Building Erection Svcs. Co. v. Walton Construction Co.

Topeka, KS - Litigation lawyer represented defendant Walton Construction Company (Walton) and Building Erection Services Company (BESCO) over liability and damages resulting from faulty construction on the University of Kansas' Memorial Stadium.

This decision resolves the third appeal in this Odyssean litigation

between Walton Construction Company (Walton) and Building Erection Services

Company (BESCO) over liability and damages resulting from faulty construction on the

University of Kansas' Memorial Stadium. This appeal arises from the district court

judge's third attempt at entering a damages award in favor of Walton. Below, the Court of

Appeals reversed the damages and attorney fee award for failure to abide by the law of

the case and the mandate rule and lack of substantial competent evidence. The Court of

Appeals also declined to remand for determination of a new award amount.

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We affirm the Court of Appeals' finding that the district court judge violated the

mandate rule with the third damages award. Because we reverse the damages award on

this ground, we need not reach the second question of whether the most recent award is

supported by substantial competent evidence. Finally, we hold that the Court of Appeals

erred by declining to remand this case to the district court for a new award. Accordingly,

we remand this case to the district court for a damages and attorney fee award that

complies with the binding mandates from the first two appeals in this case.

FACTS AND PROCEDURAL BACKGROUND

More than a decade into litigation, we assume that the parties are well-acquainted

with the facts and procedural history of this case. The issue of liability has been decided

and consistently affirmed in favor of Walton, leaving only the question of damages and

attorney fees at issue. As such, we recite only those facts necessary to explain our

holding.

In 1999, the University of Kansas (KU) built a new press box for its football

stadium. Walton was the project's general contractor. Walton hired BESCO to install

structural steel and the press box's glass curtain wall. The parties' relationship was

memorialized in a subcontractor agreement, through which BESCO agreed to indemnify

Walton against claims and losses related to BESCO's work.

Shortly after the press box was completed, KU discovered that the new

construction leaked badly. Because of the leaks, KU withheld a more than $400,000

payment from Walton. Walton, in turn, did not pay BESCO the remaining $26,548.54 it

was owed. During the ongoing dispute between KU and Walton, KU brought in an

external engineering contractor to identify the source of the leaking near the press box's

windows and propose solutions. This contractor produced the "Slemmons report." The

report did not delve into subcontractor liability for the leaks but merely allocated

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responsibility between KU and Walton. The report found KU 10% responsible for the

leaks, the architects 10% responsible, and Walton 80% responsible.

In 2002, BESCO sued Walton and KU to recover the $26,548.54 payment that was

being withheld, thus beginning this trail of litigation.

After a series of studies and attempted fixes, KU decided to take apart a section of

the press box in 2004 to determine and remedy the source of the leaks. During this

examination, KU discovered that BESCO had used inadequate screws to attach the glass

curtain wall to the press box's steel structure. This posed a large safety risk. KU opted to

fix both the leaks and the fastener issue at the same time. To do so, they removed and

replaced all the glass and the metal walls. BESCO was again subcontracted on the press

box project, this time to remediate the glass.

In 2005, Walton and KU settled their dispute over liability for the leaks and

fastener issue. Walton acknowledged it had breached its contract. Walton paid KU over

$600,000, and KU assigned its claims against BESCO to Walton. BESCO was not a party

to this agreement. Walton then sued BESCO for indemnification for its damages and

KU's damages, as well as both Walton's and KU's attorney fees. A district court judge

consolidated this case with BESCO's earlier suit.

After a bench trial, the district judge found that BESCO breached its contract with

Walton when it failed to follow the correct shop drawings and used inadequate screws for

fastening. The district judge ordered BESCO to pay Walton over a million dollars,

including the entire cost of the press box repairs and Walton's attorney fees. BESCO

appealed. In Building Erection Services Co. v. Walton Construction Co., No. 100,906,

2009 WL 4639486 (Kan. App. 2009) (unpublished opinion) (BESCO I), a Court of

Appeals panel affirmed BESCO's liability to Walton for breach of contract but reversed

and remanded the damages award for lack of substantial competent evidence.

