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Massood v. Fedynich

Court of Appeals of Missouri, Western District, Third Division

June 20, 2017

CURTIS MASSOOD, ET AL., Appellants,
v.
CRAIG FEDYNICH, ET AL., Respondents.

         Appeal from the Circuit Court of Jackson County, Missouri, The Honorable W. Brent Powell, Judge.

          Before: Anthony Rex Gabbert, Presiding Judge, Victor C. Howard, Judge and Cynthia L. Martin, Judge.

          CYNTHIA L. MARTIN, JUDGE.

         Curtis Massood ("Massood") appeals from a judgment reflecting the disposition of various claims following a jury trial, and reflecting the trial court's disposition of a claim seeking to dissolve and wind-up the affairs of Midwest Outdoor Media, LLC ("Midwest"). Massood asserts that the trial court erred in entering judgment in favor of Midwest on a derivative claim for conversion asserted by member Craig Fedynich ("Fedynich") because: (1) there was insufficient evidence to support the jury's verdict; (2) the jury's verdict was inconsistent with the jury's other verdicts; and (3) in the alternative, the trial court improperly instructed the jury regarding the calculation of damages. Massood also argues that the trial court erred in awarding Fedynich attorney's fees on the derivative claim because the award was not statutorily permitted and included charges for work unrelated to the derivative claim. Finally, Massood asserts that the trial court erroneously ordered the dissolution and wind-up of Midwest based on a finding that the owners of Midwest are deadlocked. We affirm.

         Factual and Procedural History[1]

         In 2002, Fedynich controlled several undeveloped billboard locations in Missouri, based on existing leases, lease options, or easement options. Fedynich had procured or was prepared to procure the permits necessary to construct billboards on the locations. However, Fedynich did not have the necessary capital to construct the billboards. In July 2002, Fedynich approached Massood with a business proposal to form Midwest, a billboard business.

         In forming Midwest, Fedynich and Massood entered into an operating agreement ("Operating Agreement") and a subscription agreement ("Subscription Agreement") on July 12, 2002. The Operating Agreement provided that Massood and Fedynich were the sole members of Midwest, with Massood having a 51 percent ownership interest and Fedynich having a 49 percent ownership interest. The Operating Agreement also provided that profits and losses were to be allocated to Massood and Fedynich equally. The Subscription Agreement provided:

[Massood] shall have an initial member interest in [Midwest] in the amount of 51%. [Fedynich] shall have an initial member interest in [Midwest] in the amount of 49%. These member interests shall be in those percentages at any time that [Massood] shall be personal liability [sic] for any of the liabilities of [Midwest] in excess of the personal liability of [Fedynich] for any of the liabilities of [Midwest]. At any time [Massood] shall not have personal liability for any of the liabilities of [Midwest] in excess of the personal liability of [Fedynich] for any of the liabilities of [Midwest], the membership interests of [Massood] and [Fedynich] shall be 50% each.

         The Operating Agreement provided that Massood and Fedynich would each contribute $1, 000 of capital to Midwest. In addition, the Subscription Agreement provided that Fedynich would provide ground leases and ground easements to Midwest or would provide easements sufficient to allow Midwest to construct billboards. The Subscription Agreement provided that Massood would loan Midwest the amount of $40, 000 to construct each billboard but limited Massood's total obligation to $500, 000.

         Fedynich contributed fourteen billboard locations to the company. Midwest purchased three additional billboard locations. Massood loaned Midwest a total of $554, 339.54. By the end of 2005, Midwest had completed the construction of thirteen billboards. The four remaining billboard locations were still vacant as of June 2016.

         According to both Fedynich and Massood, their intention in forming Midwest was to build billboards on the contributed billboard locations, to rent each side of the billboard to advertisers, and then to sell Midwest or its assets within a few years of the company's formation. By late 2006, Massood and Fedynich both believed that Midwest had built and rented a sufficient number of billboards to permit Midwest or its assets to be sold for a sufficient amount to repay Massood's loans, to pay Fedynich for the value of the contributed billboard sites, and to result in profit to be split between the members. Over the course of 2006 and 2007, there were three offers to purchase Midwest's billboards and locations. Massood received two offers that he declined without informing Fedynich, and Massood and Fedynich received one offer that Fedynich wanted to accept but that Massood declined.

         Massood and Fedynich met in September 2007 to discuss dividing Midwest's assets. Fedynich memorialized their conversation in a handwritten document, signed by both Massood and Fedynich. Fedynich filed suit in 2008 against Massood and Midwest, arguing that the handwritten document was a contract to divide the company's assets that should be specifically performed. On appeal, we concluded that "[b]ecause Mr. Fedynich failed to prove an enforceable contract to divide all of the assets of Midwest, the trial court should have entered judgment in favor of [Massood and Midwest]." Fedynich v. Massood, 342 S.W.3d 887, 893 (Mo. App. W.D. 2011).

