In the Missouri Court of Appeals Western District
JOHN KNOX VILLAGE, a Missouri Not- ) For-Profit Corporation, ) Respondent,) v. ) ) WD76708 FORTIS CONSTRUCTION COMPANY, ) LLC, ARMANDO DIAZ, TOM M. ) FILED: September 30, 2014 NADLER, DON S. NADLER & GARY P. ) RODENBERG, ) Appellants. )
APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY THE HONORABLE MICHAEL W. MANNERS, JUDGE
BEFORE DIVISION ONE: MARK D. PFEIFFER, PRESIDING JUDGE, LISA WHITE HARDWICK AND KAREN KING MITCHELL, JUDGES Fortis Construction Company, LLC, Tom Nadler ("T. Nadler"), Don Nadler ("D.
Nadler"), Gary Rodenberg, and Armando Diaz (referred to collectively as "Appellants")
appeal from a judgment ordering them to pay actual and punitive damages to John
Knox Village ("JKV") on JKV's claim for fraudulent misrepresentation, fraudulent
conveyance, and civil conspiracy. In their five points on appeal, Appellants contend: (1)
the circuit court lacked subject matter jurisdiction over the claim; (2) the court's finding
that T. Nadler, D. Nadler, and Rodenberg made fraudulent misrepresentations to JKV
was not supported by the evidence; (3) the court misapplied the law in determining the
amount of actual damages; (4) the court's finding that a civil conspiracy existed was not supported by sufficient evidence and was against the weight of the evidence; and (5)
the court's determination that punitive damages were warranted was not supported by
sufficient evidence and was against the weight of the evidence. For reasons explained
herein, we affirm.
FACTUAL AND PROCEDURAL HISTORY
Fortis was a limited liability company engaged in general construction in Jackson
County. Its members were Diaz, who was its president and had 52% ownership in the
company, and T. Nadler, D. Nadler, and Rodenberg, who each had 16% ownership in
the company. T. Nadler, D. Nadler, and Rodenberg were also owners of Triad
Construction Company, Inc., another general construction company that had an office in
the same building as Fortis. T. Nadler was the president of Triad, and D. Nadler and
Rodenberg were vice-presidents. Each had a one-third ownership interest in Triad.
Triad and Fortis frequently subcontracted work to each other.
In April 2010, JKV entered into a contract with Fortis in which Fortis agreed to
provide construction and general contracting services on a project known as the PACU
Project. In the contract, Fortis represented and warranted that anytime it would submit
an application for payment to JKV, all work for which payment was requested would be
free and clear of all liens, claims, or other encumbrances. Fortis also represented and
warranted that it would timely pay any subcontractors that performed work on the PACU
Project after it received payment from JKV.
Several months later, in October 2010, JKV contracted with Triad for construction
services on another project known as the Hospice Project. Like Fortis in the PACU
Project contract, Triad represented and warranted in the Hospice Project contract that
2 anytime it would submit a payment application to JKV, all work for which payment was
requested would be free and clear of all liens, claims, or other encumbrances.
Likewise, Triad represented and warranted that it would promptly pay any
subcontractors that performed work on the Hospice Project after it received payment
from JKV. The contract further provided that neither JKV nor its architect would have
responsibility for payments to subcontractors. JKV considered these provisions material
and relied upon them in deciding to contract with Triad.
Construction on the Hospice Project began immediately after construction on the
PACU Project ended. In December 2010, Triad submitted its first application for
payment on the Hospice Project to JKV. The application contained an itemized
description of the work completed for which Triad was seeking payment. Triad
represented that the current payment due was $68,787.90. In addition to the payment
application, Triad submitted a notarized waiver of lien. In the waiver of lien, Triad
represented that, upon payment by JKV of $68,787.90, Triad waived and released any
and all liens and claims or rights of lien against the Hospice Project property. Shortly
after submitting the payment application to JKV, Triad and Fortis, who was a
subcontractor on the Hospice Project, asked JKV to sign a joint check agreement
agreeing to make its check payable to both Triad and Fortis. The agreement provided
that Triad's and Fortis's endorsement and deposit of the check discharged and waived
any express or implied lien rights or derivative claims they might have against JKV for
all amounts paid. JKV issued a joint check to Triad and Fortis for $68,787.90 on
January 14, 2011.