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On remand, the district judge entered a new award of almost $900,000, accounting

for all of Walton's and KU's attorney fees and half the cost of removing and replacing the

press box's glass and metal panels. BESCO again appealed. In Building Erection Services

Co. v. Walton Construction Co., No. 111,706, 2015 WL 4879075 (Kan. App. 2015)

(unpublished opinion) (BESCO II), a different Court of Appeals panel again reversed the

amount of damages for lack of substantial competent evidence. Neither party petitioned

for review of that decision.

On remand for the second time, the district judge entered his third award. This

time, he ordered BESCO to pay 85% of the cost of removing and replacing the metal

panels, and 50% of the cost of removing and replacing the glass. Also, the district judge

again ordered BESCO to pay the attorney fees that the Court of Appeals reversed in

BESCO II, as well as further fees Walton accrued during the continuing litigation.

BESCO appealed again. In Building Erection Services Co. v. Walton Construction Co.,

No. 117,839, 2018 WL 3485670 (Kan. App. 2018) (unpublished opinion) (BESCO III),

yet another panel of the Court of Appeals again reversed the damages award and attorney

fee award for failure to abide by the law of the case and the mandate rule and lack of

substantial competent evidence. This time, the panel declined to remand for

determination of a new award amount. This court granted Walton's petition for review of

BESCO III.

DISCUSSION

The District Court's Third Award Was Prohibited by the Mandate Rule.

The parties first dispute whether the district judge's third award complied with the

mandates in BESCO I and II. To answer this question, we must first ascertain what those

mandates were. "Whether a district court complied with a Court of Appeals mandate, and

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the proper interpretation of a mandate, are questions of law over which we exercise de

novo review." Einsel v. Einsel, 304 Kan. 567, 584, 374 P.3d 612 (2016).

The BESCO I Mandate

In BESCO I, BESCO appealed the district judge's damage award ordering it to pay

the entire cost of the press box remediation. First, the panel held that Walton was entitled

to indemnification under the parties' contract. BESCO I, 2009 WL 4639486, at *5. The

panel correctly identified the controlling provisions in the contract's indemnification

clause:

"'To the fullest extent permitted by law, [BESCO] shall indemnify and hold harmless

[Walton] from and against claims, damages, losses and expenses, including but not

limited to attorney's fees, arising out of or resulting from performance of [BESCO's]

Work under this Subcontract, . . . but only to the extent caused in whole or in part by

negligent acts or omissions of [BESCO], regardless of whether or not such claim,

damage, loss or expense is caused in part by a party indemnified hereunder.' (Emphasis

added.)" 2009 WL 4639486, at *5.

The BESCO I panel held that "[t]he district court's award of all of the damages

against BESCO is not supported by either the indemnification language in the contract

between BESCO and Walton, or the record on appeal." 2009 WL 4639486, at *7. It noted

that "there is no evidence in the record on appeal that ties Walton's requested damages, or

the total cost of remediation, to BESCO's failure to follow the correct shop drawings."

(Emphasis added). 2009 WL 4639486 at *6. The panel held that "the district court erred

in assessing all of the damages against BESCO." 2009 WL 4639486, at *7. It therefore

"reverse[d] and remand[ed] this issue to the district court for a determination of those

damages that arose out of, or resulted from, BESCO's negligent acts or omissions." 2009

WL 4639486, at *7.

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In other words, Walton had failed to show causation between BESCO's faulty

workmanship and all the costs of remediation. The district court did not find that

BESCO's work caused the leaks, so it reasoned that BESCO should not have to pay all

the costs of remediation, since some of those remediation costs were due to the leaks, not

the fastener issues.

Thus, the mandate of BESCO I was to apportion the damages according to

BESCO's actual fault, i.e., those "arising out of or resulting from performance" of

BESCO's faulty work under the contract. See 2009 WL 4639486, at *5. Walton

petitioned for this court's review of BESCO I, which we declined. The BESCO I mandate

therefore became binding on the district court.

