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John Knox Village v. Fortis Construction Co. LLC

Court of Appeals of Missouri, Western District, First Division

September 30, 2014

JOHN KNOX VILLAGE, a Missouri Not-For-Profit Corporation, Respondent,
v.
FORTIS CONSTRUCTION COMPANY, LLC, ARMANDO DIAZ, TOM M. NADLER, DON S. NADLER & GARY P. RODENBERG, Appellants

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[Copyrighted Material Omitted]

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APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY. THE HONORABLE MICHAEL W. MANNERS, JUDGE.

Jerry D. Rank, Overland Park, KS, for appellant.

Stanley B. Bachman, Olathe, KS, for respondent.

BEFORE: MARK D. PFEIFFER, PRESIDING JUDGE, LISA WHITE HARDWICK AND KAREN KING MITCHELL, JUDGES. ALL CONCUR.

OPINION

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Lisa White Hardwick, Judge

Fortis Construction Company, LLC, Tom Nadler (" T. Nadler" ), Don Nadler (" D. Nadler" ), Gary Rodenberg, and Armando Diaz (referred to collectively as " Appellants" ) appeal from a judgment ordering them to pay actual and punitive damages to John Knox Village (" JKV" ) on JKV's claim for fraudulent misrepresentation, fraudulent conveyance, and civil conspiracy. In their five points on appeal, Appellants contend: (1) the circuit court lacked subject matter jurisdiction over the claim; (2) the court's finding that T. Nadler, D. Nadler, and Rodenberg made fraudulent misrepresentations to JKV was not supported by the evidence; (3) the court misapplied the law in determining the amount of actual damages; (4) the court's finding that a civil conspiracy existed was not supported by sufficient evidence and was against the weight of the evidence; and (5) the court's determination that punitive damages were warranted was not supported by sufficient evidence and was against the weight of the evidence. For reasons explained herein, we affirm.

Factual and Procedural History

Fortis was a limited liability company engaged in general construction in Jackson County. Its members were Diaz, who was its president and had 52% ownership in the company, and T. Nadler, D. Nadler, and Rodenberg, who each had 16% ownership in the company. T. Nadler, D. Nadler, and Rodenberg were also owners of Triad Construction Company, Inc., another general construction company that had an office in the same building as Fortis. T. Nadler was the president of Triad, and D. Nadler and Rodenberg were vice-presidents.

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Each had a one-third ownership interest in Triad. Triad and Fortis frequently subcontracted work to each other.

In April 2010, JKV entered into a contract with Fortis in which Fortis agreed to provide construction and general contracting services on a project known as the PACU Project. In the contract, Fortis represented and warranted that anytime it would submit an application for payment to JKV, all work for which payment was requested would be free and clear of all liens, claims, or other encumbrances. Fortis also represented and warranted that it would timely pay any subcontractors that performed work on the PACU Project after it received payment from JKV.

Several months later, in October 2010, JKV contracted with Triad for construction services on another project known as the Hospice Project. Like Fortis in the PACU Project contract, Triad represented and warranted in the Hospice Project contract that anytime it would submit a payment application to JKV, all work for which payment was requested would be free and clear of all liens, claims, or other encumbrances. Likewise, Triad represented and warranted that it would promptly pay any subcontractors that performed work on the Hospice Project after it received payment from JKV. The contract further provided that neither JKV nor its architect would have responsibility for payments to subcontractors. JKV considered these provisions material and relied upon them in deciding to contract with Triad.

