Crest Constr. II, Inc. v. Hart

487 S.W.3d 85

Crest Construction II, Inc. and Metro Energy, Inc., Appellants,

v.John A. Hart, et alia, Respondents.

WD 78135

Missouri Court of Appeals, Western District.

OPINION FILED: April 19, 2016

Michael Rahmberg, Kansas City, MO, Counsel for Appellants.

Floyd White, Jr., Kansas City, MO, Counsel for Respondents, Myers, Northland, and Taylor.

David Johnson, Kansas City, MO, Counsel for Respondent, Chaddock.

John Hart, Kansas City, MO, Respondent Acting Pro Se.

Dee Hart, Kansas City, MO, Respondent Acting Pro Se.

Before Division Three: James Edward Welsh, P.J., Thomas H. Newton, and Gary D. Witt, JJ.

Thomas H. Newton, Judge

Crest Construction II, Inc. and Metro Energy, Inc. (collectively Crest Construction) appeal a judgment awarding them $4.1 million in actual and special damages against Mr. John Hart and Ms. Dee Hart and their business entities, On Time Auto Sales and Financing LLC, Fidelity Three, Inc., and Northland Auto Brokers, LLC (collectively On Time Auto), and dismissing with prejudice the first amended petition for breach of contract, fraud, conversion, and civil conspiracy as to Mr. Larry Myers, Ms. Connie Myers, Northland II, Inc., Northland Auto Sales & Leasing LLC, Northland Auto Sales LLC, Mr. Buddy Taylor, and Ms. Hilda Marie Chaddock (Defendants). We affirm.¹

The issues arise out of a state petition that was filed after the applicable statute of limitations had expired. The state petition was filed after a federal court had dismissed a complaint raising similar claims over which the court declined to exercise pendent jurisdiction. To the extent that Crest Construction pleaded the same claims both in federal and state court, we find, as elaborated more fully below, that a federal statute tolled some of the claims as to some of the parties. We also find that the tolled state claims fail because Crest Construction failed to show either that they fell within the partial performance exception to the statute of frauds or were sufficiently pleaded.

Viewed in the light most favorable to the first amended petition, the facts allege a business deal with its inception in late 2003 involving On Time Auto's sales and resales of used vehicles to third parties, financed by relatively high-interest loans that would be assigned “with recourse” to Crest Construction, which purchased the sales agreements and promissory notes by paying the sales price to On Time Auto, less the down payment. Crest Construction was then to receive, on a weekly basis, the loan payments made to On Time Auto and the Defendants by the car buyers on their contracts. Crest Construction was allegedly promised twenty-four-percent interest on its investment with one-hundred-percent recovery of investment principal. While Crest Construction refers throughout its pleadings to terms to which the parties “agreed” and to an “agreement,” no writing executed by the parties setting forth these terms exists. Between December 2003 and December 2004, Crest Construction allegedly paid some $1.6 million for 268 vehicle loan accounts. Crest Construction received approximately $400,000 from payments on these accounts. It alleges that On Time Auto and Defendants fraudulently used the same loan agreements assigned to Crest Construction and either sold them to or obtained loans from other financial entities, thus putting its collateral at risk, and failed to pay Crest Construction the loan payments that were made on the loans purchased by Crest Construction. Crest Construction further alleges that Mr. Myers converted for his own use a “reserve account,” established to guarantee Crest Construction payment for bad loan accounts. Crest Construction also allegedly paid $200,000 for a twenty-five-percent equity interest in On Time Auto, which funds were supposed to be, but were not, used to pay off On Time Auto's entire business debt.

We dismissed an earlier appeal in this matter because the trial court had not issued a final judgment. Crest Constr. II, Inc. v. Hart, 439 S.W.3d 246 (Mo.App.W.D. 2014). The concise procedural summary therein sets the stage for the issues raised in this appeal.

On October 4, 2007, Crest Construction filed a six-count complaint in the United States District Court for the Western District of Missouri. The counts were Count I (Breach of Contract), Count II (Breach of Contract), Count III (Fraud), Count IV (Conversion), Count V (Civil Conspiracy), and Count VI (RICO). All conduct allegedly committed by any defendants occurred from December 2003 through December 2004.