The BESCO II Mandate

On remand for the first time, after additional discovery and an evidentiary hearing,

the district judge, in his second award, reduced Walton's recovery from the full cost of

the press box remediation to half the cost of the glass and metal removal and

reinstallation, plus a proportionate amount of the overhead from the repairs. He also

awarded Walton its attorney fees as well as KU's attorney fees and costs.

BESCO again appealed. It argued that the damages award was not supported by

substantial competent evidence. In BESCO II, a different Court of Appeals panel wrote

that "the determinative issue on remand was whether Walton proved by substantial

competent evidence that the claims arising from the scope of BESCO's contracted work

under BESCO's subcontract caused in whole or in part the water infiltration problem. We

think not." BESCO II, 2015 WL 4879075, at *17. The panel held that "the trial court's

apportionment between Walton and BESCO is inconsistent with the assignment of fault

contained in the Slemmons report and with BESCO's scope of work under its

subcontract." 2015 WL 4879075, at *18. The panel characterized the 50/50 split of costs

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for the glass and metal panel removal and replacement as "an unreliable approximation of

BESCO's responsibility." 2015 WL 4879075, at *19.

Finally, the BESCO II panel also reversed and remanded the attorney fee award,

reasoning that there was no nexus between the award and BESCO's scope of work, as

BESCO I required:

"Walton offers no explanation for how BESCO is liable for it or KU's assigned attorney

fees and costs incurred before anyone even realized that there was a problem with

BESCO's work. Such a conclusion would violate the law of the case established in

BESCO I." 2015 WL 4879075, at *21.

As to the damages issue, the BESCO II panel observed that the district court was

required, by the contract and the mandate of BESCO I, to allocate the costs of the press

box remediation "according to Walton's and BESCO's respective scope of work." 2015

WL 4879075, at *18. However, BESCO I cannot be construed as a mandate that Walton

had to prove BESCO's defective work caused the leaks in order to recover the costs of

remediating the fastener issue. Rather, BESCO I's mandate was to adjust the damages

award to correspond only with those costs of remediation attributable to BESCO. Indeed,

the parties' contract provides that BESCO shall indemnify Walton for "claims, damages,

losses and expenses, including but not limited to attorney's fees, arising out of or

resulting from performance of [BESCO's] Work . . . but only to the extent caused in

whole or in part by negligent acts or omissions of [BESCO]."

For this reason, we are sympathetic to Walton's argument that substantial

competent evidence supported the district court's finding, in its second award, that

BESCO was responsible for 50% of the costs of removing and replacing the glass and

metal panels. The record includes evidence suggesting the glass and metal panels had to

be removed to properly remediate BESCO's defective fastener work. Likewise, the record

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included evidence that remediation of the water infiltration also required removal of the

glass and metal panels. Because both remediation issues (water and fastener) were

rectified at the same time and both required removal of the glass and metal panels, a

50/50 split of these remediation costs may have been a reasonable computation of

BESCO's responsibility. See Cerretti v. Flint Hills Rural Elec. Co-op. Ass'n, 251 Kan.

347, 362, 837 P.2d 330 (1992) ("A reasonable basis for computation and the best

evidence obtainable under the circumstances should enable the trier of fact to make an

estimate which provides an adequate recovery of damages.").

Nevertheless, Walton did not petition for this court's review of BESCO II,

foreclosing our ability to review this issue. See Snider v. American Family Mut. Ins. Co.,

297 Kan. 157, 172, 298 P.3d 1120 (2013) ("A party aggrieved by a decision of the Court

of Appeals on a particular issue must seek review in order to preserve the matter for

Kansas Supreme Court review."); Supreme Court Rule 8.03(c)(3) (2020 Kan. S. Ct. R.

52).

As a result, under the BESCO II mandate, the district judge was again charged

with the task on remand to determine what portion of the remediation costs and attorney

fees were "attributable to the contracted work performed by BESCO that fell under the

indemnity provision of BESCO's subcontract,"—this time with full knowledge that the

mandates of BESCO I and II foreclosed any award of 50% or more of the costs of

removing the glass and metal panels. BESCO II, 2015 WL 4879075, at *18.

