Legacy Homes Partnership v. GE Capital Corp.

Decision Date17 July 2001
Docket NumberGK-BD,CFV-BD
Citation50 S.W.3d 346
Parties(Mo.App. S.D. 2001) Legacy Homes Partnership, Respondent, and Charles F. Vatterott & Company,Corporation, CFV Development Company, and Gregory B. Vatterott, Respondents/Cross-Appellants, v. General Electric Capital Corporation, Defendant, and Gerald Kerr Homes Corporation,Corporation, GK Development Company, and Gerald W. Kerr, Jr., Appellants/Cross-Respondents. ED78011 0
CourtMissouri Court of Appeals

Appeal From: Circuit Court of St. Louis County, Hon. Bernhardt C. Drumm, Jr.

Counsel for Appellant: Michael P. Stephens

Counsel for Respondent: W. Stanley Walch

Opinion Summary: Gerald Kerr Homes Corporation ("Kerr Homes"), GK-BD Corporation, GK Development Company and Gerald W. Kerr, Jr., (collectively "Kerr Parties") appeal from the judgment of the trial court which awarded damages in the amount of $95,360.40 plus accrued interest to Charles F. Vatterott & Company ("CFV") on the various claims of Charles F. Vatterott and Company, CFV-BD Corporation, CFV Development Company and Gregory B. Vatterott (collectively "Vatterott Parties") and denied Kerr Parties' petition for accounting and motion for appointment of a special master. Vatterott Parties cross-appeal from the judgment of the trial court in favor of Kerr Parties on their claim for damages for breach of fiduciary duty by Kerr Parties.

Division Two holds: The trial court did not misapply the law or abuse its discretion by failing to perform an accounting or to order such to be performed, the court having determined that the parties had already made reasonably complete accountings, and that the mutual claims for an accounting were moot. The trial court did not abuse its discretion or misapply the law by failing to appoint a special master to address the accounting disputes between the parties, where such an appointment is discretionary under Rule 68.01.

Clifford H. Ahrens, Presiding Judge

Crandall and Dowd, J.J., concurs.

Gerald Kerr Homes Corporation ("Kerr Homes"), GK-BD Corporation, GK Development Company and Gerald W. Kerr, Jr., (collectively "Kerr Parties") appeal from the judgment of the trial court which awarded damages in the amount of $95,360.40 plus accrued interest to Charles F. Vatterott & Company ("CFV") on the various claims of Charles F. Vatterott and Company, CFV-BD Corporation, CFV Development Company and Gregory B. Vatterott (collectively "Vatterott Parties") and denied Kerr Parties' petition for accounting and motion for appointment of a special master.1 Vatterott Parties cross-appeal from the judgment of the trial court in favor of Kerr Parties on their claim for damages for breach of fiduciary duty by Kerr Parties.

This case arose from a partnership between CFV and Kerr Homes to build and sell upscale residential homes, and entailing the development of various subdivisions. This partnership was the Legacy Homes partnership ("Partnership"). Matters did not run smoothly for Partnership, or for the affiliated partnerships and joint ventures entered into by the Vatterott Parties and Kerr Parties. The various partnerships were terminated on July 15, 1991, with details of the termination embodied in a Winding Up Agreement entered into on that date. Disputes over payments and obligations incurred during the existence of Partnership led to litigation. Kerr Parties contend that the trial court erred in applying the law to the particular facts of this case and not requiring the Vatterott Parties to perform a proper accounting, thereby denying Kerr Parties of the remedy of accounting. Kerr Parties further contend that the trial court abused its discretion and misapplied the law by failing to appoint a special master as requested by Kerr Parties. Kerr Parties also assert that the trial court's judgment was against the weight of the evidence. Vatterott Parties claim that the trial court erred in concluding that they were not damaged by Kerr Parties' breach of fiduciary duty. We affirm.

In early 1989 Gerald W. Kerr, Jr. ("Mr. Kerr"), former vice-president of residential development for the defunct Liberman Corporation ("Liberman"), met with Gregory B. Vatterott ("Mr. Vatterott"), president of CFV, a Missouri corporation, to discuss the possibility of a joint venture. This venture would involve the building of upscale housing in development projects abandoned in the wake of the failure of Liberman, utilizing skilled personnel who had worked for Liberman and the resources of CFV.

