66, Inc. v. Crestwood Commons Redevelopment Corp.

• Citation: 998 S.W.2d 32
• Decision Date: 03 August 1999
• Docket Number: No. 81456,81456
• Parties: 66, INC., Appellant, v. CRESTWOOD COMMONS REDEVELOPMENT CORPORATION, et al., Respondents.
• Court: Missouri Supreme Court

Page 32

998 S.W.2d 32

66, INC., Appellant, v. CRESTWOOD COMMONS REDEVELOPMENT CORPORATION, et al., Respondents.

No. 81456.

Supreme Court of Missouri En Banc.

Aug. 3, 1999.

Rehearing Denied Sept. 8, 1999.

Joe D. Jacobson, Martin M. Green, Clayton, for Appellant.

Gerard T. Carmody, Dan M. Lesicko, William J. Travis, St. Louis, for Respondents.

MICHAEL A. WOLFF, Judge.

Introduction

The City of Crestwood granted redevelopment rights and the governmental power of eminent domain to Crestwood Commons, a redevelopment corporation owned by a joint venture of Hycel Partners III, L.P. and Schnuck Markets, Inc., for redevelopment of a tract of land owned by 66, Inc. When Crestwood Commons abandoned its condemnation action to acquire the 66, Inc. property by eminent domain, 66, Inc. filed this action for damages. The trial court granted summary judgment in favor of Crestwood Commons, Hycel and Schnuck. This Court granted transfer after opinion by the Court of Appeals, Eastern District. We reverse and remand. Because the trial court did not state the reasons for its grant of summary judgment, we review respondents' arguments in support of the trial court's judgment, and hold:

1. 66, Inc. has a common law claim for abandonment of condemnation; this action is not pre-empted or extinguished by section 523.045, ¹ which allows an award of interest on a condemnation award after a condemnor abandons condemnation.

2. Crestwood Commons Redevelopment Corporation, which has no assets of its own and is operated solely by employees of Hycel and Schnuck, is the alter ego of the joint venture of Hycel and Schnuck. Accordingly, Hycel and Schnuck are responsible for claims against Crestwood Commons.

3. The claim of 66, Inc. in this case is not barred by the final judgment in an action, initiated after the filing of this present case, in which 66, Inc. made a claim to be a third-party beneficiary of the "guaranty" contract between Crestwood Commons and the City of Crestwood.

Factual and Procedural Background

66, Inc. is the former owner of the property located in the City of Crestwood, Missouri, on which it operated the 66 Drive-In Theater. Crestwood Commons Joint Venture is a general partnership formed by Hycel and Schnuck to acquire the drive-in property. Crestwood Commons Redevelopment Corporation is an urban redevelopment corporation formed pursuant to chapter 353 RSMo for the sole purpose of the condemnation action. Crestwood Commons Redevelopment Corporation was formed and is owned by the joint venture general partnership that was formed by Schnuck and Hycel.

The City of Crestwood declared the 66 Drive-In property a blighted area in 1988 and solicited contracts for its purchase and redevelopment. The Crestwood Commons Joint Venture submitted a redevelopment proposal to the city. In July 1989, Crestwood Commons Redevelopment Corporation and the city entered into a contract to redevelop the 66 Drive-In property. ² The terms of the redevelopment contract granted Crestwood Commons the power of eminent domain to acquire the 66 Drive-In property. Under the terms of the contract, Crestwood Commons could terminate the contract only if the condemnation award exceeded $7,600,000.00, increased annually by five percent. In a separate agreement with the city, Hycel and Schnuck guaranteed Crestwood Commons' performance of its obligations to the city under the redevelopment contract.

The First Case: The Condemnation Action

Two days after Crestwood Commons signed the contract with the city, on July 13, 1989, Crestwood Commons filed a condemnation action against the 66 Drive-In property, when negotiations for purchase of the property from 66, Inc. were unsuccessful. The trial court denied condemnation, but the court of appeals reversed. Crestwood Commons Redevelopment Corporation v. 66 Drive-In, 812 S.W.2d 903, 905 (Mo.App.1991). Thereafter, in December 1991, the condemnation commissioners entered their report establishing a value of $7,399,000 for the property. Both parties filed exceptions to the report. In July 1992, Crestwood Commons abandoned the condemnation prior to trial on the exceptions. Following the abandonment, 66, Inc. filed a motion for an award of interest pursuant to section 523.045 as part of the condemnation action. In June 1993, the trial court awarded interest of $250,582.55 to 66, Inc. The interest award was affirmed by the court of appeals. Crestwood Commons Redevelopment Corporation v. 66 Drive-In, 882 S.W.2d 319 (Mo.App.1994). However, 66, Inc. was unable to collect the interest award because Crestwood Commons is, as noted, a corporation that has no assets.