3 Triad submitted its second application for payment on the Hospice Project to
Triad on January 24, 2011. In this second application, Triad certified that the payment
that JKV made in response to Triad's first application for payment had been used to pay
for the work itemized in that application. Triad requested in the second application for
payment that JKV pay $64,885.10, which represented the amount due for work done to
complete the Hospice Project. Like the first application for payment, the second
application was accompanied by a notarized waiver of lien in which Triad represented
that, upon payment by JKV of the requested amount, Triad waived and released any
and all liens and claims or rights of lien against JKV's Hospice Project property. This
waiver of lien was denoted as the "final waiver of lien." Again, Triad and Fortis asked
JKV to sign a joint check agreement with identical terms as the first joint check
agreement. Because some materials were being delivered later, JKV deducted the cost
of the materials from the amount requested in the second application for payment and
issued a joint check to Triad and Fortis for $55,042.25 on February 10, 2011. A week
later, JKV issued another joint check to Triad and Fortis for $469.08 for a change order.
JKV paid Triad and Fortis a total of $124,299.23 for the Hospice Project.
On March 1, 2011, JKV's architect, John Wisniewski, learned that Fortis had not
paid some of the subcontractors on the PACU Project. This prompted Wisniewski to
look into whether Triad had paid the subcontractors on the Hospice Project. He
discovered that none of the subcontractors on the Hospice Project had been paid and
that $127,121.14 was owed to the subcontractors. Wisniewski wrote a letter to T.
Nadler demanding that Triad pay all of the subcontractors on the Hospice Project. Triad
did not do so.
4 Meanwhile, JKV began receiving notices that subcontractors were intending to
file liens on the Hospice Project property. JKV contacted each subcontractor, except
Fortis, to negotiate a payment amount to keep them from filing liens against the
property. Although several subcontractors were willing to accept 70% of the
subcontracted amount, one subcontractor demanded that it receive 100% of the
subcontracted amount, while another demanded that it receive 90%. JKV paid another
$70,373.78 directly to all of the Hospice Project subcontractors except Fortis.
On April 14, 2011, Triad filed a petition for Chapter 7 bankruptcy. In July 2011,
Fortis filed a statement of mechanic's lien on the Hospice Project property, asserting
that it was owed $36,456.92 plus interest for its work on the Hospice Project.1
In August 2011, JKV filed suit against Appellants. In its second amended
petition, JKV asserted several claims against Appellants based upon their actions with
regard to the PACU Project and Hospice Project. The only claim at issue in this appeal
is JKV's Count III, which was a claim against all Appellants for fraudulent
misrepresentation, fraudulent conveyance, and civil conspiracy involving the Hospice
Project.
In Count III, JKV alleged that T. Nadler, D. Nadler, and Rodenberg were insiders
and had complete control and dominion over non-party Triad and its business
transactions and practices. JKV alleged that T. Nadler, D. Nadler, and Rodenberg, as
Triad's owners, perpetrated fraud upon JKV, thereby allowing the corporate veil to be
pierced to subject them to individual liability.
1 After JKV filed this lawsuit, Fortis amended its statement of mechanic's lien to assert that it was owed only $1470.
5 JKV further alleged that T. Nadler, D. Nadler, and Rodenberg, as Triad's owners,
intentionally made several representations that they knew were false and material and
that JKV would rely upon in determining whether to enter into the Hospice Project
contract. These false representations were that all work for which Triad requested
payment would be free of all liens and that Triad would timely pay any subcontractors
that performed work on the Hospice Project after receiving JKV's payments. JKV
asserted that T. Nadler, D. Nadler, and Rodenberg intentionally made these fraudulent
misrepresentations for the specific purpose of encouraging and enticing JKV to enter
into the Hospice Project contract with Triad and to issue joint payments for work
performed on the project to Triad and Fortis.
