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Landowner Awarded Punitive Damages, Attorney Fees Against Contractor, Utility Company

in Columns/Law
James R. Keller

By JAMES R. KELLER

Missouri’s Southern District Court of Appeals recently upheld a jury verdict and court judgment in favor of the landlord and against Carroll Electric Cooperative Corp. for $12,224 in actual damages, $75,000 in punitive damages and $59,456 in attorney’s fees. The appellate court also upheld a separate judgment for the same amount in actual damages – but not punitive damages – against Seven Valleys Construction Co.

The case is Bare v. Carroll Electric Cooperative Corporation and Seven Valleys Construction Company, 2018 WL 1281114, decided March 13.

The judgment against Carroll Electric and Seven Valleys was for common-law trespass. The appellate court decided there was sufficient evidence to support the jury’s verdicts and the trial court’s judgments.

Carroll Electric had hired Seven Valleys to clear a right-of-way and pile resulting severed trees and brush on the edge of the right-of-way. Steven and Suzanne Bare were the co-trustees/owners of the land.

They granted an easement to Carroll Electric to clear and keep clear the right-of-way. The easement permitted the removal of trees and other obstacles outside of the right-of-way that were tall enough to interfere with transmission lines.

The landowner was concerned that the language in the easement contract seemed vague. The field service supervisor for Carroll Electric told the landowner that the language was in the easement contract so that Carroll Electric could “take danger trees.”

The landlord wanted this language removed. Carroll Electric’s representative would not do this but also said, “You have nothing to worry about.”

Carroll Electric’s design engineer had assured the landowner that the tree-clearing project could be done within 100 feet, the width of the right-of-way. Carroll Electric’s field service supervisor also told the landowner that if any damage occurred to landowner’s property beyond the right-of-way, then the landowner should “make a written claim to Carroll Electric and they would take care of restoring and repairing the damage.”

Without these promises, the landowner testified that she would not have signed the easement contract. The easement contract was one piece of paper. It guaranteed payment of $9,060 to the landowner for the easement.

The easement contract noted that logs would be left on the edge of the right-of-way for the landowner.

At trial, the Court received into evidence the one-page easement contract. It contained an additional hand-written note that stated: “Brush also to be left pushed off edge of right-of-way.”

Suzanne Bare testified at trial that she did not recognize the handwriting. She said the hand-written note was not on the easement contract when she signed it.

Carroll Electric’s field service supervisor testified that he added the hand-written note and it was on the easement before Suzanne Bare signed it.

The Southern District noted that the jury was entitled to believe or disbelief part or all of the testimony of any witness.

Steven Bare testified that he told Seven Valleys’ supervisor “not to clear anything wider than 100 feet.”

After the clearing crew had moved past the landowner’s property, the Bares went on an out-of-town trip. When they returned three days later, they discovered that a large area of their property had been bulldozed on what was previously a “fully wooded” section of their land.  In total, Seven Valleys’ work crew had removed 46 trees.

Contrary to the 100-foot limitation, Seven Valleys piled trees and lumber on the landowner’s property. Some of the trees had been placed on top of landowner’s fence, damaging the fence.  The landowner also discovered that other trees outside the boundary of the easement had been cut.

One of the issues on appeal was whether Carroll Electric controlled or had the right to control the activities of Seven Valleys. The appellate court noted that Seven Valleys’ contract permitted Carroll Electric to remove any employee of Seven Valleys. Carroll Electric could also force Seven Valleys to add employees to the project.

Further, Carroll Electric’s supervisor not only inspected Seven Valleys’ work, but he had the ability to correct work. The Southern District decided that there was substantial evidence supporting a finding that Carroll Electric’s control over Seven Valleys’ conduct “produced a trespass.”

The appellate court also considered whether the trial court errored by instructing the jury on punitive damages.

The Southern District concluded that the jury could reasonably find that Carroll Electric’s field service supervisor had added the hand-written note on the easement after it was signed by the landowner “to make it appear that the landowner had agreed to something that it had actually rejected.”

The Southern District further noted that he told Carroll Electric’s supervisor that he did not want any trees cleared beyond what they had agreed to in the easement. The supervisor replied that he would take any tree on landowner’s property that he wished.

With this evidence, the appellate court concluded that a reasonable juror could find that Carroll Electric’s conduct was outrageous by demonstrating a complete indifference to or a conscious disregard for landowner’s rights.

