Randy robb v. Bond Purchase, LLC

In the Missouri Court of Appeals
Western District
RANDY ROBB, et al., )
Appellant-Respondents, ) WD81562
v. ) Consolidated with WD81601
)
BOND PURCHASE, L.L.C., ) FILED: June 25, 2019
Respondent-Appellants. )
APPEAL FROM THE CIRCUIT COURT OF CLAY COUNTY
THE HONORABLE JANET SUTTON, JUDGE
BEFORE DIVISION ONE: VICTOR C. HOWARD, PRESIDING JUDGE,
LISA WHITE HARDWICK AND GARY D. WITT
This appeal and cross-appeal arise from a judgment entered in favor of Randy
Robb and his related corporate entities1 (collectively “Robb”) on breach of contract
and tort claims brought against Bond Purchase, LLC and its majority owner David
Johnson (“collectively, Bond”). Bond brings nine points on appeal challenging the
circuit court’s award of $34,353.29 in damages to Robb and the denial of Bond’s
counter-claims. Robb cross-appeals with two points challenging the circuit court’s
1
Robb’s related corporations are Hillcrest, Inc., Thistle Hill Development, Inc., and Crest
Construction, Inc. This opinion collectively refers to Randy Robb and his related corporate entities
as “Robb” because their interests, for purposes of this case, are singular. When necessary to show
individual action, we will refer to the specific corporations by name and to Randy Robb as “Randy.”
calculation of damages. For reasons explained herein, we affirm in part, reverse in
part, and remand for proceedings consistent with this opinion.
FACTUAL AND PROCEDURAL HISTORY
On October 7, 2011, Bond executed a promissory note (“the 2011 Hillcrest
Note”) loaning $150,000 to Robb through his corporate affiliate, Hillcrest, Inc.
(“Hillcrest”). The note provided that the maturity date of the loan would be April 7,
2012, and that Robb would make monthly, interest-only payments at a rate of
12%. The note was secured by a second deed of trust against a commercial strip
center property owned by Hillcrest and provided for multiple remedies, including
increased interest rates and late fees, if Hillcrest were to default on its terms.
Robb did not make the maturity payment as required by the terms of the
2011 Hillcrest Note on the April 7, 2012, due date. In a letter addressed to Robb
dated July 27, 2012, one of Bond’s minority owners and bookkeeper, John Alvey,
wrote that Robb had “paid a $750 extension fee and agreed that Hillcrest will begin
to make payments toward principal.” The letter requested that a $50,000 principal
reduction be made with Robb’s September payment. Robb, instead, made two
$25,000 payments for principal reductions, one in December 2012 and another in
July 2014, and consistently paid monthly interest at the 12% rate originally
specified. Bond issued monthly statements recognizing these payments of principal
and interest, without assessing any late fee or increase in interest. These
statements were provided until at least June 29, 2015.
2
On or about July 15, 2014, Bond and Robb executed three new promissory
notes (“collectively, the 2014 Notes”) involving Robb’s corporate affiliates. In
these notes, Bond extended an additional $40,000 to Hillcrest, $75,000 to Thistle
Hill Development, Inc. (“Thistle”), and $57,000 to Crest Construction, Inc.
(“Crest). These notes all had a maturity date of July 15, 2017, and provided that
Robb would pay yearly, interest-only payments at a rate of 10%. These notes had
similar provisions concerning Bond’s rights if Robb were to default on the terms of
the loan. Each promissory note was secured by a security agreement pledging
shares of Clay County Savings Bank Financial Corp. (“CCSB”) stock. Robb pledged
23,007 CCSB shares in total, assigned as follows: 5,332 shares from Hillcrest,
10,000 shares from Thistle, and 7,675 shares from Crest. The parties agreed that
the Hillcrest shares would cross-collateralize the 2011 Hillcrest Note.