Additionally, JKV alleged that Appellants entered into a civil conspiracy by which
they would unlawfully benefit themselves at JKV's expense by absconding with the
money JKV paid on the Hospice Project instead of paying the subcontractors. JKV
sought damages in excess of $75,000 jointly and severally against all Appellants, an
order disgorging Appellants from any monies paid by JKV, punitive damages, pre- and
post-judgment interest, and costs and expenses.
A bench trial was held in March 2013. Before trial, the court struck Fortis's
pleadings and found the company in default. Diaz, who was incarcerated for fraud, did
not appear and was also found in default. Following the trial, the court entered
judgment against Appellants on Count III and ordered them to pay JKV $124,299.23,
plus $13,051.42 in pre-judgment interest. The court further ordered Appellants to pay
punitive damages of $150,000, and it taxed court costs against Appellants.
6 Appellants filed a post-judgment motion to dismiss Count III or to vacate the
judgment for lack of subject matter jurisdiction. In the motion, Appellants asserted that
the bankruptcy court in Triad's bankruptcy proceeding had exclusive subject matter
jurisdiction over the claim. The circuit court denied the motion. Appellants filed this
appeal.
STANDARD OF REVIEW
Our review of this court-tried case is governed by Murphy v. Carron, 536 S.W.2d
30, 32 (Mo. banc 1976). We will affirm the circuit court's judgment unless there is no
substantial evidence to support it, it is against the weight of the evidence, or it
erroneously declares or applies the law. Id. When considering challenges based on the
sufficiency of the evidence, we accept as true all evidence and inferences favorable to
the judgment and disregard all contrary evidence and inferences. Green Valley Seed,
Inc. v. Plenge, 72 S.W.3d 601, 603 (Mo. App. 2002). We defer to the circuit court's
determination as to the credibility of witnesses and recognize that the court was free to
believe or disbelieve all, part, or none of the testimony of any witness. Arnold v. Minger,
334 S.W.3d 650, 651 (Mo. App. 2011). We will reverse the circuit court's judgment on
the basis that it is against the weight of the evidence only if we have "a firm belief that
the judgment is wrong." Pearson v. Koster, 367 S.W.3d 36, 51 (Mo. banc 2012). We
review issues of law de novo. O'Riley v. U.S. Bank, N.A., 412 S.W.3d 400, 405 (Mo.
App. 2013).
ANALYSIS
7 Subject Matter Jurisdiction
In Point I, Appellants contend the circuit court erred in denying their motion to
dismiss or to vacate the judgment on Count III for lack of subject matter jurisdiction.
"Subject matter jurisdiction is the authority of a court to hear and decide a case." State
ex rel. Laughlin v. Bowersox, 318 S.W.3d 695, 698 (Mo. banc 2010). Circuit courts in
Missouri have subject matter jurisdiction over civil cases pursuant to article V, § 14 of
the Missouri Constitution. J.C.W. ex rel. Webb v. Wyciskalla, 275 S.W.3d 249, 253 (Mo.
banc 2009). However, "no state, including Missouri, can grant subject matter
jurisdiction to its courts to hear matters that federal law places under the 'exclusive'
jurisdiction of the federal courts." Laughlin, 318 S.W.3d at 698.
Appellants contend that this case involves a matter that is under the federal
court's exclusive jurisdiction. They note that, under 28 U.S.C. § 1334(e)(1), the
bankruptcy court has exclusive jurisdiction over the property of a bankruptcy estate.
Relying primarily on In re Bridge Information Systems, Inc., 325 B.R. 824 (Bankr. E.D.
Mo. 2005), a case in which a bankruptcy court determined that a creditor's claim against
the debtor's partners for fraudulent misrepresentation and civil conspiracy was property
of the debtor's bankruptcy estate, Appellants argue that JKV's similar claim in Count III
was property of Triad's bankruptcy estate and, therefore, subject only to the bankruptcy
court's exclusive jurisdiction. We disagree.
