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City of Fairmont v. West Virginia Municipal League, Inc.

Supreme Court of Appeals of West Virginia

January 13, 2020

City of Fairmont, Plaintiff Below, Petitioner
West Virginia Municipal League, Inc., Defendant Below, Respondent

          Marion County 12-C-102


         Petitioner City of Fairmont, by counsel S. Sean Murphy and Kevin V. Sansalone, appeals the September 6, 2018, order of the Circuit Court of Marion County that denied petitioner's motion to alter or amend its April 6, 2018, order that granted summary judgment to respondent, the West Virginia Municipal League, Inc., and denied petitioner's motion for partial summary judgment. Respondent, by counsel Brian K. Cochran, filed a response in support of the circuit court's order.

         The Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

         In 2007, petitioner ("Fairmont") had trouble with its water filtration system that led to a corrective action project in 2009. One part of the corrective action project, the "Train 5" upgrades, was to be funded through "The West Virginia Municipal League Lease/Purchase Program" (the "Program"). Respondent (the "Municipal League") and a financial services company, Comvest, Ltd., Inc. ("Comvest"), established the lease/purchase Program in 1996 and terminated it in 2010.

         Fairmont contacted Comvest and applied for financing for the Train 5 upgrades. There appears to be no evidence in the record below that Fairmont involved the Municipal League in its dealings with Comvest. Comvest approved Fairmont's application and, on September 8, 2009, entered into a "Master Equipment Lease/Purchase Agreement" (the "Agreement") with Fairmont. Under the Agreement, Fairmont was to order equipment from third-party vendors as it upgraded its water filtration plant. Upon delivery and acceptance of the equipment, Fairmont would send the vendor's bill to Comvest. The Agreement obligated Comvest to pay for the equipment, which had a projected total cost of $1, 070, 600. The Agreement gave Comvest a security interest in the water filtration equipment, and required Fairmont to send Comvest 180 monthly payments of $8, 244.84, totaling $1, 484, 071.20.

         On September 10, 2009, two days after Fairmont and Comvest signed the Agreement, Comvest assigned the Agreement to the Blue Ridge Bank (the "Bank"). That same day, the Bank wired Comvest $1, 070, 600.00. Comvest promptly notified Fairmont of the assignment and directed Fairmont to send its monthly $8, 244.84 payments to the Bank.

         In summary, at that point, the relationship between Fairmont, Comvest, and the Bank was as follows: (1) Petitioner Fairmont would order equipment from third-party vendors; (2) once Fairmont accepted the equipment, it would send the bill for the equipment to Comvest; (3) Comvest would pay the third-party vendor for the equipment using the money provided by the Bank; and (4) Fairmont would send the Bank the $8, 244.84 in monthly payments. The Municipal League was not involved in this arrangement between Fairmont, Comvest, and the Bank.

         From September 2009 to March 2010, Fairmont ordered equipment from various vendors and then sent the bills for the equipment to Comvest. Comvest paid $573, 054.42 to the vendors on Fairmont's behalf from the $1, 070, 600.00 it obtained from the Bank. However, on March 16, 2010, Fairmont discovered that Comvest had converted the remainder of the $1, 070, 600.00; Comvest then declared bankruptcy. As a result, Fairmont paid its vendors $506, 823.06[1] out of pocket for the rest of its equipment. Fairmont attempted to renegotiate its monthly lease/purchase payments to the Bank to recoup the $506, 823.06. However, the Bank refused to decrease the monthly payment amount.

         On March 15, 2012, Fairmont filed a declaratory judgment action against the Municipal League and the Bank.[2] Fairmont twice amended its complaint. The first three counts of Fairmont's second amended complaint regard the Municipal League. In Count I, Fairmont alleged the Municipal League was jointly and severally liable for all the obligations of Comvest, including the obligations under the program agreement and the lease/purchase agreement. In Count II, Fairmont alleged the Municipal League was negligent in the sponsorship, marketing, and endorsement of Comvest and the Program.[3] In Count III, Fairmont alleged the Municipal League breached the terms and conditions of the Agreement between Fairmont and Comvest. For each of the first three Counts, Fairmont sought to recover the $506, 823.06 it did not receive from Comvest.[4] Fairmont also sought punitive damages.

         Count VI of Fairmont's complaint was a claim against the Bank. Fairmont sought a ruling that it did not have to pay the Bank the $506, 823.06 converted by Comvest. The Bank filed an answer and a counterclaim demanding judgment for Fairmont's missed monthly payments, attorney's fees, and the cost of any repossession of Fairmont's equipment.

         The Bank removed Fairmont's action to the bankruptcy court where it languished for nearly three years, despite Fairmont's motions to have the case remanded to the circuit court. Fairmont filed a notice of claim in the bankruptcy court for $506, 823.06. On March 6, 2015, the bankruptcy court awarded Fairmont $4, 738.42 from Comvest's estate. The bankruptcy court subsequently remanded the case back to the circuit court.

         In the circuit court, both Fairmont and the Bank moved for summary judgment. On April 24, 2016, the circuit court granted summary judgment to Fairmont on its claims against the Bank, thereby reducing Fairmont's liability to the Bank by $506, 823.06. The Bank appealed. On November 14, 2017, this Court affirmed the circuit court's order. See Blue Ridge Bank, Inc. v. City of Fairmont, 240 W.Va. 123, 807 S.E.2d 794 (2017). Accordingly, Fairmont did not have to pay the Bank the $506, 823.06 that Comvest converted.

         In the instant case, involving Fairmont and the Municipal League, the Municipal League filed a motion for summary judgment to dismiss all of Fairmont's claims. Fairmont countered with a motion for partial summary judgment asking the circuit court to find that the Municipal League and Comvest were engaged in a joint venture, and that the Municipal League was liable for any loss suffered by Fairmont due to Comvest's wrongful acts.

         By order dated April 6, 2018, the circuit court granted summary judgment to the Municipal League and denied Fairmont's motion for partial summary judgment. The circuit court found that Fairmont could not "'make a sufficient showing on [the] essential element of [damages] that it has the burden to prove' as there are no actual/compensable damages to be determined by a jury." Regarding an award of attorney's fees, the circuit court found that "the Municipal League is not a losing party. Liability has only been determined against [the] Bank, and further, the entire amount of damages sought against [the Bank or the Municipal League] has been fully recovered as a result of the judgment entered against [the] Bank." "[A]s full recovery of compensable damages has been awarded against [the] ...

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