Court Opinion

ID: 4706379
Source: CourtListenerOpinion
Date Created: 2021-07-26 16:01:15.601083+00
Date Added: 2024-06-11T08:06:36.454351
License: Public Domain

United States Court of Appeals
        For the Eighth Circuit
    ___________________________

            No. 20-2640
    ___________________________

      Timber Ridge Escapes, LLC

                   Plaintiff - Appellant

                     v.

   Quality Structures of Arkansas, LLC

                   Defendant - Appellee

        ------------------------------

   Quality Structures of Arkansas, LLC

                    Plaintiff - Appellee

                     v.

        Welk Resort Group, Inc.

                          Defendant

      Timber Ridge Escapes, LLC

              Defendant - Appellant
    ___________________________

            No. 20-2928
    ___________________________
                        Timber Ridge Escapes, LLC

                                     Plaintiff - Appellant

                                       v.

                    Quality Structures of Arkansas, LLC

                                     Defendant - Appellee

                          ------------------------------

                    Quality Structures of Arkansas, LLC

                                      Plaintiff - Appellee

                                       v.

                          Welk Resort Group, Inc.

                                             Defendant

                        Timber Ridge Escapes, LLC

                                   Defendant - Appellant
                                ____________

                  Appeals from United States District Court
              for the Western District of Missouri - Springfield
                               ____________

                          Submitted: June 16, 2021
                            Filed: July 26, 2021
                               ____________

Before LOKEN, KELLY, and ERICKSON, Circuit Judges.
                           ____________

                                       -2-
ERICKSON, Circuit Judge.

      This appeal arises out of a rancorous construction dispute between Timber
Ridge Escapes, LLC (“Timber Ridge”) and Quality Structures of Arkansas, LLC
(“Quality Structures”). After a nine-day bench trial, the district court awarded Timber
Ridge $22,500 in damages and Quality Structures an amount in excess of $5 million
in damages. Timber Ridge appeals.1 With one exception, we affirm.

I.    BACKGROUND

       Timber Ridge is a self-described owner/developer of a resort near Branson,
Missouri. In July 2015, Timber Ridge entered into four virtually identical contracts
with Quality Structures under the terms of which Quality Structures agreed to serve
as the general contractor for the project (the “construction contracts”).2 Pursuant to
the contract, Quality Structures agreed to construct two buildings (Buildings 8 and
9) and two building pads (Building Pads 10 and 11) for Timber Ridge. Over time the
relationship between Timber Ridge and Quality Structures deteriorated, and on
February 6, 2017, Timber Ridge terminated the contracts. After the termination,
Timber Ridge seized some of Quality Structures’ property, including documentation
for the project. Timber Ridge refused to return the property until the parties reached
a partial settlement on June 1, 2017.

       On June 12, 2017, Timber Ridge sued Quality Structures asserting claims
sounding in both contract and tort. Timber Ridge sought over $2 million in damages
on its claims for breach of contract, breach of the implied covenant of good faith and

      1
       Quality Structures initially filed a cross appeal, which it later moved to
dismiss. We granted that motion.
      2
      The construction contracts each consist of a Standard Form Agreement, a
Schedule of Values, and General Conditions.

                                         -3-
fair dealing, promissory estoppel, tortious interference with contractual relations,
breach of contract to indemnify and defend as well as claims for a declaratory
judgment and for injunctive relief. At its heart, Timber Ridge’s complaint alleges that
Quality Structures caused undue delays and performed unsatisfactory work. Quality
Structures filed an answer and counterclaim seeking over $6 million in damages for
sums it claimed it was owed for the work it completed. The counterclaims sought to
pierce the corporate veil and included claims for breach of contract, violation of the
Missouri Prompt Pay Act, reformation, conversion, fraudulent inducement, quantum
meruit, equitable entrustment, and promissory estoppel.

      The lawsuit quickly descended into a quagmire of finger pointing, which was
aptly described by the district court as involving the expenditure of “significant
resources demonstrating every way that the other party breached the terms of the
contracts and why they themselves are blameless.” This attitude on the part of parties
made trial of the case exponentially more difficult.

      Prior to trial, the court resolved such issues as it could on summary judgment.
Following a bench trial, the court issued findings of fact and conclusions of law
awarding Timber Ridge $22,500.00 for delays caused by Quality Structures,
approximately $5.2 million in damages to Quality Structures, and $101,239.62 in
attorney’s fees and $35,490.46 in costs to Quality Structures. Timber Ridge appeals,
arguing the district court erred in awarding Quality Structures (1) damages for extra
excavation work, (2) certain other damages, and (3) attorney’s fees.

