O'Brien v. Missouri Cities Water Co., 38112

• Citation: 574 S.W.2d 13
• Decision Date: 10 October 1978
• Docket Number: No. 38112,38112
• Parties: Leonard O'BRIEN, Plaintiff-Respondent, v. MISSOURI CITIES WATER COMPANY et al., Defendant-Appellant. . Louis District, Division Two
• Court: Court of Appeal of Missouri (US)

Page 13

574 S.W.2d 13

Leonard O'BRIEN, Plaintiff-Respondent, v. MISSOURI CITIES WATER COMPANY et al., Defendant-Appellant.

No. 38112.

Missouri Court of Appeals, St. Louis District, Division Two.

Oct. 10, 1978.

Motion for Rehearing and/or Transfer to Supreme Court Denied

Nov. 17, 1978.

Edward, Seigfried, Runge & Leonatti, Mexico, for defendant-appellant.

Paul F. Niedner, St. Charles, for plaintiff-respondent.

STEWART, Presiding Judge.

Leonard O'Brien, plaintiff, brought an action against Consolidated Water Company (Consolidated) and its wholly owned subsidiary, Missouri Cities Water Company (Missouri Cities) for money due under a contract for consulting services. These parties will frequently be referred to collectively as defendant in the opinion. With the answer defendant filed a counterclaim seeking judgment for payments made to plaintiff in excess of the amounts due under the contract. Defendant also sought damages for breach of a provision of the contract that prohibited plaintiff from engaging in activities contrary to the best interests of defendant. Defendant did not submit an instruction with respect to the claim for damages for breach of contract, therefore this claim has been abandoned and no further reference will be made to it. The jury returned a verdict against defendant on the counterclaim for overpayment and in favor of plaintiff in the sum of $55,740 on his cause of action. Defendant appeals from the judgment entered upon the verdict. We reverse and remand.

The contract sued upon is one of three contracts entered into July 7, 1967, when plaintiff and others sold their stock representing controlling interest in St. Charles Water to Consolidated. St. Charles Water was subsequently merged into Missouri Cities as a subsidiary of Consolidated.

An understanding of the issues requires a detailed chronology of events occurring prior to the sale of St. Charles Water to Consolidated.

Plaintiff and William Dreckshage, real estate developers, and a corporation which they had formed, were the principal stockholders of St. Charles Water, a corporation engaged in the business of providing water services in St. Charles County. St. Charles Water obtained certificates of convenience and necessity (certificates) from the Missouri Public Service Commission (PSC) to operate its business in four areas of St. Charles County.

One of the areas for which St. Charles Water had a certificate was known as the Twillman Area. Within this area Twillman Construction Company operated as a real estate developer and in connection with that operation had formed a water and sewer service company to supply these utilities to purchasers within the development. Twillman had a temporary certificate from the PSC. In 1965, Twillman was experiencing financial problems and negotiations were initiated between St. Charles Water and the shareholders of Twillman for the purchase of Twillman's water system. In 1966, the interested parties entered into a contract for the purchase of Twillman's water system by St. Charles Water. The price was to be $400,000.00 or the sum determined by the PSC as "net original cost rate base, which is lesser, but (not less than) $250,000.00." As material to our consideration, the contract was subject to and conditioned upon PSC's grant of a certificate to St. Charles Water, PSC's approval of the purchase and PSC's approval of the purchase price and permission of PSC to allow St. Charles Water to obtain a return based upon the purchase price.

A certificate was issued to St. Charles Water encompassing the area in which Twillman operated as well as additional area. The order of the PSC also authorized the purchase of Twillman by St. Charles Water. The PSC did not approve the purchase price but reserved the determination of original costs and the determination of value for consideration at a later date. The order was effective June 10, 1966 and St. Charles Water took possession of the properties of Twillman and operated the water system thereafter. St. Charles collected the revenues and paid the current expenses; it made no accounting to Twillman. St. Charles also paid off a judgment against Twillman.

