City of Forth Smith v. B&A Electric, Inc. , 2023 Ark. App. 24 ( 2023 )


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  •                                   Cite as 
    2023 Ark. App. 24
    ARKANSAS COURT OF APPEALS
    DIVISION I
    No. CV-21-569
    CITY OF FORT SMITH                               Opinion Delivered January   25, 2023
    APPELLANT
    APPEAL FROM THE SEBASTIAN
    COUNTY CIRCUIT COURT,
    V.                                               FORT SMITH DISTRICT
    [NO. 66FCV-17-285]
    B&A ELECTRIC, INC.; MEGEHEE
    FENCE CONTRACTING, LLC; GRIMES HONORABLE STEPHEN TABOR,
    DOZER SERVICE, INC.; JAMES        JUDGE
    GRIFFITH; AND RIVER VALLEY
    SPORTS COMPLEX, INC.
    APPELLEES REVERSED AND DISMISSED
    WAYMOND M. BROWN, Judge
    The City of Fort Smith (the City) appeals the Sebastian County Circuit Court’s entry
    of judgment against it following a jury verdict on breach-of-contract claims brought by
    appellees B&A Electric, Inc.; Megehee Fence Contracting, LLC; Grimes Dozer Service, Inc.;
    and James Griffith (the contractors), hired by third-party defendant River Valley Sports
    Complex, Inc. (RVSC). The City contends that the evidence was insufficient to support the
    judgment in favor of the contractors. We agree. Therefore, we reverse and dismiss this
    action.1
    1
    This is the third time this case has been before us—we dismissed it twice for lack of a
    final order. See City of Fort Smith v. B&A Electric, Inc., 
    2019 Ark. App. 575
    ; City of Fort Smith
    v. B&A Electric, Inc., 
    2021 Ark. App. 334
    .
    The City and RVSC entered into a written contract in March 2014 for the
    construction of a sports complex on city-owned land after RVSC principals Jake Files and
    Lee Webb presented the project to the city board. The City agreed to contribute up to $1.6
    million in amounts payable when construction reached specific milestones. RVSC solicited
    donations to cover the remaining costs of the project. The contract required RVSC to
    complete the project by June 10, 2015, but stated that after construction was complete, the
    City would lease the complex back to RVSC for ten years.
    RVSC began work on the project in 2014, and it hired the four appellees as
    contractors to provide materials and services. By the scheduled completion date, however,
    RVSC had not substantially completed the work. Work continued into 2016 as a result of
    two negotiated extensions granted by the City. The City paid RVSC over $1.08 million, but
    in early 2017, RVSC permanently ceased working on the project after having failed to meet
    the deadline extensions. When RVSC abandoned the project, it owed all four contractors
    payment for work and materials they had already provided. The contractors sought payment
    from RVSC, but RVSC did not have sufficient funds to pay. The contractors then sued the
    City for breach of contract and unjust enrichment. The City filed a third-party complaint
    against RVSC for breach of contract and contractual indemnity.
    The case went to trial before a jury in September 2018. Terry Bailey, the bookkeeper
    and corporate secretary for Grimes Dozer Service, testified that she compiled and submitted
    invoices to RVSC between 2014 and 2016. She stated that Grimes had been paid for all the
    work performed except $12,977.50 for which it was seeking judgment against the City.
    2
    On cross-examination, Bailey stated that all the invoices were directed to Webb
    because its agreement was with RVSC. She said that it billed RVSC and received payments
    from RVSC. She denied ever receiving checks from the City. She testified that Grimes
    billed the City on advice from its attorney to do so after work on the project had stopped.
    She said that Grimes was not paid after July 2016 “because RVSC did not receive another
    draw from the City because RVSC had not completed the next phase, and there was no
    money to pay us.”
    On redirect, Bailey stated that she knew the land was owned by the City and that in
    her mind, “the City would direct the money to RVSC and then to us.”
    Brian Buzbee, part owner of B&A Electric, testified that he submitted budget
    numbers to the City to provide lights, poles, and concrete bases for the softball fields in 2014
    and that the City subsequently passed a resolution with that bid exhibited. He stated that it
    received $40,000 as final payment, but it was expecting $100,000. He said that RVSC told
    B&A Electric that “we weren’t getting any more money from the City.” He testified that he
    met with his supplier, Upchurch Electric, and the city auditor, Tracey Shockley, and looked
    at the site and what had been done up to that point. He said that he subsequently pulled
    out all the panel “guts” and wiring it had installed to protect it from vandalism. He stated
    that it had completed all the work for which invoices were submitted to RVSC or the City.
    Buzbee testified that he attended a city board of directors meeting in March 2017 to inquire
    about why RVSC was not required to submit a performance bond and was told by Michael
    3
    Lorenz that “the City viewed it as a collaboration between the City and RVSC.” He stated
    that it is still owed $151,880 for which it was seeking judgment against the City.
    On cross-examination, Buzbee testified that all the invoices were directed to Webb,
    never the City. He further testified, “We never received any document from the City
    indicating we had won a bid. We have no agreement with the City that it will be responsible
    for the goods and services we delivered to the project, but the City has possession of the
    boxes and light poles.”
    On redirect, Buzbee stated that the City’s resolution referenced $458,000, the exact
