Rhodes Engineering v. Public Water Supply

Decision Date27 January 2004
Docket NumberNo. WD 61821.,WD 61821.
Citation128 S.W.3d 550
PartiesRHODES ENGINEERING COMPANY, INC., Appellant, v. PUBLIC WATER SUPPLY DISTRICT NO. 1 OF HOLT COUNTY, Rick Bottoms, Wayne E. Kurtz, Maurice E. Atkins, John Dudeck, Max Kurtz, John T. Conway, James W. Farley and Bartlett & West Engineers, Inc., Respondents.
CourtMissouri Court of Appeals

David M. Duree, St. Louis, MO, for Appellant.

Charles R. Hay, David P. O'Neal, Harold S. Youngentob, Topeka, KS, Zel M. Fischer, Rock Port, MO, for Respondents Bartlett & West Engineers, Inc., and John T. Conway.

R.A. Brown, Jr., St. Joseph, MO, for Respondent James W. Farley.

R. Dan Boulware, Sharon Kennedy, St. Joseph, MO, for Respondents Public Water Supply District No. 1 of Holt County, Rick Bottoms, Wayne E. Kurtz, Maurice E. Atkins, John Dudeck, and Max Kurtz.

Before: ULRICH, P.J., and HOWARD and NEWTON, JJ.

VICTOR C. HOWARD, Judge.

Plaintiff, an engineering firm, sought to enforce a contract with the Holt County Public Water Supply District No. 1 (the "Water District"), under which Plaintiff was to provide engineering services for the construction of a water supply system in Holt County, Missouri. Plaintiff was compensated for the preliminary work it performed on the project under an interim contract. But, once the Water District was statutorily incorporated (two years after the contract was executed), it awarded the permanent contract to another engineering firm. Plaintiff then brought suit against various defendants for breach of contract, tortious interference with contract rights or business expectancy, and fraud. All Defendants filed motions for summary judgment, which the trial court granted.

Plaintiff brings six points on appeal challenging the various grounds upon which the court granted summary judgment. As explained below, we affirm the trial court's summary judgment on Plaintiff's claims: (1) that the Water District breached the permanent contract, because there was no valid contract upon which to base the breach of contract claim; (2) that certain Defendants tortiously interfered with a contract or business expectancy, because there was no permanent contract with which the Defendants could tortiously interfere, there was no interference with the interim contract, and there was no valid business expectancy arising from either the invalid permanent contract or the interim contract; and (3) that certain of the Defendants committed fraud in representing to Plaintiff that the Water District would adopt, ratify, and execute the permanent contract once it became a legal entity, because Plaintiff cannot establish, as a matter of law, that it had a right to rely upon the allegedly fraudulent representations. However, genuine issues of material fact do exist as to whether the Interim Parties breached the interim contract in failing to pay Plaintiff for all work done thereunder, so we reverse and remand on that sole issue.

Background

We begin with a background of the controversy now at hand. Additional facts are provided where necessary in our consideration of Plaintiff's points on appeal.

I. THE CONTRACT: In the mid-1990's, residents of Holt County proposed the creation of a water supply system for their rural area. A preliminary engineering study was necessary to obtain the federal funds to create a public water supply district. Thus, they contacted Donald Sayre, of Rhodes-Sayre and Associates, Inc., who had experience developing public water supply districts in Northwest Missouri.

On May 17, 1995, Donald Sayre, as president of Rhodes-Sayre & Associates, Inc. (Plaintiff),1 executed the subject contract denominated an "Agreement for Engineering Services" on Form FHA 442-19 (Rev.7-21-67).2 The contract recited that it was an agreement between Plaintiff as "ENGINEER" and the Holt County Public Water Supply District as "OWNER"; it actually included two agreements or contracts:

The first is the "Permanent Agreement," as the parties refer to it, set out on pages one through five of the contract and containing six sections. Sections A through E detail the services to be performed by Plaintiff and how OWNER is to compensate Plaintiff for those services.3 Section F declares, "This agreement shall not become effective until approved by the FHA," and details how such approval shall occur. At the close of Sections A through F is the section for execution. Wayne Kurtz executed the Permanent Agreement under the signature provision for "OWNER,"4 and Donald Sayre executed the agreement under the "ENGINEER" signature provision. The signature line for the FHA's approval is blank.

