66 Inc., Plaintiff/Appellant, v. Crestwood Commons Redevelopment Corporation, et al., Defendants/Respondents.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Eastern District Case Style: 66 Inc., Plaintiff/Appellant, v. Crestwood Commons Redevelopment Corporation, et al., Defendants/Respondents. Case Number: 73626 Handdown Date: 12/01/1998 Appeal From: Circuit Court of St. Louis County, Hon. Maura McShane Counsel for Appellant: Martin M. Green and Joe D. Jacobson Counsel for Respondent: William J. Travis, Gerard T. Carmody, Dan M. Lesicko, and Alice A. Kelly Opinion Summary: 66, Inc., appeals from a grant of summary judgment on its abandonment of condemnation claim in favor of Crestwood Commons Redevelopment Corporation, Hycel Partners III, L.P., and Schnuck Markets, Inc. AFFIRMED. Division Two holds: The trial court did not err in entering summary judgment in favor of defendants because plaintiff's claim was barred by the doctrine of res judicata. Citation: Opinion Author: James R. Dowd Opinion Vote: AFFIRMED. Crahan, J., concurs in separate opinion; Teitelman, J., concurs in both opinions. Opinion: Appellant, 66, Inc. ("66"), appeals from a grant of summary judgment in favor of Respondents, Crestwood Commons Redevelopment Corp. ("Crestwood Commons"), Hycel Partners III, L.P. ("Hycel"), and Schnuck Markets, Inc. ("Schnuck"), on its abandonment of condemnation claim. 66 raises five points on appeal but notes that there are only three main issues before this Court: (1) whether a cause of action exists for damages in favor of a property owner and against a non-governmental condemnor when the condemnor abandons the condemnation; (2) whether the court should

disregard the separate corporate existence of the condemnor and permit the owner's claim for damages to be asserted directly against the individuals who owned and controlled the condemnor; and (3) whether the property owner's claim for damages is barred by the doctrine of res judicata. We conclude that the doctrine of res judicata bars 66's present claim and affirm the judgment of the trial court. When reviewing an appeal from summary judgment, we view the record in the light most favorable to the party against whom judgment was entered and accord the non-movant all reasonable inferences from the record. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). As the propriety of summary judgment is a question of law, our review is essentially de novo. Id. In the light most favorable to 66, the facts are as follows: 66 is the former owner of a parcel of property ("66 Drive- In" or "Property") located in the City of Crestwood, Missouri ("City") on which it operated a drive-in theater. In 1988, the City declared the Property a blighted area and sought to contract for its purchase and redevelopment. Hycel and Schnuck subsequently formed a general partnership called the Crestwood Commons Joint Venture ("Joint Venture") and an urban redevelopment corporation called Crestwood Commons Redevelopment Corporation for the purpose of acquiring the Property. At all times, the Joint Venture has been the sole owner of Crestwood Commons' stock. All of Crestwood Commons' officers were officers of either Hycel or Schnuck; all of Crestwood Commons' directors were officers or directors of either Hycel or Schnuck. Crestwood Commons was entirely dependent on the Joint Venture for all of its capital needs, it never possessed any assets of its own nor incurred any expenses. According to the joint venture agreement, Crestwood Commons would never possess the Property. Instead, the agreement provided that a portion of the Property would be sold to Schnuck contemporaneously with the acquisition of the Property. The remaining portion of the Property would be owned by the Joint Venture. The Joint Venture submitted a redevelopment proposal to the City. On July 11, 1989, Crestwood Commons and the City entered into a contract to redevelop the Property. Pursuant to the contract, the City granted Crestwood Commons the power of eminent domain to acquire the Property. In a separate agreement with the City, Hycel and Schnuck guarantied Crestwood Commons' performance of its contract with the City. On July 13, 1989, Crestwood Commons filed a petition in the Circuit Court of St. Louis County to condemn the 66 Drive-In. On December 16, 1991, the condemnation commissioners entered their report, which established the value of the 66 Drive-In at $7,399,000. Both 66 and Crestwood Commons filed exceptions to the report. On July 10, 1992, prior to a trial on the exceptions, Crestwood Commons abandoned the condemnation. Following Crestwood Commons' abandonment, 66 applied to the trial court for an award of interest pursuant to section 523.045 RSMo 1994.(FN1) The trial court awarded 66 interest in the amount of