Unlike in Bridge, the bankruptcy court in Triad's bankruptcy case never
determined that JKV's claim against Appellants was the property of Triad's bankruptcy
estate. Indeed, there is nothing in the record indicating that the bankruptcy trustee ever
considered JKV's claim to be the property of Triad's estate or attempted to include the
8 claim in the estate. Triad's bankruptcy petition was pending at the same time as JKV's
petition. According to JKV's brief on appeal, Triad's bankruptcy case was closed in
August 2013, five months after trial and two months after the court entered its judgment
in this case.
Essentially, Appellants are asking this court to find, in the first instance, that
JKV's claim against Appellants was the property of Triad's bankruptcy estate. We have
no authority to make such a finding. As Appellants noted in their motion to dismiss, the
bankruptcy court "has exclusive jurisdiction to decide whether certain property is
property of the bankruptcy estate." In re True, 285 B.R. 405, 412 (Bankr. W.D.Mo.
2002) (emphasis added). Because it is undisputed that the bankruptcy court did not
exercise jurisdiction over JKV's claim, the circuit court properly exercised its jurisdiction.
Point I is denied.
Fraudulent Misrepresentations
In Point II, Appellants contend the evidence was insufficient to support the circuit
court's finding that Triad's owners, T. Nadler, D. Nadler, and Rodenberg, made
fraudulent misrepresentations to JKV. In its judgment, the court found that T. Nadler, D.
Nadler, and Rodenberg knowingly made false and material representations in Triad's
construction contract with JKV, its applications for payment, and the lien waivers with
the intention that JKV rely on the representations and act on them by entering into the
construction contract and by issuing payments.
Appellants argue that the misrepresentations were not made by T. Nadler, D.
Nadler, and Rodenberg, but were instead made by Lloyd Black, an employee of non-
party Triad, because he signed the documents containing the misrepresentations. They
9 assert that the individual owners of Triad cannot be held liable for Black's tortious
conduct under a theory of respondeat superior, which "holds an employer liable for the
torts committed by its employees while they are acting within the scope of employment."
Thornburg v. Fed. Express Corp., 62 S.W.3d 421, 429 (Mo. App. 2001). Appellants
note that an employer cannot be held liable under the theory of respondeat superior
when its employee is not held liable. Id. Because JKV did not assert a cause of action
against Black, Appellants contend that T. Nadler, D. Nadler, and Rodenberg cannot be
held liable for Black's fraudulent misrepresentations.
JKV does not seek to hold T. Nadler, D. Nadler, and Rodenberg liable for
fraudulent misrepresentation under a theory of respondeat superior, however. JKV
seeks to hold them liable for Triad's fraudulent misrepresentations under a theory of
piercing Triad's corporate veil. "Where a corporation is used for an improper purpose
and to perpetrate injustice by which it avoids its legal obligations, 'equity will step in,
pierce the corporate veil and grant appropriate relief.'" Irwin v. Bertelsmeyer, 730
S.W.2d 302, 304 (Mo. App. 1987) (citation omitted). JKV was not asking the court to
hold Triad liable for the wrongful acts of its employee Black -- a claim to which the
theory of respondeat superior would have applied. Rather, JKV was asking the court to
disregard Triad's corporate entity so that its owners, T. Nadler, D. Nadler, and
Rodenberg, could be held individually liable for the corporation's fraudulent
misrepresentations.
Courts will disregard the corporate entity and hold corporate owners liable for the
corporation's wrongful acts if the following three elements are established:
1) Control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practice in
10 respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and
2) Such control must have been used by the corporation to commit fraud or wrong, to perpetrate the violation of statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff's legal rights; and
3) The control and breach of duty must proximately cause the injury or unjust loss complained of.
66, Inc. v. Crestwood Commons Redevelopment Corp., 998 S.W.2d 32, 40 (Mo. banc
1999) (internal quotation marks and citation omitted).
Substantial evidence supported the circuit court's finding that JKV established
these elements. Regarding the first element of control, T. Nadler, D. Nadler, and
Rodenberg were clearly in control of Triad as they were its president and vice-
presidents, respectively, and its only shareholders. Rodenberg testified that, together,
he, T. Nadler, and D. Nadler controlled Triad's decisions and its finances.
