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City of Harrisonville v. McCall Service Stations

Supreme Court of Missouri, En Banc

August 23, 2016

CITY OF HARRISONVILLE, Appellant-Respondent,
v.
McCALL SERVICE STATIONS d/b/a BIG TANK OIL, et al., Respondent-Appellant, THE MISSOURI PETROLEUM STORAGE TANK INSURANCE FUND, Respondent-Appellant.

         APPEAL FROM THE CIRCUIT COURT OF CASS COUNTY The Honorable Jacqueline A. Cook, Judge

          PER CURIAM

         The City of Harrisonville filed a petition for damages against McCall Service Stations d/b/a Big Tank Oil, Fleming Petroleum Corporation, and the Missouri Petroleum Storage Tank Insurance Fund after the City discovered that petroleum from a service station's underground storage tank had leaked and contaminated the soil where the City was working on a sewer upgrade project. The City alleged counts of nuisance and trespass against McCall, the service station's previous owner, and Fleming, the service station's current owner. The City also alleged counts of negligent and fraudulent misrepresentation against the Fund because the increased construction costs resulting from the contamination in the City's sewer easement were not paid from the Fund. The jury returned verdicts in favor of the City on all counts and awarded the City compensatory and punitive damages against McCall, Fleming, and the Fund. The circuit court then remitted the punitive damages awarded against the Fund. McCall, Fleming, and counsel for the Fund appealed. The City cross-appealed from the remittitur of the punitive damages award.

         The nuisance and trespass instructions submitted to the jury were not erroneous. McCall and Fleming failed to establish that prejudice resulted from the inclusion of the "consequential damages" language in the nuisance and trespass instructions. McCall and Fleming also failed to establish that the nuisance and trespass instructions gave the jury a roving commission on damages or gave the jury an opportunity to award improper economic damages. Likewise, the circuit court did not err in refusing to remit the compensatory damages awarded against McCall and Fleming in that substantial evidence in the record supported the compensatory damages award. Accordingly, the judgment is affirmed with respect to the damages awarded against McCall and Fleming.

         The award of punitive damages against the Fund, however, was erroneous. The City's claims against the Fund are not cognizable under the Fund's enabling statutes. Furthermore, the Fund cannot be liable for its own conduct because the Fund's statutory structure is such that the Fund is merely an account and only its Board of Trustees is responsible for the administration and operation of the Fund. It follows that, because the City failed to allege cognizable claims against the Fund for actual or compensatory damages, it also cannot recover punitive damages against the Fund. Accordingly, the punitive damages award against the Fund is reversed. This Court, however, will not disturb the compensatory damages awarded against the Fund given that counsel for the Fund did not seek relief on appeal from the compensatory damages award. Moreover, because counsel for the Fund failed to raise the argument that the Fund's trustees - not the Fund itself - are the proper parties until after the jury rendered its verdict and because the allegations in the City's petition may state a cause of action against the Fund's Board of Trustees for the actions of its agents, the cause is remanded in the interest of fairness and justice. The judgment against the Fund is affirmed in all other respects.

         I. Factual and Procedural Background[1]

         McCall owned a gas station in Harrisonville that had an underground petroleum storage tank system. In September 1997, McCall discovered that its tank system was leaking and submitted notice of this claim against the Fund. The Fund is a special trust fund created by the legislature, in section 319.129, [2] to provide insurance to service station owners for the cleanup costs associated with spills and leaks from underground petroleum storage tanks. Representatives of the Fund investigated the leak and determined that a significant amount of gasoline had leaked into the soil surrounding McCall's tank system.

         McCall and the Board of Trustees for the Fund hired Bob Fine, an environmental engineer, to determine the extent of the leak. In October 1997, Mr. Fine notified the Department of Natural Resources that McCall's leaking tank system had caused petroleum contamination to migrate offsite toward a nearby creek. Mr. Fine prepared a plan to contain the leak by installing monitoring wells on the streets contiguous to McCall's service station. McCall subsequently sold the service station to Fleming.

         In 2003, the City decided to upgrade its sewer system to accommodate its growing population. The City's residents approved a bond issue for the multi-million dollar sewer upgrade project. The City hired George Butler & Associates, a local engineering firm, to design the project and prepare a scope of services so that the construction work could be let for competitive bidding.

         Rose-Lan Construction won the bidding process and was engaged by the City to complete the sewer project. During construction, Rose-Lan encountered contaminated soil adjacent to Fleming's service station. Because Rose-Lan did not have expertise in remediation of contaminated soil, it could not complete that portion of the sewer project.

