Stephen A. Callahan v. Ewm Services, LLC ( 2021 )


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  •              RENDERED: MARCH 26, 2021; 10:00 A.M.
    NOT TO BE PUBLISHED
    Commonwealth of Kentucky
    Court of Appeals
    NO. 2020-CA-0433-MR
    STEPHEN A. CALLAHAN                                 APPELLANT
    APPEAL FROM WEBSTER CIRCUIT COURT
    v.          HONORABLE C. RENÉ WILLIAMS, JUDGE
    ACTION NO. 18-CI-00035
    EWM SERVICES LLC                                     APPELLEE
    AND                   NO. 2020-CA-0443-MR
    EWM SERVICES LLC                                    APPELLANT
    CROSS-APPEAL FROM WEBSTER CIRCUIT COURT
    v.          HONORABLE C. RENÉ WILLIAMS, JUDGE
    ACTION NO. 18-CI-00035
    STEPHEN A. CALLAHAN AND
    SR PAYNE, D/B/A PAYNE & SON
    SERVICES                                            APPELLEES
    OPINION
    REVERSING AND REMANDING
    ** ** ** ** **
    BEFORE: GOODWINE, TAYLOR, AND K. THOMPSON, JUDGES.
    GOODWINE, JUDGE: Stephen A. Callahan (“Callahan”) appeals a judgment of
    the Webster Circuit Court finding EWM Services LLC (“EWM”) was entitled to
    damages under the theory of unjust enrichment. EWM cross-appeals arguing it
    was entitled to prejudgment interest. Finding error, we reverse and remand.
    BACKGROUND
    In 2017, Callahan hired SR Payne d/b/a Payne & Son Services
    (“Payne”) to provide water hauling services from an oil well operated by Callahan.
    Although Callahan previously hired EWM in 2015 to provide water hauling
    services, he did not contact EWM in 2017 to provide any services.
    In October 2017, Payne contacted EWM requesting it perform water
    hauling services from the Callahan well. Callahan asserted he did not direct or
    authorize Payne to hire EWM to provide those services and maintained Payne
    lacked authority to hire EWM on Callahan’s behalf.
    Upon receiving invoices from EWM totaling $8,945 for hauling water
    from the Callahan well, Callahan notified EWM verbally and in writing that he had
    not hired EWM to provide the services. Callahan further advised EWM that he
    agreed to pay Payne $245 per 110-barrel load and tendered a check to EWM for
    $4,410 for the 1,970 barrels of water hauled from the Callahan well by EWM. The
    memo line advised the check was payment in full for the services provided.
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    Steven Gough (“Gough”), owner of EWM, asserted that in 2015, he
    hauled water for Callahan at his standard rate of $90 per hour, which Callahan
    paid. Gough further testified he charged the same rate for the services provided in
    2017 for a total of $8,945. When Callahan tendered a check for only $4,410 with
    language in the memo section stating “payment in full,” Gough refused to cash the
    check and retained counsel.
    On March 15, 2018, EWM filed a complaint in the Webster Circuit
    Court against Callahan and Payne alleging EWM was owed $8,945 for water
    hauling services upon a business property owned by Callahan. On December 26,
    2019, approximately one month before trial, EWM moved to amend its complaint
    to include a claim for unjust enrichment under the doctrine of quantum meruit. On
    January 2, 2020, three weeks before the trial, the circuit court heard the matter.
    Callahan objected to the filing of the amended complaint, arguing it was untimely
    and prejudicial. Despite Callahan’s objection, the circuit court granted EWM’s
    motion to amend the complaint.
    Callahan and Payne then filed answers to the amended complaint. In
    its answer, Payne notified the court that it had filed for bankruptcy and asked to be
    dismissed as a party. Although an order dismissing Payne was never entered, the
    parties acknowledged Payne was no longer a party during the hearing on the
    motion to amend the complaint.
    -3-
    A jury trial was held on January 23, 2020. The only witnesses were
    Callahan and Gough. Payne did not participate in the trial. At the close of
    evidence, counsel for the parties met with the court in chambers to discuss jury
    instructions. Counsel agreed to Instruction No. 1 and Instruction/Special Verdict
    No. 2 concerning a contract claim. However, counsel for Callahan objected to
    Instruction/Special Verdict No. 3, which instructed the jury on the elements of
    unjust enrichment. Counsel for Callahan argued EWM attempted to add unjust
    enrichment as a new claim on the day of trial. Counsel for EWM argued the
    instruction on unjust enrichment was needed to conform the evidence introduced at
    trial to the pleadings. However, as discussed above, this claim was added when the
    circuit court granted EWM’s motion to amend the complaint weeks earlier. Thus,
    the circuit court overruled Callahan’s objection and allowed Instruction/Special
    Verdict No. 3 to be submitted to the jury.