    amount of B&A Electric’s bid. He contended that the City had not offered to pay B&A
    anything on the remaining balance.
    James Griffith testified that he was hired by RVSC to do some woodwork for the
    project. He stated that he kept his costs at a certain level as requested by Webb. He said
    that he put up walls, set roof trusses, put roof decking in, and wrapped the buildings. He
    stated that he completed everything he was contracted to do and was still waiting to be paid
    the $20,337 for which he was seeking judgment against the City. He said that he contacted
    Webb for payment and attempted to contact the City three times, but the City never called
    back. He stated that although Webb was running the project, “we all believed the City was
    paying payments based on completion milestones.”
    On cross-examination, Griffith stated that he gave a verbal bid to Webb and that he
    had no written agreement with the City to pay for his services. He stated that Webb
    4
    approved everything he did. He said that he realized he would not be paid when the City
    shut down the project. He further testified,
    I put the responsibility on the City because it halted the project and stopped the
    funding. I decided to sue the City because the City controlled the money. I have no
    written or verbal agreement with the City. No representative of the City told me the
    City would cover my expenses for the project.
    On redirect, Griffith said that it was common for him not to receive verbal or written
    agreements for payment. He stated that ordinarily, he could file a lien for nonpayment, but
    that is not an option against the City.
    Shawn Megehee2 testified that he is the owner of Megehee Fence Contracting, LLC.
    He said that he was asked by Webb to perform work for the project and that he was aware
    that the project was on land owned by the City. He said that his company installed all the
    fencing per the agreement. He also stated that he left materials in Webb’s yard and
    warehouse that subsequently disappeared. He testified that he billed RVSC for $45,482.08
    but only received payment in the amount of $30,500. He was seeking judgment against the
    City for the remaining amount owed.
    After the close of the contractors’ case, the City moved for directed verdict on both
    claims. The court denied the motion.
    Jeff Dingham, deputy city administrator for the City of Fort Smith, testified that the
    City was initially contacted by Files and Webb in 2011 about a sports complex. He said that
    2
    The transcript reflects the last name as McGehee, but for purposes of this opinion,
    we will refer to it as Megehee.
    5
    at that time, the City did not own the land in question. He stated that the agreement was
    not considered by the board of directors until March 2014. He testified that the City was to
    contribute up to $1.6 million, to be paid incrementally upon the accomplishment of
    construction milestones as set out in the agreement and that the estimated total cost for the
    construction was about $6 million but that RVSC was to seek donations of time, materials,
    and labor to get the project completed. He admitted that the project was not bonded, but
    he stated that Files and Webb offered financial assurances in lieu of a bond. He said that
    RVSC made personal financial guarantees and RVSC assured the City that it would be
    successful in seeking donations of money, time, and materials to complete the project. He
    stated that the City was not actively involved in the management of the project and that Files
    and Webb handled all arrangements for providing contractors, supplies, and vendors. He
    said that RVSC never requested the City to compensate any suppliers, vendors, or
    construction services. He testified that the City agreed to two extensions when RVSC did
    not meet the original completion date of July 1, 2015, and that at the end of the second
    extension in July 2016, RVSC asked for more time because the project was still not complete.
    However, he stated that they never entered into specific discussions about more time. He
    testified that RVSC submitted a timeline showing a completion date of November 15, 2016,
    which it did not meet; and it submitted another proposed schedule showing a completion
    date of December 20, 2016, which it also failed to meet. Dingham stated that by December
    2016, a lot of the responsibility for the project had shifted to Carl Geffken, the city
    administrator.
    6
    On cross-examination, Dingham stated that he knew RVSC was a non-profit
    organization that was unfunded and had no assets, making it virtually impossible for it to
    secure a performance bond. He acknowledged that the City entered into a construction
    contract with RVSC in spite of this. He stated that the City acquired ownership of the
    property for the project in 2012. He denied that the City sent any engineers or architects to
    investigate whether this was a feasible project to complete until everything “went bad.” At
    that time, he said that the City developed an accounting of what was on the property as
    compared to what the City had paid toward the project. He stated that the value of the
    goods and services was commensurate with the amount the City had paid out; that RVSC
    was selling the City a completed complex of structure, fencing, and ball fields to be owned
    by the City; and that the agreement set out the specifications and standards for the complex
    for which RVSC was required to adhere. He testified that $1.6 million was earmarked for
    the project and that there was still money remaining in the budget. He further testified,
    The City was observing and monitoring the project. Parks and Recreation
    Department employees were out there frequently. The City knew that contractors
