Gill Const., Inc. v. 18TH & Vine Authority

• Decision Date: 21 December 2004
• Docket Number: No. WD 62073.,No. WD 62076.,WD 62073.,WD 62076.
• Citation: 157 S.W.3d 699
• Parties: GILL CONSTRUCTION, INC., Appellant-Respondent, v. 18TH & VINE AUTHORITY, Respondent-Appellant, City of Kansas City, Missouri, Respondent.
• Court: Missouri Court of Appeals

157 S.W.3d 699

GILL CONSTRUCTION, INC., Appellant-Respondent, v.18TH & VINE AUTHORITY, Respondent-AppellantCity of Kansas City, Missouri, Respondent.

No. WD 62073.

No. WD 62076.

Missouri Court of Appeals, Western District.

December 21, 2004.

As Modified February 1, 2005.

Motion for Rehearing and/or Transfer to Supreme Court Denied February 1, 2005.

Application for Transfer Denied April 5, 2005.

Roy Bash, William E. Quirk, and Susan C. Hascall, Kansas City, MO, for appellant-respondent, Gill Construction Co.

Lana K. Torczon and Heather A. Brown, Assistant City Attorneys, Kansas City, MO, for respondent-appellant, 18th & Vine Authority.

Galen Beaufort, City Attorney, Kansas City, MO, for respondent, City of Kansas City, Missouri.

Before BRECKENRIDGE, P.J., and SMART and HOWARD, JJ.

PER CURIAM.

Appellant-RespondentGill Construction Company("Gill") appeals from the Circuit Court of Jackson County's dismissal of Gill's breach of contract action against Respondent City of Kansas City("the City").Gill argues two points on appeal.Respondent-Appellant 18th and Vine Authority ("the Authority") also appeals from the circuit court's judgment for Gill in its breach of contract action against the Authority.The Authority argues fourteen points on appeal.For the reasons set forth below, we affirm the judgment of the circuit court.

Background

Gill was a Missouri corporation that was dissolved on August 2, 2001.The City is a municipal corporation.The Authority is a Missouri not-for-profit corporation in good standing that is responsible for the construction and renovation of the American Jazz Museum and the Gem Theater in the historic 18th and Vine District of Kansas City, Missouri.The 18th and Vine District was formerly the center of Kansas City's African-American culture, entertainment, and business.The 18th and Vine District deteriorated, the buildings fell into disrepair, and most of the businesses either closed or moved.The City created the Authority in order to revitalize the 18th and Vine District and oversee the redevelopment of the district.

In December 1993, the City passed OrdinanceNo. 931426 that authorized the creation of the Authority and authorized and approved a contract between the City and the Authority for management of the 18th and Vine District redevelopment ("the Project").The ordinance provided that the Authority would be managed by a five-person board, including the Mayor of the City and four others appointed by the Mayor and approved by the City Council.

Pursuant to the ordinance, the City and the Authority entered into a Management Agreement that governed the construction and management of the Project.The Management Agreement provided that the City would finance the Project out of its appropriations and either pay the Authority or pay the Authority's approved contractor directly.

The Authority and Gill entered into three contracts in conjunction with the project.The City authorized payment for change orders and additional work on contracts entered into by the Authority by passing numerous ordinances related to the creation and funding of the project.The scope of the work to be performed on the Project by Gill expanded with each contract.Gill was also asked to perform work on the Project that was beyond the scope of the agreements.The parties executed change orders for this additional work.The additional work significantly increased Gill's costs, but the Authority refused to pay for some of the work that Gill had completed on the Project.

Gill brought suit against the Authority and the City for breach of contract and for violations of the Missouri Prompt Payment Act, Section 34.057.¹Gill alleged in its breach of contract claim that the extra work performed by Gill increased the project cost by sixty-eight percent.Gill also alleged that this extra work materially altered the nature of the project and constituted a cardinal change to the agreements.Gill alleged that it had performed all conditions precedent to the Authority's and the City's obligations to pay for the work Gill performed, but the Authority did not did not fully compensate Gill for its extra work.Gill also alleged that the City was liable because it is the controlling entity and alter ego of the Authority.

Gill alleged in its Prompt Payment Act claim that the contracts were public works contracts between Gill and the Authority and City, that the Authority and the City did not make timely payments as required by the Act, and that the Authority and City improperly withheld retention contract payments from Gill after substantial completion.Gill also alleged that the failure to make final payments was not in good faith or for reasonable cause, so Gill was entitled to recover reasonable attorney's fees under the Act.