$250,582.55. The award was affirmed by this Court in Crestwood Commons v. 66 Drive-In, Inc., 882 S.W.2d 319 (Mo.App. E.D.1994). However, 66 has been unable to collect the interest award because Crestwood Commons has no assets with which to satisfy the award. On November 10, 1992, 66 filed the present action against Crestwood Commons, Hycel, and Schnuck to recover damages under the common law tort claim of abandonment of condemnation. Defendants filed a motion for summary judgment on the ground that 66's claim was barred by the doctrine of res judicata. The trial court granted defendants' motion on December 4, 1997, and 66 timely filed a notice of appeal. Besides the condemnation action and the present abandonment of condemnation action, 66 has also filed two other lawsuits against Hycel and Schnuck. The first lawsuit was filed in the Circuit Court of St. Louis County on January 28, 1994, while the instant case was pending. In that suit, 66 alleged it was a third party beneficiary of the contract between Crestwood Commons and the City, the performance of which Hycel and Schnuck guarantied. Because Crestwood Commons breached the contract, 66 claimed that Hycel and Schnuck were liable as guarantors of Crestwood Commons' contractual performance and sought as damages the $250,586.64 interest award. The trial court dismissed the petition with prejudice and this Court affirmed the dismissal in 66 Drive-In, Inc. v. Hycel Partners III, L.P., 897 S.W.2d 203 (Mo.App. E.D.1995). 66 also filed a creditor's bill (FN2) against Hycel and Schnuck on March 28, 1997, again in an effort to collect the interest award. This action is still pending. The doctrine of res judicata is designed to prevent a multiplicity of lawsuits. Missouri Real Estate & Ins. Agency, Inc. v. St. Louis County, 959 S.W.2d 847, 850 (Mo.App. E.D.1997). For res judicata to bar a claim, "four identities" must exist between the prior and present litigation: (1) identity of the thing sued for, (2) identity of the cause of action, (3) identity of the persons and parties to the action, and (4) identity of the quality of the person for or against whom the claim is made. King General Contractors, Inc. v. Reorganized Church of Jesus Christ of Latter Day Saints, 821 S.W.2d 495, 501 (Mo. banc 1991). When a claim is barred by res judicata, the trial court should enter summary judgment in favor of the defendant. State ex rel. Hamilton v. Dalton, 652 S.W.2d 237, 239 (Mo.App. E.D.1983). The first element is satisfied here because the thing sued for in both actions was monetary damages arising out of the condemnation of the 66 Drive-In. The second element is the identity of the cause of action. This element does not require that the actions be identical but only that "the claims arise out of the same act, contract, or transaction." Missouri Real Estate, 959 S.W.2d at 850 (internal quotations omitted). The term transaction is broadly construed and includes all the facts and circumstances which constitute the foundation of a claim. Id. at 850-51. Where two actions are on the same cause of action, the earlier

