four-star-enterprises-equipment-inc-rgh-llc-and-county-of ( 2014 )

FOUR STAR ENTERPRISES )
EQUIPMENT, INC., RGH, LLC, )
)
Plaintiffs-Appellants, )
)
AND COUNTY OF GREENE/GREENE )
COUNTY COMMISSION, EX REL, AND )
FOR THE USE AND BENEFIT OF FOUR )
STAR ENTERPRISES EQUIPMENT, )
INC., AND RGH, LLC, )
)
Plaintiffs, )
)
vs. ) No. SD32781
) Filed: December 9, 2014
EMPLOYERS MUTUAL CASUALTY )
COMPANY, )
)
Defendant-Respondent. )
APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY
Honorable J. Dan Conklin, Circuit Judge
Before Sheffield, P.J., Rahmeyer, J., and Lynch, J.
REVERSED AND REMANDED WITH DIRECTIONS
PER CURIAM. This case involving section 107.1701 comes to us on a $20,000
claim, with two separate lawsuits and seventeen years of litigation. Under section
107.170, “[s]tatutory payment bonds shift the ultimate risk of nonpayment from [eligible]
1
All statutory references are to RSMo Cum. Supp. 1995.
1
workman and suppliers to the surety on public work projects,” and offer eligible “laborers
and materialmen some assurance of payment.” City of Kansas City, Missouri ex rel.
Lafarge North America Inc. v. Ace Pipe Cleaning, Inc., 349 S.W.3d 399, 403-04
(Mo.App. W.D. 2011). In Missouri, public property “is protected from,” and “cannot be
encumbered by,” mechanic’s liens. Id. Four Star Enterprises Equipment, Inc. (“Four
Star”)2 claims it rented equipment to a subcontractor on a public work project and, as a
result, was eligible to seek recovery under the general contractor’s section 107.170
statutory payment bond for items covered by the bond. Id. at 404-07. Four Star obtained
a default judgment against the subcontractor, and then filed suit against Employers
Mutual Casualty Company (“EMC”), the surety for the statutory payment bond.
The trial court, however, denied Four Star’s claim for collection of the judgment. We
reverse and remand.
Factual and Procedural Background
From what can be gleaned from the record, Four Star sold and rented equipment
– “mainly” construction equipment. The underlying cause of action began when Four
Star leased construction equipment to Fred and Mark Townlian doing business as T & T
Construction (collectively, “T & T” or “Subcontractor”), which Four Star alleged was for
use on Greene County’s Plainview Road project. D & E Plumbing and Heating, Inc. (“D
& E” or “General Contractor”) was the general contractor for the project and hired T &
T. As required by section 107.170, D & E issued a payment bond for the road project
with EMC as surety. T & T did not fully pay Four Star for the rental of the equipment.
2
Four Star assigned its claim to the appellant RGH, LLC, midway through litigation in the lower court.
For purposes of our analysis in this appeal, any distinction is irrelevant. For clarity, we simply refer to the
appellant as “Four Star.”
2
In May 1997, Four Star sued T & T, D & E, and EMC to recover payment for rental of
the equipment. All three defendants were served with a summons.
Subcontractor did not appear or file an answer. General Contractor and EMC
appeared, filed and argued several motions, and engaged in discovery before filing
answers in June 2003. After General Contractor and EMC filed answers in June 2003,
Four Star3 filed an affidavit of Fred Townlian and an affidavit of a representative of Four
Star that same month. After filing answers, General Contractor and EMC also requested
and were granted two changes of judge, engaged in further discovery, and requested and
were granted at least one continuance of trial.
On September 1, 2005, the case was set for trial before a jury on November 21,
2005. At Four Star’s request, and apparently without any advance notice to D & E or
EMC, the trial court then entered a default judgment in favor of Four Star against
Subcontractor on November 16, 2005. Two days later, Four Star voluntarily dismissed D
& E and EMC from the suit without prejudice, making the default judgment final. The
default judgment remains in effect as it was not appealed and has not been set aside.
The November 16, 2005 docket entry states, “Formal judgment is signed and
filed.” The judgment itself is entitled “Judgment,” is signed by the trial court, is dated
November 16, 2005, and entered judgment in favor of Four Star against Subcontractor in
the amount of $18,873.18 for the “unpaid principal” attributable to Subcontractor’s rental
of a 553 Gehl forklift and bucket used on the Plainview Road project from September 17,
1996 through January 17, 1997, $29,725.26 for accrued interest from February 21, 1997,
and $4,000 for attorney’s fees. The judgment also indicates that the “evidence adduced”
3
On June 1, 1999, Four Star assigned its claim against Subcontractor to RGH, LLC, and Four Star then
merged into an unrelated corporation.
