In re Geiler
| Decision Date | 15 October 2008 |
| Docket Number | Adversary No. 05-4327-659.,Bankruptcy No. 05-51731-659. |
| Citation | 398 B.R. 661 |
| Parties | In re John L. GEILER, Jr., and Karen Elisabeth Dale, Debtors. Nick Bhambri, and Michelle Bhambri, Plaintiffs, v. Allied Enterprises, LLC, George David Dothage, John L. Geiler, Jr., and Karen Elizabeth Dothage, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Missouri |
Shannon Marie Trump Becker, House Springs, MO, for debtors.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The matters before the Court are Plaintiffs' Second Amended Complaint, the Defendants' Answers to the Second Amended Complaint, Defendants' Counterclaims and several pre-trial and post-trial motions. The Court conducted a four-day trial on the following dates: October 24, 2006, December 18, 2006, December 19, 2006, and February 8, 2007. Upon consideration of the record as a whole, the Court makes the following FINDINGS OF FACT:
Plaintiffs are Nick Bhambri (hereinafter "Nick") and his wife, Michelle Bhambri (hereinafter "Michelle") (hereinafter collectively "Bhambris"). Nick is the Director of Sales and Business Development for Monsanto Enviro-Chem Systems, Inc. (hereinafter "MECS"). In his position, Nick reviews commercial contracts and suggests potential contractual language to the legal department at MECS. Defendant Allied Enterprises, LLC (hereinafter "Allied") is a Missouri limited liability company in good standing with its principal place of business located in Jefferson County, Missouri. Defendant George David Dothage (hereinafter "Dave") is the manager and agent of Allied. Defendant Elizabeth Dothage (hereinafter "Liz") is the wife of Dave. Liz has signature authority on Allied's bank account at Eagle Bank. Liz is the owner of Liz Dothage Insurance Agency (hereinafter "Liz Dothage Insurance"). Dave has signature authority on Liz Dothage Insurance's bank account at Eagle Bank. Liz Dothage Insurance is a separate and distinct legal entity from Allied. Defendant John L. Geiler, Jr. (hereinafter "Johnny") and his former wife, Karen E Dale (hereinafter "Karen") filed a joint Chapter 7 bankruptcy petition on August 22, 2005. Johnny is neither a member, nor an owner of Allied. Furthermore, Johnny has no legal or equitable interest in Allied. Karen is the daughter of Dave and Liz Dothage. The Bhambris originally filed this case in Missouri State Court on January 15, 2005. The Bhambris removed it to the Bankruptcy Court on November 1, 2005. The Bankruptcy Court substantively consolidated this case with Case No. 05-4366-659 on January 20, 2006.
Nick and Michelle decided to make certain improvements to their home and hired an architect to make initial drawings of the project. Nick looked around for contractors and discovered Service Magic, an online service that specialized in connecting contractors with people who wanted repair or remodeling work done. Nick and Michelle posted their project on the website and waited for responses.
Shortly thereafter, Johnny received a lead from Service Magic and contacted the Bhambris to let them know of Allied's interest in the project. Sometime during the last weekend in January 2004, Dave and Johnny met with Nick and Michelle at the Bhambris' home to discuss the project and Allied's experience in home remodeling. Dave assured Nick and Michelle that Allied had plenty of experience in this area and that he would supervise the job. Dave and Johnny left the Bhambris' home to discuss the project and returned about a half an hour later. Based on their discussions, Allied, through Dave and Johnny, submitted a proposal for the project in early February 2004 for a price of $105,153.90 (hereinafter "Proposal 1"). The Bhambris rejected Proposal 1 because the price of the bid was too high.
The parties then discussed modifying the proposal in order to reduce the price. Several days later, Allied, through Dave and Johnny, submitted another bid for $81,808.58 (hereinafter "Proposal 2"). The Bhambris rejected Proposal 2 because the price was still too high.
A day or two after the Bhambris rejected Proposal 2, Allied, through Dave and Johnny, submitted yet another bid for $64,578.00 (hereinafter "Proposal 3"). This proposal was close to what the Bhambris wanted to spend on the project. However, Nick was uncomfortable with some of the language contained in Proposal 3, so he offered to re-write the contract to make sure that the scope of the project was clear. Using his experience in commercial contracts, Nick wrote a contract between Allied and the Bhambris. On February 11, 2004, the Bhambris through Nick, and Allied through Johnny, executed a contract to complete the work for a price of $58,683.00 (hereinafter the "Allied Contract"). Dave was not present when Nick and Johnny entered into the Allied Contract. The Allied Contract called for the work to begin on or around February 15, 2004, and end no later than May 30, 2004. It also called for Allied to provide a written, binding warranty against defective workmanship for the life of the work.