The total interest payment of $17,200 owed on the 2014 Notes was not
made on the due date of July 15, 2015. Robb, however, remained current during
this time on the 2011 Hillcrest Note, making 12% interest payments in June, July,
and August of that year. After the interest on the 2014 Notes was not timely
tendered, Robb notified Alvey, who in turn informed Johnson, that he was
contemplating selling the CCSB shares securing the four notes to satisfy the
corporate entities’ indebtedness to Bond. On August 5, 2015, Johnson sent an
email to Robb asking for confirmation that Robb was interested in selling the stock
and inquired into the potential buyer’s identity and offer price. Ten days later, and
after Robb attempted to set up a meeting with Johnson, Johnson sent another
3
email recognizing that Robb had made the June interest payment for the 2011
Hillcrest Note but still owed outstanding interest on the 2014 notes. In that email,
Johnson calculated the total outstanding balance on all four notes at $289,200, as
of July 15, 2015, and offered to reduce the total amount owed to $60,000 if Robb
agreed to sign over the 23,007 shares securing the four notes at $10.00 per
share.2
In September 2015, Robb met with the president of CCSB and Clay County
Savings Bank (“the Bank”), Mario Usera, to inquire if the Bank would be willing, as
had been its usual practice, to buyback the stock issued to Robb. Usera expressed
interest in the arrangement because the negotiated $11.00 per share price was
two or three dollars less than the book value of the stock and CCSB shares were
traded infrequently and were rarely, if ever, available in such large blocks.
Consequently, Usera agreed in principle that the Bank would purchase the shares if
Robb could provide an official accounting of the pay-off amount necessary to take
the shares free and clear of Bond’s security interest.
Robb thereafter met with Alvey on September 18, 2015, and requested that
Bond provide loan pay-off statements. Alvey did not provide any such statement.
Instead, on September 24, 2015, at the direction of Johnson, Alvey sent Robb a
notice informing Robb that all four notes were in default and Bond was exercising
2
We recognize that the August 2015 email misstated the total shares held as collateral for the four
promissory notes. Johnson’s email stated that Bond held a total of 23,005 shares. This
misstatement has no bearing on the issues before this Court.
4
its right to impose the increased default interest rate of 21% and to accelerate all
sums of outstanding principal, late fees, and accrued interest.
On October 8, 2015, Robert Thomson, another minority owner of Bond and
the company’s in-house attorney, notified Robb that Bond intended to sell the
CCSB stock at a Uniform Commercial Code (“UCC”) foreclosure sale. The
notification included the notice of default sent previously by Alvey and both letters
provided that “You are entitled to an accounting of the unpaid indebtedness
secured by the Collateral that is intended to be sold. You may request an
accounting by calling us . . . .” After receiving this notice, Robb attempted to
contact Bond and Thomson several times, both by phone and by appearing in
person at Thomson’s office. Bond repeatedly failed to provide the requested
statements of accounting.
In the absence of the requested pay-off statements, Robb and Usera agreed
that CCSB would loan Robb the funds to discharge his indebtedness, on the
condition that Bond would release the CCSB shares free and clear of any lien.
CCSB agreed that it would then repurchase the stock at $10.00 per share. CCSB
estimated the pay-off amount for the four notes would total $312,000. This
calculation included the default interest, but did not include any fees that might
have arisen from administering the note and alleged default. Accordingly, CCSB
authorized Robb to borrow no more than $325,000, which CCSB believed would
cover both the balance of the loan and any additional reasonable fee or charge that
was assessed by Bond.
5
Bond did not provide a pay-off statement until December 9, 2015, which
was three business days prior to the scheduled date of the December 15, 2015,
foreclosure sale. The pay-off was calculated as of December 4, 2015, and totaled
$432,238. This was a $120,238 difference from CCSB’s estimated pay-off
amount and resulted from Bond’s assessment of the following additional charges:
(1) a $7,500 late fee on the full $150,000 principal balance of the 2011 Hillcrest
Note, which was compounded monthly at an interest rate of 21%; (2) a default
interest rate of 21% on the $150,000 principal balance from April 7, 2012; (3) a
combined late fee charge of $9,972 on the 2014 Notes; and (4) $27,249.00 in
legal fees for work related to the note completed by Thomson and outside counsel
at Dentons US LLP.