judgment is conclusive not only as to matters actually determined in the prior litigation but also as to every point properly belonging to the subject matter of the litigation and which the parties through the exercise of reasonable diligence might have brought forward at the time. King, 821 S.W.2d at 501; Missouri Real Estate, 959 S.W.2d at 851. After reviewing the prior litigation between the parties, we conclude that an identity exists between the present cause of action and the action on the guaranty. Although the abandonment of condemnation claim and the action on the guaranty are distinct causes of action, both claims arise out of the same transaction, namely Crestwood Commons' attempt to condemn the Property and its later abandonment of the condemnation proceeding. In addition, 66's alleged injury in both actions was triggered by this transaction. We recognize that in the present action, 66 seeks to recover damages beyond the interest award; however, merely seeking different relief in the subsequent litigation does not preclude the application of the doctrine of res judicata. See Restatement (Second) of Judgments sec. 25(2) (1982); 46 Am.Jur.2d Judgments sec. 536 (1994). Because 66's present claim arises out of the same subject matter as the action on the guaranty, the second element is satisfied. The third element requires a showing that the parties and their privies are the same in the prior litigation as in the present action. See American Polled Hereford Ass'n v. City of Kansas City, 626 S.W.2d 237, 241 (Mo. 1982). In the action on the guaranty, 66 sued Hycel and Schnuck to recover the interest award entered against Crestwood Commons on the theory it was a third party beneficiary to the redevelopment contract. In the present action, the only difference in the parties is 66's inclusion of Crestwood Commons as an additional defendant. Although Crestwood Commons was not a party to the action on the guaranty, the evidence indicates that it was entirely controlled by Hycel and Schnuck, and therefore, we conclude it was in privity with the named defendants in the prior action. Thus, the third element is satisfied. The fourth element requires an identity of the quality of the person for or against whom the claims are made. It too is satisfied because in both the action on the guaranty and the present action, 66 sought to hold Hycel and Schnuck liable as the principals of Crestwood Commons. Because the four identities are present, 66's claim is barred by res judicata. 66's failure to litigate its claim of common law abandonment of condemnation contemporaneously with the action on the guaranty bars it from asserting the claim in a subsequent lawsuit. The judgment of the trial court is affirmed. Footnotes: FN1.Section 523.045 RSMo 1994 provides in part: If, within thirty days after the filing of any such commissioners' report, the condemnor shall have neither paid the amount of the award to said persons or to the clerk for them nor filed its written election to abandon the appropriation, but shall thereafter timely file such written election to abandon, then the court may, upon motion filed by said persons within ten days after the filing of said election,

assess against the condemnor six percent interest on the amount of the award from the date of the filing of the commissioners' report to the date of the filing of such election, enter judgment thereon and enforce payment thereof by execution or other appropriate proceeding. FN2.A creditor's bill is an action in which "a creditor seeks to enforce the payment of debts out of equitable assets which cannot be reached by a levy and sale on an execution and judgment." Eugene Alper Constr. Co. v. Joe Garavelli's of Westport, Inc., 655 S.W.2d 132, 136 n.2 (Mo.App. E.D.1983). Separate Opinion:

which to recover what 66, Inc. ("66") sought to recover in the guaranty action and it is therefore properly barred under the doctrine of res judicata. I write separately to address certain policy concerns raised by the facts and procedural history of this case that warrant legislative attention and/or may require judicial resolution in future cases. Although we do not decide these issues today in the light of our holding, the record before us gives ample reason to believe they will recur. The power to take private property and devote it to public use is among the most awesome powers of government. The protection of private property rights is a bedrock principle of American jurisprudence. The right to obtain, hold and freely alienate private property is perhaps the most tangible freedom incident to American citizenship. The Fifth Amendment expressly mandates that private property shall not be taken for public use without just compensation. It is by now well established that restoration of "blighted" areas is a public purpose for which private property can be taken and that, pursuant to Chapter 353 RSMo, government can delegate the power to take private property to private "redevelopment corporations." Reduced to its essence, what happened in this case is that the City of Crestwood declared 66's property to be blighted and ultimately was persuaded to delegate the power of condemnation to a judgment-proof, shell corporation known as Crestwood Commons Redevelopment Corporation. Crestwood Commons, which essentially existed in name only, was formed by two well-heeled entities, Schnuck Markets, Inc. and Hycel Partners III, L.P., who directly funded and undertook all day-to-day operations of Crestwood Commons. As indicated in the majority opinion, the plan was for Crestwood Commons to obtain 66's property by condemnation, conveying a portion of it immediately upon acquisition to Schnuck and the balance to the Schnuck-Hycel Joint Venture. What actually transpired is that, after learning the value placed on the property by the condemnation commissioners, Crestwood Commons abandoned the condemnation. It seems clear that the owner of property that is the subject of a condemnation proceeding suffers at least a partial