This is the legal standard to support an award of punitive damages under Missouri law. The Southern District, based on the standard and the evidence it considered, affirmed the award of punitive damages.

The Southern District also upheld the award of attorney fees pursuant to a Missouri statute. The statute provides that if a property owner prevails in an action for trespass against a rural electric cooperative, such property owner may be awarded reasonable attorneys’ fees, costs and expenses.

This statute also entitled the landowner to recover legal fees for the appeal including research in preparation of appellate briefs.

The appellate court sent the case back to the trial court to consider the reasonableness of the request for attorney fees and costs incurred by the appeal.

James R. Keller is counsel with Sandberg Phoenix & von Gontard P.C. where he concentrates his practice on construction law, complex business disputes, real estate and alternative dispute resolution. He also is an arbitrator and a mediator. Keller can be reached at (314) 446-4285 or jkeller@sandbergphoenix.com.

Missouri Appellate Court Adopts Spearin Doctrine

in Columns/Law

By Jim Keller Herzog Crebs LLP

James R. Keller

In one of the most comprehensive and important construction decisions in years, the Missouri Court of Appeals for the Eastern District has found the Spearin doctrine applies in Missouri.  This is the first Missouri appellate court to definitively reach this conclusion.

The Spearin doctrine stands for the proposition that when a governmental entity includes detailed specifications in a contract, it impliedly warrants that if the contractor follows those specifications, the finished product will not be defective or unsafe and if the finished product turns out to be defective or unsafe, the contractor will not be liable for the consequences. The Spearin doctrine is widely accepted around the country, but no previous Missouri appellate court has specifically adopted or rejected this doctrine in a published opinion.

The case is Penzel Construction Company, Inc. v. Jackson R-2 School District, decided February 14, 2017.

This sweeping appellate opinion also discusses expert qualifications and the measure of damages through a total cost approach or modified total cost approach.  Missouri construction lawyers will be citing this case for years to come.

Penzel Construction Company, Inc. on behalf of Total Electric, Inc. brought a breach of contract action against Jackson R-2 School District based on breach of implied warranty for allegedly furnishing deficient and inadequate plans and specifications.

The District had entered into a contract with WNB Architects to build an addition to the Jackson High School. During the bidding process, the district furnished the plans and specifications for the project to Penzel, who gave a copy of the plans to Total Electric.

Neither Penzel nor Total Electric noticed any errors in the plans at the bidding stage. Based on the plans, Total Electric submitted a bid of $1,040,444 to Penzel to furnish and install electrical work for the project.

The district then entered into a contract with Penzel to be the general contractor. Penzel entered into a subcontract with Total Electric to provide electrical work.

Penzel’s claim at the trial court level pursuant to the Spearin doctrine was that the district impliedly warranted that the plans it furnished were adequate for completing the project and that the district breached the contract by providing inadequate and defective plans and specifications.

Alleged defects in the plans included inadequate low voltage switching and wire design affecting the gymnasium and some student areas, incorrect kitchen drawings, failure to specify emergency ballasts, failure to depict all the water heaters and circulating pumps requiring wiring, outdated products, non-compliance with building codes and an incorrect depiction of some site electrical work that actually was to be performed by others.

Total Electric’s claim was for labor loss of productivity and a 16-month delay in reaching substantial completion. Total Electric alleged that its damages were compounded by slow responses from the district and WNB as problems arose. Total Electric argued that it frequently had to wait weeks to months for a response.

This caused inefficiencies requiring Total Electric to pay workers for being on the project site with little or no work available to be performed. Total Electric also claimed higher hourly costs for manual labor due to trade labor wage escalation.

At the trial court level, the district brought a third-party claim against WNB.  The trial court granted motions for summary judgment on behalf of the district and WNB.

In reversing, the Eastern District concluded pursuant to the Spearin doctrine that if a contractor makes a bid in reliance on a governmental entity’s representations of what a project would entail, that contractor should not be punished—and the entity should not receive a windfall—because the entity’s renderings were defective.

The Eastern District also decided that Penzel was not required to use expert testimony to prove the plans were substantially deficient. Rather, testimony that the plans omitted critical components, called for outdated or non-existent products and failed to comply with building codes were issues that a layperson (or a juror) without any technical training could understand.

Also, Penzel could use two witnesses with 40 and 60 years of construction experience to testify that the electrical plans and specifications were deficient, even though neither one was a registered architect, licensed electrician or licensed engineer.