Nick gave Johnny a check made payable to Allied in the amount of $30,000.00 as a down payment for the job. Johnny gave the check to Dave who endorsed it and deposited it in Allied's bank account at Eagle Bank. Dave then returned most of the money to Johnny, holding back a minor amount to pay an Allied bill that Johnny had incurred with a dumpster company. Neither Dave nor Johnny requested that the Bhambris issue a new check made payable to Johnny.
Throughout the negotiations, Nick repeatedly insisted that Allied have liability insurance before he would execute a contract. Both Dave and Johnny assured Nick that Allied carried necessary insurance. As a result, the parties included this understanding in a provision of the Allied Contract. It required Allied to carry fire, tornado, Workmen's Compensation and other necessary insurance. To comply with this provision, Allied requested a Certificate of Liability Insurance (hereinafter "Certificate of Insurance") issue through Liz Dothage Insurance. Dave routinely asked Liz to provide insurance documentation to Allied's customers through her insurance agency. In this case, Liz faxed the Certificate of Insurance to Nick on February 12, 2004, the day after Nick and Johnny executed the Allied Contract. The Certificate of Insurance listed Allied as the insured, American States Insurance Company as the insurer and Nick as the certificate holder.
A couple of days after Nick and Johnny executed the Allied Contract, work on the project began. On February 20, 2004, Johnny applied for a construction permit through St. Louis County's Department of Public Works (hereinafter the "Application for Permit"). The Application for Permit generally described the scope of the project. It noted Allied as the builder and estimated the total construction cost for the project at $32,000.00, despite the contract price of nearly $58,683.00. This was done to accommodate Nick's request to lower the price, so that he would not have to pay additional property taxes. Nonetheless, Johnny signed the Application for Permit and certified, inter alia, that he was an agent authorized to apply for the permit on behalf of Allied. St. Louis County approved the Application for Permit on March 22, 2004.
During the course of the project, Nick and Michelle decided to change the scope of the work. They approached Johnny about it. Together, the Bhambris and Johnny completed five new agreements (hereinafter "Change Orders") over several months:
Date Amount
3/08/04 $1,245.00
4/13/04 1,378.00
5/14/04 8,900.00
5/25/04 4,240.00
7/07/04 3,596.50
The Bhambris and Johnny used a form entitled "Additional Work Authorization" for the first four Change Orders. They used a form entitled "Bid Memo" for the last one. Johnny completed most of the additional contract work. However, he did not complete the work required of him by the change order of May 14, 2004. Consequently, the Bhambris held back the final payment of $2,500.00 due to Johnny when he completed the job. For each of these Change Orders, the Bhambris paid Johnny directly either through cash or a check. The Bhambris made the checks payable to Johnny. Allied did not receive any payment for this additional work.
The parties quickly developed a personal and professional relationship as the work on the Bhambri home progressed. Nick and Michelle would have meals with Johnny and Karen, and on one occasion, Nick and Johnny went to a casino together and discussed a potential business opportunity. On February 10, 2004, one day prior to the execution of the Allied Contract, Nick sent an e-mail to Johnny outlining the various bids that Johnny gave him on his house and mentioning a potential opportunity. Nick placed a bid on a residential real estate project in Kirkwood, Missouri, and asked Johnny to consider becoming the general contractor of the project if Nick won the award. If this happened, Johnny would have had to give up his side business, but it would be more lucrative to him if he focused on the potential project that Nick proposed. As late as August 2, 2004, there was yet another business opportunity that Nick wanted to share with Johnny, so he sent a letter to him. This time the project was on Kehrs Mill Road in St. Louis County, Missouri. Johnny and Nick would be equal partners with another development company if the bid was successful. In both instances, Nick was aware that these projects were solely between him and Johnny and not Allied.
While Dave oversaw the project, Johnny handled the day-to-day assignments and Karen was a member of the crew. About three weeks into the project, Johnny had a problem excavating the yard. Nick asked Dave to assist Johnny with this part of the job and Dave complied. There were other...
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