    The jury returned a verdict finding there was no contract between the
    parties under Instruction/Special Verdict No. 2. However, the jury found in favor
    of EWM under Instruction/Special Verdict No. 3, which contained the elements of
    unjust enrichment. Because the jury found for EWM under Instruction/Special
    Verdict No. 3, it did not make a determination under Instruction/Special Verdict
    No. 4, which concerned the quantum meruit claim. The jury awarded EWM
    damages in the full claimed amount of $8,945.
    -4-
    Following trial, EWM filed a motion to enter a trial order and
    judgment and for an award of prejudgment interest at the rate of six percent from
    the date of the last invoice to the date of the verdict, totaling $1,188.09. Callahan
    filed a response objecting to Instruction/Special Verdict No. 3 and the entry of the
    trial order and judgment. Callahan also argued, for the first time, that unjust
    enrichment was an equitable claim that should have been decided by the court and
    not the jury. He also objected to an award of prejudgment interest.
    On February 25, 2020, the circuit court entered a final order adopting
    the trial order and judgment in favor of EWM, but it denied EWM’s request for
    prejudgment interest because EWM’s damages were unliquidated. This appeal and
    cross-appeal followed.
    ANALYSIS
    I.           CALLAHAN’S APPEAL
    On appeal, Callahan argues the circuit court erred in (1) allowing
    EWM to amend its complaint; (2) allowing the jury to try the unjust enrichment
    claim; and (3) finding the elements of unjust enrichment were satisfied.
    First, Callahan argues the circuit court erred in allowing EWM to
    amend the complaint. Callahan asserts he was prejudiced when the circuit court
    granted EWM’s motion to amend the complaint approximately three weeks prior to
    trial. It is Callahan’s position that the claim for quantum meruit was added at that
    -5-
    time, but he argues the claim for unjust enrichment was not added until after the
    close of evidence during the trial. However, based on our review of the record, it
    is clear the claim for unjust enrichment was included in the amended complaint
    three weeks prior to trial. The amended complaint provides, “As a result of the
    actions herein, Defendant Stephen A. Callahan acquired an unjust enrichment and
    [EWM] is entitled to reasonable compensation for his rendered services under the
    doctrine of quantum meruit.” Record at 49. Furthermore, during the hearing,
    counsel for EWM stated, “We’re moving to amend the complaint to add the
    element of unjust enrichment for the defendant under the concept of quantum
    meruit.” Video Record, 1//2/2020 at 9:06:54-9:07:04.
    The question before us is whether the circuit court abused its
    discretion in granting EWM’s motion to amend the complaint three weeks prior to
    trial. “It is within the trial court’s discretion to grant or deny a motion to amend a
    pleading, and on appellate review, its decision should not be disturbed unless the
    trial court abused that discretion.” Nichols v. Zurich American Ins. Co., 
    423 S.W.3d 698
    , 707 (Ky. 2014) (citation omitted). “The test for abuse of discretion is
    whether the trial judge’s decision was arbitrary, unreasonable, unfair, or
    unsupported by sound legal principles.” Goodyear Tire and Rubber Co. v.
    Thompson, 
    11 S.W.3d 575
    , 581 (Ky. 2000) (citing Commonwealth v. English, 
    993 S.W.2d 941
    , 945 (Ky. 1999)).
    -6-
    Kentucky Rule of Civil Procedure (CR) 15.01 sets forth the conditions
    under which a complaint may be amended. CR 15.01 provides:
    A party may amend his pleading once as a matter of
    course at any time before a responsive pleading is served
    or, if the pleading is one to which no responsive pleading
    is permitted and the action has not been placed upon the
    trial calendar, he may so amend it at any time within 20
    days after it is served. Otherwise a party may amend his
    pleading only by leave of court or by written consent of
    the adverse party; and leave shall be freely given when
    justice so requires. A party shall plead in response to an
    amended pleading within the time remaining for response
    to the original pleading or within 10 days after service of
    the amended pleading, whichever period may be longer,
    unless the court otherwise orders.
