Parish v. Novus Equities Co.

• Decision Date: 12 June 2007
• Docket Number: No. ED 88842.,ED 88842.
• Citation: 231 S.W.3d 236
• Parties: Leesa PARISH, et al., Plaintiffs/Appellants, v. NOVUS EQUITIES COMPANY, et al., Defendants/Respondents.
• Court: Missouri Court of Appeals

231 S.W.3d 236

Leesa PARISH, et al., Plaintiffs/Appellants, v. NOVUS EQUITIES COMPANY, et al., Defendants/Respondents.

No. ED 88842.

Missouri Court of Appeals, Eastern District, Division One.

June 12, 2007.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 31, 2007.

Application for Transfer Denied September 25, 2007.

Patricia A. Wilcox, Weiss & Associates, P.C., St. Louis, MO, for appellant.

Martin J. Buckley, Adrian P. Sulser, David S. Davis, Buckley & Buckley, LLC, St. Louis, MO, for respondent.

Before CLIFFORD H. AHRENS, P.J., and MARY K. HOFF, J., and NANNETTE A. BAKER, J.

OPINION

PER CURIAM.

Leesa Parish, Gerald Petersen, Kelly Luitjens, Robert S. Luitjens, Margaret E. Cooksey, the Charles and Margaret Cooksey Trust, Sharon L. Naumann, Reynold L. Green, Tracy M. Green, Jason McLaughlin, Mary McLaughlin, Jay Gardner, Tammy Gardner, Vernon Conway, Sandra Conway, Michael Ashcraft, Pamela Ashcraft, Marian Czyzewski, and Nancy Czyzewski (collectively referred to as the Homeowners) appeal from the trial court's judgment¹ granting the City of Sunset Hills' (the City) Motion to Dismiss Count V and Count VII (Motion to Dismiss) of the Homeowners' second amended petition and granting the City's Motion for Summary Judgment with regard to Count VI (Motion for Summary Judgment) of the Homeowners' second amended petition. We affirm.

Facts and Procedural History

In the spring of 2004, the City, a fourth class city, expressed interest in having a private organization redevelop an area within the City's boundaries known as the Sunset Manor neighborhood (Redevelopment Area) through the use of tax increment financing, pursuant to the Real Property Tax Increment Allocation Redevelopment Act, Section 99.800² et seq., and in accordance with the City's already-prepared redevelopment plan. In April and May 2004, the City's board of aldermen solicited proposals from private developers. On June 30, 2004, Novus Development Company (Novus) submitted its proposal for the Redevelopment Area. On August 10, 2004, the City's board of aldermen adopted Ordinance No. 1564, which designated Novus as the "preferred developer" of the Redevelopment Area subject to certain conditions, including that the City and Novus reached a mutually "satisfactory redevelopment agreement."

In May 2005, the City's board of aldermen adopted Ordinance No. 1590, which memorialized the board of aldermen's determination that the Redevelopment Area was "blighted" under Section 99.810, approved Novus' redevelopment proposal and the City's redevelopment plan, and authorized the City to execute and enter into a redevelopment agreement with Novus. The City and Novus subsequently decided to modify their first agreement and, on July 12, 2005, the board of aldermen adopted Ordinance No. 1600, which authorized the City to enter into an amended redevelopment agreement (the Redevelopment Agreement) with Novus. The Redevelopment Agreement provided, inter alia, that Novus would provide the City with periodic written reports concerning the status of the redevelopment project, including financing commitments. The written reports were to be submitted to the City no later than the first day of each calendar quarter following the date the City and Novus executed the Redevelopment Agreement, July 12, 2005, and continuing until the completion of the project.

Meanwhile, between August 27, 2003, and July 1, 2005, Novus and each of the Homeowners had executed real estate contracts, under the terms of which the Homeowners agreed to sell and Novus agreed to purchase the Homeowners' homes in the Redevelopment Area for above-market value prices and to close each of the transactions on various dates between August 22, 2005, and September 1, 2005. However, after the City and Novus entered into the Redevelopment Agreement and as the closing dates for the real estate contracts approached, Novus notified the Homeowners that Novus had been unable to obtain financing and needed to reschedule the original closing dates to no later than September 30, 2005, to allow Novus time to restructure their financing. The Homeowners agreed to the change, and the Homeowners and representatives of Novus signed written amendments to the real estate contracts specifying the new closing dates. Ultimately, Novus was unable to obtain adequate financing, and the rescheduled closings never occurred.