To prove Total Electric’s loss of productivity claim, Penzel used the total cost method or modified total cost method.

The total cost method requires proof of four elements: 1) the nature of the particular loss makes it impossible or highly impractical to determine any loss with a reasonable degree of accuracy; 2) the contractor’s bid or estimate was realistic; 3) the actual costs are reasonable; and 4) the contractor is not responsible for any added costs.

The modified total cost method is more flexible by allowing for adjustments to the total calculation of damages. The four-prong test is still used; however, it is merely a starting point and subject to adjustments to aid in proving the actual losses.

The appellate court concluded that the total cost method or modified total cost method may be an avenue to establish damages in this case.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR. He also is an arbitrator and a mediator.

Missouri’s Supreme Court Reverses $8,000,000 Punitive Damage Verdict

in Columns/Law
James R. Keller

By James R. Keller

Missouri’s Supreme Court weighed in on another construction case in 2016 by a reversing a jury verdict in favor of the City of Harrisonville of $8,000,000 in punitive damages.

The case is City of Harrisonville v. McCall Service Stations d/b/a Big Tank Oil and the Missouri Petroleum Storage Tank Insurance Fund, 495 S.W.3d 738 (Mo. 2016), decided August 23.

The project was the cleanup from underground petroleum storage tanks at a service station in Harrisonville. An upgrade of an adjacent sewer system for the City prompted the cleanup.

Missouri, by statute, established the Missouri Petroleum Storage Tank Insurance Fund per Section 319.129. This Fund provides insurance to service station owners for the cleanup costs from spills and leaks from underground petroleum storage tanks.

McCall Service Stations d/b/a Big Tank Oil owned a service station. McCall informed the Fund in 1997 that significant gasoline had leaked into the soil around its tank system.

McCall and the Fund hired Bob Fine, an environmental engineer, to determine the extent of the leak. Fine notified the Missouri Department of Natural Resources that the leak was moving toward a nearby creek.

Fine prepared a plan to contain the leak by installing monitoring wells on streets next to the site. McCall thereafter sold the service station to Fleming Petroleum Corporation.

In 2003, Harrisonville decided to upgrade its sewer system given a growth in population. The City awarded a construction contract, after competitive bidding, to Rose-Lan Construction for a multi-million dollar sewer upgrade per a bond issue for this work.

During construction, Rose-Lan encountered contaminated soil next to Fleming’s service station and notified the Department of Natural Resources.

Fine, who had been monitoring the situation since 1997, confirmed that the underground storage tank was the source of the leak. He suggested that the most cost-effective approach would be to leave the contaminated soil in place and install petroleum-resistant pipe and fittings.

The City’s engineer estimated that to completely remove and replace the contaminated soil would cost more than $500,000. BV Construction submitted a bid of $190,226.38 to install the petroleum-resistant pipe per Fine’s approach.

The Fund obtained a lower bid of $175,161.41 from Midwest Remediation.

There were several discussions between the City and the Fund about the remediation and who would pay for it. Three representatives for the City felt based on the meetings that the Fund would reimburse the City for the remediation costs.

After these discussions, the City’s attorney sent a letter to the Fund’s representative that the City was going forward with Midwest in reliance on the “promise” that the Fund would pay the full amount of Midwest Remediation’s costs. The City then authorized Rose-Lan to subcontract with Midwest Remediation to install the petroleum-resistant pipe.

The Fund did not reimburse the City for the work—thus the lawsuit.

The City sued the Fund for fraudulent and negligent misrepresentation.  The City alleged it hired Midwest Remediation in reliance of the Fund’s representative’s express promise that the Fund would pay for the cost of Midwest’s work.

During trial, the City established that it incurred increased costs of $172,100.98 to complete the sewer upgrade project as a direct result of the contamination caused by McCall and Fleming. None of these costs would have been incurred had the City not encountered petroleum-contaminated soil.

The jury returned a verdict for the City of $172,100.98 in compensatory damages against McCall, Fleming and the Fund, $100 in punitive damages against McCall and Fleming and $8,000,000 in punitive damages against the Fund.

Regarding the Fund’s liability, Section 319.131 states that the Fund will pay all of any participants’ cleanup costs that are greater than $10,000 but less than $1,000,000 per occurrence and the Fund shall provide coverage for third-party claims involving property damage or bodily injury caused by leaking petroleum storage tanks.