On the second and third elements, the evidence showed that T. Nadler, D.
Nadler, and Rodenberg used their control of Triad to perpetrate fraud against JKV,
causing JKV injury. The essential elements of fraud are:
(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of the falsity of the representation; (7) the hearer's reliance on the representation being true; (8) the hearer's right to rely thereon; and (9) the hearer's consequent and proximately caused injury.
Stander v. Szabados, 407 S.W.3d 73, 81 (Mo. App. 2013). Triad represented that all
work for which payment was requested would be free and clear of all liens, claims, or
other encumbrances, that Triad would timely pay any subcontractors that performed
11 work on the Hospice Project, and that all work for which JKV had issued payment in
response to an application for payment would be used to pay for the subcontracted
work itemized in that application. Triad represented in its second payment application
that the proceeds of the first payment application had been used to pay for the work
therein represented. JKV's representative testified that these representations were
material and that JKV would not have entered into the construction contract or issued
payments without them. T. Nadler, D. Nadler, and Rodenberg agreed that these
representations were material, that JKV had the right to rely on them, and that they
intended for JKV to rely on them.
T. Nadler, D. Nadler, and Rodenberg also admitted that these representations
were false, because they knew, particularly at the time the payment applications were
submitted, that they had not paid, and would not be paying, any of the subcontractors
on the Hospice Project with JKV's payments and that the property would, in fact, be
subject to liens.2 Triad's dire financial circumstances at the time the payment
applications were submitted further supported the conclusion that T. Nadler, D. Nadler,
and Rodenberg knowingly misrepresented that subcontractors had been, or would be,
paid with payment application proceeds. In fact, T. Nadler, D. Nadler, and Rodenberg
admitted that they made these representations in the second application for payment
and in the lien waivers because they knew that JKV would not have made a second
payment without these representations.3 JKV was injured by these representations
2 The court noted in its judgment that, under Section 429.014, RSMo 2000, a contractor who fails or refuses to pay a subcontractor for services after the contractor has received payment from the property owner has committed lien fraud, regardless of whether the lien was perfected or filed. 3 The knowingly false nature of the representations made at the time of Triad's payment applications is particularly critical to establishing fraud in this case and, thus, to piercing the corporate veil, and it serves
12 because it paid $124,299.23 to Triad and Fortis, none of which was used to pay the
subcontractors. This caused JKV to have to negotiate directly with the subcontractors
and spend an additional $70,373.78 to pay the subcontractors to keep liens from being
filed against the Hospice Project property.
Evidence that T. Nadler, D. Nadler, and Rodenberg used their control of Triad to
make fraudulent misrepresentations to JKV was sufficient to support the court's piercing
the corporate veil to hold them individually responsible. Point II is denied.
Damages
In Point III, Appellants contend the court misapplied the law in determining the
amount of damages. The court awarded JKV $124,299.23 in damages, which was the
total amount that JKV paid to Triad and Fortis on the Hospice Project. Appellants assert
the award resulted in a windfall to JKV. They argue that JKV will have paid only
$70,373.78, the amount it paid directly to the subcontractors, for a project that was
100% completed and worth $134,112.10. Appellants contend the correct amount of
damages is $60,560.91, which is the difference between the total amount that JKV paid,
$194,673.01 ($124,299.23 to Triad + $70,373.78 to the subcontractors) and the total
amount that JKV should have paid, $134,112.10, for the project.
Damages for fraud and deceit "are measured by the 'benefit of the bargain' rule."
Dierkes v. Blue Cross & Blue Shield, 991 S.W.2d 662, 669 (Mo. banc 1999). The
benefit of the bargain rule "allows a defrauded party to be awarded the difference
between the actual value of the property and what its value would have been if it had
been as represented." Heberer v. Shell Oil Co., 744 S.W.2d 441, 443 (Mo. banc 1988).
to differentiate this case from a garden-variety breach of contract action involving the non-payment of subcontractors.
