Stephen A. Callahan v. Ewm Services, LLC ( 2021 )

RENDERED: MARCH 26, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0433-MR
STEPHEN A. CALLAHAN APPELLANT
APPEAL FROM WEBSTER CIRCUIT COURT
v. HONORABLE C. RENÉ WILLIAMS, JUDGE
ACTION NO. 18-CI-00035
EWM SERVICES LLC APPELLEE
AND NO. 2020-CA-0443-MR
EWM SERVICES LLC APPELLANT
CROSS-APPEAL FROM WEBSTER CIRCUIT COURT
v. HONORABLE C. RENÉ WILLIAMS, JUDGE
ACTION NO. 18-CI-00035
STEPHEN A. CALLAHAN AND
SR PAYNE, D/B/A PAYNE & SON
SERVICES APPELLEES
OPINION
REVERSING AND REMANDING
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BEFORE: GOODWINE, TAYLOR, AND K. THOMPSON, JUDGES.
GOODWINE, JUDGE: Stephen A. Callahan (“Callahan”) appeals a judgment of
the Webster Circuit Court finding EWM Services LLC (“EWM”) was entitled to
damages under the theory of unjust enrichment. EWM cross-appeals arguing it
was entitled to prejudgment interest. Finding error, we reverse and remand.
BACKGROUND
In 2017, Callahan hired SR Payne d/b/a Payne & Son Services
(“Payne”) to provide water hauling services from an oil well operated by Callahan.
Although Callahan previously hired EWM in 2015 to provide water hauling
services, he did not contact EWM in 2017 to provide any services.
In October 2017, Payne contacted EWM requesting it perform water
hauling services from the Callahan well. Callahan asserted he did not direct or
authorize Payne to hire EWM to provide those services and maintained Payne
lacked authority to hire EWM on Callahan’s behalf.
Upon receiving invoices from EWM totaling $8,945 for hauling water
from the Callahan well, Callahan notified EWM verbally and in writing that he had
not hired EWM to provide the services. Callahan further advised EWM that he
agreed to pay Payne $245 per 110-barrel load and tendered a check to EWM for
$4,410 for the 1,970 barrels of water hauled from the Callahan well by EWM. The
memo line advised the check was payment in full for the services provided.
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Steven Gough (“Gough”), owner of EWM, asserted that in 2015, he
hauled water for Callahan at his standard rate of $90 per hour, which Callahan
paid. Gough further testified he charged the same rate for the services provided in
2017 for a total of $8,945. When Callahan tendered a check for only $4,410 with
language in the memo section stating “payment in full,” Gough refused to cash the
check and retained counsel.
On March 15, 2018, EWM filed a complaint in the Webster Circuit
Court against Callahan and Payne alleging EWM was owed $8,945 for water
hauling services upon a business property owned by Callahan. On December 26,
2019, approximately one month before trial, EWM moved to amend its complaint
to include a claim for unjust enrichment under the doctrine of quantum meruit. On
January 2, 2020, three weeks before the trial, the circuit court heard the matter.
Callahan objected to the filing of the amended complaint, arguing it was untimely
and prejudicial. Despite Callahan’s objection, the circuit court granted EWM’s
motion to amend the complaint.
Callahan and Payne then filed answers to the amended complaint. In
its answer, Payne notified the court that it had filed for bankruptcy and asked to be
dismissed as a party. Although an order dismissing Payne was never entered, the
parties acknowledged Payne was no longer a party during the hearing on the
motion to amend the complaint.
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A jury trial was held on January 23, 2020. The only witnesses were
Callahan and Gough. Payne did not participate in the trial. At the close of
evidence, counsel for the parties met with the court in chambers to discuss jury
instructions. Counsel agreed to Instruction No. 1 and Instruction/Special Verdict
No. 2 concerning a contract claim. However, counsel for Callahan objected to
Instruction/Special Verdict No. 3, which instructed the jury on the elements of
unjust enrichment. Counsel for Callahan argued EWM attempted to add unjust
enrichment as a new claim on the day of trial. Counsel for EWM argued the
instruction on unjust enrichment was needed to conform the evidence introduced at
trial to the pleadings. However, as discussed above, this claim was added when the
circuit court granted EWM’s motion to amend the complaint weeks earlier. Thus,
the circuit court overruled Callahan’s objection and allowed Instruction/Special
Verdict No. 3 to be submitted to the jury.