The Missouri Supreme Court decided the City’s claims against the Fund did not fall within the statutorily authorized claims set out in Section 319.131.  The Fund is not authorized to provide coverage for claims that do not constitute a participant’s cleanup costs or involve third-party claims. The City’s tort claims were beyond the coverage provided by the Fund.

Despite this finding, the Supreme Court left in place the award of compensatory damages solely because the Fund had not appealed this portion of the jury’s verdict.

But the Supreme Court decided that since the City did not have a claim against the Fund for compensatory damages, even though they were awarded, the City could not recover punitive damages from the Fund.

There must first be actual damages to support the award of punitive damages.  Since the actual damages were not allowed by statute, the punitive damages could not be allowed either, the high court concluded. Thus, the Supreme Court reversed the $8,000,000 punitive damage award.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

Subcontractor Denied Bond Claim Against St. Louis County

in Law

By James R. Keller

James R. Keller
James R. Keller

The Supreme Court of Missouri recently ruled that a subcontractor cannot pursue a bond claim against St. Louis County, but may pursue its mechanic’s lien claim against the leasehold interest of a company that acted as St. Louis County’s agent. The Missouri Supreme Court rarely decides construction cases involving bonds and mechanic’s liens, making this decision significant in how subcontractors will pursue future claims.

The case is Brentwood Glass Company v. Pal’s Glass Service, Inc., Clayco, Inc., Cornerstone VI, LLC, St. Louis County, National City Bank of the Midwest, N.A., Paul M. Macon, UMB Bank, N.A. and Victor Zarilli, 2016 WL 4444039, decided August 23.

St. Louis County had purchased property known as Six CityPlace Drive in Creve Coeur, Missouri, which the County had planned to develop as the headquarters of Smurfit-Stone Container Enterprises, Inc.

The County entered into a contract with Cornerstone to construct the project on the County’s behalf. Cornerstone acted as the County’s agent.

Clayco, Inc. was the general contractor for the project. Clayco entered into a subcontract with Pal’s Glass to supply glass and glazing work. Pal’s Glass entered into a sub-subcontract with Brentwood Glass for some of this work.

No contractor on the project obtained a bond that would comply with Section 107.170.2 of the Revised Statutes of Missouri. This section provides that all public entities (such as St. Louis County) must require every contractor for work on public property to furnish a bond to cover materials and labor.

Brentwood Glass filed a mechanic’s lien on the property in the amount of $1,061,464.08. Brentwood Glass then filed a nine-count petition against Pal’s Glass, Clayco, Cornerstone, St. Louis County, as well as various banks and individuals, seeking recovery on its mechanic’s lien and in one count pursuing an action against St. Louis County for its alleged failure to require a payment bond under Section 107.170.

Pal’s Glass admitted it owed $593,261.47. It consented to a judgment for that amount plus costs.

Because the property was owned by St. Louis County at the time Brentwood Glass began working on the building, Brentwood Glass could not pursue its mechanic’s lien against the County. Public property is not subject to a mechanic’s lien.

Cornerstone, however, held a leasehold interest in the property. Cornerstone is a private company and not a public entity.

The Supreme Court reversed the decision of the trial court and found that Brentwood Glass could pursue its mechanic’s lien against Cornerstone’s leasehold interest. The Supreme Court of Missouri sent back for further consideration by the trial court whether Brentwood Glass’s lien statement properly complied with Missouri law, which requires a “just and true” account of any money that is due.

The lien statement included potentially non-lienable items. Brentwood Glass admitted that its statement incorrectly included efforts to recover for payments that Clayco had paid directly to Brentwood Glass’s subcontractors and material suppliers.

The Missouri Supreme Court determined that the trial court must decide whether these non-lienable items were included in the lien statement with an intent to defraud or were honest mistakes. If honest mistakes, presumably the trial court will determine that the mechanic’s lien is proper.

Regarding the public bond claim against St. Louis County, Section 107.170.1 requires a bond for any “contractor” that “provides construction services under contract to a public entity,” but not a party that merely arranges for such services to be provided by others. The Supreme Court decided that Cornerstone did not provide construction services under its contract with the County. Therefore, Cornerstone was not a contractor within the meaning of Section 107.170.1.

The Supreme Court of Missouri also decided that even if this section required a bond, Brentwood Glass’s claim must fail because it did not name as a party in its lawsuit any individual officials of St. Louis County, but instead named as the defendant only St. Louis County. The court held:  “The decisive fact is that the County—a political subdivision—is immune from suit under the doctrine of sovereign immunity.”