The Homeowners subsequently filed their initial petition and their first amended petition against the City, Novus, Novus Equities Company, Mainstreet at Sunset, L.L.C., Novus-Sunset, L.L.C., Jonathan Browne, Lisa Browne, Westfield America, Inc., WEA Crestwood Plaza, L.L.C., and Missouri Residential I, L.L.C. Westfield America, Inc., WEA Crestwood Plaza, L.L.C., and Missouri Residential I, L.L.C., collectively filed a motion to dismiss the Homeowners' claims as to them, which the trial court granted. The City filed a separate motion to dismiss the Homeowners' sole claim as to it, which alleged that the City was negligent in failing to oversee Novus' financing of the redevelopment project and that the Homeowners sustained economic losses as a result. The trial court denied the City's motion to dismiss as being premature, finding that, although the City's conduct as alleged in the Homeowners' petition was "governmental in nature and entitled to limited sovereign immunity," the Homeowners should be allowed to conduct discovery on the issue of whether the City had waived sovereign immunity and, if so, to amend their petition.

During discovery, the City produced a certified copy of the City's insurance policy in effect at the time the Homeowners' alleged claims occurred. Consequently, the Homeowners filed their second amended petition re-alleging four of their previous claims against Novus and modifying their previous claim against the City and set out in three new counts, Counts V, VI, and VII. Counts V and VII alleged that the City had acted in its proprietary capacity when it entered into the Redevelopment Agreement with Novus and had been negligent in monitoring and confirming Novus' ability to obtain binding financial commitments for the redevelopment project pursuant to the terms of the Redevelopment Agreement, and, therefore, was liable for the Homeowners' losses stemming from Novus' failure to close on its real estate contracts with the Home-owners. Count VI alleged that the City maintained insurance to cover the type of damages alleged in the Homeowners' second amended petition, i.e. economic losses, and such insurance constituted an absolute and complete waiver of all immunities against liability the City otherwise might have had.

In response, the City filed its Motion to Dismiss Counts V and VII and its Motion for Summary Judgment on Count VI. In its Motion to Dismiss, the City argued that Counts V and VII of the Homeowners' second amended petition failed to state a claim upon which relief could be granted because the trial court previously had found the City to be operating in its governmental capacity when it entered into the Redevelopment Agreement with Novus, which entitled the City to assert the affirmative defense of sovereign immunity with regard to those counts. The City further argued that the Homeowners had not specifically pleaded facts demonstrating their claim was within an exception to sovereign immunity. In its Motion for Summary Judgment, the City argued that it was entitled to judgment on Count VI of the Homeowners' second amended petition on the ground that it was not liable because: 1) the trial court previously had determined that the City's alleged conduct had been governmental in nature and that conduct was protected by limited sovereign immunity; 2) the City's insurance policy, which otherwise might have acted as a waiver of the City's immunity in this case, contained language indicating the policy was neither a waiver nor intended to act as a waiver of the City's immunity from the Homeowners' claims; and 3) the City's insurance policy did not include coverage for the type of damages Homeowners' allegedly sustained, i.e. economic losses.

In its judgment, with regard to the City's Motion to Dismiss, the trial court agreed with the City's position that the Homeowners' second amended petition had failed to specifically plead facts demonstrating that Counts V and VII fell within an exception to the doctrine of sovereign immunity and found that allowing the Homeowners to amend Counts V and VII would not cure the inadequacy of those counts. With regard to the City's Motion for Summary Judgment, the trial court found that the City did not waive its limited sovereign immunity by procuring an insurance policy because the insurance policy contained a sovereign immunity disclaimer specifically disclaiming coverage for injuries or damages that would be barred by the doctrines of sovereign immunity or governmental immunity and thereby avoided waiving its governmental immunity.

Point I

In their first point on appeal, the Homeowners claim the trial court erred in granting the City's motion to dismiss Counts V and VII of the Homeowners' second amended petition because the City was acting in its proprietary capacity when it participated in the Redevelopment Agreement with Novus and, therefore, was not protected from being sued for negligence by the doctrine of sovereign immunity. In the argument segment of their brief, the Homeowners specifically contend that, under the terms of the Redevelopment Agreement, the City assumed a duty to monitor and to confirm whether Novus had procured binding financial commitments for the redevelopment project, which was a duty owed to the Homeowners and not to the general public. The City was to perform its duty by requiring Novus to provide the City with mandatory periodic written reports demonstrating that Novus had procured binding financial commitments. The Homeowners further contend that they reasonably relied on the City to monitor and...