarly, the need to redesign the retaining wall, which itself was

change work, complicated and delayed work on Building 51. Perhaps under normal

circumstances in the construction business, a myriad of changes may not so transform

a project as to reflect an abandonment of the contract by the parties. This case is

different. While the parties understood a certain amount of change was inherent to

the design and construction process, the number and frequency of the changes

transformed, or so the district court could reasonably believe, the nature of the task

OBG believed it undertook when it signed the subcontract while it was strapped for

cash. 

Third, about half-way through the work, it became apparent the parties did not

agree about two fundamental facts: What documents defined the base scope of the

work and the design stage from which work changes should be measured. The parties

never resolved these differences. In other words, for half of the time they were

together on the project, they operated by agreeing to disagree, without a shared

understanding of basic rights and duties under the subcontract. 

Fourth, though the subcontract allowed the Joint Venture to make payments

directly to OBG's sub-tier contractors, the parties renegotiated advanced payments in

exchange for new subcontract milestones in lieu of issuing subcontract modifications.

Also, toward the end of OBG's services, the Joint Venture funded the escrow account.

As the district court stated, “the need to resort to these extra-contractual devices to

address a matter as fundamental as project pricing for change work reinforces the

conclusion that the parties abandoned the contract.”

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15

The most crucial evidence supporting the court's finding of abandonment may

be the breakdown of the work change process. The contract contained an inherent

flaw: The Changes clause required OBG immediately to comply with change

requests, even while the price was being negotiated. When the parties could not

resolve their disputes over the prices of the Big Six, OBG was forced to continue

working – something it could not do because of its cash-flow problems. In essence,

given OBG's financial state, the Changes clause led to an impasse which effectively

suspended the contract.

This flaw in the subcontract surfaced after a dispute erupted over Big Six. To

whatever extent OBG underbid the contract and then inflated costs of the Big Six to

make up the difference, there were other delays and changes for which OBG was not

responsible and which increased OBG's costs substantially. Nevertheless, the Joint

Venture withheld payment on the Big Six by declining to issue contract modifications

as required by the subcontract, though the CORs contained undisputed charges,

including the $1.8 million cost of accelerating Building 51. Meanwhile, apparently

because it had already committed resources to the project and needed whatever cash

it could get, OBG remained on the job. Likewise, apparently because it faced

looming completion deadlines, the Joint Venture kept on the job a subcontractor it

believed had underbid the contract and inflated CORs. In other words, the parties

altogether abandoned the subcontract's flawed process for pricing and paying

changes, resorting to whatever expedient they could conceive to see the project

through. 

The parties resorted to the Amendment and the modifications which were

themselves problematic. In signing the Amendment and all the modifications but one,

OBG crossed out language reaffirming the contract and attached Exhibit A, which

acknowledged the fact that the change process had ground to a halt because of

unresolved disputes. In turn, the Joint Venture representative did not initial Exhibit

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16

A and instead wrote, “the Company rejects all changes to this contract modification

form which was agreed to in the original subcontract.” 

The Joint Venture argues the Amendment and modifications are evidence the

parties repeatedly reaffirmed the contract. In truth, however, the Amendment and

modifications only cast light on the reality the parties maintained a working

relationship outside the parameters of the contract, so much so that they could not

even agree to disagree. We conclude there was substantial evidence to support the

district court's finding the parties abandoned the subcontract. 

III

Quantum meruit recovery is limited to the reasonable value of the services

performed. Bash v. B.C. Constr. Co., 780 S.W.2d 697, 698 (Mo. Ct. App. 1989). In

reviewing the district court's determination of reasonable value under Missouri law,

we affirm the determination “unless there is no substantial evidence to support it, it

is against the weight of authority, or it erroneously declares or applies the law.”

Kennco Contractors, Inc. v. Duncan, 53 S.W.3d 557, 559 (Mo. Ct. App. 2001)

(applying the Murphy standard).

Reasonable value is “the price usually and customarily paid for such or like

services at the time and in the locality where the services were rendered.” Kinetic

Energy Corp. v. Trigen Energy Corp., 22 S.W.3d 691, 697 (Mo. Ct. App. 1999)

(citation omitted). The plaintiff must shoulder the burden of proving the reasonable

value of its services. Id.

The district court determined the reasonable value of OBG's services as

follows. First, it calculated the value of OBG's base subcontract work by adding the

subcontract price of $15,300,000 and the price of the eight approved modifications,

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17

$9,525,884, for a total of $24,825,884. Then, the court subtracted the Joint Venture's

payments of $21,772,082, for a balance of $1,567,975 due on the base work. 