These meetings led to the formation of a partnership between CFV and Kerr Homes, a Missouri corporation, on February 21, 1989, originally known as the Vatt-Kerr partnership, but later as the Legacy Homes partnership ("Partnership"). This Partnership was embodied in the Partnership Agreement ("Partnership Agreement") signed on that date. Under the terms of the Partnership Agreement, Partnership was a general partnership, with each partner holding a fifty percent interest. Kerr Homes was responsible for the day-to-day operation of Partnership activities, providing home-building expertise and managerial skills. CFV was responsible for all Partnership accounting functions and banking. Mr. Vatterott had insisted that Partnership use CFV's accounting system to account for revenues and expenses for Partnership as a precondition to forming Partnership, as CFV had a computer program, C-Mass, for construction operations. Under the Partnership Agreement, CFV also was to provide much of the initial financial backing for Partnership, up to $240,000 in advances in the first six months. Partnership was originally planned to have a duration of three years. CFV did provide $240,000 in advances in the first six months of the Partnership, and subsequently advanced Partnership substantial additional funds.

Partnership, in its own name and through other entities which the partners established for the purposes of conducting Partnership business, became involved in the development of a number of residential subdivision projects.2 The partnership agreements for these other entities were substantially similar to the Partnership Agreement.

The accounting system used by CFV, and therefore by Partnership, utilized a central disbursing account from which the expenses for the different operating divisions would be paid. The managers of the various divisions used a coding system to identify each particular division to which charges were to be debited. Each division kept separate ledgers to show the revenues produced and expenses incurred by that division. Partnership employees, under the direction of Partnership managerial personnel, handled the coding for Partnership expenses. Invoices for Partnership activities were identified either by subdivision or by subdivision and lot number if the invoice related to a particular lot. The invoices and coding information were then sent to CFV's main office to be inputted into the central disbursing system. CFV generated monthly cash-flow summaries for Partnership.

Partnership originally located its office in the Mega Bank Building in St. Ann, Missouri, sharing the same building with CFV, which had opened a bank account for Partnership business with Mega Bank. In August 1989, Mr. Kerr took over the management of CFV's residential single-family construction business at the request of Mr. Vatterott, and management of these operations were pooled with Partnership and Partnership's affiliates. The purposes of the pooling of management of these various operations were to achieve cost savings and lower operating overhead and to provide the marketing expertise of Partnership's personnel to CFV's residential projects. CFV's residential construction business was separate and distinct from Partnership and Partnership projects and remained so, though it had two projects in the same subdivisions as Partnership projects. Mr. Kerr's annual salary increased from $125,000 for managing Partnership operations to $175,000 for managing CFV's residential construction business as well. How the operating overhead was to be allocated between the parties following the pooled management of operations between CFV's single-family residential division and Partnership lies at the heart of the dispute between the parties in this case. Around November 1989 the Partnership office was moved from the Mega Bank Building in St. Ann to the Roosevelt Bank building in Chesterfield, which was closer to areas of anticipated development and marketing activity.

Problems began to emerge between the Vatterott and Kerr parties concerning the allocation of overhead from the pooled operations management and the failure of sales and revenue from Partnership projects to match initial projections. CFV advanced money to Partnership beyond the $240,000 called for in Partnership Agreement. The cash-flow summary for Partnership generated by CFV for the period from February 1989 to July 1990 indicates that CFV had advanced $2,905,092 to Partnership, as well as $105,600 in cash advances to Partnership from Kerr Homes. Throughout 1990 problems continued to develop and grow concerning money, payments to Partnership vendors and contractors, and profitability. Several meetings were held between Mr. Vatterott and Mr. Kerr regarding these financial problems, with Mr. Vatterott taking the position that Partnership expenses needed to be cut, that the Partnership would not start any new development projects, and that CFV would not renew the Partnership after it expired. Around September 1990, Mr. Kerr opened a bank account for Partnership at Roosevelt Bank to which he was the only signatory, and without the knowledge or consent of CFV or its officers. Between September 1990 and August 1991, Mr. Kerr deposited funds produced by Partnership's business activities totalling $262,692.23 into this account.

Problems continued into 1991, and early in that year Kerr Homes proposed amending the Partnership Agreement to change the method of allocating Partnership...

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