         Meanwhile, in 2004, Midwest and Craig Outdoor Advertising, Inc. ("Craig")[2] joined as plaintiffs in a lawsuit filed in federal court against Viacom Outdoor, Inc. ("Viacom") ("Viacom suit"). The Viacom suit alleged that:

[Viacom and its executives] perpetrated a scheme by which Viacom and its employees and consultants would represent to businesses and individuals interested in constructing billboards on railroad property that Viacom was acting as the agent for those railroads with respect to billboard construction and that applications to build on railroad property would be evaluated on a first-come, first-served basis. In reality, however, Viacom employees or consultants reviewed each site application to determine if Viacom wanted to develop the site itself.

Craig Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1008 (8th Cir. 2008). Midwest and Craig were represented by the same attorneys in the Viacom suit. The suit was based on Midwest and Craig's interests in three billboard sites, acquired from a company named Ad Trend. Two of the sites were owned jointly by Midwest and Craig, and the third site was solely owned by Midwest. Midwest's interest in the three sites was acquired using $15, 000 of Massood's personal funds.

         Following a jury trial, judgment was entered in favor of Midwest and Craig in federal court. Following appeal and remand, the initial judgment was reduced. In January 2010, Midwest received a check for $776, 372.25, which represented its share of the final judgment against Viacom minus attorney's fees and expenses.[3] Massood endorsed that check, and it was deposited into Midwest's bank account. Then, Massood paid himself a total of $807, 060.53 from Midwest, which represented the Viacom judgment plus amounts advanced by Massood to fund the Viacom litigation.

         Based on the reduction of the initial judgment in the Viacom suit, Midwest filed a legal malpractice suit in July 2010 against the attorneys who represented Midwest and Craig ("malpractice suit"). Midwest settled the malpractice suit in May 2011. The settlement provided that Midwest was to be paid a total of $1, 350, 000, after attorney's fees, in two installments of $675, 000. Midwest received the first $675, 000 check in June 2011 and received the second $675, 000 check in January 2012. Massood deposited both checks directly into his personal account.

         In May 2011, Massood filed suit against Fedynich claiming breach of fiduciary duty, breach of contract, and tortious interference in connection with the operation of Midwest. Massood's suit also named Midwest, and sought declaratory judgments on several issues, including that the funds Massood gave Midwest to construct billboards were loans and not capital contributions, that Midwest properly distributed $807, 060.53 to Massood following the Viacom judgment, and that Massood was entitled to the $1, 350, 000 in proceeds from the malpractice suit settlement.

         In September 2011, Fedynich filed suit against Massood alleging breach of fiduciary duty and breach of contract based on Midwest's distribution of the Viacom judgment proceeds to Massood and based on Massood's deposit of the malpractice settlement into his own account. Fedynich also sought a judgment ordering dissolution and wind-up of Midwest. Finally, Fedynich filed a derivative action on behalf of Midwest against Massood for conversion of the malpractice settlement.

         The trial court consolidated the cases. Thirteen claims were submitted to the jury, and Fedynich's action to dissolve and wind-up Midwest was tried to the court. The claims submitted to the jury were disposed as follows:

(1) On Massood's claim for a declaratory judgment that the money he contributed to Midwest to construct billboards were loans, the jury returned a verdict in Massood's favor and found that from 2002 to 2003, Massood loaned Midwest $554, 339.54.
(2)On Massood's claim for a declaratory judgment setting the interest rate chargeable on the loans made to Midwest, the jury returned a verdict declaring that Massood was not entitled to interest on the loans he made to Midwest.
(3)On Massood's claim for a declaratory judgment that he was entitled to the proceeds Midwest received from the Viacom suit, the jury returned a verdict declaring that "Massood is entitled to the entire amount [Midwest] received from the Viacom litigation."
(4)On Massood's claim for a declaratory judgment that he was entitled to the proceeds from the malpractice suit settlement, the jury returned a verdict declaring that "Massood is not entitled to the entire amount [Midwest] received from the malpractice settlement."
(5) On Massood's claim against Fedynich for breach of the Subscription Agreement that asserted Fedynich failed to provide a sufficient number of ground leases and ground easements to allow Midwest to engage in its business activities, the jury returned a verdict in favor of Fedynich.
(6) On Massood's claim against Fedynich for breach of fiduciary duty alleging that Fedynich engaged in mismanagement of Midwest's day-to-day affairs, the jury returned a verdict in favor of Fedynich.
(7)On Massood's claim against Fedynich for breach of contract alleging that Fedynich mismanaged Midwest's day-to-day affairs, the jury returned a verdict in favor of Fedynich.
(8) On Massood's claim against Fedynich for tortious interference with a brokerage agreement Midwest entered into with a company that regarding a sale of Midwest's assets, the jury returned a verdict in favor of Fedynich.
(9) On Fedynich's claim against Massood for breach of fiduciary duty regarding Massood's distribution of the proceeds from the Viacom suit from Midwest to himself, the jury returned a verdict in favor of Massood.
(10)On Fedynich's claim against Massood for breach of contract for failing to distribute the proceeds from the Viacom suit in accordance with the Operating Agreement, the jury returned a verdict in favor of Massood.
(11) On Fedynich's claim against Massood for breach of fiduciary duty regarding Massood's deposit of the malpractice settlement into his personal account, the jury ...

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