13 "In fraud cases where the benefit of the bargain rule is inadequate, other measures of
damages may be used." Dierkes, 991 S.W.2d at 669. For example, "[t]he benefit of the
bargain rule does not apply where the purchaser rescinds and returns the property
received or where he received nothing of value." Heberer, 744 S.W.2d at 443. "In such
case, he may properly recover the amount he paid with interest from the date of
payment, plus incidental losses and expenses suffered as a result of the seller's
misrepresentations." Id.
The "bargain" in this case included not only the completed project, but also
Triad's unequivocal representations that, after it received payment from JKV, it would
promptly pay any subcontractors that performed work on the Hospice Project; that JKV
would not be responsible for payments to subcontractors; and that all work for which
payment was requested would be free and clear of all liens, claims, or other
encumbrances. The evidence showed that, instead of paying any of the subcontractors,
T. Nadler, D. Nadler, and Rodenberg used JKV's payments to pay their own salaries,
benefits, and expenses. The evidence further showed that T. Nadler's, D. Nadler's, and
Rodenberg's failure to pay the subcontractors rendered the Hospice Project property
subject to potential liens in the amount of $127,121.14.
Thus, while it is true that JKV received a finished Hospice Project constructed by
Triad's subcontractors, the Hospice Project property was subject to potential liens from
every one of those subcontractors. It was only after JKV negotiated directly with the
subcontractors and paid them $70,373.78 that JKV was able to keep the subcontractors
from filing liens on the property. Because T. Nadler, D. Nadler, and Rodenberg chose
not to use JKV's payments to pay the subcontractors, thereby subjecting the property to
14 potential liens totaling $127,121.14, JKV essentially received nothing of value in return
for the $124,299.23 it paid Triad and Fortis. Therefore, JKV was entitled to recover this
amount as its damages. Point III is denied.
Civil Conspiracy
In Point IV, Appellants contend the circuit court's finding that a civil conspiracy
existed between Appellants was not supported by substantial evidence and was against
the weight of the evidence.4 They argue that JKV failed to prove, by clear and
convincing evidence as to each Appellant, the elements necessary to establish the
existence of a civil conspiracy.5
"A 'civil conspiracy' is an agreement or understanding between persons to do an
unlawful act, or to use unlawful means to do a lawful act." Oak Bluff Partners, Inc. v.
Meyer, 3 S.W.3d 777, 780-81 (Mo. banc 1999). A civil conspiracy claim seeks "'to hold
the conspirators jointly and severally liable for the underlying act.'" W. Blue Print Co. v.
Roberts, 367 S.W.3d 7, 22 (Mo. banc 2012) (citation omitted). To establish a civil
conspiracy, JKV had to show: "(1) two or more persons; (2) with an unlawful objective;
(3) after a meeting of the minds; (4) committed at least one act in furtherance of the
conspiracy; and (5) [JKV] was thereby damaged." Id. "Evidence of a civil conspiracy
4 In both Point IV and Point V, Appellants assert a substantial-evidence challenge and an against-the- weight-of-the-evidence challenge. As the Supreme Court recently noted in Ivie v. Smith, No. SC 93872, 2014 WL 3107448, at *6, n.11 (Mo. banc July 8, 2014), "[t]hese are distinct claims" that "must appear in separate points relied on in the appellant's brief to be preserved for appellate review." Nevertheless, we will gratuitously address the merits of both claims. 5 We review whether JKV presented clear and convincing evidence to support its claim of civil conspiracy under the Murphy v. Carron standard, because "[t]he same standard of review applies in all types of court-tried cases regardless of the burden of proof at trial." Ivie, 2014 WL 3107448, at *6 (footnotes omitted). Thus, we will affirm the circuit court's judgment if it was supported by substantial evidence and was not against the weight of the evidence. In re J.A.R., 426 S.W.3d 624, 626 (Mo. banc 2014).
15 may be circumstantial." Kansas City Downtown Minority Dev. Corp. v. Corrigan Assocs.
Ltd. P'ship, 868 S.W.2d 210, 222 (Mo. App. 1994).
