Western District COA finds contract to rebuild house was not valid

Daily Record and the Kansas City Daily News-Press, Apr 28, 2006 by Denise G. Callahan

A breach of contract claim was transformed into a quantum meruit mission after the Missouri Court of Appeals, Western District, said a home builder and his clients never consummated a contract.

The appellate division reversed a trial court's decision that erred twice and directed the court to enter a new judgment awarding the proper sum of damages to the two parties under the theories of recovery pled and supported by the evidence presented at trial.

The trial court erred in determining that [Bob] Dulin was not entitled to recover against the Desselles in quantum meruit. That determination was based on the court's erroneous conclusion that they had entered into a valid written construction contract on June 12, 2001, opinion author Judge Joseph M. Ellis wrote.

The Facts

The case all began when fire destroyed the home of H. Kent and Shirley Desselle in Lake Lotawana on Feb. 7, 2001. The couple's insurance company, State Farm, agreed the home was a total loss and allowed $266,269 to rebuild.

Based on the insurance company payout, the Desselles contracted with Bob Dulin to build their new house for an approximate price of $270,000.

The contract, according to Dulin's Lee's Summit attorney, Ronald K. Barker, consisted of an old contract his client had copied so many times it was nearly illegible. It had a couple of clauses that would allow the house price to rise above the approximate price of $270,000 namely

The contract read, Said purchase price shall be increased by an amount equal to the sum of the following: (i) The net increase in cost resulting from change orders. (ii) The amounts spent by [Dulin] on items for which allowances have been made in excess of the amount of the allowances set forth in the Specifications attached.

After construction was started the Desselles did issue two written change orders - a $5,000 sub floor in the attic and fireplace enclosure in an upstairs storage area and a $15,000 seawall and rough-in. The Desselles paid the $15,000 out-of-pocket to the company who did the work so Dulin wasn't owed that amount.

No additional written change orders surfaced, but the building plans did change drastically, which is where the dispute begins.

The house that burned was 3,371 square feet. The new structure that replaced it was 5,139 square feet.

As construction continued the Desselles stopped paying Dulin his interim progress payments and also began paying some of the subcontractors on their own. The Desselles sued Dulin on a breach of contract claim. Dulin countersued, under a variety of theories.

The trial court ruled that there was a binding and complete express contract by and between Dulin and the Desselles at the time Dulin began building a new home for the Desselles, Ellis wrote. Accordingly, it viewed all of the evidence presented at trial through the lens of that contract. In particular, the trial court required Dulin to prove, as a prerequisite to recovery of any sum above and beyond the contract price of 'apt. $270,000,' that the construction expenses he actually incurred in building the Desselles' new home were either (1) the subject of a written change order; or (2) in excess of the maximum dollar allowances set forth in State Farm's itemized breakdown for each of the types or categories of rebuilding expenses State Farm had agreed to pay under the terms of its insurance contract with the Desselles.

Applying this standard to the amounts billed by Dulin and every subcontractor used by Dulin over the course of the entire construction project, the trial court allowed Dulin to recover from the Desselles some of the construction expenses Dulin had incurred as the general contractor, while disallowing others and holding Dulin solely responsible for them, he continued. Ultimately, the court awarded Dulin $29,533.14 on his breach of contract claims against the Desselles and awarded the Desselles $16,557.24 on their breach of contract claims against Dulin, resulting in a net judgment in favor of Dulin against the Desselles of $12,975.90.

The Appeal

Dulin filed the instant appeal challenging the validity of the contract among other claims. The appeals court judges agreed that the document the parties signed was void.

The trial court erroneously applied the law in finding that a valid express contract existed between the parties for construction of the Desselles' new home. The essential terms of the agreement had been reserved for future determination by the parties because there were no definite plans for the scope or specifications of the construction project and there was no agreement as to the contract price, the opinion reads. All portions of its judgment involving that finding, therefore, are reversed and remanded for further proceedings.

The court then went on to say that since the trial court erroneously declared the existence of a contract, Circuit Court Judge W. Stephen Nixon also erred in denying the quantum meruit claim. The appellate division used Nixon's own words - acknowledging monetary awards would be much different under quantum meruit - to instruct on how matter must now proceed.