City of Harrisonville v. Bd. of Trs. of the Mo Petroleum Storage Tank Ins. Fund

655 S.W.3d 770

CITY OF HARRISONVILLE, Missouri, Respondent/Cross-Appellant,

v.The BOARD OF TRUSTEES OF the MO PETROLEUM STORAGE TANK INSURANCE FUND in Their Official Capacity, Appellant/Cross-Respondent.

No. SC 99273

Supreme Court of Missouri, en banc.

Opinion issued December 20, 2022

The board was represented by James R. Layton of Tueth Keeney Cooper Mohan & Jackstadt PC in St. Louis, (314) 880-3600.

Harrisonville was represented by Steven E. Mauer, Christine Roto Smith and Alex C. Felzien of Mauer Law Firm PC in Kansas City, (816) 759-3300.

Patricia Breckenridge, Judge

The City of Harrisonville and the board of trustees of the petroleum storage tank insurance fund¹ appeal the judgment of the circuit court awarding $8 million in punitive damages against the board on the city's claim of fraud and ordering post-judgment interest to accrue from the date it entered judgment. On appeal, the city claims the circuit court erred in ordering post-judgment interest accrue from the date it entered judgment rather than the date of an earlier judgment. In its cross-appeal, the board raised six claims of error, including that the city's claim of fraud against it was barred by sovereign immunity. The Court finds the circuit court erred in entering its judgment awarding punitive damages to the city on its fraud claim because the board is a state agency entitled to sovereign immunity and no exception to immunity applies. The circuit court's judgment is reversed, and judgment is entered for the board pursuant to Rule 84.14.

Factual and Procedural Background

In 2003, the city decided to upgrade its sewer system. During that process, the city discovered that soil in its easement adjacent to a gas station was contaminated by petroleum leaking from an underground storage tank. The city reported the petroleum leak to the department of natural resources, which informed the city the board had monitored contamination from the gas station since 1997. The board determined the contamination in the city's easement traced back to the gas station. The board was involved, along with the city and the fund's third-party administrator, in deciding how to remediate the contamination. An environmental engineer the board retained suggested the most cost-effective solution was to leave the contaminated soil in place and install petroleum-resistant pipes and fittings in the contaminated easement for the city's sewer upgrade. To that end, the city ultimately hired Midwest Remediation upon recommendation by the fund's third-party administrator to install petroleum-resistant pipe and fittings in the easement, with the understanding the fund would reimburse the city's costs.

Despite its demands for reimbursement, the fund did not reimburse the city for the costs of Midwest Remediation's work. When it was not paid, the city sued the fund in the Cass County circuit court, asserting claims for the torts of negligent misrepresentation and fraud. The city also asserted claims for the torts of nuisance and trespass against the owner and former owner of the gas station based on the migration of petroleum contamination from the underground tank system. The city sought compensatory and punitive damages from each defendant. It also sought punitive damages against the fund on its fraud claim. Following a trial in 2011, a jury returned a verdict for the city on all claims, awarding it compensatory damages against all defendants, $100 in punitive damages against the owners, and $8 million in punitive damages against the fund. The circuit court remitted the punitive damages award against the fund to $2.5 million. All defendants appealed, and the city filed a cross-appeal.

On appeal in 2016, this Court held the city's claims against the fund were not cognizable under the fund's enabling statutes and the fund is not a legal entity capable of suing or being sued.² City of Harrisonville v. McCall Serv. Stations , 495 S.W.3d 738, 751-52 (Mo. banc 2016) [hereinafter City of Harrisonville I ]. As a result, the Court found neither the compensatory nor punitive damages awards against the fund were "cognizable." Id. Counsel for the fund, however, had abandoned the argument on appeal relating to the validity of the compensatory damages award. Id. at 752. Consequently, the Court affirmed the compensatory damages award and reversed only the award of punitive damages against the fund. Id. at 752-53.

The Court recognized, however, that counsel for the fund had not raised the argument that the fund was not a proper party until after the jury rendered its verdict. Id. at 753. So "when the issue finally was raised, the City was not in a position to request leave to amend its petition to add or substitute parties." Id. Recognizing the city's allegations "may state a cause of action" against the board, the Court remanded the case in the interest of fairness and justice "[w]ithout expressing any opinion about the merits of the claims that may be asserted or the source for payment of any judgment against the board on such claims[.]" Id.