    had been retained by RVSC and doing work on the project. The City did not have a
    specific relationship with the other contractors. This project was significantly
    underfunded. The City’s position is that it has a contract with RVSC, not with the
    other contractors. No performance bond or surety was obtained in July 2015 when
    the first extension was agreed [to]. The City did not do anything to secure payment
    to the contractors who worked on the project, or to get a personal surety bond from
    Webb or Files, or to warn the contractors they might not get paid. The City had no
    relationship with any of the contractors and it did not contact any of them.
    The City did not distribute any money without RVSC having met the construction
    milestones. At some point the City requested to look at RVSC’s checks written and
    bank statements, and to see exactly what funds had been paid out by RVSC. City
    employees were on the property periodically, every day in some weeks, seeing what
    7
    was going on. The agreement was a contract between the City and RVSC for the
    construction of this complex on City-owned property. RVSC had no other sources
    of income to my knowledge. The City paid RVSC $1.08 million. The City passed
    resolutions allowing all this to happen. The Financial Assurances document in
    Exhibit 1 lists items that needed to happen on the property for the project to occur
    and where different components would come from. Assurances were provided to the
    satisfaction of the Board of Directors, but there were no assurances in the
    conventional sense.
    On cross-examination by RVSC, Dingham stated that a report prepared by Morrison-
    Shipley Engineers showed that the value of work the City received was $1.18 million,
    $100,000 more than what the City had paid out. He stated that the agreement was
    terminated because of delays and that he believed city employees picked up materials and
    some donated air conditioners from Webb’s place. He testified that the City requested
    RVSC’s bank statements, check ledgers, and documents, which were provided as requested.
    On redirect, Dingham stated that the City estimated that an additional $3.5 million
    would be required to complete the project. He said that as deputy city administrator, he had
    no confidence that RVSC would be able to deliver what it promised to deliver in the
    agreement.
    On recross, Dingham stated that the financial-assurances document was never
    thought of as a bond but as a way to make the project happen. He admitted that the lack of
    a bond had put the contractors and other people in a terrible position.
    Carl Geffken testified that he was the city administrator for the City of Fort Smith
    and had served in that capacity since May 16, 2016. He stated that the City wanted the
    project to succeed; however, after RVSC failed to meet the extended deadlines for
    8
    completion, he recommended that the City explore termination of the agreement. He stated
    that Files approached him about getting General Improvement Fund (GIF) money for sewer
    and water improvements on the property and that he was able to secure $45,070 in GIF
    money. He testified that he paid $26,945 of that money to DiAnna Gonzales for work on
    the project. He stated that the board of directors asked RVSC to submit a revised estimated
    date of completion by January 31, 2017, and that a completion date of September 2017 was
    subsequently given. He stated that Shockley requested bank statements, checks, and other
    information from RVSC. He testified that on February 1, he issued a cease-and-desist order
    to ensure nothing went into or came out of the sports complex. He stated that on February
    3, Files called him to talk about withdrawing from the contract, but he had already told Files
    that the contract would probably be terminated. On February 7, Geffken stated that the
    board of directors approved a resolution to terminate the contract with RVSC. He stated
    that RVSC did not offer to cure any default in the contract and that some of the contractors
    called the City requesting payment. He testified that in his view, this was a public-private
    partnership like another partnership the City was involved in at the time. He stated that
    there is $520,000 left in the City’s budget for the project. However, he said that engineers
    estimate that it will cost a total of $5 million to complete the project, far more than what
    remains in the budget.
    On cross-examination, Geffken testified that the City decided it was not going to pay
    anyone else based on its relationship with RVSC. He stated that the City’s money was just
    the “seed money to help fill the gaps.” He said that the sports complex was a collaboration
    9
    in which the City contributed $1.6 million and RVSC was to achieve donations of $3 million
    through contributions or direct funding, that RVSC was not a project manager, and that the
    City did not hire the contractors. He testified that it was in the scope of the business plan
    for RVSC to have money to hire contractors and that RVSC was on the hook to make the
    payments. He indicated that surety bonds are never a requirement, but it is the proper thing
    to do. However, he stated that the board of directors decided to go forward with what was
    unconventional. He said that he did not dispute that the contractors performed the work
    for which they sought payment but that the City had no intention of paying them. He said
    that the City found out that RVSC had no funds, but that was not the original plan as he
    understood it. He admitted that there is enough money left in the City’s budget to pay the
    contractors.
    On cross-examination by RVSC, Geffken stated that he recommended to the board