The Missouri Supreme Court’s decision was far from unanimous. Two of the Justices, including the Chief Justice, filed concurring/dissenting opinions.  They believed that Cornerstone was a contractor within the meaning of the statute and therefore Brentwood Glass should have been able to pursue its bond claim. They also believed that Brentwood Glass should have been given the opportunity when the case is sent back to the trial court to amend its petition to name individual officials as defendants.

Three other Justices filed a different concurring/dissenting opinion. They believed that Brentwood Glass did not demonstrate substantial compliance with Missouri’s mechanic’s lien statute that requires a “just and true account.”  These three Justices believed that Brentwood Glass should not have been allowed to pursue its mechanic’s lien claim.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

 

The Sun Does Not Shine on Homeowner’s Solar Panels

in Columns/Law
James R. Keller
James R. Keller

By James R. Keller

After three trials and one appeal, a homeowner must remove part of its solar panel system, because the homeowners’ association did not approve it, and pay up to $56,000 in attorney fees to the association.

The case is The Lake at Twelve Oaks Home Association, Inc. v. Hausman, 2016 WL 1579124 (W.D. Mo. April 19, 2016).

In July 2012, Matthew and Stacy Hausman installed a photovoltaic solar array system on various roofs and on the ground of their home, which is located within a subdivision in St. Joseph, MO.  The subdivision was part of The Lake at Twelve Oaks Homes Association, Inc. Homeowners were subject to a declaration of covenants, conditions and restrictions for the subdivision.

One of the restrictions was that homeowners must submit written plans and specifications and obtain written permission from the Association’s Design Review Committee (DRC) prior to construction of any structure that materially changed the exterior appearance of that homeowner’s property. The Hausmans did not submit anything to the DRC.  Ironically, Matthew Hausman was a member of the DRC.

The Association demanded that the Hausmans remove the solar array as being in violation of the restrictions of the subdivision. The Hausmans did not remove the system. The Association filed a lawsuit seeking a permanent injunction.

In the first trial, the judge ordered the Hausmans to present their plans for the solar array system to the DRC for its review and approval in total, in part or not at all.

Shortly thereafter, the St. Joseph City Council enacted an amendment to its zoning ordinances regarding solar energy systems within the city limits.  It provided in part that no homeowner’s agreement could be more restrictive than the new city ordinance.

The DRC approved the portion of the system installed on the rear roof but rejected the portion of the system that included the panels installed on the side roof of the garage and the ground-mounted panels on the south side of the garage. The DRC’s decision was based on a provision within the Solar Guidelines previously adopted by the DRC that required panels to be constructed only within a fenced yard or patio at the rear of the main structure.

The DRC also based its decision on how the solar panels affected the character of the subdivision and considered individual homeowner complaints plus compatibility with surrounding properties and impact on the value of subdivision homes.

After a second trial, the court ordered the Hausmans, consistent with the DRC decision, to remove the part of the solar array system erected on the garage and the ground-mounted panels on the south side of the garage.

The trial court then set aside its own judgment, deciding that the parties should have included the city as an indispensable party given its new ordinance on solar panels.

After a third trial, the trial court again found in favor of the Association and ordered the Hausmans to remove the solar arrays not approved by the DRC. The court also determined that the city’s solar ordinances could not be applied retroactively to the Association’s Solar Guidelines and further found that the DRC’s decision was reasonable.

Finally, the trial court awarded attorney fees (provided in the subdivision declarations) to the Association.

The Hausmans argued on appeal that the trial court erred in upholding the DRC’s decision as being reasonable. They argued that sale prices for homes in the subdivision actually increased after the solar panels were installed.

By contrast, the DRC chair testified at trial that most members of the DRC did not find the solar energy system to be esthetically pleasing.  He further testified that the Association had received complaints from approximately 20 neighbors who expressed negative views regarding the appearance of the solar system and concern that its installation lowered the value of surrounding properties.

The Hausmans’ former next-door neighbor testified that the glare from the solar panels focused on his property four to five hours a day.  He further testified that he made $20,000 in concessions in the sale price of his home due to the negative impact of the solar system.

Another neighbor who lives in the home across the street from the Hausmans testified that the glare from the panels during the evening penetrated into his front window and negatively affected the value of his home.

