Repair Masters Const., Inc. v. Gary

• Decision Date: 03 March 2009
• Docket Number: No. ED 91290.,ED 91290.
• Citation: 277 S.W.3d 854
• Parties: REPAIR MASTERS CONSTRUCTION, INC., Plaintiff/Respondent, v. Wanda GARY, Defendants/Appellant.
• Court: Missouri Court of Appeals

277 S.W.3d 854

REPAIR MASTERS CONSTRUCTION, INC., Plaintiff/Respondent, v. Wanda GARY, Defendants/Appellant.

No. ED 91290.

Missouri Court of Appeals, Eastern District, Division Three.

March 3, 2009.

Thomas Carter, II, St. Louis, MO, for appellant.

Jeffrey R. Schmitt, St. Louis, MO, for respondent.

CLIFFORD H. AHRENS, Judge.

Wanda Gary ("Homeowner") appeals from the judgment of the trial court awarding Repair Masters Construction, Inc. ("Contractor") $8,473.78 in damages for breach of contract and $2,000.00 for its attorney's fees. We reverse.

Homeowner's house located at 4611 St. Louis Avenue in the City of St. Louis Missouri, was damaged by fire on August 23, 2006. Contractor received a call to board up the house that night, and it did so at approximately 9:30 p.m.¹ A salesman from Contractor discussed repairing the building with Homeowner, and that night she signed a document called a "Service Agreement." The Service Agreement authorized Contractor to perform work on the house, "As described in the scope submitted to/by our insurance company." Homeowner also agreed to "accept responsibility for payment upon completion. PER INSURANCE ESTIMATE 1/3 DOWN, 1/3 ROUGH IN, BALANCE ON COMPLETION." The second page of the Service Agreement contained a clause under the heading "DELAYS, ETC." that provided that "Purchaser further agrees to pay Contractor an amount equal to 15% of the total contract price should Purchaser cancel this contract for any reason prior to the initiation of work on the Purchaser's roof." (Emphasis added). This document did not contain a set price for the work to be performed, nor did it require that any estimates for work to be performed be accepted or approved by Homeowner or Homeowner's insurance provider. Contractor examined the damaged property, took photos, and sent several estimates for different scopes of work to be done to Homeowner's insurance company, with the amounts ranging from $36,506.98 for an estimate dated September 15, 2006, to $91,606.28, which included a stated profit of $7,633.86 as well as overhead of $7633.86 for an estimate dated October 3, 2006. The insurance company rejected these estimates. Homeowner hired a public adjuster at Contractor's suggestion, who prepared two estimates. The first estimate, dated September 13, 2006, stated a net claim of $39,626.34, and the second estimate of October 15, 2006, asserted a net claim of $56,498.53. Homeowner called Contractor to cancel the "contract." On November 1, 2006, Contractor sent a letter to Homeowner that blamed the delays on starting the repairs on the failure of the public adjuster and Homeowner's insurer to agree on the scope of work. It stated that she could use another contractor and she would be released from the agreements signed on August 23, 2006, for a cancellation fee of fifteen percent of its last estimate of $64,498.53. Another contractor performed the work.

Contractor sued Homeowner for breach of contract. Homeowner's answer to Contractor's complaint raised the affirmative defense of unconscionability. The case was tried without a jury. Two witnesses testified, the president/owner of Contractor and Homeowner. Contractor's salesman who proposed the Service Agreement to Homeowner did not. The Service Agreement, along with Contractor's several estimates, the estimates of the public adjuster, and several pieces of correspondence were entered into evidence.

The trial court found that Homeowner's house was damaged by fire on August 23, 2006, that Contractor did emergency boarding up that night, and that Homeowner entered into a contract with Contractor that same night that had a liquidated damages clause. It found that there were a number of bids presented as evidence, including a bid by Contractor for over $90,000 submitted within two days of the fire, but that "it is less clear whether or not the actual scope of work was agreed upon." The trial court found that the public adjuster's estimate of October 15, 2006, indicated that the proper scope of work was $56,498.53. It also found that the "contract" had a liquidated damages clause of fifteen percent of the contract price if Homeowner cancelled prior to the start of work, and that Homeowner did cancel the contract.

The trial court found that in this case "it would have been difficult to prove damages at the time the contract was entered into on August 23, 2006, because, not only had an estimate not been prepared, but the negotiation between the adjusters, which ultimately leads to the scope of work to be performed had not occurred." (Emphasis added). It also found that the profit estimate was approximately ten percent of the cost of the work, and "[t]herefore, a penalty clause of fifteen percent (15%) would not be unreasonable." (Emphasis added). It determined that the proper scope of work is $56,498.53, and that fifteen percent of that amount is $8,473.78, and awarded that amount as damages to Contractor, and a further $2,000 for reasonable attorney's fees.

Homeowner now appeals.

We will affirm the judgment of the trial court in a bench-tried case unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We consider the evidence in the light most favorable to the prevailing party and give that party the benefit of all reasonable inferences from the record, disregarding all evidence to the contrary. Stoup v. Robinson, 933 S.W.2d 935, 935 (Mo.App.1996). As the trier of fact, the trial court determines the credibility of the witnesses and is free to believe or to disbelieve all, some, or none of the testimony of a witness. Apted-Hulling Inc. v. L&S Properties, Ltd., 234 S.W.3d 486, 489 (Mo.App.2007).

In her first point relied on, Homeowner contends that the trial court erred in granting judgment in favor of Contractor because it was based on the liquidated damages clause, which was unconscionable under the circumstances presented.

Liquidated damages clauses are valid and enforceable, whereas penalty clauses are not. Diffley v. Royal Papers, 948 S.W.2d 244, 246 (Mo.App.1997). A penalty provision specifies a punishment for default, while liquidated damages are a measure of compensation that at the time of contracting, the parties agree will represent damages in the event of a breach. Id. For a damage clause to be valid as setting liquidated damages, the amount fixed as damages must be a reasonable prediction for the harm caused by the breach and the harm must be of a kind difficult to estimate accurately. Id. In determining whether an agreement sets forth liquidated damages or a penalty, this Court looks...