CCSB refused to authorize the additional $120,238 necessary for the release
and Thistle and Crest’s shares were sold at the foreclosure sale for $71,000 and
$54,000, respectively, while the sale of Hillcrest’s shares were stayed by Chapter
11 bankruptcy proceedings. Bond subsequently purchased Hillcrest’s shares for
$54,632.50 at a Chapter 11 bankruptcy sale.
After the sale of Thistle and Crest’s shares at the foreclosure sale and
Bond’s acquisition of Hillcrest’s shares, Bond continued to assert that Robb had an
outstanding balance remaining on the notes. Consequently, Robb made a payment
of $228,730.61 to prevent the foreclosure sale of the commercial strip center
property that originally secured the 2011 Hillcrest Note. Both parties, however,
reserved the right to assert claims against one another.
6
Robb filed a petition in circuit court seeking a declaratory judgment regarding
amounts owed under the promissory notes and asserting claims against Bond for
breach of implied covenant of good faith and tortious interference. Bond filed
counterclaims seeking a deficiency judgment based on Robb’s alleged breach of the
promissory notes and guaranties. Following a bench trial in October 2017, the
circuit court determined, inter alia, that Bond had breached the implied covenant of
good faith and fair dealing, tortiously interfered with Robb’s contract or business
expectancy, and had disposed of the shares securing the notes in a commercially
unreasonable manner. Further, the court ruled that Bond was not entitled to any
deficiency judgment and, instead, entered judgment in favor of Robb, awarding
$34,353.29 in damages. The court subsequently denied Robb’s motion to amend
the judgment. Bond appeals and Robb cross-appeals.
STANDARD OF REVIEW
“On review of a court-tried case, an appellate court will affirm the circuit
court's judgment unless there is no substantial evidence to support it, it is against
the weight of the evidence, or it erroneously declares or applies the law.” Ivie v.
Smith, 439 S.W.3d 189, 198-99 (Mo. banc 2014) (citing Murphy v. Carron, 536
S.W.2d 30, 32 (Mo. banc 1976)). While we defer to the circuit court’s factual
findings, the court’s legal conclusions and application of law to fact are reviewed
7
de novo. Zweig v. Metro. St. Louis Sewer Dist., 412 S.W.3d 223, 231 (Mo. banc
2013).
The interpretation of a contract presents a question of law subject to our de
novo review. Belton Chopper 58, LLC v. N. Cass Dev., LLC, 496 S.W.3d 529,
532 (Mo. App. 2016). “When we conduct a de novo review, ‘the judgment may
be affirmed on an entirely different basis than that presented to the trial court’ and
‘can be affirmed on any theory that is supported by the record.’” Id. (quoting
Hensley–O'Neal v. Metro. Nat. Bank, 297 S.W.3d 610, 614 (Mo. App. 2009)).
ANALYSIS
I. Bond’s Appeal
A. Modification of Promissory Note
In Point I, Bond contends that the circuit court erred in relying on the July
27, 2012, letter and testimony regarding an extension of the 2011 Hillcrest Note
because such evidence of modification violated the Statute of Frauds. As codified
at Section 432.047.2, RSMo Cum. Supp. 2012,3 the Missouri Commercial Credit
Agreement Statute of Frauds, precludes actions and defenses on a credit
agreement, regardless of the legal theory, unless the underlying agreement is in
writing.
We cannot consider the merits of this argument because Bond failed to
preserve it for appeal. Despite pleading an affirmative defense for statute of
3
All statutory references are to the Revised Statutes of Missouri as updated by the 2012
Cumulative Supplement.