II.   DISCUSSION

      A.     Extra Excavation

     The construction contracts originally contemplated excavation work at agreed
upon prices: $75 per cubic yard for excavated rock and $6.85 per cubic yard for

                                         -4-
excavated dirt. About a month after the parties entered into the construction
contracts, Timber Ridge sent Quality Structures written instructions that greatly
expanded the scope of the excavation work. This expansion increased the amount of
rock and dirt that Quality Structures had to excavate, especially the amount of rock
that needed to be excavated.

        Quality Structures performed the extra excavation work as instructed but before
Quality Structures could request additional payment for the work, Timber Ridge
terminated the contracts. When Quality Structures requested payment (about a month
after the termination), Timber Ridge refused to pay. The district court concluded that
Timber Ridge breached the construction contracts when it failed to pay for the
additional excavation work. Timber Ridge contends Quality Structures (1) failed to
substantially comply with “contractual predicates to payment,” and (2) did not put
forth sufficient evidence to “prove damages from nonpayment.”

             1.     Substantial Compliance

       We apply Missouri substantive law to this diversity action. See Erie R.R. Co.
v. Tompkins, 304 U.S. 64, 78 (1938). To recover for a breach of contract under
Missouri law, Quality Structures must establish that it substantially performed its
obligations under the contracts. See Moore v. Armed Forces Bank, N.A., 534 S.W.3d
323, 327 (Mo. Ct. App. 2017) (listing the elements for breach of contract). A party
substantially performs if the contract deviation is “very slight” and the opposing party
has “received substantially the same benefit it would have from literal performance.”
Pepsi MidAm. v. Harris, 232 S.W.3d 648, 653 (Mo. Ct. App. 2007).

      While the parties apparently dispute whether federal law or Missouri law
provides the standard of review for the district court’s substantial performance
decision, they agree that the appropriate standard of review is for clear error. Because

                                          -5-
the standard of review under both Missouri law and federal law is for clear error we
need not resolve the dispute over which law applies.

       We will only reverse a finding under the clearly erroneous standard if it “is not
supported by substantial evidence in the record, if it is based on an erroneous view
of the law, or if we are left with the definite and firm conviction that an error was
made.” Federated Mut. Ins. Co. v. Moody Station & Grocery, 821 F.3d 973, 977 (8th
Cir. 2016) (citations omitted); Flooring Sys., Inc. v. Saat Constr. Co., 100 S.W.3d
835, 837 (Mo. Ct. App. 2003) (same). The evidence in the record makes clear that
the scope of the work was both dramatically expanded and that Quality Structures
performed the expanded scope of the work. The district court did not clearly err in
finding substantial performance under the contracts related to the excavation work.

        Even though substantial performance occurred, Timber Ridge objects to the
district court’s determination of the amount due for the performance. Under the
contracts, the scope of work and amounts due for that work could be adjusted through
various mechanisms including, as relevant here, a Construction Change Directive.
Specifically, § 7.3 of the General Conditions for the construction contracts provides
for Construction Change Directives—that is, “written order[s]” by Timber Ridge
“directing a change in the Work prior to agreement on adjustment, if any, in the
Contract Sum or Contract Time, or both.” A Construction Change Directive may
result in an increase in the Contract Sum “based on” (among other things) “unit prices
stated in the Contract Documents or subsequently agreed upon.”

      The district court found that Timber Ridge issued a Construction Change
Directive under § 7.3 for the extra excavation work and that Quality Structures
substantially complied with § 7.3, which entitled it to receive payment for an
increased amount under the contract. The record contains evidence that Timber
Ridge submitted a written order to Quality Structures that directed a change in the
excavation work. The district court did not err in finding this writing was sufficient

                                          -6-
to be a Construction Change Directive. We also conclude that the court properly
calculated an increase in the Contract Sum based on the unit prices agreed to by the
parties in the original contracts for excavation ($75 per yard for rock and $6.85 per
yard for dirt).

