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Septagon Construction Company Inc. v. Industrial Development Authority of City of Moberly

Court of Appeals of Missouri, Western District, Third Division

March 7, 2017

SEPTAGON CONSTRUCTION COMPANY INCORPORATED - COLUMBIA, ET AL., Respondents,
v.
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF MOBERLY, MAYOR BOB RILEY AND THE MOBERLY REDEVELOPMENT CORPORATION, Respondents, STOCKMAN CONSTRUCTION CORP., Appellant-Respondent, CITY OF MOBERLY, MISSOURI and MOBERLY AREA ECONOMIC DEVELOPMENT CORP, Respondent-Appellant.

         APPEAL FROM THE CIRCUIT COURT OF RANDOLPH COUNTY, MISSOURI THE HONORABLE SCOTT A. HAYES, JUDGE

          Before: Karen King Mitchell, Presiding Judge, Victor C. Howard, Judge and Gary D. Witt, Judge.

          VICTOR C. HOWARD, JUDGE.

         Stockman Construction Corp. appeals the summary judgment in favor of the Moberly Defendants[1] on Stockman's claims seeking relief for the failure of the Moberly Defendants to obtain a public works payment bond, breach of contract, and unjust enrichment. The City and the EDC cross-appeal from the judgment of the trial court denying their motion for costs incurred. The judgment is affirmed.

         Factual and Procedural Background

         In 2010, Mamtek US, Inc. sought financing and incentives to construct a sucralose manufacturing facility in Moberly (Mamtek Project). The EDC worked with various state entities to bring the Mamtek Project to Moberly for the purpose of bringing jobs to the area. The Authority issued bonds to help finance the construction of the sucralose facility to be owned eventually by Mamtek. The City declared blighted the property on which the Mamtek Project was to be constructed (Subject Property). Property transfers occurred between the EDC and the City to the Authority so that the Authority could issue a Deed of Trust for the Subject Property to provide security to the bondholders until Mamtek made all the required bond payments.

         Specifically, a Management, Operating, and Purchase Agreement, a Development Agreement, and a Trust Indenture, effective July 1, 2010, set forth the financing of the Mamtek Project. Pursuant to these various agreements, Mamtek agreed to construct, manage, and operate the Mamtek Project through the term of the bonds (September 2025), and the City agreed to timely make the bond proceeds available to pay or reimburse Mamtek for the construction of the Project. Mamtek further agreed to make timely payments to the City in the amount of the principal and interest on the bonds. The City would own the Project during the term of the bonds, and Mamtek would be obligated to purchase, and the City would be obligated to sell, the Project on the expiration of the term or the redemption of the bonds. Additionally, if Mamtek defaulted on any of its obligations, the interests of the Subject Property would transfer to the bond trustee, UMB Bank, for the benefit of the bondholders. The financing agreements did not have any design terms, plans or specification, schedule for completion, or change order terms.

         Mamtek entered into a construction contract with Septagon Construction to design and construct the Mamtek Project. The contract identified Mamtek as the Owner and Septagon as the contractor. It provided that all portions of the Project that Septagon does not perform itself shall be performed under subcontracts, the subcontracts will be between Septagon and the subcontractor, and Septagon shall be responsible for supervising and for the performance of the subcontractors. The contract contemplated that mechanic's liens could be asserted on the Subject Property. Septagon, as general contractor, obtained a performance and payment bond naming Mamtek as Owner and the City as co-obligee.

         As the Mamtek Project moved forward, Mamtek submitted payment requests with supporting invoices to the City to receive payment from the bond proceeds for work performed on the Subject Property. After reviewing the requests for compliance with the financing terms, the City submitted authorizations to the bond trustee, UMB Bank, to make payments from the bond proceeds.

         Stockman Construction agreed to perform certain construction work directly for Mamtek pursuant to a contract between the two entities. Stockman began work and billed Mamtek. The City authorized UMB Bank to make payments of $331, 470.05 to Stockman for its work on the Moberly Project.