8
frauds, Bond did not object at trial when Robb presented the July 27, 2012, letter
evidencing the extension between the parties and testimony about the terms of the
oral modification. Even when the statute of frauds is properly pled, “failure to
object to offered evidence of the oral agreement constitute[s] a waiver of the
protection of the statute.” Crawford v. Detring, 965 S.W.2d 188, 192 (Mo. App.
1998) (internal citation and quotations omitted).4 Because there was no
contemporaneous objection at the time Robb presented evidence of an oral
modification, Bond waived its statute of frauds defense under Section 432.047.2
and, consequently, preserved nothing for appeal. Bond’s first point is denied.5
In its second point on appeal, Bond argues that the circuit court erred in
finding that it waived enforcement of terms in the 2011 Hillcrest Note prior to its
formal notice of default because, even if Section 432.047.2 did not preclude
Robb’s actions and defenses, the plain language of the note required that any
modification or waiver of its terms be specifically set forth in writing. Bond
contends that nothing in the record reveals a written waiver expressing any
forfeiture of its right to enforce the terms of the note.
The waiver provision of the 2011 Hillcrest Note stated, in pertinent part:
4
While Crawford addressed the general statute of frauds, our determination that Bond has failed to
preserve its first allegation of error is consistent with the general rule that in order to preserve an
issue for appeal the party must make a timely and specific objection at trial stating the particular
grounds it later seeks to advance on appeal. See Catroppa v. Metal Bldg. Supply, Inc., 267 S.W.3d
812, 816 (Mo. App. 2008).
5
Bond’s sub-argument in its first point on appeal – asserting that because Hillcrest failed to make a
$50,000 principal payment by the date requested in the modification letter, Bond was released of
any contractual obligation set forth in the alleged modification – also was not preserved and is
improper because it was not raised in the Point Relied On. Rule 84.04(e).
9
No delay or omissions by Lender to exercise any right, remedy,
privilege or power hereunder or under any other Loan Document shall
impair such right, remedy, privilege or power or be construed to be a
waiver of any default or acquiescence therein, and any single or partial
exercise of any such right, remedy, privilege or power shall not
preclude other or future exercise thereof or the exercise of any other
right, remedy, privilege or power, and no waiver whatsoever shall be
valid unless in writing signed by Lender, and then only to the extent in
such writing specifically set forth. All remedies herein or by law
afforded shall be cumulative and not alternative, and all shall be
available to Lender until this Note has been paid in full.
The circuit court determined that Bond had either waived its right to enforce the
promissory note or was estopped from doing so prior to formal notice of default
because Bond directed Alvey to send monthly written acknowledgments
recognizing that the maturity date for the note had been extended, that timely
interest payments were paid by Robb, and that two principal reductions had been
made. The circuit court also found that these letters included reminders of the due
date for the next 12% interest rate payment and noted the remaining principal
balance, without ever referencing or imposing the $7,500 late fee or the 21%
interest rate.
“Waiver is the intentional relinquishment of a known right.” Horne v. Ebert,
108 S.W.3d 142, 147 (Mo. App. 2003) (emphasis in original). “Where there is no
express declaration of waiver, there must be a clear, unequivocal, and decisive act
showing waiver implied by conduct.” Star Dev. Corp. v. Urgent Care Assocs., Inc.,
429 S.W.3d 487, 494 (Mo. App. 2014) (internal citation and quotations omitted).
“While a party's conduct can result in waiver of a contractual right, the conduct
10
must be so manifestly consistent with and indicative of an intention to renounce a
particular right or benefit that no other reasonable explanation of [the] conduct is
possible.” Horne, 108 S.W.3d at 147 (alteration in original) (internal citations and
quotations omitted).
The record supports the circuit court’s determination that Bond’s course of
conduct expressly evidenced an intent to extend the contract with Robb and
temporarily waive its rights upon default. The first of the letters sent from Alvey,
stated:
Please see the attached calculation showing $200.00 of unpaid
interest. The schedule also calculates the interest due on August 7th
and September 7th.