    of directors in December 2016 that the contract with RVSC be terminated. He said that
    RVSC’s notice of withdrawal came on February 3.
    On recross, Geffken stated that he would like for RVSC to honor the contract it had
    with the contractors it hired. He denied that the contractors provided goods and services to
    the City but contended they did so for RVSC. He admitted that the City was going to own
    the complex.
    Tracey Shockley testified that she is the internal auditor for the City of Fort Smith.
    She said that she first knew of the project in January 2017 after a board of directors study
    session when she was asked to look into it. She stated that she met with Buzbee and agreed
    10
    that he could remove his materials from the job site. She said that she also spoke with
    Megehee about materials he had left at the job site but learned from Webb that those
    materials had already been paid for. She said that Megehee left, and the City made
    arrangements with Webb to secure all the items.
    Lee Webb testified that he and Files were the organizers of RVSC. He stated that the
    purpose of RVSC was to create a softball complex to host tournaments. He said that Fort
    Chaffee donated 62.5 acres of property to the City and that there were various other
    donations made to the project. He stated that when certain thresholds were met, the City
    would send an inspector out, a check would be issued for the work, and he would then pay
    the contractors. He testified that it was communicated to the City that RVSC did not have
    any assets. He said that in January 2017, the City asked for a new completion deadline. He
    stated that RVSC provided bank statements and a breakdown of what the contractors were
    owed, as requested by the City. He said that he attended the study session in January 2017,
    and there was no mention of terminating the agreement at that time. He stated that he
    received a letter on February 1 requesting RVSC to cease and desist from doing work on the
    project; that RVSC subsequently sent a withdrawal letter to the City on February 3; and that
    RVSC received a letter of termination on March 17. He testified that after termination of
    the contract, he cooperated with the City to pick up materials, including air conditioning
    units, backstop poles, and fencing. He opined that the materials picked up by the City were
    already paid for.
    11
    On cross-examination by the City, Webb stated that RVSC had not met any of the
    deadlines as set out in the agreement and extensions and that he hired all the contractors
    and they answered to him. He said that the contractors billed RVSC and that he paid them.
    He stated that he did not send the contractors to the City to be paid because RVSC was
    responsible for paying them once the draw money came in. He testified that RVSC received
    payments from the City for the contract thresholds that were completed.
    On cross-examination by the contractors, Webb stated that the agreement with the
    City was drafted by the City’s attorneys. He said that the agreement set forth what RVSC
    could and could not do in developing the property as well as the design, the standards of
    construction, the time for completion, and the payment schedule. The agreement also
    waived a performance bond. He testified that the only money in RVSC’s account came from
    the City, with the exception of a refund for pallets and that the contributions from third
    parties were materials or materials at cost. Webb testified that the City monitored the work
    being performed, controlled all the money, inspected the work, and subsequently stopped
    the contract. He stated that the contractors performed all the work they invoiced and are
    owed all the money they are claiming. He said that the City gave RVSC authority to hire
    the contractors and that RVSC was going to benefit by being allowed to lease the property
    for ten years after completion. He said that RVSC received no payment or management
    fees. He opined that this was a collaboration between two parties.
    At the close of all evidence, the City renewed its motion, which the court again
    denied. The jury returned verdicts in favor of the contractors for the full amount of their
    12
    requested damages on both their breach-of-contract claims and their unjust-enrichment
    claims.3 The jury found in favor of RVSC on the City’s third-party claims. The parties
    agreed that the jury’s verdicts granting relief to the contractors on their breach-of-contract
    and unjust-enrichment claims were incompatible, and with the consent of the parties, the
    court entered judgment against the City on only the contractors’ breach-of-contract claims.
    The City now appeals.
    In reviewing a jury’s verdict, our appellate courts determine whether it is supported
    by substantial evidence.4 Substantial evidence is that which goes beyond suspicion or
    conjecture and is sufficient to compel a conclusion one way or the other. 5 In determining
    whether there is substantial evidence, we view the evidence and all reasonable inferences
    arising therefrom in the light most favorable to the party on whose behalf judgment was
    entered.6 It is not an appellate court’s province to try issues of fact; we simply examine the
    record to determine if there is substantial evidence to support the jury verdict. 7 The weight
    and value of testimony is a matter within the exclusive province of the jury.8
    3
    B&A Electric was awarded $151,880; Megehee Fence Contracting was awarded
    $14,926.88; Grimes Dozer Service was awarded $12,977.50; and James Griffith was awarded
    $20,337.50.
    4
    Hunter v. Keck, 
    2020 Ark. App. 233
    , 
    600 S.W.3d 109
    .
    5
    