On remand, the city filed a motion to substitute the board for the fund. At the request of the board, the circuit court ordered the city to file an amended petition. The city complied with the court's order by filing a second amended petition that, for the first time, named the board as a defendant.³ Thereafter, the case was transferred to the Cole County circuit court, where venue was proper, and successively assigned to numerous judges. In 2018, the board filed a motion for summary judgment, claiming sovereign immunity from the city's tort claims, that was overruled.

Believing this Court had issued a remand with directions for the circuit court to review whether, after substitution, the city's first amended petition stated a claim against the board, the circuit court determined the city, indeed, stated a claim against the board.⁴ Relying on the jury verdict from 2011, the circuit court entered judgment against the board for $8 million in punitive damages, the amount the jury awarded against the fund in 2011 before remittitur. The judgment also provided interest would accrue from the date judgment was entered against the board, rather than from the judgment entered against the fund in 2011. The board filed a motion to vacate, correct, alter, or amend the judgment, reasserting sovereign immunity, that the circuit court overruled. The board and the city cross-appealed. This Court has jurisdiction pursuant to article V, section 3 of the Missouri Constitution because the board, among other issues, raises a challenge to the validity of the statutory cap on punitive damages in section 510.265.1(2).⁵

In its appeal, the city claims the circuit court erred in ordering that interest accrue from the date of the judgment against the board, rather than from the date of judgment against the fund. In its cross-appeal, the board raises six claims of error, including that the circuit court erred in entering judgment for $8 million in punitive damages against it because sovereign immunity bars the city's tort claims.⁶ Because that claim is dispositive, only that claim will be addressed.

Standard of Review

The circuit court's judgment will be affirmed "unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law." Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976). "[T]his Court reviews de novo both the trial court's legal conclusions and its application of law to the facts." Empire Dist. Elec. Co. v. Scorse , 620 S.W.3d 216, 224 (Mo. banc 2021) (alteration in original) (internal quotation marks omitted).

Board Entitled to Sovereign Immunity

The board claims the circuit court erred in that the city's suit for fraud and the award of punitive damages on that claim are barred because the board is a state agency with sovereign immunity against tort claims except as waived by the General Assembly. The city argues the board waived sovereign immunity because the board did not plead it as a defense and the circuit court's ruling that the board is not a state entity is the law of the case because the board did not appeal that ruling in City of Harrisonville I .

"[S]overeign immunity applies to the government and its political subdivisions unless waived or abrogated or the sovereign consents to suit." Metro. St. Louis Sewer Dist. v. City of Bellefontaine Neighbors , 476 S.W.3d 913, 921 (Mo. banc 2016). Section 537.600 codifies the doctrine of sovereign immunity from liability in tort. The statute provides:

Such sovereign or governmental tort immunity as existed at common law in this state prior to September 12, 1977, except to the extent waived, abrogated or modified by statutes in effect prior to that date, shall remain in full force and effect; except that, the immunity of the public entity from liability and suit for compensatory damages for negligent acts or omissions is herby expressly waived in [two] instances[.]

Section 537.600.1. The two waivers of immunity from liability and suit for compensatory damages for negligent acts or omissions in section 527.600.1(1)-(2) are for injuries caused by public employees’ negligent operation of motor vehicles in the course of their employment and for injuries caused by a dangerous condition of a public entity's property. Section 527.610.1 also provides sovereign immunity is waived by a public entity's purchase of liability insurance for tort claims under certain circumstances.

In the absence of an express statutory exception or recognized common-law exception, "sovereign immunity is the rule and applies to all suits against public entities[.]" City of Bellefontaine Neighbors , 476 S.W.3d at 921-22. To overcome the general rule of sovereign immunity, a plaintiff must show "the legislature expressly intended to waive sovereign immunity." Poke v. Indep. Sch. Dist. , 647 S.W.3d 18, 21 (Mo. banc 2022). Applied to this case,...