DODSON AVIATION INC. v. HLMP AVIATION Corp.

DODSON AVIATION, INC., Plaintiff,

v.HLMP AVIATION CORP., et al., Defendants.

Case No. 08-4102-KGS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

DATE: March 31, 2011

MEMORANDUM AND ORDER

This matter comes before the Court upon the parties' cross motions for partial summary judgment. The motions are fully briefed, and the Court is prepared to rule. For the reasons explained below, Defendant's Motion for Partial Summary Judgment (ECF No. 131) is granted in part and denied in part, and Plaintiff's Motion for Partial Summary Judgment (ECF No. 127) is granted.

I. Introduction and Background

Prior to February 2007, PTC Aviation Corporation ("PTC") owned a Beech King Air Model 200 Aircraft ("King Air").¹ At all times relevant, Hernan Lopez ("Lopez") was the sole owner of PTC.² In July 2006, Lopez purportedly contracted with Dodson Aviation, Inc. ("Plaintiff or "Dodson Aviation") to perform certain repairs on the King Air.³ Thereafter, in July 2006, Lopez ultimately delivered the King Air to Mena Aerospace, Inc. ("Mena"), which was to perform the initial portion of the repairs. Lopez and Dodson Aviation did not enter into a written contract governing the repairs to be performed.

On February 9, 2007, Lopez, PTC, Orlando Padron ("Padron"), and HLMP Aviation Corp. ("HLMP" or "Defendant") entered into an agreement regarding ownership of the King Air.⁴ As contemplated by the agreement, a new corporation (HLMP) was formed whose shares were owned equally by Lopez and Padron.⁵ The agreement states that Lopez and Padron wished to transfer title of the King Air to HLMP.⁶ Under a section entitled "Consideration," the agreement states Padron was loaning $55,000 to Lopez and describes the parties' contributions towards refurbishment of the King Air as follows: Lopez would "provide the expertise and skill reasonably necessary to refurbish the [King Air] rendering it airworthy," and Padron would "provide the funds reasonably necessary to accomplish such work which has been presented by [Lopez] to be $250,000."⁷ On February 9, 2007, Padron was elected President and Secretary of HLMP; Lopez was elected Vice President and Treasurer.⁸ Also on February 9, 2007, Lopez executed a bill of sale on behalf of PTC, transferring title of the King Air to HLMP.⁹

After February 9, 2007, Lopez continued to communicate with Dodson Aviation about the repairs to the King Air.¹⁰ On February 8, 2008, when the work on the King Air was complete or nearly complete, Lopez was sent a "recap" of the charges for repairing the King Air, which reflected a balance due of $315,957.18.¹¹

On March 18, 2008, HLMP and Padron initiated a lawsuit in Miami-Dade County, Florida, against Lopez, PTC, Dodson Aviation, Dodson International Parts, Inc. ("DIPI"), and 1^st Source Bank, alleging inter alia that Lopez conspired to defraud Padron into organizing and investing capital in HLMP.¹² More specifically, HLMP and Padron alleged Lopez misrepresented the cost to repair the King Air and failed to disclose the existence of a $225,000 lien on the King Air held by 1^st Source Bank.¹³ On March 19, 2008, HLMP and/or Padron removed the King Air from Dodson Aviation's possession pursuant to an Ex Parte Temporary Injunction issued by the Circuit Court of Miami-Dade County, Florida.¹⁴

On March 19, 2008, Dodson Aviation filed a mechanic's lien pursuant to K.S.A. 58-201 and a Second Amended Lien in May 2008 for the services and parts used in repairing the King Air.¹⁵Dodson Aviation claims the value of the services provided for repairing the King Air, plus out-of-pocket expenses, is nearly $616,000; after giving credit for $131,102.46 in advance payments, Dodson Aviation still claims $484,894.50.¹⁶ This amount includes services performed and costs incurred by DIPI and Mena, two alleged subcontractors of Dodson Aviation. Dodson Aviation then filed this action to foreclose its mechanic's lien.¹⁷ HLMP disputes the amount due to Dodson Aviation, but not the validity of the lien.¹⁸

