Case Summary for January 12, 2011

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Case Summary for January 12, 2011

THE FOLLOWING DOCKET SUMMARIES ARE PREPARED BY THE COURT'S STAFF FOR THE INTEREST AND CONVENIENCE OF THE READER. THE SUMMARIES MAY NOT INCLUDE ALL ISSUES PENDING BEFORE THE COURT AND DO NOT REFLECT ANY OPINION OF THE COURT ON THE MERITS OF A CASE. COPIES OF ALL BRIEFS FILED WITH THE COURT ARE AVAILABLE AT THE SUPREME COURT BUILDING, COURT EN BANC DIVISION. SUMMARIES ARE UNOFFICIAL AND SHOULD NOT BE QUOTED OR CITED.

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DOCKET SUMMARIES
SUPREME COURT OF MISSOURI

9 a.m. Wednesday, Jan. 12, 2011

____________________________________________________________________________________________________

SC91138
DeBaliviere Place Association v. Steven Veal
St. Louis city
Authority of neighborhood association to impose assessments and fees

Listen to the oral argument:

Veal was represented during arguments by Elkin L. Kistner of the Bick & Kistner PC in St. Louis, and the association was represented by Ira M. Berkowitz of the Law Office of Marvin J. Nodiff PC in St. Louis.

DeBaliviere Place Association (a neighborhood association) incorporated in 1977. In 1992, the association was dissolved administratively for failure to comply with Missouri corporate filing requirements. It is disputed as to what degree the association continued to operate. In 1997, Steven Veal bought real property within the association’s development area. According to the declaration of covenants, owners of all properties within the association’s development area are required to pay certain costs and assessments. Veal contends that when he acquired the property, he was unaware of the declaration or that the property was included the association’s development area. A new association was formed in 2003. In 2005 and 2007, the new association recorded liens against portions of Veal’s property and filed lawsuits against Veal to collect unpaid assessments, interest and fees. In 2006, the new association obtained an assignment agreement from the original association purporting to assign the original association’s rights to the new association. In 2007, the trial court consolidated the association’s suits against Veal, ordered the liens foreclosed and granted the association summary judgment, finding Veal owed the association unpaid assessments, interest and attorney’s fees. After the trial court found it incorrectly determined the interest Veal owed, it reduced the interest award but did not amend its judgment further. Veal appeals.

Veal argues the trial court erred in granting the association summary judgment. He contends any rights or obligations the original association had under the declaration ceased to exist 10 years after its dissolution; therefore, the new association lacked authority to collect assessments or file the underlying suits. Alternatively, Veal asserts that even if the 2006 assignment was valid, the “exclusive permissible use” for the assessments was to add new properties, which he asserts is an unauthorized and unlawful activity when “winding down” a dissolved corporation. Alternatively, Veal argues the association lacked authority to impose liens and collect assessments from 1998 until the new association obtained the assignment in 2006. Veal argues the trial court erred in ordering the liens foreclosed because the association lacked authority to assess or collect the amounts covered in the 2005 lien, the 2007 liens were filed prematurely under the terms of the declaration and the trial court incorrectly calculated the interest amounts in its initial judgment. Finally, he contends the association was not entitled to recover attorney fees under the terms of the declaration.

The association responds that the trial court properly entered summary judgment in its favor. It argues the power to “wind down” the dissolved association’s affairs was vested in the former officers and directors, not the corporation; therefore, there is no time limit on the original association properly assigning its rights. It asserts the 2006 assignment is valid and consistent with the intent of the declaration to provide continuing governance of the association. The association contends Veal’s assertion that it conducted unauthorized and unlawful activity when “winding down” is an affirmative defense improperly raised after the trial court’s judgment and an incorrect interpretation of the association’s permissible uses of the assessments. It responds that it had the authority to collect assessments for the years prior to obtaining an assignment of the original association’s interest in 2006. It argues Veal’s contention that the 2007 liens are invalid is without merit because Veal admitted the association had authority to foreclose on the liens, he raises this affirmative defense for the first time on appeal and the liens were not filed prematurely under the declaration. Alternatively, the association asserts the appellate court had no authority to dismiss two of its counts without a hearing or trial because that ruling constituted a judgment on the merits rather than a mere review of the trial court’s judgment.