You also paid a $750.00 extension fee and agreed that Hillcrest will
begin to make payments toward principal. Accordingly, please make a
$50,000 principal payment with the September 7, 2012 payment.
Bond continued to express approval of the extension in subsequent letters by
referencing payments either paid or owed by Robb at 12% interest, while never
expressing Bond’s intention to reserve the right to call the note in default. Bond
argues that the waiver provision of the original promissory note, set forth supra,
requires that we find that the text of the letters insufficient to waive the right to
enforce a late fee and default interest because they do not contain a specific,
written waiver of those rights.
In support of its contention, Bond cites Luck “E” Strike Corp. v. First State
Bank of Purdy, 75 S.W.3d 828, 830 (Mo. App. 2002), wherein a borrower
11
executed a loan agreement on three separate Small Business Administration loans.
The loan agreement had a waiver provision similar to Bond’s that required all
modifications or waivers to be evidenced in writing to be effective. Id. Shortly
after executing those agreements, the borrower had difficulty making timely
payments and incurred approximately 82 late fees totaling nearly $35,000. Id.
Attempting to avoid additional late fees, the borrower executed two modifications
that deferred certain missed payments until the maturity date of two of the loans.
Id. at 830-31. After another lender requested the pay-off amount from First State
Bank, the borrower received pay-off amounts that included several late fees, which
the borrower contended had been assessed in error because First State Bank had
waived its right to collect such fees. Id. at 831-32.
The borrower in Luck “E” Strike averred “that the two modification
agreements, the loan balance documents provided by [First State Bank to the
borrower], an auditor's statement prepared by [First State Bank] and submitted to
[the borrower’s] auditors, and an alleged statement by [an agent of First State
Bank] that he would ‘take care of the problem’ show[ed] that [First State Bank]
implicitly waived its right to collect the late fees.” Id. at 833. In denying the
borrower’s assertion however, the appeals court found these allegations were
insufficient to demonstrate waiver because the First State Bank had repeatedly
expressed its intention to collect late fees, under the terms of the original loan
agreements, throughout the modification process. Id. Importantly, the
modification documents provided that the borrower would “comply with the other
12
terms of said promissory note and deed of trust[,]” and that the note “as modified
by this agreement . . . is hereby ratified and confirmed.” Id. Further, unlike the
circumstances presented here, the Luck “E” Strike court specifically noted the
borrower’s testimony that it was aware of the late fees prior to receiving the
bank’s pay-off documents and that it had engaged in “ongoing discussions”
regarding the payment of late fees throughout the modification process. Id.
While Luck “E” Strike supports Bond’s proposition that a lender need not
continually and explicitly reiterate its intention to reserve contractual remedies, Id.
at 834-35, it should not be read to mean that a contract with a no-oral waiver
provision creates an unassailable firewall against future oral waiver. Indeed, the
circuit court properly recognized that “[p]arties to a contract cannot, even by an
express provision in that contract, deprive themselves of the power to alter or vary
or discharge it by subsequent agreement.” Fritts v. Cloud Oak Flooring Co., 478
S.W.2d 8, 14 (Mo. App. 1972) (alteration in original) (internal citation and
quotations omitted). This remains true even if the subsequent agreement is made
orally and, “[i]n like manner, a provision that an express condition of a promise or
promises in the contract cannot be eliminated by waiver, or by conduct constituting
an estoppel, is wholly ineffective.” Id. (internal citation and quotations omitted).
Here, the court had evidence of a second agreement or modification
expressing an intention to extend the original note, which was subsequently
supported by the oral testimony of Robb without objection from Bond. Thus, the
circuit court reasonably determined that the letters and testimony evidenced Bond’s
13
intent to waive its enforcement rights triggered upon Robb’s default until Bond
reasserted its intention to enforce those rights under the note. Bond correctly
argues that Missouri law allows commercial creditors to informally accommodate
delinquent debtors without waiving their bargained-for remedies, see Bancorpsouth
Bank v. Paramont Properties, L.L.C., 349 S.W.3d 363, 368 (Mo. App. 2011), but
that does not mean that a commercial creditor may never waive enforcement of a
contractual remedy. See Fritts, 478 S.W.2d at 14. Where, as here, the
commercial creditor does not make a contemporaneous objection to the admission
of properly offered evidence of waiver, it would be improper to require the court to
categorically ignore conduct expressly indicative of such waiver. Bond’s second
point is denied.
