Eastridge Development Co. v. Halpert Associates, Inc., s. 85-2512

• Decision Date: 01 August 1988
• Docket Number: 85-2575,Nos. 85-2512,s. 85-2512
• Citation: 853 F.2d 772
• Parties: EASTRIDGE DEVELOPMENT COMPANY, Plaintiff-Appellee and Cross Appellant, v. HALPERT ASSOCIATES, INC. and Professional Service Industries, Inc., Defendant- Appellants and Cross Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 772

853 F.2d 772

EASTRIDGE DEVELOPMENT COMPANY, Plaintiff-Appellee and Cross Appellant, v. HALPERT ASSOCIATES, INC. and Professional Service Industries, Inc., Defendant- Appellants and Cross Appellees.

Nos. 85-2512, 85-2575.

United States Court of Appeals Tenth Circuit.

Aug. 1, 1988.

Jeffrey C. Brinkerhoff (Mark W. Gifford, with him on the brief), Brown, Drew, Apostolos, Massey & Sullivan, Casper, Wyo., for Eastridge Development Co.

Cameron S. Walker, Schwartz, Bon, McCrary & Walker, Casper, Wyo., and William D. Lyman, Oak Brook, Ill., for Halpert Associates, Inc. and Professional Service Industries.

Before SEYMOUR and ANDERSON, Circuit Judges, and BROWN, Senior District Judge. ^*

WESLEY E. BROWN, Senior District Judge.

This appeal arises out of the construction of a shopping mall in Casper, Wyoming, known as the Eastridge Mall. The plaintiff, Eastridge Development Company (hereafter "Eastridge") filed suit to collect damages for professional negligence by two engineering firms which had done soil studies of the site prior to construction. One firm, The Empire Laboratories, did a preliminary study for Eastridge's predecessor in interest, the Price Development Company. The second firm, the defendant, Halpert Associates, (hereafter "Halpert") did a second study for Westcor Properties, the actual developer of the shopping center. The third defendant, Professional Service Industries (hereafter "PSI") was later joined as a defendant as the parent holding company of, and alleged alter ego of, Halpert Associates. Halpert filed for bankruptcy just prior to trial. The defendant, The Empire Laboratories, settled the case before trial for the sum of $15,000, and it is no longer a party to these proceedings.

At trial before a jury, Eastridge presented evidence to support its claim that because of negligent engineering tests and reports, it sustained various damages due to water seepage at the construction site. The jury returned a verdict in favor of Eastridge and judgment was entered against both defendants, Halpert and PSI, in the sum of $208,000, plus interest.

All parties have appealed, presenting issues involving the admission of evidence, the sufficiency of the evidence, the instructions, the impact of the statute of limitations, the denial of a motion to bifurcate the trial, the question of in personam jurisdiction; the alleged "amendment" of the verdict, the merits of plaintiff's claim for punitive damages, and the effect of the $15,000 pre-trial settlement by the Empire Laboratories.

In order to discuss the various issues raised on appeal it is first necessary to review the proceedings in the district court which led to this appeal.

Eastridge filed its original complaint on September 16, 1983 against two defendants, Halpert and Empire Laboratories, seeking damages for negligence in their preparation of the two engineering reports. The damages sought were the difference between the cost of correcting ground water problems which occurred on the site during construction, and the cost to correct those same problems, had the potential problem been disclosed in the reports.

The evidence was that in 1978 Eastridge's predecessor, Price Development Company, began preliminary plans to develop the Eastridge Mall and retained Empire to draw up a soils and ground water profile for the mall site, which at that time was undeveloped prairie land. Empire drilled 30 test holes at locations throughout the site, but only one of those test holes was in the vicinity of what was called the "detention basin", where the water problem later developed. Empire reported that no unusual ground water problems would be encountered at the site.

When Westcor took over the development, the defendant Halpert was retained to perform more comprehenisve soil testing at the site. Halpert performed additional borings, but did not check the area of the detention basin. It appears that Halpert relied upon the data obtained by Empire, and incorporated the Empire test results into its report which Halpert eventually rendered on December 28, 1979. The Halpert report concluded that "no unusual problems as regards ground water should be expected."

A non-jury trial was initially set to commence on October 15, 1984 against the two defendants, but Empire settled for a $15,000 payment, and was dismissed from the case. Halpert filed for bankruptcy and the case was removed from the trial calendar.

