Essex Development v. Cotton Custom, ED 86691.
| Decision Date | 11 July 2006 |
| Docket Number | No. ED 86691.,ED 86691. |
| Citation | 195 S.W.3d 532 |
| Parties | ESSEX DEVELOPMENT, INC., Plaintiff-Appellant, v. COTTON CUSTOM HOMES, L.L.C., Defendant-Respondent. |
| Court | Missouri Court of Appeals |
Scott M. McKinnis, St. Louis, MO, for Appellant.
Graham L.W. Day, Robert S. Kenney, St. Louis, MO, for Respondent.
Plaintiff-Appellant Essex Development, Inc. ("Essex Development") appeals from the decision granting Defendant-Respondent Cotton Custom Home's ("Cotton") motion for summary judgment, and denying Essex Development's motion for summary judgment. We reverse and remand for further hearing.
This case arises out of a dispute between two real estate developers co-developing a sub-division of single-family homes in Jefferson County, Missouri. The dispute involves determining whether the construction contract in question contemplated a "costs plus fee" format, where such a format was not specifically stated in the contract. Did the contract allow the seller to pass along to the buyer its actual costs of construction plus an additional 15% charge for profit and overhead from one of its contractors, where the contract does not explicitly address the payment of such a charge?
Since this appeal involves our review of the trial court's grant of summary judgment, our review is de novo. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). We review the record in the light most favorable to the party against whom summary judgment was entered. Id. Furthermore, we accord the non-moving party all reasonable inferences from the record. Id.
Viewed in the light most favorable to Essex Development, in June of 2002, Cotton and Essex Development entered into a written contract to develop a community of single-family homes called Buena Vista Development ("Development") on undeveloped land which Cotton owned in Jefferson County. Prior to the contract being signed, Cotton had sought to independently develop the land. The land in question was legally held by an entity owned by Cotton called Romaine Valley Properties, L.L.C. ("Romaine"). Cotton owned another entity, Buena Vista, L.L.C. ("Buena Vista"), a real estate development company that Cotton wanted to actually develop the land owned by Romaine. Since Cotton lacked the financial resources to acquire the financing necessary to complete the project on its own, it sought the assistance of Essex Development, which had sufficient experience and resources to complete the project.
The primary contract in dispute in this case called for Cotton to purchase from Essex Development 61 fully-developed lots of single-family homes on the land previously held by Romaine. Cotton had previously conveyed Buena Vista's assets, as well as Romaine's land, to Essex Development. Essex Development was to use its resources and expertise to develop the property, and ultimately convey the developed lots back to Cotton, which would then market the lots to the general public.
The contract also provided that during the construction process Buena Vista could petition Jefferson County to create a Neighborhood Improvement District ("NID"). If the NID was granted, Jefferson County would assist in financing the Development. Buena Vista petitioned Jefferson County for the NID, which Jefferson County approved. During this time, another related company, Essex Contracting, Inc. ("Essex Contracting"), submitted a bid to Jefferson County to do the construction work resulting from the NID.1 The trial court, in its order granting summary judgment to Cotton, specifically noted that Essex Contracting's bid to Jefferson County did not include an extra charge of 15% for profit and overhead. Jefferson County ultimately awarded Essex Contracting the contract for the NID-related work.2
Essex Contracting performed the NID work for Buena Vista, and during the construction phase of the project submitted numerous "Pay Applications" and "Job Cost Reports" to Buena Vista for payment. Pursuant to a separate oral agreement between Essex Contracting and Buena Vista, each of these documents contained a handwritten notation adding 15% to the final cost. It is these additional charges that are the central controversy of this case. These additional charges are in dispute because they were added to the final payment that Buena Vista/Essex Contracting sought from Cotton upon the closing of their original deal. Essex Contracting cited the 15% charges as "profit and overhead."
The dispute centers on the language of the original contract providing for the final "Purchase Price" that Cotton would pay Essex Development for the lots, and whether the addition of Essex Contracting's surcharges was contemplated by the parties, where such charges were not explicitly provided for in the contract. Although the parties dispute the interpretation of the relevant provisions of the contract, they do not dispute its language, which reads, in pertinent part, as follows:
2. Purchase Price
The "Purchase Price" for all lots shall be equal to the total amount of:
a. All of Seller's original costs for acquisition of the Real Property constituting the Buena Vista Subdivision.... The original acquisition costs shall include not only the purchase price of the Real Property including interest, incurred by Seller in acquiring and financing the Real Property.
* * *
c. All otherwise unreimbursed costs of development of the subdivision incurred by Seller [Essex Development], including all costs of construction of the Improvements, and all costs of maintenance of the subdivision until the last Lot is sold or conveyed.
d. All unreimbursed costs incurred by Seller, if any, of implementation of a NID (as defined in Paragraph 9) to develop subdivision, including the costs of any surety bonds or letters of credit required by the NID.
In particular, sub-section (c) of the "Purchase Price" paragraph is the central focus of this litigation because Essex Development argues that this provision allows it to pass along to Cotton Essex Contracting's 15% charge for "profit and overhead" as one of the other "unremimbursed costs of development." Conversely, Cotton argues that this 15% charge should not be passed along for two reasons: first, it was not contemplated by the parties, and second, the plain language of the contract does not allow for such a charge, where it is not a true "cost of development." Cotton objected to paying these charges because they were not a true "cost of development" in that Essex Development, Buena Vista, and Essex Contracting were all owned by the same principals at the time, and therefore, such a payment between these entities was tantamount to a payment to itself, which Cotton clearly did not contemplate paying.
Cotton refused to pay Essex Development for these disputed charges, which amounted to $200,000. Prior to the closing on the lots, the parties entered into an agreement to set up an escrow account to facilitate the closing on a timely basis. As part of the escrow agreement, the parties placed $200,000 of the proceeds from the lot closing into the escrow account, pending the resolution of this dispute.
Following the closing on the lots and the establishment of the escrow account, Essex Development, as the owners of Buena Vista, filed this action for breach of contract as well as declaratory judgment, seeking to recover the balance of the escrow account. In its reply, Cotton asserted several affirmative defenses and counterclaims, and also filed a petition for declaratory judgment and breach of contract. During discovery, Cotton propounded several requests which sought to examine and clarify the relationship between Buena Vista, Essex Development, and Essex Contracting. Essex Development objected to many of these requests, at which time Cotton amended its petition to include a count for piercing the corporate veil/alter ego and breach of implied covenant of good faith and fair dealing. These counts were added to facilitate Cotton's investigation of the relevant relationship between the three entities.
Both parties filed motions for summary judgment and the trial court received the parties' briefs and...
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