The appellate court discounted evidence from the Hausmans that the DRC had approved a solar array system of another homeowner in the subdivision and thus by denying the Hausmans’ system the DRC had acted in an arbitrary and capricious manner. The Western District noted that the system for this other homeowner could not be seen by anyone and that there were no complaints from the neighbors.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

Contractor and its Owners Liable for Damages and Attorney Fees

in Columns/Law
James R. Keller

By James R. Keller

The Missouri Court of Appeals for the Southern District has upheld a trial court’s judgment in favor of a homeowner and against a contractor and its owners for damages and attorney fees.

The case is Rogers v. Superior Metal, Inc., SD 33696, 2016 WL 442773 (S.D. Mo. Feb. 4, 2016).  This decision may open new personal liability against owners of construction companies.

Superior Metal, Inc. is a construction company that installs metal buildings, roofing, siding and windows.  In 2013, Harley Rogers decided he wanted to build a shed on his property for storage.  He discussed the project with Randy Mueller, one of the owners of Superior Metal.  Mueller told him that “it would be a stand up product” and that “the building would be straight, free of defects, and would be good lumber.”

Rogers and Superior Metal entered into a written agreement for $13,500.00 for Superior Metal to build a pole barn on Rogers’ property.

During construction, Rogers noticed defects and mentioned his concerns to Jonathan Holtzman, co-owner of Superior Metal.

Once completed, according to the appellate court opinion, the building had numerous construction defects.  Rogers demanded his money back.  Superior Metal refused to issue a refund.

Rogers sued for breach of contract, unjust enrichment, fraudulent misrepresentation, negligence, and violations of the Missouri Merchandising Practices Act (MMPA).  Rogers also sued Mueller and Holtzman individually based on an allegation of fraudulent misrepresentation.

The trial was in front of a judge instead of a jury.  The trial court found for Rogers on all counts, awarding $23,500.00 in damages, $10,000.00 in attorney fees, and $1.00 for punitive damages.  The appellate opinion offers no explanation why the award was $23,500.00 when the original contract price was $13,500.00.

The contractor’s first challenge on appeal was that the owner did not present any evidence as to how the alleged construction defects diminished the value of his property.  In Missouri, there are two measures of damages regarding defective performance of a building contract.

One is the cost-to-repair method, and the other is the diminished-value method.  The cost-to-repair method measures damages by the cost of repairing the defective work.  The diminished value method measures the difference between the value of the property before and after the defective work.

The Southern District noted that the cost method is the preferred method to recover damages and that the diminished-value measure should be used when the cost to repair method would cause “unreasonable economic waste.”  In other words, if the cost to repair far exceeds the diminished value of the property, then the diminished value of the property is the proper measure of damage.

In this case, once the landowner presented evidence on the cost to repair, the contractor has the burden to establish that the cost to repair is disproportionately high when compared to the diminution in value of the property.

The contractor presented evidence through an expert that it would cost only $445.00 to repair the defects in the building.  But the contractor presented no evidence regarding the diminution in the value of the property and thus the Southern District on appeal affirmed the trial court’s decision that the damages for faulty construction were $23,500.00.

The appellate court also decided that owners Mueller and Holtzman were individually liable given the trial court’s finding of fraudulent misrepresentation.  Their communications with Rogers, according to the court, were “affirmative participation in the actionable wrong and so justify imposition of individual liability.”  Their personal liability stemmed from fraud, not just breach of contract.  This result will trouble construction company owners.

Regarding attorney fees, the Missouri Merchandising Practices Act allows a trial court to award attorney fees based on the amount of time reasonably expended as well as punitive damages.  Defendants contended that there was no evidence to itemize any attorney fee time and thus no support for attorney fees.

The Southern District concluded that it is well within a trial court’s discretion, as an expert on attorney fees, as well as having familiarity with the case at hand, to decide what attorney fees are proper.

The Southern District also decided that on remand the trial court could determine what attorney fees should be assessed for the appeal since Missouri law allows that the award of attorney fees can include those attorney fees incurred on appeal.

There is no mention of the $1.00 assessed in punitive damages.  The trial court’s decision was affirmed on appeal.  It appears this award stood as well.  A $1.00 punitive damage award usually reflects a statement of disapproval with defendant conduct and is not intended to reflect plaintiff’s actual damages.

James R. Keller is a partner at Herzog Crebs LLP where he concentrates his practice on construction law, complex business disputes, real estate and ADR.  He also is an arbitrator and a mediator.

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