City of Harrisonville v. McCall Serv. Stations

• Decision Date: 23 August 2016
• Docket Number: No. SC 94115,SC 94115
• Citation: 495 S.W.3d 738
• Parties: 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.
• Court: Missouri Supreme Court

495 S.W.3d 738

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.

No. SC 94115

Supreme Court of Missouri, en banc .

Opinion issued August 23, 2016

The city was represented by Steven E. Mauerand Heather S. Esau Zergerof Zerger & Mauer LLP in Kansas City, (816) 759-3300. The fund was represented by Solicitor General James R. Laytonand Timothy Dugganof the attorney general's office in Jefferson City, (573) 751-3321.

The service station owners were represented by Glenn E. Bradfordand Nancy L. Skinnerof Glenn E. Bradford & Associates PC in Kansas City, (816) 283-0400.

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 Background¹

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...