On remand for the second time, the parties did not present additional evidence,

and the district judge entered his third award on the existing record. In the third award,

the district judge challenged the BESCO I and II mandates in light of his prior factual

findings:

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"There seems to be confusion regarding the nature and the importance of the

Slemmons report as it relates to the fastener issue. In BESCO II, the Court of Appeals

noted that the BESCO I panel held that 'The remediation work was initially started only

because of the extensive water infiltration, in which both the Slemmons and ED reports

did not attribute any fault to BESCO.' BESCO II at *10 (citing BESCO I at *6). This is

unfortunate because while this may have been the BESCO I panel's understanding at the

time, the facts found by this Court establish otherwise. . . .

"The BESCO II panel misunderstands the role of the Slemmons report. . . .

"The panel places too much emphasis on the Slemmons report. The

determinative issue here is not whether Walton proved by substantial competent evidence

that BESCO's subpar work caused water infiltration. Rather, the issue here is whether

Walton satisfactorily proved that the renovations were caused in whole [or] in part by

BESCO's failure to use the correct shop drawings to install the curtain wall system. This

Court believes that the findings of fact from BESCO I and BESCO II incorporated into

this decision show that the renovation was made necessary because of the anchoring

issues caused by BESCO. The water infiltration was not the primary concern. The

anchoring issue, and the hazard of certain casualty if the curtain wall system failed fueled

the renovations. Even though the renovations fixed separate issue[s] that caused the water

infiltration, it is clear that the main purpose of renovating was to anchor the curtain wall

system properly."

The district judge also discussed the applicability of the law of the case doctrine.

Erroneously, he concluded that the mandate rule did not prohibit him from entering an

award of 50% or more of the glass and metal remediation costs because "[t]his case has

been anything but final." Ultimately, the district judge entered a new award granting

Walton a higher percentage (85%) of the metal costs, the same percentage of glass costs,

and the same attorney fees overturned in BESCO II, plus new attorney fees accrued in the

ongoing litigation.

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The District Court's Damage Award Is Prohibited by the Mandate Rule.

In this appeal, BESCO argues that "[t]he binding law of the case and the mandates

established in BESCO I do not permit an award to Walton for any of the remediation

costs incurred for removing metal panels or glass removal."

Walton, on the other hand, encourages this court to adopt the district judge's

reasoning that the law of the case doctrine and mandate rule did not foreclose his third

award because the law of the case doctrine is discretionary, and the case was "anything

but final." Walton also argues that the third award did comply with what it considers to

be the Court of Appeals' mandates.

In State v. Kleypas, 305 Kan. 224, 296-97, 382 P.3d 373 (2016), we explained the

binding effect of a mandate and its limiting impact on subsequent proceedings in district

court:

"Two statutes address the controlling nature of a mandate. K.S.A. 60-2106(c)

provides, in relevant part, that the mandate of this court 'shall be controlling in the

conduct of any further proceedings necessary in the district court.' And K.S.A. 20-108

states that a district court must execute any further proceedings 'according to the

command of the appellate court made therein.' Under the plain language of these statutes,

a district court is required to apply the mandate without exception. Collier, 263 Kan. at

637. The Collier court made this point emphatically, stating: 'It is axiomatic that on

remand for further proceedings after a decision by an appellate court, the trial court must

proceed in accordance with the mandate and the law of the case as established on appeal.'

263 Kan. 629, Syl. ¶ 4.

"Some jurisdictions, notably several federal circuit courts, hold that a trial court

may depart from a mandate in order to obey new law without first asking permission

from the appellate court. See 18B Wright, Miller, & Cooper, Federal Practice and

Procedure: Jurisdiction 2d § 4478.3 (2002). While this court has recognized its power to

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recall, correct, amplify, or modify its own mandate, e.g., West v. Insurance Co., 105 Kan.