       Timber Ridge’s argument that Quality Structures failed to substantially comply
with the requirements for payment because Quality Structures “did not provide
documentation of its actual costs” is unavailing. Under certain circumstances, § 7.3.6
requires “an itemized accounting” of expenses (such as labor, equipment, and
overhead) for an adjustment in the Contract Sum. But, even assuming an itemized
accounting was required,3 the district court did not clearly err in finding that Quality
Structures substantially complied with the requirement. When it requested payment
for the extra excavation work, Quality Structures submitted itemizations documenting
the total materials excavated and overhead costs. Because the parties agreed to pay
for excavation based on unit prices, which captured labor and equipment costs, it is
not clearly erroneous to conclude that Quality Structures’ documentation substantially
complied with any requirement to provide an “itemized accounting.”4 The district
court did not clearly err in determining that Quality Structures substantially complied
with the contractual predicates for payment for the extra excavation work.

      3
        We are not convinced that requirement applies to this adjustment based on unit
prices under § 7.3.3.2. Rather, § 7.3.6 requires itemization if Quality Structures “does
not promptly respond or disagrees with the method for adjustment in the Contract
Sum” or for adjustments under § 7.3.3.3, neither of which appear to be applicable.
      4
        We also find persuasive the district court’s finding that any failure by Quality
Structures to comply with the Construction Change Directive process was excused
by Timber Ridge’s material breach in terminating the contracts and thereafter seizing
Quality Structures’ property, including its documentation for the project, and
initiating suit.

                                          -7-
             2.    Proof of Damages

       Timber Ridge contends the district court erred in finding Quality Structures
proved damages related to Timber Ridge’s failure to pay for the additional excavation
work. We again review for clear error. See Vigoro Indus., Inc. v. Crisp, 82 F.3d 785,
789 (8th Cir. 1996) (noting that the court’s determination of damages is a form of
fact-finding to be set aside only if clearly erroneous); Williams v. Williams, 99
S.W.3d 552, 557 (Mo. Ct. App. 2003) (affirming the trial court’s damages award
unless clearly erroneous).

       To recover damages for breach of contract, Quality Structures must prove both
the existence and the amount of damages with “reasonable certainty.” Williams, 99
S.W.3d at 557 (citations omitted). Timber Ridge argues that Quality Structures did
not meet its burden when it failed to properly maintain and produce records of the
actual cost of the extra excavation work, including records for labor and equipment
use. This argument is a non-sequitur as the contract established a price for the
additional excavation at a fixed price per cubic yard—$75 for rock and $6.85 for dirt.

      Timber Ridge also claims Quality Structures’ expert Josh Holland’s testimony
was unreliable as to the total number of cubic yards excavated by Quality Structures
and the damages award is therefore speculative as to the excavation claim. We
disagree.5 Holland, a civil engineer, used engineering software to calculate the
volume of materials excavated. Although Holland disclaimed that his calculations

      5
       To the extent that Timber Ridge challenges the district court’s methodology
in calculating damages, we recognize that issue could be subject to de novo review.
See Knowlton v. Anheuser-Busch Cos. Pen. Plan, 849 F.3d 422, 430 n.7 (8th Cir.
2017) (noting methodology is reviewed de novo in an ERISA case); Comens v. SSM
St. Charles Clinic Med. Gr., Inc., 335 S.W.3d 76, 81 (Mo. Ct. App. 2011) (“The
proper measure of damages” is “review[ed] de novo.”). But the reliance on Holland’s
calculations meets muster under any standard of review.

                                         -8-
were a “best guess estimate,” he testified that he reached his conclusions to a
reasonable degree of engineering certainty. Holland’s methodology is the industry
standard for calculating excavation volumes and is the same methodology the parties
used to approve the project’s original Schedule of Values.6 The district court
permissibly relied on Holland’s calculations when finding that Quality Structures
proved damages based on the cubic yards it excavated. See Denton Constr. Co. v.
Mo. State Highway Comm’n, 454 S.W.2d 44, 56 (Mo. 1970) (accepting estimated
excavation volumes as the “best available” evidence of and a “reasonable basis” for
damages where “the actual amount of damages” was “not be susceptible of exact
proof” (citations omitted)). Finding unpersuasive Timber Ridge’s remaining
challenges to the damages award for the extra excavation work, we affirm.

      B.     Certain Other Damages

       The district court also awarded Quality Structures damages on its breach of
contract and reformation counterclaims for other amounts owing on work that Quality
Structures performed.7 Timber Ridge again argues that the district court clearly erred
in finding Quality Structure proved these damages. We disagree, with one exception.