The Community Association Institute argues, as friend of the Court, that the trial court’s judgment should be affirmed. It contends the association validly exists with the authority to impose and collect assessments. It asserts a community association should be authorized to carry out its responsibilities regardless of whether it is incorporated or unincorporated. The institute argues that if the trial court’s judgment is reversed, the results detrimentally would affect numerous communities in Missouri and the rest of the country.

SC91098
Kathleen Schmitz and Craig Ewing v. Great American Assurance Company a/k/a Great American Insurance
Boone County
Challenges following wrongful death judgment

Listen to the oral argument:

The parents were represented during arguments by David J. Moen of David J. Moen PC in Jefferson City, and Great American was represented by Paul L. Wickens of Foland, Wickens, Eisfelder, Roper & Hofer PC in Kansas City.

In July 2003, Kathleen Schmitz and Craig Ewing’s daughter died as a result of a fall from a rock climbing wall. The incident occurred on premises under the possession and control of Columbia Professional Baseball LLC. Combined Specialty Insurance Company, now known as Virginia Surety Company, served as the primary insurer for Columbia Professional Baseball. Great American Assurance Company served as the excess insurer. Both insurance companies denied they had any duty to defend or indemnify Columbia Professional Baseball.

In March 2004, the parents sued the climbing wall’s operator for their daughter’s wrongful death. Three months later, they named Columbia Professional Baseball as a defendant in the case. Later that month, the parents settled their case with the operator. The insurance companies continued to deny any duty to defend or indemnify. In December 2004, under a settlement agreement entered pursuant to section 537.065, RSMo, Columbia Professional Baseball and the parents agreed that if the parents obtained a judgment against Columbia Professional Baseball, the parents would restrict any recovery to the amount of its insurance policies. Following a March 2005 hearing held in accordance with the settlement agreement, the trial court found Columbia Professional Baseball liable for the daughter’s death and the parents’ damages to be just more than $4.58 million. Two months later, the parents filed an equitable garnishment action against the insurance companies. In August 2006, the trial court granted partial summary judgment in favor of the parents, finding the insurance policies covered the loss. The parents settled with Virginia Surety, agreeing to release claims against both insurers to the full extent of Virginia Surety’s policy limits of $1 million in exchange for a monetary payment of $700,000. The parents released their claims against Virginia Surety and credited Great American to the extent of an additional $1 million. The parents then proceeded with the garnishment action against Great American for the remaining liability. In October 2008, the trial court determined that Great American was bound by the wrongful death judgment but that reasonable damages for the daughter’s death were $2,2 million, not $4.58 million. Further, the trial court determined the parents were barred from enforcing that judgment against Great American because Virginia Surety only paid the parents $700,000, not the full, primary policy limit of $1 million. The parents appeal, and Great American cross-appeals.

The parents’ appeal

The parents argue the trial court erred in ruling they were barred from recovering against Great American. The parents contend that they credited Great American with, and filed a partial satisfaction of judgment for, the full $1 million and that Missouri law allows them to recover from Great American even after settling their claim against Virginia Surety so long as Great American receives a credit for Virginia Surety’s full limits of insurance coverage. They assert the trial court erred in ruling that any damages in the wrongful death action above $2.2 million are unreasonable. They argue that the court in the wrongful death action had the discretion, as an independent fact-finder, to enter the $4.58 million judgment, that its judgment became final after 30 days and that the judgment is not subject to reasonableness review in a collateral proceeding.

Great American responds that the trial court properly ruled the parents could not recover from Great American. It argues Great American’s policy predicated exhaustion on “sums actually paid,” not “negotiated exhaustion,” and the parents failed to exhaust Virginia Surety’s limits by “actual payment.” It contends the trial court properly examined the reasonableness of the judgment in the wrongful death action. Great American asserts the trial court followed the standard for judgments obtained under section 537.065 because it considered the sum for which a reasonably prudent defendant would have settled the claim and the judgment in the wrongful death action was not the result of a contested trial on the merits.