414, 415-16, 185 P. 12 (1919), Kansas cases have not recognized the power of a district

court to unilaterally depart from the mandate, even when a change in the law has

occurred. And neither K.S.A. 60-2106(c) nor K.S.A. 20-108 contemplate such an

exception. See State v. Prine, 297 Kan. 460, 475, 303 P.3d 662 (2013) (appellate court

cannot delete provisions or supply omissions in a statute). Hence, we conclude the district

court was duty bound to comply with the mandate as written. K.S.A. 60-2106(c); Collier,

263 Kan. 629, Syl. ¶ 4."

So while different panels of the Court of Appeals hearing successive appeals in the

same case may, in exceptional circumstances, depart from the law of the case, under

Kansas law no exceptional circumstances permit a lower court to circumvent the mandate

of a higher court, a result that logically follows from the hierarchical court system. See

18B Wright, Miller, & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 4478

(2002) ("Principles of authority, however, do inhere in the 'mandate rule' that binds a

lower court on remand to the law of the case established on appeal. The very structure of

a hierarchical court system demands as much.").

While the district judge's second award—the 50/50 damages split—likely

complied with the spirit of BESCO I's mandate to assess the damages according to the

parties' contract, BESCO II held that a 50/50 split was not supported by substantial

competent evidence. On the second remand, the district judge was bound by the mandate

rule to this holding. Insofar as the district judge's third award again granted Walton 50%

of the cost of the glass remediation, it violated the mandate rule.

The award of 85% of the metal panel remediation costs also violated the mandate

rule because the prohibition of such an award is logically implied in BESCO II's ruling:

if 50% of the metal panel costs are not supported by substantial competent evidence, a

larger percentage of the costs also lacks support by substantial competent evidence. See

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State v. Tafoya, 304 Kan. 663, 670, 372 P.3d 1247 (2016) ("[T]he substance of the Court

of Appeals ruling controls over the form its ruling takes.").

In Gannon v. State, 303 Kan. 682, Syl. ¶ 2, 368 P.3d 1024 (2016), we explained

that the mandate rule compels the district court to implement both the letter and spirit of

the appellate court's opinion:

"It is axiomatic that on remand for further proceedings after a decision by an

appellate court, the district court must proceed in accordance with the appellate court

mandate. The district court must implement both the letter and spirit of the mandate,

taking into account the appellate court's opinion and the circumstances it embraces, and it

has no authority to consider matters outside the mandate."

Here, the substance or the "spirit" of BESCO II foreclosed a damages award of 50% or

more of the costs of the glass and metal panel remediation. And Walton did not petition

for review of this decision. Despite this, in his third award, the district judge awarded

Walton damages of 50% of the cost of the glass remediation and 85% of the cost of the

metal panel remediation. The district court committed reversible error by failing to follow

the appellate mandates. Kleypas, 305 Kan. at 297.

The Attorney Fee Award Is also Prohibited by the Mandate Rule

Likewise, the mandate rule requires reversal of the attorney fees component of the

third award. Originally, the district judge awarded Walton $250,000 in attorney fees. The

BESCO I panel did not specifically address the proper allocation of Walton's attorney

fees under the contract. In his second award, the district judge awarded Walton over

$500,000 in attorney fees, including all of KU's attorney fees and costs.

In BESCO II, the panel considered whether the award was supported by

substantial competent evidence. BESCO II, 2015 WL 4879075, at *15. The panel

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concluded that this portion of the award included fees unrelated to the scope of BESCO's

work and remanded this issue to the district court to apportion the fees consistent with the

scope of the indemnification provision:

"KU's attorney-fee itemization spans more than 150 pages and includes a

significant amount of work conducted from April 2003 up until the fastener problem was

discovered in 2004. The same is true of Walton's attorney-fee itemization. Walton offers

no explanation for how BESCO is liable for it or KU's assigned attorney fees and costs

incurred before anyone even realized that there was a problem with BESCO's work. Such

a conclusion would violate the law of the case established in BESCO I. Likewise, the trial

court offers no explanation for why it only assessed half of the remediation damages to

BESCO but ordered it to pay all of KU's and Walton's attorney fees and costs.

"As a result, we reverse that portion of the trial court's judgment that orders

BESCO to pay Walton's and KU's attorney fees and expenses. We remand with directions

to determine what portion of those fees and expenses that were attributable to the

contracted work performed by BESCO that fell under the indemnity provision of

BESCO's subcontract." 2015 WL 4879075, at *21.