      6
        And Holland testified that calculations after excavation (such as for the
damages computation) are more accurate than calculations before excavation (such
as for the Schedule of Values).
      7
       Specifically, the court awarded damages for certain unpaid Change Order
Requests, Pay Applications, and additional amounts due after the court reformed the
construction contracts to increase the Guaranteed Maximum Prices for Buildings 8
and 9 due to mutual mistake of the parties. This was permissible as the construction
contracts each had a Guaranteed Maximum Price, which reflected the maximum price
that Timber Ridge would have to pay under the contracts, absent a change through
the appropriate contractual procedures.

                                         -9-
      Timber Ridge points us to one specific error in the damages award. On a
Change Order Request for site lighting for Building 8, the district court awarded
$68,599.03. However, Quality Structures indicated at trial that it was not seeking to
recover for labor and certain bollards on that Change Order Request. Excluding those
amounts from the damages award, we are unsure how the damages on this specific
Change Order Request would total $68,599.03. We ask the district court to
reconsider that amount in light of the concessions made at trial and either adjust its
award or explain its calculation.

       We are unmoved by Timber Ridge’s remaining challenges to the damages
award. Quality Structures supported its damages requests with documentation (such
as invoices and internal records), testimony, or both. On careful review, we conclude
the district court did not clearly err in either relying on that evidence or calculating
the damages from that evidence.8 With the one exception noted above, we affirm.

      C.     Attorney’s Fees

      Finally, Timber Ridge argues that the district court abused its discretion in
awarding Quality Structures attorney’s fees. See Weitz Co. v. MH Wash., 631 F.3d
510, 528 (8th Cir. 2011) (reviewing for abuse of discretion and noting that state law
governs the availability of attorney’s fees in diversity cases). The district court
awarded Quality Structures $101,239.62 in fees under the Missouri Prompt Pay Act

      8
        Timber Ridge contends two issues infect the entire damages award: (1) that
no final accounting was conducted under the construction contracts, and (2) that
Quality Structures relied on Guaranteed Maximum Prices under the construction
contracts to compute how much work it completed (while it awaited the final
accounting). Viewed in isolation, these concerns could carry weight. But we agree
with the district court that Timber Ridge is responsible for these problems by
accepting Quality Structures’ methodology throughout the project while awaiting
final accounting and then making a final accounting impossible. The district court
did not clearly err in finding damages, even with these obstacles.

                                         -10-
(“PPA”), Mo. Rev. Stat. § 431.180. The district court limited fees to those arising
only from Timber Ridge’s failure to pay Pay Applications submitted prior to
termination ($958,773.07), and its failure to pay Change Order Requests prior to
termination ($448,973.23) because it found Timber Ridge reasonably disputed the
remaining claims.

       The PPA authorizes an award of attorney’s fees in construction disputes if the
construction contract (1) was entered into after August 28, 1995, and (2) required
scheduled payments which were not made. See Mo. Rev. Stat. § 431.180. Timber
Ridge contends the second requirement was not met for the pre-termination Change
Order Requests because those requests did not generate a “due date for payment.”
But, absent Timber Ridge’s material breaches of the construction contracts, those
requests would have been approved and generated a scheduled payment. Timber
Ridge cannot skirt a due date for payment (and therefore liability under the PPA) by
wrongfully failing to process Change Order Requests. Because the district court, at
least implicitly, found that Timber Ridge was required to pay Quality Structures at the
completion of the work (before termination), this argument fails. See Twehouse
Excavating, Inc. v. Jefferson City Ret., LLC, 613 S.W.3d 499, 507 (Mo. Ct. App.
2020) (finding that payment being due at the completion of work was sufficient for
a scheduled payment).

       Timber Ridge next asserts the district court abused its discretion in awarding
fees because Timber Ridge withheld all payment from Quality Structures “based upon
a legitimate dispute.” While Missouri law allows courts to deny fees based on a
legitimate dispute, it does not require courts to do so. See Walton Constr. Co. v.
MGM Masonry, Inc., 199 S.W.3d 799, 807–08 (Mo. Ct. App. 2006). Finding no
abuse of discretion, we affirm the fee award.

                                         -11-
III.   CONCLUSION

      We affirm the judgment of the district court with one exception. We reverse
and remand for reconsideration consistent with this order the award of $68,599.03 in
damages on the Change Order Request for site lighting for Building 8.
                      ______________________________

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