B. Late Fees
Bond’s next two points on appeal address the late fee clause of the 2011
Hillcrest Note. In Point III, Bond avers that the circuit court erred in determining
that the late fee clause could only be applied to regular interest payments and not
the final principal payment made upon maturation of the note. Bond asserts the
assessment of a late fee upon untimely tender of the final payment, including the
principal pay-off, was specifically contemplated by the note.
The primary goal of contract interpretation is to determine and give effect to
the parties’ intentions. Helterbrand v. Five Star Mobile Home Sales, Inc., 48
S.W.3d 649, 658 (Mo. App. 2001). “We will determine the intent of the parties
based on the contract alone, and only where the contract is ambiguous on its face
14
may we look outside the contract to determine the parties' intent.” J.H. Berra
Const. Co. v. City of Wash., 510 S.W.3d 871, 874 (Mo. App. 2017). “A contract
is ambiguous if its terms are susceptible of more than one meaning so that
reasonable persons may fairly and honestly differ in their construction of the
terms.” Trimble v. Pracna, 167 S.W.3d 706, 714 (Mo. banc 2005).
The 2011 Hillcrest Note provided, in pertinent part:
The entire unpaid principal balance of this Note shall be due and
payable on April 7, 2012 (the “Maturity Date”). This Note is not a
revolving credit facility, and Borrower may not borrow, repay and
reborrow funds hereunder. All monthly payments of interest shall be
made in arrears and due on the 1st day of each month. If a payment is
5 or more days late, Borrowers will be charged a late fee of five
percent (5.00%) of the regularly scheduled payment.
(Emphasis in original). Bond argues, inter alia, that the final sentence of the late
fee clause states that a 5% late fee applies to “payments” and “regularly scheduled
payments,” which must be read to include both “monthly payments of interest”
and the principal payment due upon maturation. Robb contends that those terms
plainly refer only to monthly interest payments.
Although the note does not define the disputed terms, we can derive
contextual meaning from a review of a dictionary. Bailey v. Federated Mut. Ins.
Co., 152 S.W.3d 355, 357 (Mo. App. 2004). The definition of “regularly” is: in a
regular, orderly, lawful, or methodical way. Regularly, WEBSTER’S THIRD NEW
INTERNATIONAL DICTIONARY 1913 (1993). And of the several definitions for the
term “regular,” the one that most plausibly applies in the context of the note is:
15
“returning, recurring, or received at stated, fixed, or uniform intervals.” Regular,
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1913 (1993). Further,
the dictionary defines “scheduled” as: “to appoint, assign, or designate to do or
receive something at a fixed time in the future.” Schedule, WEBSTER’S THIRD
NEW INTERNATIONAL DICTIONARY 2028 (1993). And finally, the dictionary
defines “payment” as: “something that is paid: the discharge of a debt or
obligation.” Payment, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
1659 (1993).
Based on these definitions, it is reasonable to conclude that the term
“regularly scheduled payment,” as used in the 2011 Hillcrest Note, refers to the
monies Bond was to receive at fixed, recurring intervals to discharge the debt owed
by Robb. While that definition could apply to the contractual term “monthly
payments of interest” as referenced in the prior sentence, the term “payment”
could also refer to all monies tendered by Robb as the borrower. At best, the late
fee clause of the 2011 Hillcrest Note is ambiguous because the terms of the note
are susceptible to more than one meaning, in that either Bond’s or Robb’s
construction could reasonably apply. See Bailey, 152 S.W.3d at 357. However,
as the drafter of the note, Bond cannot benefit from this ambiguity. “Where a
contract is fairly open to two or more interpretations, it will be construed against
the party who prepared the contract.” Trimble, 167 S.W.3d at 714. Therefore,
Bond’s third point is denied.