3
included the “affidavits” of Fred Townlian and a Four Star representative, and the
“admissions” of Fred Townlian. The docket sheet for the case shows that a copy of the
docket sheet was mailed to counsel for General Contractor and EMC on November 16,
2005.
Subsequently, in September 2006, RGH, LLC, and Four Star filed suit against
EMC to: (1) collect the default judgment under the statutory payment bond issued by
General Contractor for Greene County’s Plainview Road project and for which EMC was
surety (Count I), and (2) recover additional damages for “vexatious[] refus[al] to pay” the
default judgment pursuant to sections 375.296 and 375.420 (Count II).
Four Star’s evidence tended to show that Four Star rented a Gehl forklift and
bucket to Subcontractor that Subcontractor used on Greene County’s Plainview Road
project from September 17, 1996 through January 17, 1997, but did not fully pay Four
Star the amount owed under the rental agreement. EMC’s evidence tended to show that
General Contractor terminated Subcontractor before September 17, 1996, and that
Subcontractor did not perform any work on the Plainview Road project after being
terminated. At trial, counsel for EMC acknowledged that the earlier lawsuit that gave
rise to the default judgment was “very similar to this lawsuit, same parties, same set of
facts.” The statutory payment bond issued by General Contractor, and for which EMC
was surety, was admitted by agreement of the parties.
At trial, EMC steadfastly objected to certain documents offered into evidence by
Four Star. Although the trial court noted those objections, all documents offered by Four
Star during trial were admitted into evidence. Before trial, Four Star requested that the
4
trial court issue “specific findings as to any reason or basis for the denial of any portion
of [Four Star’s] bond claim.”
More than a year after the trial concluded, the trial court adopted verbatim the
forty-three pages of EMC’s proposed findings and incorporated those findings into its
judgment denying both of Four Star’s claims. The judgment reversed numerous
evidentiary rulings made during the trial admitting documents offered by Four Star and
excluded those documents from evidence and consideration by the trial court in arriving
at its judgment. Four Star now appeals this judgment.
Four Star raises six claims on appeal: (1) The trial court failed to comply with
Four Star’s Rule 73.014 request for findings of fact; (2) The trial court erroneously
declared the law of a surety’s liability under a statutory payment bond; (3) The trial
court’s judgment was against the weight of the evidence; (4) The trial court erroneously
declared that the claims were barred by the statute of limitations; (5) The trial court
abused its discretion by reversing evidentiary rulings sua sponte after trial; and (6) The
trial court erred by refusing to hold EMC liable for vexatious refusal to pay on the bond.5
Because all of Four Star’s points involve in some manner documentary evidence
that was admitted during the trial and then excluded from evidence after trial by the
judgment, we begin our review with Four Star’s fifth point, which we find dispositive of
this appeal.
Standard of Review
The admission or exclusion of evidence is within the sound discretion of
the trial court. Where evidence is excluded, the issue is whether or not the
trial court abused its discretion, not whether the evidence was admissible.
4
All rule references are to Missouri Court Rules (2014).
5
Four Star withdrew its sixth point in its reply brief.
5
A trial court abuses its discretion when the ruling is clearly against the
logic of the circumstances and is so arbitrary and unreasonable as to shock
one’s sense of justice and indicates a lack of careful consideration. We
give substantial deference to the trial court’s decision to admit or exclude
evidence because of its superior opportunity to evaluate the proffered
evidence in the context of the trial. We will affirm the trial court’s
evidentiary ruling unless there is a substantial or glaring injustice. To
reverse, we must find that the trial court’s error in excluding evidence was
prejudicial and not harmless and that the error materially affected the
merits of the action. A ruling within the trial court’s discretion is
presumed correct, and the appellant bears the burden of showing abuse of
discretion and prejudice.
Romeo v. Jones, 144 S.W.3d 324, 332 (Mo.App. E.D. 2004) (internal citations omitted).