The court then calculated the value of the change work at $3,797,891,

reflecting the CORs which the Joint Venture had approved but not absorbed in

executed contract modifications. In doing so, the court made a finding of fact the

approvals, in absence of testimony from the Joint Venture employee who signed the

CORs, represented the value of the change work listed on those CORs. Adding the

value of the unpaid change work to the balance due on the base work, the court

arrived at a figure of $6,851,693. 

Finally, the court subtracted $1,369,007 for back-charges for OBG's scheduling

delays and for the Joint Venture's costs in completing and redoing OBG's work. In

summary, the district court concluded OBG was entitled to recover in quantum meruit

the amount of $6,851,693, and the Joint Venture was entitled to offset that amount

by $1,369,007 in back-charges, for a total recovery by OBG in the amount of

$5,482,686. 

The Joint Venture challenges the award on several grounds. First, it correctly

cites Bash for the proposition the contract price cannot serve as the measure of

damages in quantum meruit where the plaintiff has not fully performed the contract.

780 S.W.2d at 699 (stating the agreed price for full performance is not a reasonable

value for partial performance). OBG, in turn, correctly distinguishes that case by

citing Zeller v. Janssen for the proposition the contract can serve as a basis for

valuation where there is evidence of the percentage of work completed. 569 S.W.3d

5, 6 (Mo. Ct. App. 1978) (stating contractor completed 68% of the work and therefore

a reasonable value of the work within the scope of contract equaled 68% of the

contract price).

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These citations are red herrings, for the present case does not manifest the

concerns which bar use of the contract price to begin with. Under the subcontract,

the Joint Venture paid OBG incrementally for each milestone and for undisputed

work changes. Using this progressive method, the Joint Venture paid OBG

$21,772,082, well over the original subcontract price of $15,300,000. While OBG

never finished the buildings, it clearly provided services worth the price of the

original subcontract and its subsequent modifications. Indeed, because of the lag in

the contractual scheme, the Joint Venture apparently did not pay OBG until well after

it had completed the paid-for work. It is also undisputed the Joint Venture suspended

payments when it believed that OBG could not proceed to the Joint Venture's

satisfaction. Under this payment structure, at most there could be doubt as to OBG's

full performance of only the last, marginal modification. Thus, the price of the

subcontract, including modifications, was a reliable method for valuating OBG's base

services.

Next, the Joint Venture argues the district court's calculations created a $2.3

million windfall for OBG. The Joint Venture points to the testimony of OBG's

project manager who apparently stated “when we left the job we had $2.3 million of

work remaining.” From this testimony, the Joint Venture concludes the OBG's own

work valuation priced the base work services at $21,030,057 ($23,340,0576 minus

$2.3 million). As a factual matter, this conclusion does not follow necessarily from

the manager's testimony. The court may have easily understood the testimony to

reflect only the amount of work remaining, regardless of how much work OBG had

already completed. For example, OBG could have performed $30 million worth of

services to get to the point where there was still $2.3 million worth of work left to

perform. 

Finally, the Joint Venture points out its expert testified the CORs contained

overstatements to the tune of $1.6 million. Indeed, the court specifically found the

CORs generally contained “overstated unit prices and material quantities,

Appellate Case: 02-4156 Page: 18 Date Filed: 08/26/2004 Entry ID: 1803633 
10Moreover, among the ten disputed CORs was COR 28 for accelerating

Building 51. To repeat, OBG argued this COR was understated by $1.2 million and

the difference spread among the other five CORs in the Big Six. The court found

that, among the nine other CORs in dispute, those belonging to the Big Six overstate

the price by only $350,000. Thus, even on the expert's testimony, OBG provided the

Joint Venture $850,000 in unpaid services. 

19

duplications, and mistakes.” Still, as to the ten CORs which the Joint Venture had

chosen to approve, the Court found the approval was sufficient evidence of the

parties' valuation of the work. Faced with conflicting evidence, the district court

apparently decided that, as to these ten CORs, the evidence of the Joint Venture's

signature on the approval line weighed more heavily than the testimony of the expert

witness.10 This decision was within the province of the judge as the fact-finder. 

We note the district court specifically found that its calculations did not

compensate OBG for certain services which OBG undoubtedly provided but which

were difficult to valuate reliably (for example, the additional work needed to build the

retaining wall). We also note the Joint Venture argued all along that OBG had

underbid the contract. As the district court suggested, the value of OBG's services

may have exceeded the damages award.

IV

Because the finding the parties abandoned the contract is supported by the

weight of the evidence, we affirm the district court's judgment. Because substantial

evidence supports the district court's determination of the reasonable value of OBG's

services, we affirm the court's damages award.

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Appellate Case: 02-4156 Page: 19 Date Filed: 08/26/2004 Entry ID: 1803633