Walton did not petition for review of BESCO II. Thus, like the similar holding

with respect to damages, this holding formed the mandate the district judge was bound to

follow on remand. Nevertheless, in the third award, the district judge once again ordered

BESCO to pay Walton over $500,000, including all of KU's attorney fees and costs,

without determining what portion of these fees and expenses were attributable to the

work BESCO performed under the contract. This violated the explicit mandate of BESCO

II and was reversible error. Kleypas, 305 Kan. at 297.

We Do Not Decide Whether the Most Recent Award Is Supported by Substantial

Competent Evidence.

Below, the Court of Appeals in this case also analyzed the third award to

determine whether it was supported by substantial competent evidence. And the parties

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preserved that issue for this court's review. Nevertheless, we decline to reach the issue of

substantial competent evidence because any ruling on such an issue would constitute

dicta, as it is unnecessary to the resolution of this case. See In re Estate of Loughmiller,

229 Kan. 584, 589, 629 P.2d 156 (1981) (components of a decision not necessary to the

case's holding constitute dicta). Because awards of 50% of the glass costs and 85% of the

metal costs are legally barred by the mandate rule, those awards must be reversed

regardless of whether they are supported by substantial competent evidence. Accordingly,

we decline to reach this issue and vacate the portion of the Court of Appeals' BESCO III

decision holding that the third award was not supported by substantial competent

evidence.

We Remand for a New Award.

In BESCO III, the Court of Appeals panel reversed the damages and attorney fee

awards but declined to remand for new awards. 2018 WL 3485670, at *16-18. The panel

cited this court's opinion from LSF Franchise REO I, LLC v. Emporia Restaurants, Inc.,

283 Kan. 13, 42, 152 P.3d 34 (2007), which found remand to be unnecessary in limited

instances:

"In some instances, this court will remand the case before it for a reconsideration of the

evidence at the trial court level in light of its opinion. Remand is not necessary, however,

where an appellate court announces no new legal principles, but instead reviews the

record in light of the existing law and determines that the record cannot support the trial

court's conclusions."

The BESCO III panel reasoned that "Walton has had three chances to present

evidence that would support its damages award, and it has failed to do so. We see no

reason to give Walton a fourth chance." 2018 WL 3485670, at *16.

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LSF Franchise is distinguishable from this case. There, the plaintiff-debtor, as an

entity challenging a garnishment order, had the burden to prove that it did not own the

funds in the accounts being garnished. The district court ruled that the funds were not

subject to garnishment because they did not belong to the debtor. On appeal, we held that

none of the district judge's conclusions were supported by any evidence; the funds in the

account belonged to the debtor. LSF Franchise, 283 Kan. at 41. We thus declined to

remand because our holding that the accounts were in fact subject to garnishment

required no further action from the district court. 283 Kan. at 42.

In stark contrast, here, BESCO's liability to Walton has been consistently affirmed

and is now the law of the case. Moreover, the record includes evidence supporting an

award of damages for Walton. As the BESCO II panel acknowledged, Walton did not fail

to meet its burden to prove damages. BESCO II, 2015 WL 4879075, at *12. The issue is

not whether Walton can recover at all, but rather arriving at a damages and attorney fee

award that comports with BESCO's liability under the parties' contract and the mandates

in BESCO I and II.

Moreover, while this matter has been before the district court on three occasions,

Walton had only one opportunity to present evidence supporting an apportionment of

damages consistent with the mandate in BESCO I. And, Walton did so. Further, we

hesitate to hold Walton accountable for the district court's failure to comply with the

mandates of the Court of Appeals.

Under these circumstances—where liability has been established, the record

clearly shows Walton has sustained damages, and the only remaining question is the

proper apportionment of damages to be awarded—we hold that it was error for the Court

of Appeals to decline to remand the matter to the district court.

For the reasons explained above, we affirm the Court of Appeals' judgment insofar

as it reversed the third award for failing to comply with the mandate rule. We vacate the

portion of the Court of Appeals' opinion holding that the third award was not supported

by substantial competent evidence. Finally, we reverse the Court of Appeals' decision to

not remand the case, and we remand to the district court for entry of an award that

complies with the mandates from BESCO I and BESCO II.