In its judgment, the court found that Appellants "knowingly developed and
entered into a civil conspiracy wherein they would unlawfully benefit themselves at the
expense of [JKV] by absconding with monies paid by [JKV] on the Hospice project
which were supposed to be used for paying subcontractors." The evidence supporting
this finding as to T. Nadler, D. Nadler, and Rodenberg showed that they, "as a group,"
controlled Triad's finances. Triad had a negative balance in its checking account until
receiving the first payment from JKV in January 2011. In fact, the previous eight checks
written on this account had bounced for insufficient funds before the deposit of JKV's
first check for $68,787.90.
After depositing JKV's payments into Triad's checking account, T. Nadler, D.
Nadler, and Rodenberg used those funds to pay bi-weekly salaries to themselves, to
reimburse themselves for undocumented expenses, and to pay for health insurance
premiums, automobile payments, and cell phone bills. T. Nadler, D. Nadler, and
Rodenberg also used the payments from JKV to write unexplained checks directly to
Triad and to pay Fortis for work on other projects.
Triad's accountant testified that she spoke with T. Nadler, D. Nadler, and
Rodenberg on "many" occasions about paying the subcontractors on the Hospice
Project for their work. All three of Triad's owners were authorized to write checks on
Triad's account. Despite knowing that the subcontractors had not been paid and having
the ability to cut checks to the subcontractors, none of Triad's owners paid the
16 subcontractors on the Hospice Project. Instead, they liquidated Triad's bank account
down to approximately $500 before filing for bankruptcy in April 2011.
Appellants contend that the joint check agreements between Triad and Fortis
indicated a lack of a meeting of the minds to defraud JKV. Specifically, they argue that
the purpose of the joint check agreements was to ensure that Triad paid Fortis for its
work on the Project as one of Triad's subcontractors. Contrary to Appellants'
contention, however, evidence concerning the joint check agreements supported the
court's finding that a civil conspiracy existed, because the record showed that
Appellants did not follow the terms of the joint check agreements. Although the
agreements provided that all monies were to be deposited into Fortis's bank account,
JKV's first two checks, which totaled $123,830.15, were deposited into Triad's bank
account. Because T. Nadler, D. Nadler, and Rodenberg were also three of the four
owners of Fortis, the court could reasonably infer that the reason the checks were
deposited into Triad's bank account instead of Fortis's was because T. Nadler, D.
Nadler, and Rodenberg planned to liquidate Triad's account and file bankruptcy on
behalf of Triad, in an attempt to shield themselves from liability.
Moreover, the record refuted Appellants' assertion that the purpose of the
agreements was to ensure that Triad would pay Fortis for its work on the Project.
Triad's records showed that, on February 15, 2011, Triad wrote a check to Fortis for
$40,600 for three invoices that were purportedly for Fortis's work on the Hospice
Project. While Fortis's billing history for the Hospice Project indicated that Fortis
received the $40,600 payment on February 16, 2011, the record showed that Fortis
backed out over $35,000 of that payment on June 3, 2011, two months after Triad filed
17 bankruptcy. The billing history then indicated that, as of June 3, 2011, Fortis was owed
$36,456.92 for its work on the Hospice Project. Fortis subsequently filed a lien against
the Hospice Project property for that amount. From this evidence, the court could
reasonably infer that Fortis and Diaz, who was Fortis's majority owner and president,
were part of the civil conspiracy to defraud JKV.
Clear and convincing circumstantial evidence established that each of the
Appellants acted with a "unity of purpose," a "common design and understanding," or "a
meeting of the minds" to unlawfully benefit themselves at JKV's expense by conveying
JKV's payments on the Hospice Project to themselves, either directly or indirectly,
instead of to the subcontractors. Oak Bluff, 3 S.W.2d at 781 (internal quotation marks
and citation omitted). The circuit court's finding that a civil conspiracy existed was
supported by substantial evidence.