Great American’s cross-appeal

Great American argues the trial court erred in ruling Great American could be bound by the wrongful death judgment. It contends a condition precedent to enforcing a judgment obtained by section 537.065 against an insurer is a wrongful denial of a duty to defend, and Great American did not wrongfully deny a duty to defend. Great American asserts the trial court erred in finding coverage under the terms of the Virginia Surety policy because the policy had an applicable exclusion.

The parents respond that the trial court properly ruled that Great American was bound by the wrongful death judgment. They argue that section 537.065 does not contain a condition precedent requiring a breach of the duty to defend, and, alternatively, that Great American did breach its duty to indemnify and declined its opportunity to defend. The parents contend the trial court properly found coverage under the terms of the Virginia Surety policy because the policy’s coverage exclusion did not apply.

SC90996
In re the Marriage of Tanya L. Lindhorst and Eric J. Lindhorst; Tanya L. Lindhorst, n/k/a Tanya L. Templeton v. Eric J. Lindhorst
St. Louis County
Challenge to modification of maintenance and child support

Listen to the oral argument:

The mother was represented during arguments by Craig J. Hoefer, a solo practitioner, from Wildwood, and the father was represented by Margaret A. Smith of the Lindhorst Law Firm LLC in in St. Louis.

A mother and father, who had two minor children, dissolved their marriage in April 1998. The dissolution decree granted custody of the children to the mother and ordered the father pay $1,100 per month in child support and $1,000 per month in maintenance to the mother. As part of the dissolution decree, the trial court found the mother suffered from rheumatoid arthritis and “arguably” could work only part time. In 2003, an administrative judge found the mother was disabled and eligible for disability benefits. In November 2006, the mother sought an increase in child support based on the father’s increased income, the maturation of the children and the mother’s alleged inability to work. The father subsequently filed a counter-motion seeking a decrease in his child support obligation and the termination of his maintenance obligation. During a December 2008 hearing, the mother and father presented conflicting expert testimony as to whether the mother was able to work. The trial court ultimately relied on the father’s expert and held that the mother “is not totally disabled” and that “part time employment … appears feasible and appropriate.” Based on this determination, in February 2009, the trial court reduced the father’s maintenance obligation from $1,000 to $500 per month but raised his child support obligation from $1,100 to $1,273 per month. The modification of child support was applied retroactively to January 1, 2009. The mother appeals.

The mother argues the trial court erred in reducing the father’s maintenance obligation. She contends he failed to meet his burden of proving that circumstances changed “so substantially and continually” that the original maintenance award was unreasonable because he failed to establish a reduction in his income; that the mother could work more than she did at the time of the original decree; and an increase in the mother’s financial resources or a decrease in her living expenses. The mother asserts the trial court erred in imputing (attributing) income to her based on the speculative availability of part-time work. The mother argues that, in assessing whether the original maintenance award was reasonable, the trial court ignored federal regulations prohibiting a gainfully employed individual from receiving disability benefits when it both considered the mother’s disability benefits and imputed income based on her ability to work part-time. The mother contends the trial court abused its discretion in failing to follow its own local presumption when retroactively awarding child support payments to only a month before the judgment. She asserts the child support award instead should be applied retroactively to when the father was served with the mother’s motion to modify child support.

The father responds that the trial court properly reduced the mother’s maintenance award. He argues the mother’s disability benefits, her cohabitation with her parents and her ability to be employed constitute a change in circumstances “so substantial and continuing” as to form a basis for modifying maintenance. The father contends that the trial court’s reduction of maintenance did not constitute error because it found the mother was not disabled and was able to work part-time. Also, the father asserts the trial court properly determined the mother could meet her “reasonable needs” with a lesser amount of maintenance. The father argues that the income the trial court imputed to the mother based on the possibility of her working part-time was supported by substantial evidence and that imputing income to the mother was not an abuse of the court’s discretion. The father contends the trial court properly found the mother only needed $500 a month in maintenance.