Second, following this signature page of the Permanent Agreement, at page six, is the "Interim Agreement." Just below its heading, this agreement parenthetically states it is, "(For use only when OWNER is not legally organized on the date the Agreement for Engineering Services [ (the Permanent Agreement) ] is executed)." On May 17, 1995, when the Permanent Agreement was executed, the Water District (OWNER) was not legally organized; that did not occur until 1997. Rather, at the time the agreements were executed, a steering committee had been formed for the purpose of developing the Water District. This Interim Agreement provided as follows:

In lieu of the execution of the foregoing [Permanent Agreement] dated the [17th] day of May, 1995, by the party designated as OWNER therein, the ... INTERIM PARTIES have executed this Interim Agreement in consideration of the services described in Section A-1 thru 5, inclusive, of said [Permanent Agreement] to be performed by the ENGINEER [(Plaintiff) ], and the ENGINEER agrees to accept this Interim Agreement as evidenced by ENGINEER'S execution hereof contemporaneously with the execution of the [Permanent Agreement]. The ENGINEER also agrees to perform services set forth in said Section A-1 thru 5, inclusive, of said agreement, [governing preliminary engineering services,] in consideration of the sum stated in Section B-1, [i.e., Plaintiff will receive $10 per meter sign-up "after the review of the preliminary engineering report by the FHA and acceptance by the OWNER."]

It is anticipated that OWNER shall promptly become a legal entity with full authority to accept and execute said [Permanent Agreement] and that the OWNER, after becoming so qualified, shall promptly take such action as necessary to adopt, ratify, execute, and become bound by the [Permanent Agreement]. The ENGINEER agrees that upon such due execution of the [Permanent Agreement] by the OWNER, the INTERIM PARTIES automatically will be relieved of any responsibility or liability assumed by their execution of this Interim Agreement, and that the ENGINEER will hold the OWNER solely responsible for performance of the terms and conditions imposed upon the OWNER by the [Permanent Agreement], including the payment of all sums specified in Section B-1 of said Agreement.

If the OWNER is not legally organized, or if after being duly organized it fails or refuses to adopt, ratify, and execute the [Permanent Agreement] within 30 days from the date it becomes legally organized and qualified to do so, or if for any other reason the project fails to proceed beyond the preliminary stage described in Section A-1 thru 5, inclusive, of said Agreement, the INTERIM PARTIES agree to pay ENGINEER for such preliminary engineering services an amount not to exceed the sum specified therefor in Section B-1 of said Agreement.

Donald Sayre executed the Interim Agreement on behalf of Plaintiff as "ENGINEER." Wayne Kurtz, Maurice Atkins, and Max Kurtz (steering committee members) executed the Interim Agreement as "INTERIM PARTIES."

On September 26, 1995, the Missouri Department of Natural Resources approved the preliminary engineering report submitted by Plaintiff for the project. In December of 1995, Plaintiff submitted and was subsequently compensated for a $4,000 invoice for preliminary work on the project. Plaintiff thereafter continued to perform engineering services for the project.

On August 21, 1997, Donald Sayre, Plaintiff's lead engineer on the water supply district project, passed away. Following his death, his son Cary Sayre and others affiliated with Plaintiff continued work on the project. Plaintiff's work on the project continued until 1998 when, as explained below, the Water District entered into a permanent contract with another engineering firm for the construction of the water supply system.

II. Public Water Supply District No. 1 of Holt County, Missouri: On December 26, 1996, attorney James Farley, on behalf of Holt County residents, filed in the Circuit Court of Holt County, Missouri, a Petition under Chapter 247 of the Missouri Revised Statutes for the statutory formation of a public water supply district. The matter was set for hearing, and certain residents filed exceptions from the water supply district.

On February 5, 1997, the Circuit Court of Holt County, Missouri, entered its "Interlocutory Decree and Judgment Incorporating Water Supply District." According to statute, the court appointed Phil Graves, Matt Clifton, Kent Kurtz, Wayne Kurtz, and John Dudeck to the first Board of Directors of the Water District. The court's decree set an election date of April 1, 1997, for voters residing within the boundaries of the district to vote on the proposition as to whether the District should be incorporated.

The election was held, and a majority of the voters assented to the Water District's incorporation. Thus, on May 13, 1997, the Circuit Court of Holt County, Missouri, entered its Order declaring the Decree of Incorporation of the Public Water Supply District No. 1 of Holt County, Missouri, to be final and conclusive. On June 9, 1997, the decree of incorporation was filed with the Missouri Secretary of State.

The court-appointed Board of Directors held its...

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