Norber v. Marcotte

• Decision Date: 09 March 2004
• Docket Number: No. ED 82672.,ED 82672.
• Citation: 134 S.W.3d 651
• Parties: Douglas S. NORBER, Respondent, v. Steven and Deborah MARCOTTE, Appellants.
• Court: Missouri Court of Appeals

134 S.W.3d 651

Douglas S. NORBER, Respondent, v. Steven and Deborah MARCOTTE, Appellants.

No. ED 82672.

Missouri Court of Appeals, Eastern District, Division Four.

March 9, 2004.

Motion for Rehearing and/or Transfer to Supreme Court Denied April 28, 2004.

Application for Transfer Denied June 22, 2004.

Matthew P. O'Grady, St. Louis, MO, for appellant.

William L. Sauerwein, St. Louis, MO, for respondent.

BOOKER T. SHAW, Presiding Judge.

Steven and Deborah Marcotte (collectively, "Marcotte") appeal from the trial court's entry of a default judgment against them in favor of Douglas Norber ("Norber") and from the damage awards derived from that judgment. Marcotte raises six points on appeal challenging the trial court's rulings with respect to the discovery sanctions entered against him and the damage awards arising from Norber's petition, which Marcotte claims does not state a claim for relief. The trial court's judgment is affirmed in part, reversed and remanded in part.¹

In October 1993, Marcotte and Norber agreed to open a transmission supply business in the City of St. Louis. Pursuant to their agreement, each party would hold a fifty-percent ownership interest in the business. Norber left his current employment to work full time at the business, while Marcotte continued to work elsewhere.

Norber continued to perform all aspects of management and work full time until sometime in 1997, when Marcotte joined him. Marcotte assumed responsibility for the financial aspects of the business, while Norber retained control over purchasing supplies and inventory, making sales, and handling all personnel matters. Norber took no income during the early years of the business at the behest of Marcotte in an effort to make the business more profitable.

The business flourished from 1998 until 2001. Periodically, Norber approached Marcotte about formalizing their agreement in a written partnership agreement, but Marcotte declined. Marcotte assured Norber that the partnership could be formalized at a later date. Norber also requested to review and inspect the financial papers of the business, but Marcotte did not permit Norber access to these documents.

In July 2001, Norber retained counsel to draft a formalized partnership agreement. When Norber approached Marcotte about reviewing and signing the agreement, Marcotte locked Norber out of the business and prevented him from engaging in any operation of the business.

Norber filed suit against Marcotte for fraud and damages in St. Louis City in August 2001. After protracted discovery disputes, Norber voluntarily dismissed his petition on May 3, 2002.

Later that same day, Norber refiled his petition requesting an accounting of the partnership assets, as well as seeking damages for breach of partnership agreement, breach of fiduciary duty, unjust enrichment, and fraudulent misrepresentation in St. Louis County. In October 2002, Norber propounded interrogatories and requests for production to Marcotte. Marcotte refused to answer several of the interrogatories, objecting to the requests on various grounds. The trial court overruled all of Marcotte's objections to the discovery requests and granted Norber's motion to compel production.

Norber filed a motion for sanctions against Marcotte for failing to comply with the trial court's order to tender proper discovery. The trial court granted Norber's motion for sanctions, but allowed Marcotte an additional fifteen days to comply with the discovery requests or his answer would be stricken.

Marcotte delivered two boxes to Norber containing 3,354 pages of discovery. After reviewing its contents, Norber brought a second motion for sanctions, arguing the documents were evasive, duplicative, incomplete, and nonresponsive to his request for production. The trial court conducted an in camera inspection of the documents and agreed with Norber's assessment. The trial court struck Marcotte's answer and later entered a default judgment against him.

The trial court held a hearing, on the issue of damages only, in January 2003. Norber presented two witnesses at the damages hearing and testified on his own behalf. The trial court did not permit Marcotte to present any evidence on his behalf, cross-examine any witnesses, or offer any objections during the witnesses' testimony.

On February 13, 2003, the trial court awarded Norber both actual and punitive damages on his petition. The trial court overruled Marcotte's motion for new trial. Marcotte appeals, raising six points of error with respect to the trial court's judgment.

Marcotte's first point on appeal claims the trial court lacked subject matter jurisdiction to strike his answer and enter a default judgment against him in that Norber's petition does not state a claim upon which relief can be granted. Marcotte argues the petition is replete with legal conclusions and lacks the factual foundation to support Norber's claims.