Construction on the Hospice Project began immediately after construction on the PACU Project ended. In December 2010, Triad submitted its first application for payment on the Hospice Project to JKV. The application contained an itemized description of the work completed for which Triad was seeking payment. Triad represented that the current payment due was $68,787.90. In addition to the payment application, Triad submitted a notarized waiver of lien. In the waiver of lien, Triad represented that, upon payment by JKV of $68,787.90, Triad waived and released any and all liens and claims or rights of lien against the Hospice Project property. Shortly after submitting the payment application to JKV, Triad and Fortis, who was a subcontractor on the Hospice Project, asked JKV to sign a joint check agreement agreeing to make its check payable to both Triad and Fortis. The agreement provided that Triad's and Fortis's endorsement and deposit of the check discharged and waived any express or implied lien rights or derivative claims they might have against JKV for all amounts paid. JKV issued a joint check to Triad and Fortis for $68,787.90 on January 14, 2011.

Triad submitted its second application for payment on the Hospice Project to Triad on January 24, 2011. In this second application, Triad certified that the payment that JKV made in response to Triad's first application for payment had been used to pay for the work itemized in that application. Triad requested in the second application for payment that JKV pay $64,885.10, which represented the amount due for work done to complete the Hospice Project. Like the first application for payment, the second application was accompanied by a notarized waiver of lien in which Triad represented that, upon payment by JKV of the requested amount, Triad waived and released any and all liens and claims or rights of lien against JKV's Hospice Project property. This waiver of lien was denoted as the " final waiver of lien." Again, Triad and Fortis asked JKV to sign a joint check agreement with identical terms as the first joint check agreement. Because some materials were being delivered later, JKV deducted the cost of

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the materials from the amount requested in the second application for payment and issued a joint check to Triad and Fortis for $55,042.25 on February 10, 2011. A week later, JKV issued another joint check to Triad and Fortis for $469.08 for a change order. JKV paid Triad and Fortis a total of $124,299.23 for the Hospice Project.

On March 1, 2011, JKV's architect, John Wisniewski, learned that Fortis had not paid some of the subcontractors on the PACU Project. This prompted Wisniewski to look into whether Triad had paid the subcontractors on the Hospice Project. He discovered that none of the subcontractors on the Hospice Project had been paid and that $127,121.14 was owed to the subcontractors. Wisniewski wrote a letter to T. Nadler demanding that Triad pay all of the subcontractors on the Hospice Project. Triad did not do so.

Meanwhile, JKV began receiving notices that subcontractors were intending to file liens on the Hospice Project property. JKV contacted each subcontractor, except Fortis, to negotiate a payment amount to keep them from filing liens against the property. Although several subcontractors were willing to accept 70% of the subcontracted amount, one subcontractor demanded that it receive 100% of the subcontracted amount, while another demanded that it receive 90%. JKV paid another $70,373.78 directly to all of the Hospice Project subcontractors except Fortis.

On April 14, 2011, Triad filed a petition for Chapter 7 bankruptcy. In July 2011, Fortis filed a statement of mechanic's lien on the Hospice Project property, asserting that it was owed $36,456.92 plus interest for its work on the Hospice Project. [1]

In August 2011, JKV filed suit against Appellants. In its second amended petition, JKV asserted several claims against Appellants based upon their actions with regard to the PACU Project and Hospice Project. The only claim at issue in this appeal is JKV's Count III, which was a claim against all Appellants for fraudulent misrepresentation, fraudulent conveyance, and civil conspiracy involving the Hospice Project.

In Count III, JKV alleged that T. Nadler, D. Nadler, and Rodenberg were insiders and had complete control and dominion over non-party Triad and its business transactions and practices. JKV alleged that T. Nadler, D. Nadler, and Rodenberg, as Triad's owners, perpetrated fraud upon JKV, thereby allowing the corporate veil to be pierced to subject them to individual liability.

JKV further alleged that T. Nadler, D. Nadler, and Rodenberg, as Triad's owners, intentionally made several representations that they knew were false and material and that JKV would rely upon in determining whether to enter into the Hospice Project contract. These false representations were that all work for which Triad requested payment would be free of all liens and that Triad would timely pay any subcontractors that performed work on the Hospice Project after receiving JKV's payments. JKV asserted that T. Nadler, D. Nadler, and Rodenberg intentionally made these fraudulent misrepresentations for the specific purpose of ...


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