The jury returned a verdict finding there was no contract between the
parties under Instruction/Special Verdict No. 2. However, the jury found in favor
of EWM under Instruction/Special Verdict No. 3, which contained the elements of
unjust enrichment. Because the jury found for EWM under Instruction/Special
Verdict No. 3, it did not make a determination under Instruction/Special Verdict
No. 4, which concerned the quantum meruit claim. The jury awarded EWM
damages in the full claimed amount of $8,945.
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Following trial, EWM filed a motion to enter a trial order and
judgment and for an award of prejudgment interest at the rate of six percent from
the date of the last invoice to the date of the verdict, totaling $1,188.09. Callahan
filed a response objecting to Instruction/Special Verdict No. 3 and the entry of the
trial order and judgment. Callahan also argued, for the first time, that unjust
enrichment was an equitable claim that should have been decided by the court and
not the jury. He also objected to an award of prejudgment interest.
On February 25, 2020, the circuit court entered a final order adopting
the trial order and judgment in favor of EWM, but it denied EWM’s request for
prejudgment interest because EWM’s damages were unliquidated. This appeal and
cross-appeal followed.
ANALYSIS
I. CALLAHAN’S APPEAL
On appeal, Callahan argues the circuit court erred in (1) allowing
EWM to amend its complaint; (2) allowing the jury to try the unjust enrichment
claim; and (3) finding the elements of unjust enrichment were satisfied.
First, Callahan argues the circuit court erred in allowing EWM to
amend the complaint. Callahan asserts he was prejudiced when the circuit court
granted EWM’s motion to amend the complaint approximately three weeks prior to
trial. It is Callahan’s position that the claim for quantum meruit was added at that
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time, but he argues the claim for unjust enrichment was not added until after the
close of evidence during the trial. However, based on our review of the record, it
is clear the claim for unjust enrichment was included in the amended complaint
three weeks prior to trial. The amended complaint provides, “As a result of the
actions herein, Defendant Stephen A. Callahan acquired an unjust enrichment and
[EWM] is entitled to reasonable compensation for his rendered services under the
doctrine of quantum meruit.” Record at 49. Furthermore, during the hearing,
counsel for EWM stated, “We’re moving to amend the complaint to add the
element of unjust enrichment for the defendant under the concept of quantum
meruit.” Video Record, 1//2/2020 at 9:06:54-9:07:04.
The question before us is whether the circuit court abused its
discretion in granting EWM’s motion to amend the complaint three weeks prior to
trial. “It is within the trial court’s discretion to grant or deny a motion to amend a
pleading, and on appellate review, its decision should not be disturbed unless the
trial court abused that discretion.” Nichols v. Zurich American Ins. Co., 423
S.W.3d 698, 707 (Ky. 2014) (citation omitted). “The test for abuse of discretion is
whether the trial judge’s decision was arbitrary, unreasonable, unfair, or
unsupported by sound legal principles.” Goodyear Tire and Rubber Co. v.
Thompson, 11 S.W.3d 575, 581 (Ky. 2000) (citing Commonwealth v. English, 993
S.W.2d 941, 945 (Ky. 1999)).
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Kentucky Rule of Civil Procedure (CR) 15.01 sets forth the conditions
under which a complaint may be amended. CR 15.01 provides:
A party may amend his pleading once as a matter of
course at any time before a responsive pleading is served
or, if the pleading is one to which no responsive pleading
is permitted and the action has not been placed upon the
trial calendar, he may so amend it at any time within 20
days after it is served. Otherwise a party may amend his
pleading only by leave of court or by written consent of
the adverse party; and leave shall be freely given when
justice so requires. A party shall plead in response to an
amended pleading within the time remaining for response
to the original pleading or within 10 days after service of
the amended pleading, whichever period may be longer,
unless the court otherwise orders.