On August 27, 2010, the district court dismissed Count VI (RICO), which had provided the basis for federal jurisdiction. The district court declined to exercise supplemental jurisdiction under 28 U.S.C. § 1367(c)(3) over the remaining claims, finding that the case was “a garden variety fraud and breach of contract case that should be heard in Missouri state court.” The court dismissed all of Crest Construction's claims without prejudice. On November 4, 2010, the district court denied Crest Construction's motion to set aside the court's judgment and allow it to amend the complaint. On appeal to the Eighth Circuit Court of Appeals, Crest Construction submitted an amended complaint. The Eighth Circuit rejected the amended complaint and affirmed the district court's judgment on October 31, 2011.

On September 24, 2010, within thirty days of the federal district court's dismissal, Crest Construction filed its petition in the Circuit Court of Clay County. Crest Construction amended its petition on December 15, 2011. The amended petition brought the following claims: Count I (Breach of Contract), Count II (Breach of Contract), Count III (Fraud), Count IV (Conversion), and Count V (Civil Conspiracy). In its amended petition, Crest Construction alleged that it entered into a business relationship with [On Time Auto and] some of the Defendants to purchase vehicle sales contracts and promissory notes obtained by those companies from third-party customers. The claims stem from this relationship and the subsequent events that Crest Construction alleged transpired from December 2003 through 2004.

On October 26, 2011, the trial court entered a default judgment for Crest Construction against [On Time Auto]. In its judgment, the court cited Rule 74.05(b), the rule addressing the entry of interlocutory default judgment. The docket sheet also reflects that the default judgment was interlocutory.

On August 29, 2012, the circuit court held a hearing on the remaining Defendants' joint motion to dismiss. On September 28, 2012, the circuit court granted Defendants' motion. The circuit court found that Crest Construction's claims were barred by the statute of limitations, that the alleged contract could not be enforced because it violated the statute of frauds, and that Crest Construction's petition failed to properly plead a claim or cause of action as to each of the Defendants. On June 28, 2013, the circuit court entered its judgment dismissing Crest Construction's first amended complaint with prejudice as to “all defendants.” The court, however, specifically stated in its judgment:

Defendants John D. Hart and Dee Hart did not appear personally nor were they represented by counsel the Court having entered judgment previously in favor of Plaintiffs against Defendant John Hart and Dee Hart and their business entities on October 26, 2011, and this Judgment does not address that Interlocutory judgment.

Id. at 248–49.

We dismissed the appeal because no damages had been awarded, and thus the trial court had not resolved all of the issues as to all of the parties. Id. at 249. Thereafter, the trial court conducted a hearing on damages, during which Crest Construction's owner, principal shareholder, and primary officer Mr. Randall L. Robb testified, and issued a final judgment on October 9, 2014, awarding Crest Construction $4.1 million in damages against Mr. and Ms. Hart and their business entities. Finding that Crest Construction's amended petition was barred by the statute of limitations, the alleged agreement did not comply with the statute of frauds, and the petition failed to properly plead the elements of common law fraud and civil conspiracy,² the trial court again dismissed the petition as to Defendants with prejudice. Crest Construction filed this appeal.

The parties have cited the standard applicable to appellate review of a trial court's ruling on a motion to dismiss. And while the trial court here decided the matter on the basis of the Defendants' joint motion to dismiss, it did not confine itself to the pleadings in making its determination.³ The Defendants attached exhibits to their joint suggestions in support of that motion, including the federal criminal docket in a mail fraud case against Mr. and Ms. Hart, Crest Construction's original federal complaint, the district court's ruling, and the Eighth Circuit's opinion. Crest Construction attached documents to its response, including an affidavit and a spreadsheet purportedly reflecting its losses and, as noted above, introduced evidence during a damages hearing. “Where, as here, both parties introduce evidence beyond the pleadings, a motion to dismiss is converted to a motion for summary judgment, and the parties are charged with knowledge that the motion was so converted.” Thomas v. Grant Thornton LLP, 478 S.W.3d 440, 444 (Mo.App.W.D. 2015). Accordingly, we review the trial court's judgment de novo and consider the record in the light most favorable to the party against whom judgment was entered, giving the non-mover the benefit of all reasonable inferences from the record. Woodson v. City of Independence, 124 S.W.3d 20, 26 (Mo.App.W.D. 2004). The circuit court enters summary judgment when “ ‘the motion, the response, [and] the reply ... show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ ” Id. (quoting Rule 74.04(c)(6)).

Legal Analysis

In the first point, Crest...