         The City notified the department of natural resources of the contaminated soil and was informed that the Fund's Board of Trustees had retained Mr. Fine to monitor the contamination since 1997. The Fund's Board of Trustees then hired Mr. Fine to determine whether gasoline from Fleming's service station was responsible for the soil contamination in the City's sewer easement. Mr. Fine confirmed that the leak from Fleming's underground storage tank was the source of the contamination.

         The City began discussions with Mr. Fine regarding the best way to address the contaminated soil and to complete construction of the sewer upgrade project. The City's engineer, Ted Martin, estimated that to completely remove and replace the contaminated soil would cost in excess of $500, 000. Mr. Fine, on behalf of the Fund, suggested that a more cost-effective approach would be to leave the contaminated soil in place and install petroleum-resistant pipe and fittings. BV Construction submitted a bid of $190, 226.38 to install the petroleum resistant pipe according to Mr. Fine's suggested approach.

         Pat Vuchetich, the Fund's third-party administrator, concluded that Mr. Fine and BV Construction's estimate was too high and made efforts to find a cheaper bid. Mr. Vuchetich contacted multiple companies and determined that Midwest Remediation was best suited for the project based on his prior experience with the company. Mr. Vuchetich requested that Midwest Remediation prepare a bid and assisted Midwest Remediation's project manager, Shaun Thomas, in preparing the bid by making suggestions about specific cost items. Midwest Remediation's bid was for $175, 161.41, more than $15, 000 lower than the bid submitted by BV Construction.

         On April 13, 2004, Mr. Vuchetich forwarded Midwest Remediation's bid to Carol Eighmey, the executive director of the Fund's Board of Trustees. Mr. Vuchetich stated that the exposure to the Fund would be $135, 571 after subtracting Rose-Lan's estimated costs for the relevant section of pipe that the City would avoid because Rose-Lan would not be constructing that portion of the project. Mr. Vuchetich informed Ms. Eighmey that he would tell the City that Midwest's costs were reasonable.

         On April 15, 2004, the City held a meeting for all parties involved in the remediation project. Mr. Vuchetich represented the Fund at the meeting. The City was represented by the City administrator, Dianna Wright, the City attorney, Steve Mauer, and Mr. Martin, the City engineer. Mr. Thomas of Midwest Remediation and William Rextroat of Rose-Lan were also in attendance.

         At the meeting, Mr. Vuchetich presented Midwest Remediation's bid and informed the City that the bid was reasonable. Mr. Vuchetich also expressed concerns that Rose-Lan's initial bid of $19, 061.31 for installing the relevant section of pipe was too low. In response, Rose-Lan revised its bid to $25, 138.41. Rose-Lan's revised bid reduced the amount of the contamination-related costs for which the Fund would be responsible. Mr. Vuchetich also stated, on behalf of the Fund, that both the City and George Butler & Associates should share some of the additional costs of the cleanup project based upon their failure to discover the soil contamination before preparing the sewer construction plan. The City responded that the Fund should address those concerns with George Butler & Associates, not with the City. Ms. Wright, Mr. Martin, and Mr. Rextroat left the meeting with the understanding that Mr. Vuchetich, on behalf of the Fund, wanted the City to hire Midwest Remediation for the remediation project and that the City would be reimbursed from the Fund for the cost of Midwest Remediation's work, less the amount that the City would otherwise have paid to Rose-Lan for the affected portion of the sewer project.

         Various discussions between the City and Mr. Vuchetich occurred over the following months. Mr. Vuchetich, on at least two occasions, made an offer of $50, 000 to the City to settle the Fund's liability. On August 3, 2004, the City authorized Rose-Lan to subcontract with Midwest Remediation to install the petroleum-resistant pipes. The following day, the City's attorney sent a letter to Mr. Vuchetich stating that the City was going forward in reliance on his promise that the Fund would pay the full amount of Midwest Remediation's costs.

         The City was not reimbursed from the Fund for the costs of Midwest Remediation's work. As a result, the City filed suit against the Fund for fraudulent and negligent representation, alleging that the City had hired Midwest Remediation in reliance on Mr. Vuchetich's promise that the cost of Midwest Remediation's work would be paid from the Fund. The City also asserted claims for nuisance and trespass against McCall and Fleming based on the migration of petroleum contamination from the underground tank system.[3] The City sought compensatory and punitive damages from each defendant.

         A jury trial was conducted on the City's claims. During trial, the circuit court granted the City's motion for directed verdict on liability against McCall and Fleming. This left only the issue of damages for jury determination on the City's nuisance and trespass claims against McCall and Fleming and the issue of liability and damages on the City's claims of negligent and fraudulent misrepresentation against the Fund. McCall and Fleming made oral and written motions for directed verdict that were overruled by the circuit court. The Fund made only an oral motion for directed verdict at the close of all evidence that the circuit court also overruled.