HLMP has filed a Motion for Partial Summary Judgment, seeking an order that Dodson Aviation is not entitled to prejudgment interest as a matter of Kansas law. HLMP also seeks an order that Dodson Aviation's lien does not extend to work performed on the King Air by Mena or for parts sold by DIPI because they purportedly had separate, direct contracts with Lopez. Further, HLMP asserts it is entitled to an offset of up to $225,000 for any amounts otherwise due Dodson Aviation because Dodson Aviation was purportedly unjustly enriched by HLMP's payment of $225,000 to remove a lien held by 1^st Source Bank on the King Air. Dodson Aviation has filed a cross Motion for Partial Summary Judgment seeking an order that HLMP is not entitled to an offset for unjust enrichment.

II. Legal Standard Governing Summary Judgment Motions

Summary judgment is appropriate only if "the movant shows that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law."¹⁹ As to materiality, the substantive law will identify which facts are material.²⁰ Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment; factual disputes that are irrelevant or unnecessary will not be counted.²¹ A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim."²² A "genuine" issue of fact exists where "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way."²³ In considering a motion for summary judgment, a court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment."²⁴

The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law.²⁵ In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim.²⁶

Once the movant has met this initial burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial."²⁷ A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of its pleading.²⁸ Rather, the nonmoving part must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant."²⁹ To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein.³⁰ The court's function at this juncture is not to weigh the evidence, but merely to determine whether there is sufficient evidence favoring the nonmovant for a finder of fact to return a verdict in that party's favor.³¹

III. Analysis

A. Prejudgment Interest

Dodson Aviation claims prejudgment interest in the amount of $105,000 through May 18, 2010, with interest continuing to accrue at a per diem rate of $135.00 pursuant to K.S.A. 16-201.³²K.S.A. 16-201 provides, "Creditors shall be allowed to receive interest at the rate of ten percent per annum, when no other rate of interest is agreed upon, for any money after it becomes due . . ." Under this statute, a party is entitled to prejudgment interest only on liquidated claims.³³ A claim becomes liquidated when both the amount due and the date on which it is due are fixed and certain, or when the same become definitely ascertainable by mathematical computation.³⁴ As a general rule, prejudgment interest is not allowable on a claim for unliquidated damages, subject to certain exceptions.³⁵

In this case, there was no written contract governing the repair of the King Air. On July 9, 2006, Lopez requested a quote from Robert Dodson, Jr. ("JR Dodson") for work on the King Air.³⁶Lopez ended up speaking with Robert Dodson, Sr., Dodson Aviation's President, who provided an estimate of $250,000 prior to seeing the King Air.³⁷ According to Dodson Aviation's representative, the initial $250,000 estimate including repainting the King Air, refurbishing its interior, performing an "import inspection," and upgrading some radios.³⁸ During his deposition, Lopez testified he was given a $250,000 quote but then qualified that the $250,000 quote was only for parts, with another $150,000 quoted for labor.³⁹ Thus, it does not appear that Lopez and Dodson Aviation even agree on the scope of the initial quote. After the King Air was delivered for repair, Lopez was told the scope of the work needed to be expanded due to other problems found on the plane but was not provided with an estimate for the additional work.⁴⁰

Lopez testified he was quoted labor rates ranging from $38 per hour to $56 per hour, but he could not remember the exact amounts.⁴¹ Robert Dodson, Sr. testified he never discussed hourly labor rates with Lopez.⁴² According to Robert Dodson, Sr., there was never an agreement the work would be performed for a fixed price or at any particular hourly rates.⁴³ The agreement was simply, "we're going to do the work, you'll get billed for it."⁴⁴ Lopez and Dodson Aviation do not appear to have agreed upon any specific financial terms of the work to be performed. Thus, there was no contract or agreement specifying how the cost of the repairs would be calculated.⁴⁵

The absence of a such a contract does not necessarily preclude a finding that Dodson Aviation's damages are liquidated as long as the damages are still certain or fixed or can be ascertained by mathematical computation.⁴⁶ Dodson Aviation attached to its Second Amended Statement for Mechanic's Lien an invoice listing the charges for its labor, parts, and out-of-pocket expenses, claiming...