         Ultimately, Mamtek did not complete the Project and defaulted on its obligations to make the required bond payments. The bond trustee, UMB Bank, took possession and control of the Subject Property on behalf of the bondholders.

         Thereafter, in February 2012, Stockman filed suit against the Moberly Defendants and others essentially seeking damages for nonpayment of over $349, 000 for additional work it performed for Mamtek. Specifically, it asserted claims against the Moberly Defendants for violation of section 107.170(2)[2] for failing to require Mamtek to obtain a public works payment bond, breach of contract, and unjust enrichment. Alternatively, it asserted a mechanic's lien claim against the Moberly Defendants and others to determine the respective rights of all parties asserting a lien on the Subject Property. Septagon and other subcontractors also filed mechanic's lien suits. Septagon's lawsuit included the alternative claims against the City and the Authority for violation of section 107.170(2). The trial court consolidated the lawsuits.

         In March 2013, UMB Bank filed a motion requesting the trial court to order the sale of the Subject Property, deposit the funds from such sale into the court registry, and at some point in the future, determine the rights of the mechanic's lien claimants and distribute the funds accordingly. UMB Bank also sought reimbursement of its reasonable expenses in maintaining and marketing the property. The City and the EDC filed a motion in April 2013 for their costs in maintaining the Subject Property since Mamtek's default and before UMB Bank took possession of it. The next month, the Moberly Defendants filed a notice with the trial court disclaiming any and all right, title, and interest in Subject Property.

         In June 2013, the trial court ordered the Subject Property sold and the proceeds placed in the court registry. Six months later, the trial court entered an order approving a commercial real estate sales contract and the sale of the Subject Property. In accordance with its prior order of sale, the trial court ordered the sale proceeds placed in the court registry and that valid liens and claims shall attach to the sale proceeds and the validity and priority of liens, as well as claims for reimbursement of costs incurred in maintaining the Subject Property, would be determined at a later time.

         In April 2014, the Moberly Defendants filed a joint motion for summary judgment on all of Stockman's claims against them. They asserted that the EDC, the RDC, and the Authority were entitled to judgment as a matter of law on Stockman's claim for violation of the public works payment bond statute, section 107.170, because there was no public works contract between those entities and Stockman and none of the entities satisfy the definition of a "public entity" under the statute. They further asserted that Stockman's public works payment bond claim failed against the City and the mayor because the agreement between City and Mamtek was not a public works contract and a mechanic's lien was the proper remedy. The Moberly Defendants argued that Stockman's claim for breach of contract failed as a matter of law because there was no contract between the City and Stockman and Stockman was not a third-party beneficiary to the agreements between the City and the Authority and Mamtek. Finally, the Moberly Defendants asserted that they were entitled to judgment as a matter of law on Stockman's claim for unjust enrichment because such a claim cannot be made against municipal corporations, none of the Moberly Defendants benefitted from Stockman's work, and the City paid Stockman for its work from bond proceeds.[3]

         Stockman responded and filed a cross-motion for summary judgment. In February 2015, after arguments on the motion, the trial court granted summary judgment in favor of the Moberly Defendants against Stockman on all counts for the reasons stated in the Moberly Defendants' motion. It further denied Stockman's motion for summary judgment.

         Several months later in November 2015, the remaining parties including UMB Bank, Stockman, Septagon, and others filed a joint motion for release of funds and dismissal of the remaining claims. The remaining parties proposed a settlement wherein each would accept an agreed upon payment from the court registry to resolve all remaining claims and facilitate the conclusion of the case while reserving the right to appeal the summary judgment in favor of the Moberly Defendants. The trial court entered an order directing payout of the funds in the court registry according to the agreement of the remaining parties. A month later, the trial court issued its final judgment reaffirming its prior summary judgment in favor of the Moberly Defendants and dismissing all other claims of all parties. This appeal by Stockman and cross-appeal by the City and the EDC followed.

         Stockman's ...


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