In Kenney v. Hanger Prosthetics & Orthotics, Inc., 269 S.W.3d 866,
869-70 (Ky. App. 2007), this Court compiled the factors a circuit court may
consider when presented with a motion to amend the complaint:
In determining whether to grant a motion to amend a
party’s complaint, a circuit court “may consider such
factors as the failure to cure deficiencies by amendment
or the futility of the amendment itself.” First National
Bank of Cincinnati v. Hartman, 747 S.W.2d 614, 616
(Ky. App. 1988). Other factors include whether
amendment would prejudice the opposing party or would
work an injustice. See Shah v. American Synthetic
Rubber Corp., 655 S.W.2d 489, 493 (Ky. 1983).
Ultimately, whether a party may amend his complaint is
discretionary with the circuit court, and we will not
disturb its ruling unless it has abused its discretion.
Lambert v. Franklin Real Estate Co., 37 S.W.3d 770, 779
(Ky. App. 2000).
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Here, Callahan asserts the motion to amend was not timely as it was
filed three weeks before trial, which was nearly two years after the original
complaint was filed. He further argues he was prejudiced by the addition of the
unjust enrichment claim following the close of evidence at trial because he did not
have time to prepare a defense to EWM’s unjust enrichment claim. Despite this
contention, the unjust enrichment claim was clearly added when the circuit court
granted EWM’s motion to amend the complaint weeks earlier. Although Callahan
objected EWM’s motion to amend the complaint prior to trial, he also
acknowledged he was not surprised to see the claims in EWM’s amended
complaint at the hearing and never requested a continuance to prepare a defense to
the amended complaint. The record indicates Callahan was not prejudiced by the
addition of the unjust enrichment claim weeks before trial.
Furthermore, the addition of the unjust enrichment claim was not
futile and cured a deficiency in the original complaint. To prevail on a claim for
unjust enrichment, a plaintiff must prove: “(1) benefit conferred upon defendant at
plaintiff’s expense; (2) a resulting appreciation of benefit by defendant; and (3)
inequitable retention of benefit without payment for its value.” Jones v. Sparks,
297 S.W.3d 73, 78 (Ky. App. 2009) (citation omitted). The evidence presented
indicated the likelihood that there was no contract between Callahan and EWM but
that Callahan received a benefit from the services provided by EWM. EWM
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provided water hauling services for Callahan, which allowed his gas wells to
continue to run, and Callahan did not remit payment for the full value of EWM’s
services. As such, we hold the circuit court did not abuse its discretion in granting
EWM’s motion to amend the complaint.
Next, we turn to Callahan’s argument that the circuit court should
have decided the unjust enrichment claim instead of the jury. Callahan did not
raise this argument before the instructions were submitted to the jury. Instead, he
raised this argument for the first time in his objection to EWM’s motion for entry
of the trial order and judgment. He argued unjust enrichment is an equitable claim
that should have been decided by the court.
On appeal, Callahan reasserts unjust enrichment is an equitable issue
that must be decided by the court. He further argues he did not have time to
determine whether unjust enrichment was an issue for the jury or court to decide
because unjust enrichment was raised for the first time after the close of evidence
and again asserts he was prejudiced by the late addition of that claim. Conversely,
EWM argues Callahan never requested the circuit court adjudicate the unjust
enrichment claim, and therefore, he impliedly consented to the jury determining
the outcome of the unjust enrichment claim instead of the circuit court.
“Equitable claims, such as unjust enrichment, are heard and decided
by the trial court, not the jury.” Superior Steel, Inc. v. Ascent at Roebling’s Bridge,
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LLC, 540 S.W.3d 770, 782 (Ky. 2017) (citing Steelvest, Inc. v. Scansteel Serv. Ctr.,
Inc., 908 S.W.2d 104, 108 (Ky. 1995)). However, “there may be factual issues that
are capable of jury determination before application of an equitable remedy, but
there is no entitlement to a jury trial on an unjust enrichment claim.” Id. (citing
Steelvest, Inc., 908 S.W.2d at 107-09).
CR 39.03 provides guidance on whether the circuit court appropriately
permitted the jury to decide the unjust enrichment claim:
In all actions not triable of right by a jury the court upon
motion or of its own initiative may try any issue with an
advisory jury; or the court, with the consent of all parties
noted of record, may order a trial with a jury whose
verdict has the same effect as if trial by jury had been a
matter of right.