Discussion
Four Star contends that the following evidence was admitted at trial and then later
excluded from evidence in the trial court’s judgment: (1) Four Star’s first proof of claim
submitted to EMC; (2) Four Star’s supplemented proof of claim; (3) the judgment against
T & T; (4) Four Star’s contract assigning its claim to RGH, LLC; (5) a statement of the T
& T account record with Four Star; (6) a statement of attorney’s fees; (7) the daily log
book of Greene County; (8) a second daily log book of Greene County; (9) the pickup
ticket for the equipment; (10) the delivery ticket for the equipment; and (11) the rental
contract between Four Star and T & T. Regarding a few of these exhibits, the judgment
is somewhat ambiguous as to whether they were excluded from evidence.6 Nevertheless,
certain previously admitted exhibits that are crucial to Four Star’s case and its points on
appeal were clearly found to be inadmissible in the judgment. Particularly, Four Star, in
6
For example, regarding the statement of attorney’s fees, the judgment states that EMC objected to the
admissibility of the exhibit but it never expressly sustains the objection. Regarding the Greene County
daily log books, the judgment finds that EMC’s objection to admissibility should have been sustained to the
first exhibit and then continues in the next sentence to discuss the second exhibit as if that exhibit would be
inadmissible for the same reason, but never expressly says so.
6
part, claims that the trial court misapplied the law in excluding the default judgment from
evidence and in declining to treat the default judgment as binding on EMC.7
We will review whether the trial court abused its discretion in excluding exhibits
from evidence by its judgment that were previously admitted into evidence during trial
without distinguishing among the different exhibits within that group.8 We initially note
that Rule 73.01 requires a court in a case tried without a jury to “rule upon all objections
to evidence as in jury cases.” Rule 73.01(a). Some case law, however, suggests that the
rules excluding evidence are less strictly enforced in a court-tried case. Gardner v.
Robinson, 759 S.W.2d 867, 868 (Mo.App. S.D. 1988). Here, we are not presented with a
mere exclusion of evidence at trial. Rather, the evidence in question was admitted during
7
See generally City of Independence v. Kerr Construction Paving Company, Inc., 957 S.W.2d 315, 319-
20, 324-25 (Mo.App. W.D. 1997) (holding that a surety’s liability for items covered by a statutory payment
bond issued pursuant to section 107.170 is coextensive with the bond principal’s liability for these items,
and the surety is liable as a matter of law to the extent of the principal’s liability for these items); Stoops v.
Wittler, 1 Mo.App. 420, 423-24 (Mo.App. St.L.D. 1876) (concluding “a judgment against the principal is
conclusive against the surety, though he be not a party to the suit, if he have notice of the proceeding, or, at
least, where he has been a party defendant and has filed an answer, though before trial the suit be dismissed
as to him,” and “a judgment binds none but parties and privies,” and, in dicta, suggesting that the same
principle would apply to a default judgment); Home Insurance Co. of New York v. Savage, 103 S.W.2d
900, 902 (Mo.App. K.C.D. 1937) (finding it unnecessary to decide whether a default judgment entered
against a principal in a lawsuit against the principal and two sureties was binding on the sureties, but stating
in dicta “[m]any authorities hold that a judgment against the principal, obtained under circumstances
identical with those here, absent fraud, collusion, or clerical error in its entry, is conclusive on the
sureties”); City of Kansas City, Missouri ex rel. Lafarge North America Inc. v. Ace Pipe Cleaning, Inc.,
349 S.W.3d 399, 404 & n.11 (Mo.App. W.D. 2011) (a subcontractor is in direct privity of contract with the
general contractor, and, for the purpose of determining the right of a sub-subcontractor to a subcontractor to
recover under a statutory payment bond issued pursuant to section 107.170, the law adopts the legal fiction
that the sub-subcontractor also is in privity of contract with the general contractor though that technically is
not true); State of Missouri ex rel. Family Support Division v. Stovall-Reid, 163 S.W.3d 519, 521-22
(Mo.App. E.D. 2005) (“[r]es judicata prevents a party from re-litigating issues judicially determined in a
previous action, even when the judgment was entered by default,” and notice of the default judgment
hearing is not relevant where the default judgment has not been set aside and remains in effect) (italics
added, and internal citation omitted); and Xiaoyan Gu v. Da Hua Hu, No. ED100001, 2014 WL 3728710,
at *8 (Mo.App. E.D. July 29, 2014) (res judicata “applies to the parties and their privies,” and “[f]or privity
to exist, . . . the interests of the party and non-party must be ‘so closely intertwined that the non-party can
fairly be considered to have had his or her day in court’”) (quoting Stine v. Warford, 18 S.W.3d 601, 605
(Mo.App. W.D.2000)).
8
We may do so because we make no finding regarding the underlying issue of whether the individual
exhibits were admissible. Romeo, 144 S.W.3d at 332.
7
the trial. It was only after the trial concluded, when Four Star could no longer present
any other evidence, that the trial court, at the invitation and request of EMC,9 excluded
the previously admitted evidence. The issue in this appeal is whether the procedure
employed by the trial court in admitting this evidence at trial and then excluding it by its
judgment was an abuse of discretion. We conclude that it was.