By leave of court, Eastridge twice amended its complaint to assert a claim against PSI, claiming that PSI was liable for Halpert's actions as its alter ego. In this connection, Eastridge claimed that PSI had concealed the extent of its ownership and control of Halpert, that it had used Halpert solely for its own purposes, stripping it of its assets, all in an attempt to hinder and defraud Eastridge in its pursuit of damages from Halpert. Eastridge's amended complaints were filed on October 10, 1984, and on April 14, 1985.

PSI demanded a jury trial. The stay in bankruptcy was lifted, and jury trial proceeded on May 6th against both Halpert and PSI.

Prior to trial, PSI twice moved for dismissal of the complaint because of absence of in personam jurisdiction. These motions were denied. Also prior to trial, PSI moved to bifurcate the trial of the cases against Halpert and PSI to avoid prejudice. This motion was denied without hearing on May 3, 1985.

At trial, Eastridge prosecuted different claims against Halpert and PSI. The case against Halpert focused upon its negligence in failing to investigate and report on the ground water condition at the mall site. The case against PSI centered upon its conduct in controlling and manipulating Halpert's affairs so as to drain its assets, leaving Halpert as a bankrupt, uninsured, judgment-proof shell.

Under its second amended complaint, Eastridge also sought punitive damages from PSI for its alleged willful and wanton manipulation and misuse of Halpert. The trial court refused to receive evidence, or to instruct on the issue of punitive damages.

At trial, one witness testified that it had cost $286,905.00 to deal with the ground water problems on the site, and that it was anticipated that it would cost another $23,200 more to fully correct the problem. The witness estimated that if the ground water problem had been known in advance, it could have been corrected at a cost of only $30,000 to $50,000.

During the trial, Halpert and PSI moved for directed verdicts at the close of the plaintiff's case, and at the close of all of the evidence. These motions were denied.

On May 14, 1985, the jury returned a verdict in favor of Eastridge and against both defendants, in the sum of $208,000. The jury found that Eastridge was 20% negligent, Halpert 80% negligent, and that the Empire Laboratories, which had settled out of the case, was not negligent.

Halpert and PSI filed combined motions for Judgment N.O.V., for New Trial, and for Amendment of the Judgment. All of these motions were denied without hearing on September 9, 1985, and these appeals followed.

Other aspects of the case will be discussed in greater detail in the course of this opinion.

Jurisdiction.

PSI contends that the plaintiff failed to meet its burden of proof that the Court had in personam jurisdiction over PSI. In this connection, PSI contends that "(o)ther than the work in Wyoming, performed by Halpert for Westcor some years prior to P.S.I.'s having any involvement with Halpert, P.S.I. had no contact with the State of Wyoming prior to this litigation." (Appellee Brief p. 34). In support of this statement, PSI cites the Affidavit of Robert K. Pfister, an officer of the corporation, filed with the District Court on October 19, 1984. (Vol. L Record, Dkt. 99).

According to this affidavit, we are informed that PSI is a Delaware corporation, with its principal place of business in Oak Brook, Illinois; that it acquired all of the capital stock of Halpert Associates on December 1, 1981, pursuant to an agreement dated November 5, 1981; that Halpert was not merged into PSI, but remained a separate corporation after its acquisition by PSI; that at the time PSI acquired Halpert, it had minimal assets consisting of office furniture, equipment, and two trucks; that these assets were maintained on Halpert's books until December, 1983 when they were acquired by PSI for book value; that Halpert consistently lost money from its operations after its acquisition by PSI; that PSI carried Halpert's operations financially, until it decided to stop supporting Halpert and to discontinue its business in March, 1983; that all transactions between Halpert and PSI were conducted in the Detroit, Michigan area and in Oak Brook, Illinois; that Mr. Halpert of Halpert made three or four business trips to Wyoming, all prior to the transfer of ownership to PSI; that the soil borings in question were performed during one of these trips in November, 1979; and that apart from this neither PSI nor any of its wholly-owned subsidiaries is or has ever been incorporated in Wyoming or qualified to do business in Wyoming, transacted any business in Wyoming, supplied goods or services to persons or businesses in that state, owned property or "had any contacts with persons in the State of Wyoming" ... "employed any person in the State of Wyoming for business purposes with the exception of legal counsel appearing on its behalf in this case", or had any "contact, business or otherwise," with the State of Wyoming. In this Affidavit, Mr. Pfister provided financial statements of Halpert to the court for the years 1982 and 1983, representing that they were "true and accurate copies" of said statements, prepared as a result of an audit, and Pfister swore that he had "no reason to believe that they do not truly and accurately represent the financial conditions of Halpert on the dates stated thereon...."

At trial, plaintiff presented evidence which tended to prove that Mr. Pfister's Affidavit was...