         The jury returned a verdict for the City on all claims. The jury awarded $172, 100.98 in compensatory damages against McCall, Fleming, and the Fund. The jury also awarded $100 in punitive damages against McCall and Fleming and $8 million in punitive damages against the Fund. The circuit court entered its judgment accordingly.

         McCall, Fleming, and counsel for the Fund each filed post-trial motions. Counsel for the Fund argued that the $8 million punitive damages award exceeded the cap on punitive damages in section 510.265.1(2) and that the punitive damages award violated the due process requirements of the United States and Missouri constitutions. In refusing to apply the statutory damages cap, the circuit court found that the City's cause of action accrued before the statutory cap's enactment in 2005. Nevertheless, the circuit court remitted the punitive damages award to $2.5 million on due process grounds. The circuit court overruled the remaining post-trial motions.

         McCall, Fleming, and counsel for the Fund appeal. The City cross-appeals the circuit court's remitter of the punitive damages award. After an opinion by the court of appeals, the case was transferred to this Court.[4] Mo. Const. art. V. sec. 10.

         II. The Jury Instructions Were Not Erroneous

         In their first point, McCall and Fleming assert that the circuit court erred by submitting instruction Nos. 7 and 9, which pertained to the City's nuisance and trespass claims, respectively, because the instructions erroneously permitted the recovery of consequential damages. "Whether a jury was instructed properly is a question of law this Court reviews de novo." Hervey v. Missouri Dep't of Corrections, 379 S.W.3d 156, 159 (Mo. banc 2012). This Court conducts its review in the light most favorable to the record and will find submission of an instruction proper "if the instruction is supported by any theory[.]" Id. "The party challenging the instruction must show that the offending instruction misdirected, misled, or confused the jury, resulting in prejudice to the party challenging the instruction." Id. This Court will reverse instructional errors "only if the error resulted in prejudice that materially affects the merits of the action." Id.

         If a Missouri approved instruction (MAI) is applicable in a particular case, that instruction must be given "to the exclusion of any other instruction on the same subject." Rule 70.02(b). "Any deviation from an approved MAI instruction is presumed prejudicial error unless the contrary is shown." Kenney v. Wal-Mart Stores, Inc., 100 S.W.3d 809, 813 (Mo. banc 2003). MAIs, however, do not exist for every particular legal issue. When there is no applicable MAI, the instruction given "shall be simple, brief, impartial, free from argument, and shall not submit to the jury or require findings of detailed evidentiary facts." Rule 70.02(b). Although McCall and Fleming's point relied on challenges the jury instructions submitted on both the City's nuisance claim and trespass claim, the authority on which McCall and Fleming rely addresses only the damages recoverable in a common law trespass action. McCall and Fleming do not cite any authority to support their claim that consequential damages are not recoverable in a common law nuisance action. "Where a party fails to support a contention with relevant authority or argument beyond conclusions, the point is considered abandoned." Beatty v. State Tax Comm'n, 912 S.W.2d 492, 498-99 (Mo. banc 1995). McCall and Fleming, therefore, abandoned their argument that the circuit court erroneously instructed the jury that consequential damages were recoverable under the City's nuisance claim. Because the jury was instructed on and awarded consequential damages under the nuisance claim, no prejudice resulted from the trespass instruction also including the consequential damages language. Fleshner v. Pepose Vision Inst., P.C., 304 S.W.3d 81, 91 (Mo. banc 2010).

         McCall and Fleming also assert that the circuit court improperly submitted damages instructions based on MAI 4.02 rather than MAI 4.01. McCall and Fleming, however, did not object to the instructions on such grounds. Rule 70.03 provides: "No party may assign as error the giving or failure to give instructions unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection." The only objection raised by McCall and Fleming was that the language regarding consequential damages should not have been included in the instruction. In fact, McCall and Fleming modeled their instructions after MAI 4.02. Accordingly, because McCall and Fleming failed to make the specific objection to the instructions they are now claiming to be error, the issue is not preserved for appellate review. See Howard v. City of Kansas City, 332 S.W.3d 772, 790 (Mo. banc 2011).