The Authority and the City both filed motions to dismiss, arguing that the contracts were not created pursuant to necessary procedure and certification requirements and were, therefore, void.The City also argued that it was not liable to Gill even if the contracts were legal because the Authority was not the City's agent and the contracts were solely between Gill and the Authority.The trial court agreed with the City's argument that the contracts were not valid and, therefore, not enforceable against the City under Section 432.070andSections 82and95 of the Charter of Kansas City.The case then proceeded to a jury trial against the Authority.

The Authority moved for a directed verdict at the close of the evidence and again at the conclusion of the trial.The circuit court denied both motions.The jury returned a verdict in favor of Gill and awarded $449,000 damages for performance of extra work, $1,065,000 for loss of business opportunities and bonding capacity, and $360,000 under the Prompt Payment Act for a grand total of $1,874,000.After the trial, Gill moved for an award of attorney's fees under the Prompt Payment Act and was awarded $197,371.70, calculated on an hourly basis.

Gill filed a post-trial motion to alter or amend the judgment including the court's earlier order dismissing the City as a defendant.In support of the motion, Gill argued the City was a proper defendant because the contracts were valid and enforceable and because the evidence at trial had shown the City had either directly contracted with Gill, or was so linked to the Authority that the Authority was an agent of the City.The circuit court denied Gill's motion to alter or amend the judgment.The circuit court also overruled the Authority's motion for judgment notwithstanding the verdict or in the alternative, for a new trial.Gill and the Authority filed cross-appeals.The cross-appeals follow.

Gill's Appeal

In Point I, Gill argues the circuit court erred by granting the City's Motion to Dismiss Gill's original petition, because the contracts between Gill and the Authority were enforceable, in that the contracts designated the Authority to act as the City's limited agent.In Point II, Gill argues the circuit court erred by refusing to alter or amend its order dismissing the City, because the Authority and the City are jointly liable for breach of contract and violation of the Prompt Payment Act.

Point I of Gill's Appeal

In Point I, Gill argues the circuit court erred by granting the City's Motion to Dismiss Gill's original petition, because the contracts between Gill and the Authority were enforceable under Section 432.070andSections 82and95 of the Charter of Kansas City, in that the contracts were expressly authorized by city ordinance which designated the Authority to act as the City's limited agent for the purpose of constructing the Project, in that the City approved the Management Agreement by ordinance and the contracts were supported by the consideration of Gill's performance.

Reynolds v. Diamond Foods & Poultry, Inc.,79 S.W.3d 907, 909(Mo.banc 2002), sets forth the standard of review for a motion to dismiss for failure to state a claim upon which relief can be granted:

[A]motion to dismiss for failure to state a cause of action is solely a test of the adequacy of the plaintiff's petition.It assumes that all of plaintiff's averments are true, and liberally grants to plaintiff all reasonable inferences therefrom.No attempt is made to weigh any facts alleged as to whether they are credible or persuasive.Instead, the petition is reviewed in an almost academic manner, to determine if the facts alleged meet the elements of a recognized cause of action, or of a cause that might be adopted in that case.

In support of Point I, Gill argues the circuit court erroneously interpreted and applied the law by dismissing the City from Gill's breach of contract claim because the contracts are fully enforceable under Missouri law and the allegations in its petition are sufficient to withstand the City's motion to dismiss because the facts set forth by Gill in its petition invoked substantive principles of law that entitled Gill to relief.Gill claims the contracts satisfy Section 432.070andSections 82and95 of the Kansas City Charter and asserts that the contracts were authorized by city ordinances that were duly signed and authorized by the Mayor of Kansas City, the City Attorney, and the City Director of Finance.Gill points to the fact that the City passed numerous ordinances regarding the funding of the Authority, which, Gill argues, were sufficient to bind a municipality to its contractual obligations.Gill claims that in Kansas City Ordinance 931426, the City designated the Authority to act as the City's limited agent for the purpose of constructing the Project, and because the contracts and change orders were all executed by the Authority as the City's expressly designated agent pursuant to ordinances that were part of the public record, the contracts and change orders met the requirements of Section 432.070.Thus, Gill argues, the contracts and change orders were valid actions of...