The defense of failure to state a claim can be raised at any time, including upon appeal. Rule 55.27(g)(2); Bray v. Brooks, 41 S.W.3d 7, 15 (Mo.App. W.D. 2001). The failure to state a claim is a jurisdictional defect and may be raised sua sponte by the appellate court. Bray, 41 S.W.3d at 15.

Our review of whether a petition fails to state a claim requires us to consider the pleadings, allowing them their broadest intendment, and accepting as true the facts as pleaded with all reasonable inferences arising therefrom. Polk v. Inroads/St. Louis, Inc., 951 S.W.2d 646, 647 (Mo.App.E.D.1997). If the allegations invoke principles of substantive law entitling a plaintiff to relief, the petition should not be dismissed. Industrial Testing Laboratories, Inc. v. Thermal Science, Inc., 953 S.W.2d 144, 146 (Mo.App. E.D.1997).

We focus our analysis on Count II of Norber's petition alleging Marcotte's breach of the partnership agreement. This claim presupposes a partnership exists between Norber and Marcotte, and it is the basis for every other claim in Norber's petition. Marcotte claims Norber alleges no factual basis that a partnership exists between them, and therefore, if there is no partnership, the rest of Norber's petition would fail to state a claim upon which relief could be granted.

The law never presumes a partnership exists, but rather, the burden is upon the party asserting its existence to establish all elements of a partnership by clear, cogent, and convincing evidence. Morrison v. Labor and Indus. Relations Com'n, 23 S.W.3d 902, 907-908 (Mo.App. W.D.2000). "Clear, cogent, and convincing" means the court should be "clearly convinced of the affirmative of the proposition to be proved." Grissum v. Reesman, 505 S.W.2d 81, 86 (Mo.1974); Hillme v. Chastain, 75 S.W.3d 315, 317 (Mo.App. S.D.2002). This does not mean that there may not be contrary evidence. Id.

Section 358.060.1, RSMo 2000² defines a partnership as "an association of two or more persons to carry on as co-owners [of] a business for profit." Fischer v. Brancato, 937 S.W.2d 379, 382 (Mo.App. E.D.1996). "Partnership is defined by the courts as a contract of two or more competent persons to place their money, effects, labor and skill, or some or all of them, in lawful commerce or business and to divide the profits and bear the loss in certain proportions." Id. A partnership agreement may be oral or written, express or implied, from the acts and conduct of the parties; however, the primary criteria in determining the creation of a partnership is the intention of the parties. Id. It is not necessary that the parties have the intent to form a partnership, only that they have the intent to enter into a relationship constituting a partnership in law. Id.

Taking all of the allegations in Norber's petition as true, Norber stated a claim for relief against Marcotte. The petition sufficiently alleges a partnership existed between Norber and Marcotte. Norber averred the parties entered into a verbal agreement to open a transmission supply business in October 1993. Norber devoted his time, labor, and skills to the business from its inception until Marcotte locked him out of the business in July 2001. Norber also discussed how he participated in every aspect of the business and how he and Marcotte agreed to forbear income in an effort to make the business profitable. Additionally, Norber alleged the parties held themselves out to third parties as partners. Since Norber alleged sufficient facts to establish partnership existed between him and Marcotte, he was entitled to seek an accounting, as per the first count in his petition.

As to the second count of Norber's petition, breach of the partnership agreement, we must analyze contract law to determine whether Norber stated a claim for relief. To make a submissible case for breach of contract claim, a plaintiff must allege and prove: (1) a mutual agreement between parties capable of contracting; (2) mutual obligations arising out of the agreement; (3) valid consideration; (4) part performance by one party; and (5) damages resulting from the breach of contract. Fidelity Nat. Title Ins. Co. v. Tri-Lakes Title Co. Inc., 968 S.W.2d 727, 730 (Mo.App. S.D.1998).

As discussed above, Norber alleged sufficient facts to show there was a mutual agreement between Marcotte and Norber to form the business and each had mutual obligations in the running of the business. Norber alleged he terminated his current employment in anticipation of opening the business, and took no income for many years in an effort to make the business more profitable. Norber also alleged Marcotte breached his partnership agreement by locking him out of the business, ignoring his requests to inspect the books, misrepresenting the state of the business, and wrongfully transferring funds from the business account to Marcotte's personal account. Finally, Norber alleged damages in the form of lost wages, lost profits, and loss of his interest in the partnership as of the date he was locked out of the...