SC91076
In re: Seth Shumaker
Adair County
Attorney discipline
Listen to the oral argument:Listen to the oral argument:

The office of chief disciplinary counsel was represented during arguments by Sharon K. Weedin of the chief disciplinary counsel's office in Jefferson City, and Shumaker was represented by Brent Mayberry, a solo practitioner, from Kirksville.

In February 2006, Kirksville attorney Seth Shumaker and three other individuals signed an operating agreement forming Mid-America Credit Bureau LLC, a collection agency. The chief disciplinary counsel alleges that in September 2006, a signing member of the collection agency’s operating agreement – who was also Shumaker’s client – signed a deed of trust and a promissory note conveying real property to Shumaker and promising to pay Shumaker $250,000 in yearly $35,000 increments. In return, Shumaker gave the client a check for $2,000 and assured the client he would not file the deed of trust nor enforce the promissory note. The chief disciplinary counsel alleges that Shumaker later began paying bills for the collection agency via a second mortgage on his client’s property and that Shumaker demanded payment on the promissory note, despite his promise to the client. Shumaker asserts that the client’s promissory note and deed of trust were the client’s capital contribution to the collection agency and that they were unrelated to the $2,000 check. The chief disciplinary counsel contends that, in July 2007, the same client told Shumaker not to approach the president of a local insurance company because the client knew Shumaker was considering suing the insurance company on the client’s behalf. In August 2007, Shumaker sent the president a letter advising him that Shumaker represented a number of plaintiffs and that he wished to speak with the president or he would “proceed accordingly.” Shumaker alleges his client demanded that he write and send the letter.

In October 2006, a couple whose property was being foreclosed contacted Shumaker for his legal assistance. On the day of the foreclosure, the couple arrived at Shumaker’s office. Shumaker was not present, but his assistant told the couple they needed to sign a warranty deed conveying their property interests to Miller Properties LLC as well as a lease renting the property back to the couple for $700 a month. The couple signed both documents. Miller Properties was a one-third owner/member of KV1316 LLC, of which Shumaker was a one-third owner/member. In March 2007, Miller Properties conveyed the property to Reaggy LLC, which Shumaker and his wife owned in full. Noting that Shumaker received two previous admonitions for violations of the rules of professional conduct related to communications, safeguarding property and making false statements, the chief disciplinary counsel asks this Court to discipline Shumaker’s law license.

The chief disciplinary counsel argues this Court should suspend Shumaker’s license with no leave to appeal for reinstatement for two years. He contends Shumaker knowingly, and by subterfuge, acquired ownership interests adverse to the interests of his clients, who were in vulnerable situations. He asserts Shumaker twice violated Rule 4-1.8(a) by entering into business transactions with two separate clients and acquiring an adverse interest in those clients’ properties under terms that were unreasonable and unfair, were not disclosed fully and communicated in writing, did not allow the clients reasonable opportunity to seek advice of independent counsel, and to which the clients did not consent to in writing. The chief disciplinary counsel argues Shumaker violated Rules 4-1.7(b) and 4-1.8(b) because his personal interests, and those of another client, materially limited his ability to represent his clients. He contends Shumaker reasonably could not have believed his representation of certain clients would not have an adverse effect on his representation of other clients. He asserts Shumaker used information relating to these representations to a client’s disadvantage.

Shumaker responds that the chief disciplinary counsel’s recommendations are not the product of “sound reflection” because the chief disciplinary counsel did not complete an objective or thorough investigation of the allegations. Shumaker argues the chief disciplinary counsel has been inconsistent in recommending sanctions and has based those recommendations on selected portions of the record. He contends that he did not take a promissory note and deed of trust from his client and that, in making capital contributions on his client’s behalf, he acted fairly and reasonably, fully disclosed the terms in writing and the client had reasonable opportunity to seek advice of independent counsel. As a result, he contends, he did not violate Rule 4-1.8(a). Further, Shumaker asserts he did not violate Rule 4-1.8(a) because he did not have an attorney-client relationship with the couple seeking his assistance with their foreclosure at the time the property was conveyed. He argues he did not violate Rules 4-1.7(b) and 4-1.8(b) because he acted at the specific request of his client and because his client waived any conflict limiting the representation.