Appellants argue that there was contrary evidence indicating the lack of a
conspiracy, including that they used JKV's money not to benefit themselves, but to pay
Triad's employees and "necessary business expenses"; that neither Rodenberg nor
Fortis paid themselves back in full for the money that Triad owed them before Triad filed
bankruptcy; and that JKV was not Triad's sole or largest source of revenue. "When the
evidence poses two reasonable but different conclusions, appellate courts must defer to
the circuit court's assessment of that evidence." Ivie v. Smith, No. SC 93872, 2014 WL
3107448, at *12 (Mo. banc July 8, 2014). Based upon the findings and conclusions in
the judgment, it is clear that the court put "little or no stock" in this evidence from
Appellants. See In re J.A.R., 426 S.W.3d 624, 632 n.14 (Mo. banc 2014). Deferring to
18 the circuit court's assessment of the evidence, we do not firmly believe that the court's
finding that a civil conspiracy existed is wrong. Point IV is denied.
Punitive Damages
In Point V, Appellants contend the circuit court's determination that punitive
damages were warranted was not supported by substantial evidence and was against
the weight of the evidence.
Punitive damages require clear and convincing proof of a culpable mental state,
either from a wanton, willful, or outrageous act, or from reckless disregard for an act's
consequences such that an evil motive may be inferred." Drury v. Mo. Youth Soccer
Ass'n, Inc., 259 S.W.3d 558, 573 (Mo. App. 2008). "The necessary mental state is
found when a person intentionally does a wrongful act without just cause or excuse." Id.
"When someone intentionally commits a wrong and knew that it was wrong at the time,
an evil motive and wanton behavior is exhibited." Id. Additionally, "[a]n evil intent may
also be inferred where a person recklessly disregards the rights and interests of another
person." Id.
In this case, the evidence showed that T. Nadler, D. Nadler, and Rodenberg
knew JKV was relying on their representations that the subcontractors would be paid
and that the work performed on the Hospice Project would be free of liens. Indeed, T.
Nadler testified at trial that, when he sent the second application for payment and the
final waiver of lien to JKV, he did not warn JKV that the subcontractors could, in fact, file
liens against the property because he knew that JKV would not have made the second
payment to them and JKV's money was "vital to our operation."6 The evidence further
showed that T. Nadler, D. Nadler, and Rodenberg knowingly used JKV's payments not 6 D. Nadler and Rodenberg testified that they heard and agreed with all of T. Nadler's testimony.
19 to pay the subcontractors, but to pay bi-weekly salaries to themselves, to reimburse
themselves for undocumented expenses, and to pay health insurance premiums,
automobile payments, and cell phone bills.
As to Diaz and Fortis, the evidence established that Fortis was paid $40,600 from
JKV's payments, and Fortis initially indicated on its accounting records that this amount
was for its work on the Hospice Project. After Triad filed bankruptcy, however, Fortis
removed over $35,000 of that payment from the accounting ledger to make it appear as
if it had not been paid. Diaz, on behalf of Fortis, then filed a lien against the Hospice
Project property for $36,456.92 in an attempt to recollect the amount that had already
been paid to Fortis and removed from its books.
All of this evidence was sufficient to support the circuit court's determination that
Appellants' conduct was malicious and premised upon an evil motive that was
intentional, willful, reckless, and indifferent to JKV's rights. Appellants note that they
offered good character evidence, evidence that they had made personal loans to Triad
and taken pay cuts, and evidence that they acted only negligently and not intentionally
in falsely certifying on the second payment application that the subcontractors had been
paid. They argue that this evidence negated any finding that they acted with evil motive
or reckless indifference. While we consider contrary evidence in our review, "we still
defer to the [circuit] court's credibility decisions and will find a judgment to be against the
weight of the evidence only when we firmly believe the judgment is wrong." Ries v.
Shoemake, 359 S.W.3d 137, 146 n.1 (Mo. App. 2012). Deferring to the circuit court's
credibility decisions in this case, we do not firmly believe that its judgment awarding
punitive damages is wrong. Point V is denied.
20 CONCLUSION
We affirm the circuit court's judgment.
__________________________________ __ LISA W HITE HARDWICK, JUDGE
ALL CONCUR.