City of Richmond Heights v. Waite

• Decision Date: 07 April 2009
• Docket Number: No. ED 91353.,ED 91353.
• Parties: CITY OF RICHMOND HEIGHTS, Appellant, v. Dorothy WAITE, Respondent, and Lamonica Wright, Nation One Mortgage Company, Inc., Michael J. Starrett, Trustee, Mers, and Unknown Husbands, Wives, Grantees, and Successors, Defendants.
• Court: Missouri Court of Appeals

280 S.W.3d 770

CITY OF RICHMOND HEIGHTS, Appellant, v. Dorothy WAITE, Respondent, and Lamonica Wright, Nation One Mortgage Company, Inc., Michael J. Starrett, Trustee, Mers, and Unknown Husbands, Wives, Grantees, and Successors, Defendants.

No. ED 91353.

Missouri Court of Appeals, Eastern District, Division One.

April 7, 2009.

James E. Mello, Jeffery T. McPherson, Cynthia A. Petracek, Armstrong Teasdale LLP, St. Louis, MO, for Appellant.

Steven E. Spoeneman, Spoeneman, Watkins, Waltrip & Harvell, L.L.P., St. Louis, MO, for Respondent.

Cynthia Garnholz, Garnholz & Ricci, L.C., St. Louis, MO, for Defendants.

KURT S. ODENWALD, Presiding Judge.

Introduction

The City of Richmond Heights (the City) appeals from the trial court's judgment dismissing the City's condemnation action. The City seeks to condemn a parcel of property owned by Dorothy Waite (Seller) located within the Hadley Township Redevelopment Area. The trial court dismissed the City's petition based on its finding that the offer made by the City to purchase the property was not a binding offer, and that the City failed to engage in good faith negotiations as required by Missouri's condemnation statutes. We reverse.

Background

The boundaries of the Hadley Township Redevelopment Area encompass Hanley Road on the west, Interstate 64 and Dale Avenue on the north, Laclede Station Road on the east, and West Bruno Avenue to the south. The City seeks to redevelop this area into a comprehensive, mixed use district consisting of both residential and commercial components. After developing a plan for the area and soliciting proposals from developers, the City selected Michelson Commercial Realty & Development (MCRD) as the developer.¹ The City and MCRD entered into an agreement authorizing MCRD and its agents to act on behalf of the City for the purpose of acquiring property in the redevelopment area. MCRD subsequently assigned its rights established in the development agreement to Michelson Hadley Heights Development, LLC (Michelson).

The property at issue in this case is a residential parcel located at 7915 West Bruno Avenue (Subject Property), owned by Seller. Seller currently leases Subject Property to a tenant. City Manager Amy Hamilton testified at the trial court's hearing that to the best of her knowledge, acquisition of Seller's property was necessary to carry out the City's comprehensive redevelopment plan.

On December 12, 2006, the City, through Michelson, offered to purchase the Subject Property for $175,000. The City communicated this offer by sending Seller a certified letter, which enclosed a proposed Purchase Agreement. The Purchase Agreement included a provision allowing Seller to recover liquidated damages upon the City's default. The liquidated damages clause allowed Seller to retain the $1000 earnest deposit and $5000 advance payment as liquidated damages, should the sale of the Subject Property not close due to the City's failure to perform. Under the proposed liquidated damages clause, the parties agreed "that the aforementioned amount is their best estimate of Seller's damages in such case, such damages being difficult if not [im]possible to ascertain." If the sale did not close because of Seller's failure to perform, the City, as purchaser, would be entitled to receive from Seller the previously paid earnest money and advance payment, and all remedies "available at law or in equity, including, but not limited to, the right to obtain specific performance of this Agreement."

Seller rejected the City's offer of $175,000 and made a counteroffer of $355,200 on January 8, 2007. In response to Seller's counteroffer, the City raised its offer to $200,000. In responding to Seller's proposal, the City noted that its appraisal estimated the Subject Property's value at $140,000, but it was offering $200,000 "[i]n an effort to resolve this issue quickly." With its response, the City sent Seller another proposed Purchase Agreement, which included an identical liquidated damages clause.