The Second Case: The Present Action for Damages

In November 1992, while the motion for award of interest was pending, 66, Inc. filed the present action, which originally sought specific performance from the city and Crestwood Commons of the redevelopment agreement, on the theory that 66, Inc. was a third-party beneficiary of that contract. In March 1993--which also was before the court's decision on interest in the condemnation action--66, Inc. added a count seeking damages caused by the abandonment of the condemnation and added Hycel and Schnuck as defendants to the action, on the theory that Crestwood Commons is their alter ego. In August 1994, 66, Inc. amended its petition a second time, removing the request for specific performance and seeking damages in excess of $2,650,000 arising from the abandonment of the condemnation proceedings. ³

The 66, Inc. drive-in property was sold in November 1993 for $7,934, 500. 66, Inc. alleges that it previously had a contract to sell the property to National Supermarkets for $8 million and would have closed the sale in early 1991, except that the Crestwood damages exceed the sum of interest awarded pursuant to section 523.045 in the condemnation action.

The Third Case: The "Guaranty" Action

In January 1994, after it was apparent that Crestwood Commons was a shell corporation that had no assets from which to collect the interest award judgment, 66, Inc. filed a separate "guaranty" action against Schnuck and Hycel for payment of the interest judgment. 66, Inc. alleged that it was a third-party beneficiary of the contract between the joint venture and the city by which Hycel and Schnuck guaranteed Crestwood Commons' performance of the redevelopment contract. 66, Inc. asserted that Crestwood Commons breached the redevelopment contract when it abandoned the condemnation even though the commissioners' award was less than $7,600,000. In August 1994, the trial court dismissed the "guaranty" action with prejudice. The court of appeals affirmed the dismissal. 66 Drive-In, Inc. v. Hycel Partners III, L.P., 897 S.W.2d 203 (Mo.App.1995). ⁴ The present action for damages, as we have noted, was pending throughout the existence of the separate guaranty action. No motion was made in either lawsuit to consolidate 66, Inc.'s claim for damages and the guaranty claim; see, Rule 66.01.

The Claim for Damages for Abandonment of Condemnation

Missouri courts have long recognized a claim for damages resulting from abandonment of condemnation proceedings by a private corporation. North Missouri Railroad Co. v. Lackland, 25 Mo. 515 (Mo.1857). See also, Missouri State Park Board v. McDaniel, 513 S.W.2d 447, 449 (Mo.1974) and Nifong v. Texas Empire Pipe Line Co., 225 Mo.App. 1134, 40 S.W.2d 522, 524 (1931). The award of damages is based on "the broad principle of the inherent equity in the proposition that when the corporation, clothed with and exercising such extraordinary powers delegated by the government, in which it properly resides, entails expense upon the proprietor in protecting his private property rights and the proceeding is dismissed or abandoned, as a result of which he receives no compensation whatever, the corporation, on the plainest principles of justice, should reimburse him to the extent of such reasonable expenditure entailed by its voluntary act." Nifong, 40 S.W.2d at 524 quoting Kirn v. Railroad, 124 Mo.App. 271, 101 S.W. 673 (1907).

Missouri law draws a clear distinction between governmental and non-governmental condemnors. Governmental condemnors, clothed with the privileges of the sovereign, are liable upon abandonment of a condemnation only if they act in bad faith. Center School District v. Kenton, 345 S.W.2d 120, 126 (Mo.1961); Meadow Park Land Co. v. School District of Kansas City, 301 Mo. 688, 257 S.W. 441 (1923). Private corporations that are granted the sovereign's power of eminent domain do not get the protection afforded by the "bad faith" standard. Non-governmental condemnors are liable for the costs, expenses and "actual losses inflicted on the land-owner, by the institution and maintenance of the proceedings to condemn his land" after the proceedings are discontinued. Nifong, supra, 40 S.W.2d at 523-524, quoting Leisse v. St. Louis & Iron Mountain Railroad Co., 2 Mo.App. 105, 113-114.

A separate action--- such as filed by 66, Inc. here--- is the only means for making a damages claim for abandonment of condemnation because the only damage issue recognized in a condemnation proceeding is the value of the real estate being taken. Rule 86.08. The owner's claim for expense and loss suffered from the condemnation proceeding, which is not damage to the real estate, cannot be asserted as a counterclaim in the condemnation action itself, but must be brought in a separate action for damages. Rejecting the use of a counterclaim for such damages, this Court in State ex rel. Washington University Medical Center Redevelopment Corp. v. Gaertner, 626 S.W.2d 373, 378 (Mo. banc 1982) said:

Pending the granting of a more expeditious form of relief by the legislature, or modification of our present rules of civil procedure by the Court, landowner's relief lies in pursuing in a separate action the claim now alleged and stated in his counterclaim. Our prior cases have recognized such a right on the part of the landowner.

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