    Id.
    6
    
    Id.
    7
    
    Id.
    8
    
    Id.
    13
    The City contends that the evidence was insufficient to support the jury’s verdict in
    favor of the contractors for their breach-of-contract claims. In order to prove a breach-of-
    contract claim, one must prove the existence of an agreement, breach of the agreement, and
    resulting damages.9 Here, the City contends— and the contractors concede— that there was
    no direct contract between the parties. At all relevant times, the City had an agreement with
    RVSC, and RVSC had agreements with the contractors.
    The contractors argue that RVSC was an agent for the City with direct authority to
    act and contract on the City’s behalf.          A party asserting the existence of an agency
    relationship has the burden of proving that an agency relationship exists.10 The two essential
    elements of an agency relationship are (1) that an agent has the authority to act for the
    principal and (2) that the agent act on the principal’s behalf and be subject to the principal’s
    control.11 The City contends that there is no evidence of an agency relationship between it
    and RVSC; however, the contractors list a number of things that they contend support the
    existence of such a relationship: (1) the City approved invoices before they were paid; (2)
    the City represented to B&A Electric that the City viewed the project as a collaboration
    between the City and RVSC; (3) the City took possession of job materials that were provided
    by the contractors but for which RVSC did not make payment; (4) the City retained all
    9
    Stone v. Read, 
    2022 Ark. App. 349
    .
    10
    Hardin v. Bishop, 
    2013 Ark. App. 395
    , 
    430 S.W.3d 49
    .
    11
    
    Id.
    14
    materials and improvements, regardless of whether the City had paid for them; (5) the City
    monitored the project regularly, including daily monitoring, on a frequent basis; (6) the City
    controlled distribution of money; (7) the City monitored RVSC’s checks and bank
    statements; (8) a city engineer would look at the work and approve it; (9) contractors
    submitted budgeting numbers directly to the City; (10) contractors and the City worked
    together to incorporate contractor figures into the City’s resolution and agreement; (11) the
    City chose to waive any performance bond and rely directly on the budget numbers provided
    by the contractors; and (12) a city employee and a city auditor met directly with contractors
    to review the work of the contractors. Despite the items listed by appellees to prove an
    alleged agency relationship between the City and RVSC, there was no evidence or testimony
    by any of the parties that RVSC was indeed the City’s agent. Although the City gave RVSC
    the authority to hire the contractors, it had little involvement concerning which contractors
    RVSC hired or how the contractors performed their jobs except for making inspections
    when thresholds were met. The City denied the existence of an agency relationship, and
    RVSC did not offer any testimony to support a finding of such a relationship. As a matter
    of fact, Webb testified that RVSC hired the contractors, that the contractors answered to
    RVSC, and that RVSC was responsible for paying them. Even if the contractors believed
    they had a contractual relationship with the City via their verbal contracts with RVSC, belief
    alone is not enough to support a finding that RVSC was an agent for the City.
    The City also maintains that there can be no apparent or implied agency authority
    imputed against it. The City is correct that an actual agency relationship has to exist, even
    15
    if it appeared that RVSC had the authority to bind the City. We have already determined
    that there was no actual agency relationship between the City and RVSC; therefore, because
    the City is a sovereign, there can be no apparent or implied agency relationship between the
    parties.12 Accordingly, the jury’s verdict in favor of the contractors’ breach-of-contract claims
    is not supported by substantial evidence, and we reverse and dismiss.
    Reversed and dismissed.
    ABRAMSON and GLADWIN, JJ., agree.
    Gilker & Jones, P.A., by: Michael R. Jones, for appellant.
    Walters, Allison, Parker & Estell, by: Derick Allison, for appellees.
    12
    See City of Bryant v. Collins, 
    2011 Ark. App. 713
    , 
    386 S.W.3d 699
    .
    16
    

Document Info

Citation Numbers: 2023 Ark. App. 24

Filed Date: 1/25/2023

Precedential Status: Precedential

Modified Date: 1/25/2023