Before the approval of a purchase price for the Twillman system by PSC, plaintiff and other shareholders sold the controlling interest in St. Charles to Consolidated in exchange for stock of Consolidated, under a contract dated June 7, 1967. ¹

On the same date the parties to the contract of sale of the stock in St. Charles Water executed a contract calling for plaintiff and Mr. Dreckshage to render consulting services to St. Charles Water for a period of two years. Plaintiff and Mr. Dreckshage were each to receive $12,500.00 per year. Of some significance to our consideration of this case, plaintiff and Mr. Dreckshage were to perform services "to complete water and sewer plant construction, original cost hearing before the Missouri Public Service Commission, completion of the Twillman contract for St. Charles and main extension commitments for a period of two years."

The contract which forms the basis of this action bears the same date as the other two contracts and provides for payment for consulting services beginning two years after the date of acquisition of the stock of St. Charles Water as provided in the first contract and continuing for a period of eight years. In consideration of consulting services provided by plaintiff and Mr. Dreckshage, Consolidated agreed to pay

". . . in each year during the term of this agreement, semi-annually, a sum in the aggregate equal to Thirty Dollars ($30.00) per active customer added to the system now owned by St. Charles and within its service area during such semi-annual period (added active customer is defined as a newly added meter). . . ." ²

The contract provided for a maximum payment based upon the classification permitted by PSC for tap-in fees charged by the defendants. By reason of the action of the PSC the payments were not to exceed $160,000.00. The maximum limitation is not a material consideration in the case.

Defendant submitted its first semi-annual payment along with an accounting for meters added, in January, 1970 and continued to do so through July of 1972. The accountings showed a total of 1098 meters added for which $32,940.00 was paid by defendants. Plaintiff did not receive an accounting or payment in January, 1973. He later received a letter dated March 22, 1973, from Missouri Cities signed by a Mr. Lee. Mr. Lee had not been with the Consolidated organization when the contract was drawn. The letter advised that Missouri Cities was not obligated to make payments for new customers added to water main extensions of the system which were not in existence at the time the contract was executed; that as he read the contract they were to pay "$30.00 per active customer added to the St. Charles Water System as constituted on June 6, 1967." Mr. Lee advised that an audit revealed that payments had been made with respect to 194 customers who had been added to main extensions made by defendant which represented an overpayment of $5,820.00. He advised that after allocating a proportionate share to Mr. Dreckshage, plaintiff had been overpaid on 106 additional customers in the sum of $3,180.00 and that this amount would be charged against new customers which would be added in the future to the system as constituted on June 6, 1967. This action on the part of defendant precipitated this litigation.

After the suit was commenced, defendant, in addition to the claim for overpayment of 106 customers added to the main extensions, alleged that it had mistakenly paid plaintiff for customers added to the Twillman area. It is defendant's contention that the Twillman area was not a part of the system "owned by St. Charles and within its service area" as of June 7, 1967, as provided for in the contract; that it had mistakenly paid plaintiff for 476 added customers within the Twillman area that were not called for by the contract. Defendant by its counterclaim sought to recover $14,595.00 for the alleged overpayment.

Plaintiff testified that as of January 1, 1976, there were 2267 meters added after the consulting contract became effective. This included the Twillman area and the water main extensions which had been added to the system after Consolidated obtained control of St. Charles Water. He also testified that in addition to meters there had been 647 tap-ins to apartment units. He stated that adding the tap-ins to the meters would total 2914. Using the figure 2914, the total number in dollars at $30.00 each was $87,420.00. Plaintiff had been paid $32,940.00. As stated above, the jury returned a verdict of $55,740.00.

Other facts and matters of evidence will be set out hereafter.

We consider first defendant's contention that the court erred in giving plaintiff's verdict directing instruction. In considering this issue we combine plaintiff's points I and III. As we view the issues, it is contended that the instruction gave the jury a roving commission to interpret unambiguous portions of the contract.

The instruction reads:

"Your verdict must be for plaintiff on plaintiff's claim for fees due if you believe:

First, that plaintiff and defendant entered in to the Eight year consulting contract referred to in evidence, and

Second, that by reason of that contract defendant agreed to pay certain fees for active water customers added to the system owned by St. Charles County Water Company and within its service area, and

Third, that plaintiff has substantially performed the contract when requested thereto, and has at all times been ready, able and willing to perform his obligations under that contract, and

Fourth, that defendant has failed to pay a part of the fees due and owing on the contract as of January 1, 1976, and

Fifth, that plaintiff was damaged thereby, unless you believe that plaintiff is not entitled to recover by reason of Instruction Number 5."

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