On January 28, 2007, Seller again rejected the City's offer and counter-offered with an asking price of $300,000 for the Subject Property. Additionally, Seller requested mediation, but stated that the request "is only valid if we are unable to reach an agreement on Monday, January 29, 2007." In an attempt to move forward with the requested mediation, the City proposed a mediator in a letter on February 9, 2007. When the City had "not received a response to [its] letter or [] phone calls," it mailed another letter to Seller on February 22, 2007. The letter communicated the City's assumption that Seller was no longer interested in mediation. On March 13, 2007, Seller responded that she was "prepared to engage in mediation" if the City was "open to payment of a valuation amount in excess of its recent offer" of $200,000. On March 22, 2007, the City countered that it did "not believe that any renewed request for mediation by [Seller was] timely." However, the City indicated its willingness to entertain an offer from Seller, even though it believed its offer of $200,000 exceeded the Subject Property's fair market value. No written response was made by Seller. In May 2007, the City sent Seller a letter offering $140,000 for the Subject Property, accompanied by an appraisal summary and a proposed Purchase Agreement. The Purchase Agreement again contained a liquidated damages clause.

The City filed a Petition in Condemnation on July 17, 2007, alleging that the City made a good faith offer to Seller to acquire and purchase the Subject Property, but the parties "have been unable to reach an agreement for the purchase of [the Subject Property] or for the proper compensation to be paid for the same." Thus, the City requested that the trial court enter a judgment and order condemning the Subject Property.

On July 25, 2007, Seller agreed to consent to judgment under the Petition in Condemnation upon a stipulation that the Seller would receive $250,000 for the Subject Property. In August 2007, the City rejected Seller's demand and offered $225,000 to Seller for purchase of the Subject Property "in complete and full settlement of this action." The City filed a First Amended Petition in Condemnation on October 11, 2007.

Finally, Seller sent a letter to the City on October 24, 2007, stating that she would "agree to confess [the City's] condemnation ... and stipulate to an award of damages without the necessity of appointment of commissioners or hearing, in exchange for payment of $225,000 with both parties reservation to file exceptions to the stipulated commissioner's award." However, Seller also stated, "Alternatively, [Seller] will accept full and final settlement of all claims and complete sale for the agreed sale price of $325,000, provided there are some agreeable deadlines concerning the timing and closing of sale."

The parties were unable to reach an agreement on the purchase price. On December 14, 2007, a hearing was held in the Circuit Court of St. Louis County. Following the close of the evidence on the condemnation, Seller reversed her prior position and willingness to confess the condemnation, and opposed the order of condemnation. Seller's stated opposition to the condemnation was based upon her argument that the inclusion of the liquidated damages clause in the Purchase Agreement allowed the City to terminate the contract unilaterally, and rendered the Purchase Agreement "nothing more than an option to purchase," which failed to meet the statutory requirement for the purchase of property under Missouri's condemnation laws. Seller argued that the Purchase Agreement at issue was not an unconditional offer because if the City chose not to complete the process of condemnation, it could walk away from the contract with the minimal consequence of allowing Seller to retain the $5000 advanced payment and $1000 earnest deposit.

At the trial court's request, the parties submitted further briefs on the issue. In her brief, Seller again argued that the City was unable to meet its burden and prove good faith negotiation as required by Section 526.256, RSMo 2000,² which obligates a condemnor to make an offer to purchase sufficient to create a binding contract if accepted. The City countered that the Purchase Agreement imposed an obligation on it to acquire the Subject Property, and that the liquidated damages clause simply provided a remedy to Seller if the City breached this obligation.

The trial court entered its judgment dismissing the City's condemnation petition on January 28, 2008. The trial court reasoned that although none of the authorities cited by the parties were on point, it agreed with Seller that the liquidated damages provision within the Purchase Agreement rendered the offer not binding, and therefore was unenforceable. The trial court held that "[u]nder [the City's] offer, the property owner [Seller] may not compel the [City] to perform and is limited only to nominal, liquidated damages as the exclusive remedy. This does not constitute `good faith negotiations' on the part of the condemning authority, as interpreted by the Courts."

The City filed its timely notice of appeal from the trial court's judgment on May 9, 2008.

Point on Appeal

In its sole point on appeal, the City alleges that the trial court erred in dismissing the condemnation petition because the dismissal erroneously declares and applies the law without proper evidentiary support. The City claims that the liquidated damages provision at issue did not make the Purchase Agreement non-binding and unenforceable; nor did the liquidated damages provision demonstrate the City's lack of good faith negotiations. Rather, the City asserts that the evidence demonstrates that it, through the project developer, satisfied the statutory elements of good faith negotiations required to support the condemnation of property. We agree.

Standard of Review

When the issue to be determined on appeal is a...