         McCall and Fleming further assert that the inclusion of the phrase "consequential damages" in instruction Nos. 7 and 9 gave the jury a "roving commission." "A roving commission occurs when an instruction assumes a disputed fact or submits an abstract legal question that allows the jury to roam freely through the evidence and choose any facts which suit its fancy or its perception of logic to impose liability." Klotz v. St. Anthony's Med. Ctr., 311 S.W.3d 752, 766 (Mo. banc 2010) (internal quotations omitted). In determining whether a jury instruction failed to give the jury meaningful guidance but, instead, constituted a roving commission, "[t]he issue is whether the phrase as used in the verdict director was misleading in the context of the evidence at trial." Id. at 767. "Where the testimony in a case explains a phrase used in the verdict director, there is no 'roving commission.'" Id.

         In this case, the testimony at trial made clear precisely what damages the City was seeking to collect as a result of the petroleum contamination. Dianna Wright, the City's former administrator, testified that the City was required to hire Midwest Remediation to install petroleum-resistant piping in the area where the contamination had been discovered because Rose-Lan was not qualified to deal with the petroleum contamination. Ms. Wright further explained that Midwest Remediation charged the City $155, 257.98 more than Rose-Lan had contracted to charge for completion of the sewer upgrade project in the contaminated area. Ms. Wright testified that these additional costs were a direct result of the soil contamination. She also testified that the City incurred additional costs of $4, 660 for soil testing to determine the scope of the contamination and $12, 183 in additional fees to George Butler & Associates due to the increased scope of the sewer project caused by the soil contamination. Ms. Wright testified that the City's damages were the sum of these costs, $172, 100.98, which directly resulted from the soil contamination.

         Therefore, Ms. Wright's testimony establishes that the City incurred increased costs of $172, 100.98 to complete the sewer upgrade project as a direct result of the contamination for which McCall and Fleming are responsible. None of the costs for which the City sought reimbursement would have been incurred had the City not encountered petroleum-contaminated soil. The increased costs to which Ms. Wright testified are the costs for which the City sought compensation in its closing arguments, and the jury awarded the City compensatory damages in this precise amount. The City was entitled to recover these costs, which were proximately caused by the trespass of contaminants into the City's sewer easement. Under these circumstances, the reference to "consequential damages" in instruction Nos. 7 and 9 was sufficiently definite to inform the jury of the legal standard to be applied, and these instructions did not constitute a prohibited "roving commission."

         McCall and Fleming also assert that instructions Nos. 7 and 9 were erroneous because the instructions allowed the City to seek recovery of "economic damages." In support of their argument, McCall and Fleming rely on the following exchange during Ms. Wright's cross-examination by their counsel:

Q. ... So ... the difference in the money you paid [to Midwest Remediation] and the money that Rose-Lan said they would have spent, that represented the loss of the benefit of your good bargain with Rose-Lan; is that your understanding?

         A. That's my understanding. McCall and Fleming claim that this exchange establishes that the City was seeking "benefit of the bargain" damages rather than recovery of only those costs that were directly attributable to the petroleum contamination.

         By agreeing with McCall and Fleming's counsel that part of the City's damages reflected "the loss of the benefit of [the City's] good bargain with Rose-Lan, " Ms. Wright was merely testifying that, due to the petroleum contamination, the City could no longer construct this portion of the sewer upgrade project at the lower costs to which Rose-Lan had agreed but, instead, had to hire a specialized contractor to perform part of the sewer upgrade project at a much higher cost. Although McCall and Fleming's counsel asked his questions in terms of the "benefit of the bargain, " Ms. Wright's response is consistent with the remainder of her testimony that the City could have had the relevant work performed at a much lower price but for the discovery of the contamination. The isolated excerpt from Ms. Wright's testimony, therefore, does not establish that the instructions permitted the City to seek "benefit of the bargain" damages.

         III. Competent Evidence Supports the Compensatory Damages Award

         In their second point, McCall and Fleming argue that the circuit court abused its discretion by failing to sustain their motions for a directed verdict and for judgment notwithstanding the verdict, which sought to limit the City's compensatory damages to $72, 009.89. McCall and Fleming argue that there was no competent evidence that the damages attributable to the contamination exceeded that amount.

         "The standard of review for the denial of a judgment notwithstanding the verdict (JNOV) is essentially the same as review of the denial of a motion for directed verdict." All Am. Painting, LLC v. Fin. Solutions & Assocs., Inc., 315 S.W.3d 719, 723 (Mo. banc 2010).

When reviewing a circuit court's denial of a judgment notwithstanding the verdict, this Court must determine whether the plaintiff presented a submissible case by offering evidence to support every element necessary for liability. Evidence is viewed in the light most favorable to the jury's verdict, giving the plaintiff all reasonable inferences and disregarding all conflicting evidence and inferences. This Court will reverse the jury's verdict for insufficient evidence only where there is a complete absence of probative fact to support the jury's conclusion.