    In Kenney v. Hanger Prosthetics & Orthotics, Inc., 
    269 S.W.3d 866
    ,
    869-70 (Ky. App. 2007), this Court compiled the factors a circuit court may
    consider when presented with a motion to amend the complaint:
    In determining whether to grant a motion to amend a
    party’s complaint, a circuit court “may consider such
    factors as the failure to cure deficiencies by amendment
    or the futility of the amendment itself.” First National
    Bank of Cincinnati v. Hartman, 
    747 S.W.2d 614
    , 616
    (Ky. App. 1988). Other factors include whether
    amendment would prejudice the opposing party or would
    work an injustice. See Shah v. American Synthetic
    Rubber Corp., 
    655 S.W.2d 489
    , 493 (Ky. 1983).
    Ultimately, whether a party may amend his complaint is
    discretionary with the circuit court, and we will not
    disturb its ruling unless it has abused its discretion.
    Lambert v. Franklin Real Estate Co., 
    37 S.W.3d 770
    , 779
    (Ky. App. 2000).
    -7-
    Here, Callahan asserts the motion to amend was not timely as it was
    filed three weeks before trial, which was nearly two years after the original
    complaint was filed. He further argues he was prejudiced by the addition of the
    unjust enrichment claim following the close of evidence at trial because he did not
    have time to prepare a defense to EWM’s unjust enrichment claim. Despite this
    contention, the unjust enrichment claim was clearly added when the circuit court
    granted EWM’s motion to amend the complaint weeks earlier. Although Callahan
    objected EWM’s motion to amend the complaint prior to trial, he also
    acknowledged he was not surprised to see the claims in EWM’s amended
    complaint at the hearing and never requested a continuance to prepare a defense to
    the amended complaint. The record indicates Callahan was not prejudiced by the
    addition of the unjust enrichment claim weeks before trial.
    Furthermore, the addition of the unjust enrichment claim was not
    futile and cured a deficiency in the original complaint. To prevail on a claim for
    unjust enrichment, a plaintiff must prove: “(1) benefit conferred upon defendant at
    plaintiff’s expense; (2) a resulting appreciation of benefit by defendant; and (3)
    inequitable retention of benefit without payment for its value.” Jones v. Sparks,
    
    297 S.W.3d 73
    , 78 (Ky. App. 2009) (citation omitted). The evidence presented
    indicated the likelihood that there was no contract between Callahan and EWM but
    that Callahan received a benefit from the services provided by EWM. EWM
    -8-
    provided water hauling services for Callahan, which allowed his gas wells to
    continue to run, and Callahan did not remit payment for the full value of EWM’s
    services. As such, we hold the circuit court did not abuse its discretion in granting
    EWM’s motion to amend the complaint.
    Next, we turn to Callahan’s argument that the circuit court should
    have decided the unjust enrichment claim instead of the jury. Callahan did not
    raise this argument before the instructions were submitted to the jury. Instead, he
    raised this argument for the first time in his objection to EWM’s motion for entry
    of the trial order and judgment. He argued unjust enrichment is an equitable claim
    that should have been decided by the court.
    On appeal, Callahan reasserts unjust enrichment is an equitable issue
    that must be decided by the court. He further argues he did not have time to
    determine whether unjust enrichment was an issue for the jury or court to decide
    because unjust enrichment was raised for the first time after the close of evidence
    and again asserts he was prejudiced by the late addition of that claim. Conversely,
    EWM argues Callahan never requested the circuit court adjudicate the unjust
    enrichment claim, and therefore, he impliedly consented to the jury determining
    the outcome of the unjust enrichment claim instead of the circuit court.
    “Equitable claims, such as unjust enrichment, are heard and decided
    by the trial court, not the jury.” Superior Steel, Inc. v. Ascent at Roebling’s Bridge,
    -9-
    LLC, 
    540 S.W.3d 770
    , 782 (Ky. 2017) (citing Steelvest, Inc. v. Scansteel Serv. Ctr.,
    Inc., 
    908 S.W.2d 104
    , 108 (Ky. 1995)). However, “there may be factual issues that
    are capable of jury determination before application of an equitable remedy, but
    there is no entitlement to a jury trial on an unjust enrichment claim.” 
    Id.
     (citing
    Steelvest, Inc., 908 S.W.2d at 107-09).
    CR 39.03 provides guidance on whether the circuit court appropriately
    permitted the jury to decide the unjust enrichment claim:
    In all actions not triable of right by a jury the court upon
    motion or of its own initiative may try any issue with an
    advisory jury; or the court, with the consent of all parties
    noted of record, may order a trial with a jury whose
    verdict has the same effect as if trial by jury had been a
    matter of right.