Under the current version of CR 39.03, “the consent must be noted of record, or, in
other words, expressed consent is required.” Emerson v. Emerson, 709 S.W.2d
853, 855 (Ky. App. 1986) (citing 7 BERTELSMAN & PHILLIPS, KENTUCKY
PRACTICE, CR 39.03, Comment 2 (4th ed. 1984)). When an equitable claim, such
as unjust enrichment, is before the court “absent expressed consent, the jury is
advisory only, regardless of what the court may characterize it.” Id. (citation
omitted). The circuit court may accept or reject the findings of the advisory jury,
but it “must make findings of fact and conclusions of law pursuant to CR
52.01.” Id. (citation omitted).
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Here, Callahan did not give his express consent for the trial court to
permit the jury’s verdict to have the same effect as if the jury had been a matter of
right. Therefore, the jury’s verdict was merely advisory in this instance. As in
Emerson, “if the court agreed with the panel, it should have . . . made its findings
and conclusions in conformity with the verdict” as required by CR 52.01. Id. We
must reverse the trial court’s finding that EWM was unjustly enriched and remand
with instructions to enter findings of facts and conclusions of law as to whether
EWM presented evidence satisfying all elements of an unjust enrichment claim.
Third, Callahan argues EWM’s claim failed to satisfy all elements of
unjust enrichment. As the circuit court failed to make required findings under CR
52.01, we need not address Callahan’s argument. The circuit court will make this
determination on remand.
II. EWM’S CROSS-APPEAL
Finally, we address EWM’s cross-appeal. EWM argues it was
entitled to an award of prejudgment interest. In its order denying an award of
prejudgment interest, the circuit court seemed to find that because the damages
claimed by EWM were unliquidated, prejudgment interest could not be awarded.
Although there is a distinction between liquidated and unliquidated damages, the
mere fact that damages are unliquidated is not a bar to an award of prejudgment
interest. Claims are liquidated when they are “of such a nature that the amount is
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capable of ascertainment by mere computation, can be established with reasonable
certainty, can be ascertained in accordance with fixed rules of evidence and known
standards of value, or can be determined by reference to well-established market
values.” Hall v. Rowe, 439 S.W.3d 183, 188 (Ky. App. 2014) (citation omitted).
When a party states a claim for liquidated damages, “[t]he longstanding rule in this
state is that prejudgment interest is awarded as a matter of right.” Id. (citation
omitted). Conversely, when a party makes a claim for unliquidated damages, “the
question of allowance of prejudgment interest is a matter addressed to the Court in
its sound discretion.” Nucor Corp. v. General Elec. Co., 812 S.W.2d 136, 140
(Ky. 1991) (internal quotation marks omitted).
EWM was entitled to prejudgment interest as a matter of right because
its damages arise from a liquidated claim. EWM sent Callahan invoices in the
amount of $8,945, which was easily computed by multiplying its rate of $90 per
hour times the number of hours of work performed plus the sum of the salt water
disposal fees. In its complaint, EWM requested damages in the amount of $8,945,
which the jury awarded. As such, we reverse the circuit court’s finding that EWM
was not entitled to prejudgment interest. On remand, if the circuit court enters
findings of fact and conclusions of law in favor of EWM on its unjust enrichment
claim, then it must enter an award of prejudgment interest.
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CONCLUSION
For the foregoing reasons, we reverse the judgment of the Webster
Circuit Court and remand with instructions to make findings of fact and
conclusions of law as required by CR 52.01. If the circuit court agrees with the
jury’s finding that Callahan was unjustly enriched when EWM provided water
hauling services without paying the full amount of EWM’s invoice, then the court
must award EWM prejudgment interest.
ALL CONCUR.
BRIEFS FOR APPELLANT/ BRIEF FOR APPELLEE/
CROSS-APPELLEE: CROSS-APPELLANT EWM
SERVICES LLC:
John H. Henderson, III
Evansville, Indiana Wm. Clint Prow
Providence, Kentucky
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