In Jones v. Wells Fargo Auto Finance, LLC, a trial court ruled on a motion to
dismiss without an evidentiary hearing despite the fact that both parties had requested an
evidentiary hearing. 383 S.W.3d 472, 474-75 (Mo.App. W.D. 2012). The sua sponte
ruling required reversal because the losing party could not have known that the trial court
intended to rule solely on their motion papers and therefore was deprived of an
opportunity to argue otherwise to the court. Id. at 477.
Similarly, the trial court’s procedure employed here of excluding evidence by its
judgment that was previously admitted during trial deprived Four Star of any
foreknowledge that the trial court intended to rule on a more limited amount of evidence
than Four Star had presented and had been admitted into evidence at trial. Ruling on a
crucial piece of evidence after the record has been closed places the parties in the
untenable position of not knowing what additional evidence is needed to complete their
case. Estate of Loik, 426 A.2d 1134, 1137 (Pa. 1981).
Having reasonably relied upon the trial court’s admission of its proffered
evidence at trial, this procedural device also deprived Four Star of any opportunity to
present other evidence, in lieu of the post-trial excluded evidence. Once the trial court
9
“Findings of fact and conclusions of law by a court sitting without a jury ordinarily should not encompass
or consist of evidentiary rulings[.]” 89 C.J.S. Trial § 1259. Because findings of fact can be adopted after
the close of evidence, it would be inappropriate to include evidentiary rulings therein because “[a] ruling on
objections to evidence or motions to strike evidence should be made as soon as possible at the time that the
objection or motion is made.” 88 C.J.S. Trial § 243 (internal footnotes omitted).
8
decided to exclude the previously admitted evidence, the failure to give Four Star a
chance to offer other evidence in lieu of the previously admitted and then excluded
evidence shocks this Court’s sense of fairness and justice. This failure substantially
hindered Four Star’s fair ability to present its case and therefore prejudiced Four Star.10
Portions of this evidence, e.g. the rental agreement between Four Star and T & T, were
crucial to Four Star’s claims; therefore, this is an error that materially affected the merits
of this action. The trial court abused its discretion in excluding evidence by its judgment
that it had previously admitted at trial without giving Four Star an opportunity to offer
other evidence in lieu of the subsequently excluded evidence. Four Star’s fifth point is
granted.
Conclusion
The judgment is reversed and the case is remanded to the trial court for further
proceedings consistent with this opinion. If, on remand, the trial court determines that
10
This Court appreciates EMC’s counsel’s candor about the fairness issue during oral argument:
EMC’s counsel: All the evidence that came in I objected to. The judge changed his mind
on the validity of my objections. The way these things are tried with a court-tried case,
you all know that the courts on a court-tried case basically take in all the evidence except
that which is obviously plain error and they can take all that stuff with the case and they
can change their . . . .
Judge Rahmeyer: He didn’t do that though. The court didn’t say “I’m taking this with
the case.”
EMC’s counsel: No, he did not.
Judge Rahmeyer: He really ruled retroactively that this evidence is not admissible.
EMC’s counsel: Yeah, he ruled retroactively.
Judge Rahmeyer: And you have to admit that does not comply with any sort of due
process or any sort of fairness.
EMC’s counsel: I admit that.
“The preferable practice is for the trial court to prepare its own specific findings of fact and conclusions of
law so as to better insure that all issues raised are addressed and that erroneous allegations of fact or law . . .
are not incorporated in a court order.” Malone v. State, 747 S.W.2d 695, 699 (Mo.App. E.D. 1988).
9
the proffered evidence was properly excluded, Four Star should be given a chance to
offer additional evidence.11
11
Because the trial court denied Four Star’s claim under General Contractor’s statutory payment bond, the
trial court did not consider, nor do we, EMC’s claims that (1) all or a portion of the “unpaid principal”
awarded in the default judgment was beyond the scope of the relief Four Star sought in its petition (EMC
asserts Four Star’s petition sought only “rent”) and also beyond the scope of those items that are
recoverable under a statutory payment bond issued pursuant to section 107.170, and (2) the interest and
attorney fees awarded in the default judgment are beyond the scope of those items that are recoverable
under a section 107.170 statutory payment bond. See generally Edward V. Crites & Joseph C. Blanner,
Payment Bonds for Public Works Contractors, 70 J. Mo. Bar, Jan.-Feb. 2014, at 18 for a general discussion
of statutory payment bonds issued pursuant to section 107.170 for public works and the items that are
recoverable under those bonds.
10