taking when that proceeding is later abandoned. The property is for all practical purposes rendered unalienable and unsuitable for any alternative development during the pendency of the proceedings. The Missouri Legislature has at least implicitly recognized the detriment suffered by such property owners, at least where the abandonment occurs more than thirty days after the filing of the Commissioners' report. Section 523.045 RSMo 1994 provides in part: If, within thirty days after the filing of any such commissioners' report, the condemnor shall have neither paid the amount of the award to said persons or to the clerk for them nor filed its written election to abandon the appropriation, but shall thereafter timely file such written election to abandon, then the court may, upon motion filed by said persons within ten days after the filing of said election, assess against the condemnor six percent interest on the amount of the award from the date of the filing of the commissioners' report to the date of the filing of such election, enter judgment thereon and enforce payment thereof by execution or other appropriate proceeding. Of course, in this case, the limited remedy provided by the legislature has thus far proven illusory. 66 sought and obtained a judgment against Crestwood Commons for $250,582.55 pursuant to section 523.045 RSMo 1994 but has thus far been unable to collect it because Crestwood Commons never has had and never will have any money. As noted in the majority opinion, it remains to be seen whether 66 will ultimately be successful in collecting this money in its creditor's bill action against Hycel and Schnuck by piercing the corporate veil of the shell corporation, Crestwood Commons. Disturbingly, according to Respondents' condemnation expert, Mr. Donald Beimdiek, use of a shell corporation to exercise the power of eminent domain is not unusual; it is typical. This means that the limited remedy provided by the legislature will virtually never be enforceable against a redevelopment corporation condemnor and that any judgment rendered pursuant to the statute can only be collected if the injured party can devise some equitable means of piercing the corporate veil of the redevelopment corporation and obtaining judgment against the real parties in interest. Even if such efforts may ultimately prove successful, it is inconceivable that this is what the legislature

intended. In view of our disposition, we do not reach or decide in this case whether Missouri has or will recognize a common law action for wrongful abandonment of condemnation. It is worth noting, however, that one of Respondents' alternative contentions is that even if such a common law action has been recognized, it has been wholly supplanted by the "exclusive," yet thus far wholly illusory remedy found in section 523.045 RSMo. To put it mildly, that contention would carry more weight if offered by a party who had paid the judgment and thus demonstrated the efficacy of the legislature's "exclusive" remedy. It is unpersuasive when offered by parties who have conclusively established that the legislative remedy will virtually never be collectible. Respondents also urge that even if Missouri recognizes a common law action for wrongful abandonment, they cannot be held liable because there is no basis for piercing Crestwood Commons' corporate veil and imposing liability on them. Respondents acknowledge the three part test for piercing the corporate veil set forth in Collett v. American National Stores, Inc., 708 S.W.2d 273, 284 (Mo. App. 1986). These are: (1) Control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practices with 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 defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or dishonest or unjust act in contravention of plaintiff's legal rights; and (3) The aforesaid control and breach of the duty must proximately cause the injury or unjust loss complained of. Respondents concede the first element but claim that there is no evidence that Crestwood Commons was used to support a fraud or improper purpose. According to Respondents, since the condemnation and development of property is a legitimate purpose and there were funding arrangements in place that, consistent with industry standards, were sufficient to acquire and develop the project if it had gone forward, the second element is not satisfied. As stated in Collett, however, the control need not have been used to perpetrate a fraud; it is sufficient if the control is used to perpetrate the violation of a statutory or other positive legal duty. Respondents have not explained why section 523.045 RSMo 1994 would not constitute a positive legal duty imposed on abandoning condemnors. As noted earlier, it has not yet been determined whether 66 will ultimately be able to collect its judgment from Hycel and Schnuck and, in view of our disposition, we need not decide in this case whether parties similarly situated to 66 have a common law action for "wrongful abandonment." What is clear is that municipalities who delegate the power of

condemnation can avoid virtually all of the procedural hurdles 66 has encountered in this case by requiring a bond or written guaranty by the real parties in interest that expressly secures the rights of owners of condemned property in the event of abandonment. Action by the legislature may also be appropriate to impose such a requirement. Footnotes: FN1.Section 523.045 RSMo 1994 provides in part: If, within thirty days after the filing of any such commissioners' report, the condemnor shall have neither paid the amount of the award to said persons or to the clerk for them nor filed its written election to abandon the appropriation, but shall thereafter timely file such written election to abandon, then the court may, upon motion filed by said persons within ten days after the filing of said election, assess against the condemnor six percent interest on the amount of the award from the date of the filing of the commissioners' report to the date of the filing of such election, enter judgment thereon and enforce payment thereof by execution or other appropriate proceeding. FN2.As noted in the majority opinion, it remains to be seen whether 66 will ultimately be successful in collecting this money in its creditor's bill action against Hycel and Schnuck by piercing the corporate veil of the shell corporation, Crestwood Commons. This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.