Smith v. Brown & Williamson Tobacco Corp., 410 S.W.3d 623, 630 (Mo. banc 2013) (internal citation and quotation omitted).

         McCall and Fleming claim that the only evidence on which the jury could have relied to determine the City's damages was the testimony of Mr. Thomas, who prepared Midwest Remediation's bid for the remediation project. Mr. Thomas testified that only $72, 009.98 of Midwest Remediation's bid of $175, 161.44 was directly attributable to the soil contamination at the site. This claim ignores the other evidence presented by the City to support its claim for damages.

         Ms. Wright testified that all of the damages it was seeking to recover resulted from the necessity to hire Midwest Remediation to construct a portion of the sewer upgrade project that Rose-Lan was not qualified to perform because of the petroleum contamination. Furthermore, the City's evidence indicated that representatives of the Fund recommended Midwest Remediation and viewed its bid to install the petroleum-resistant pipes for $155, 257.98 more than Rose-Lan's contract charged as "reasonable" for the work needed. Even if Mr. Thomas' testimony were viewed as inconsistent with the City's other evidence, any inconsistency was for the jury to resolve. Accordingly, viewing the evidence in the light most favorable to the verdict and disregarding any evidence to the contrary, the circuit court did not err in overruling McCall and Fleming's motion for directed verdict or motion for JNOV.

         IV. Remittitur of Compensatory Damages

         In their third point, McCall and Fleming assert that the circuit court abused its discretion by not remitting the compensatory damages award based on Mr. Thomas's testimony that Midwest Remediation's contamination-related costs were only $72, 009.98. Because substantial evidence supported the jury's compensatory damage award, the circuit court did not abuse its discretion in refusing to remit the compensatory damages awarded against McCall and Fleming. Badahman v. Catering St. Louis, 395 S.W.3d 29, 39-40 (Mo. banc 2013).

         V. The Evidence Supports a Finding of Detrimental Reliance

         On cross-appeal, counsel for the Fund asserts that the circuit court erred in overruling its motion for judgment notwithstanding the verdict because the City did not make a submissible case of fraud or negligent misrepresentation in that the City presented no evidence that it relied to its detriment on Mr. Vuchetich's representations. In fraudulent misrepresentation cases, the plaintiff is required to establish each and every element of a fraud claim, and its failure to do so is fatal to the claim. Heberer v. Shell Oil Co., 744 S.W.2d 441, 443 (Mo. banc 1988). An injury directly and proximately caused by the misrepresentation is an essential element of a fraudulent misrepresentation claim. Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765 (Mo. banc 2007).

         Counsel for the Fund contends that the uncontroverted evidence shows that the City actually saved $30, 000.00 by relying on Mr. Vuchetich's statements and hiring Midwest Remediation. Counsel argues that the City provided no proof that hiring Midwest Remediation resulted in costs to the City beyond those that the City was to incur if it did not hire Midwest Remediation. This argument, however, ignores that the City presented evidence that it would have acted differently if Mr. Vuchetich had not promised that the cost of Midwest Remediation's work would be paid from the Fund.

         Ms. Wright testified that, based on Mr. Vuchetich's representations, the City left the April 2004 meeting with the understanding that the Fund's representatives wanted the City to hire Midwest Restoration and that the City would be reimbursed from the Fund for the costs of Midwest Remediation's work, less the amount that the City would have otherwise paid Rose-Lan for the same portion of the sewer project. As a result, the City authorized Rose-Lan to subcontract with Midwest Restoration for that portion of the sewer project. The City then paid Midwest Restoration for its work on the sewer project. Ultimately, however, the City was not reimbursed from the Fund for the costs of Midwest Remediation's work. Ms. Wright testified that, if she would have been told that the City would not be reimbursed from the Fund for all of the costs in excess of Rose-Lan's contract price, she would have told representatives of the Fund to "come and get your contaminated soil, and get it out of our easement, and completely remove it, clean it up, get a certification that it's now clean." Ms. Wright further testified that the City would then have had Rose-Lan complete the sewer installation as originally planned at no additional cost. Mr. Martin provided similar testimony. Testimony at trial reflected that the cost of excavation of all contaminated soils would have been approximately $500, 000, for which the City claimed the Fund would have been responsible.

         Based upon the proceeding facts, the City presented substantial evidence to allow the trier of fact to find that the City relied on Mr. Vuchetich's representations to its detriment in that the City incurred additional costs when it hired and paid Midwest Restoration to complete that portion of the sewer project that it otherwise would not have incurred had the City demanded representatives of the Fund remove all contaminated soil for Rose-Lan to complete that portion of the sewer project as initially planned. The circuit court, therefore, did not ...


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