    Under the current version of CR 39.03, “the consent must be noted of record, or, in
    other words, expressed consent is required.” Emerson v. Emerson, 
    709 S.W.2d 853
    , 855 (Ky. App. 1986) (citing 7 BERTELSMAN & PHILLIPS, KENTUCKY
    PRACTICE, CR 39.03, Comment 2 (4th ed. 1984)). When an equitable claim, such
    as unjust enrichment, is before the court “absent expressed consent, the jury is
    advisory only, regardless of what the court may characterize it.” 
    Id.
     (citation
    omitted). The circuit court may accept or reject the findings of the advisory jury,
    but it “must make findings of fact and conclusions of law pursuant to CR
    52.01.” 
    Id.
     (citation omitted).
    -10-
    Here, Callahan did not give his express consent for the trial court to
    permit the jury’s verdict to have the same effect as if the jury had been a matter of
    right. Therefore, the jury’s verdict was merely advisory in this instance. As in
    Emerson, “if the court agreed with the panel, it should have . . . made its findings
    and conclusions in conformity with the verdict” as required by CR 52.01. 
    Id.
     We
    must reverse the trial court’s finding that EWM was unjustly enriched and remand
    with instructions to enter findings of facts and conclusions of law as to whether
    EWM presented evidence satisfying all elements of an unjust enrichment claim.
    Third, Callahan argues EWM’s claim failed to satisfy all elements of
    unjust enrichment. As the circuit court failed to make required findings under CR
    52.01, we need not address Callahan’s argument. The circuit court will make this
    determination on remand.
    II.          EWM’S CROSS-APPEAL
    Finally, we address EWM’s cross-appeal. EWM argues it was
    entitled to an award of prejudgment interest. In its order denying an award of
    prejudgment interest, the circuit court seemed to find that because the damages
    claimed by EWM were unliquidated, prejudgment interest could not be awarded.
    Although there is a distinction between liquidated and unliquidated damages, the
    mere fact that damages are unliquidated is not a bar to an award of prejudgment
    interest. Claims are liquidated when they are “of such a nature that the amount is
    -11-
    capable of ascertainment by mere computation, can be established with reasonable
    certainty, can be ascertained in accordance with fixed rules of evidence and known
    standards of value, or can be determined by reference to well-established market
    values.” Hall v. Rowe, 
    439 S.W.3d 183
    , 188 (Ky. App. 2014) (citation omitted).
    When a party states a claim for liquidated damages, “[t]he longstanding rule in this
    state is that prejudgment interest is awarded as a matter of right.” 
    Id.
     (citation
    omitted). Conversely, when a party makes a claim for unliquidated damages, “the
    question of allowance of prejudgment interest is a matter addressed to the Court in
    its sound discretion.” Nucor Corp. v. General Elec. Co., 
    812 S.W.2d 136
    , 140
    (Ky. 1991) (internal quotation marks omitted).
    EWM was entitled to prejudgment interest as a matter of right because
    its damages arise from a liquidated claim. EWM sent Callahan invoices in the
    amount of $8,945, which was easily computed by multiplying its rate of $90 per
    hour times the number of hours of work performed plus the sum of the salt water
    disposal fees. In its complaint, EWM requested damages in the amount of $8,945,
    which the jury awarded. As such, we reverse the circuit court’s finding that EWM
    was not entitled to prejudgment interest. On remand, if the circuit court enters
    findings of fact and conclusions of law in favor of EWM on its unjust enrichment
    claim, then it must enter an award of prejudgment interest.
    -12-
    CONCLUSION
    For the foregoing reasons, we reverse the judgment of the Webster
    Circuit Court and remand with instructions to make findings of fact and
    conclusions of law as required by CR 52.01. If the circuit court agrees with the
    jury’s finding that Callahan was unjustly enriched when EWM provided water
    hauling services without paying the full amount of EWM’s invoice, then the court
    must award EWM prejudgment interest.
    ALL CONCUR.
    BRIEFS FOR APPELLANT/                     BRIEF FOR APPELLEE/
    CROSS-APPELLEE:                           CROSS-APPELLANT EWM
    SERVICES LLC:
    John H. Henderson, III
    Evansville, Indiana                       Wm. Clint Prow
    Providence, Kentucky
    -13-