16
In Point IV, Bond contends that the circuit court erred in finding that the late
fee clause was an impermissible penalty rather than liquidated damages. Based on
our determination in Point III that the late fee clause was ambiguous and must be
construed against Bond, we need not further address this matter. Point IV is
denied.
C. Foreclosure Sale
In Point V, Bond contends the court erred in determining that the UCC
foreclosure sale held to dispose of the stock securing the four notes was not
completed in a commercially reasonable manner. Additional facts are discussed
herein to provide context for this argument.
CCSB shares are publicly, but lightly, traded without restriction on the over-
the-counter bulletin board or pink sheet market (“OTC Market”). Prior to the events
at issue in this appeal, Johnson had received regulatory approval to own or
beneficially control up to 25% of the ownership of CCSB. Since 2007, Johnson,
either personally or through several corporate entities, had actively and
continuously solicited CCSB shareholders with offers to purchase their shares or to
obtain proxies for voting purposes. Park G.P., Inc. (“Park”) was one such entity.
During trial, Usera described Johnson as a “dissident shareholder” who had
previously sued CCSB and expressed ongoing criticism of the operations of the
Bank.
As noted supra, Thomson, acting as Bond’s attorney, sent a letter notifying
Robb of Bond’s intention to dispose of the 23,007 shares securing the four notes
17
at a UCC foreclosure sale scheduled for December 15, 2015. The notice of public
sale for all the notes was not separately advertised. The combined advertisement
appeared in: (1) the Kansas City Business Journal on December 11, 2015; (2) the
Liberty Tribune on December 3, 2015 and December 10, 2015; and (3) in the
Excelsior Springs Standard on December 3, 2015, December 11, 2015, and
December 15, 2015. The latter two publications are not customarily known as
publishers of notices concerning foreclosure sales of publicly traded stock but
rather real estate. At no time prior to sale of the stock, did Bond provide CCSB or
its stockholders notice of the foreclosure sale or offer the shares to either in a
private sale. Further, Thomson never offered Bond or Park the shares, despite
Johnson and Bond’s earlier offer to purchase the shares at $10.00 per share.
Prior to December 15, Robb commenced the current action, initially asking
for a restraining order enjoining the foreclosure sale proposed by Bond.
Consequently, the foreclosure sale was continued from December 15 to December
22 before being continued to December 30, 2015. On that same day, the circuit
court denied Robb’s request for temporary injunction and the sale was set for
January 12, 2016. The original publication for the foreclosure sale stated that any
buyer would be required to both tender the purchase price in cash at the time of
sale and certify that he or she was acquiring the share for his or her own
investment and not for subsequent resale or as the agent of another. Bond
asserted that the latter obligation was promulgated to comply with the Security
Exchange Commission’s guidance on sales done without the assistance of a
18
registered broker-dealer. One day before the January 12 foreclosure sale, Thomson
modified the terms of the sale, allowing successful bidders to pay 10% of the bid
price at the time of sale and the balance by noon the following day. This
modification was not published, posted, or publicly announced by Bond except on
the date of the sale.
The Thistle and Crest shares were sold in two distinct blocks on January 12,
2016. The Thistle shares sold for $71,000 or $7.10 per share, while the Crest
shares fetched $54,000 or $7.03 per share. Matt Duffield, former husband of
Deann Totta, the vice president of Bond’s related corporate entity, Maxus
Properties, Inc., purchased both blocks of stock. Although Duffield certified that
he was purchasing the shares for his own account, Thomson later testified that
DEW, LLC (“DEW”), which had been formed two days after the foreclosure sale,
had actually purchased the shares. Thomson initially refused to disclose the
identity of DEW’s owner, citing attorney-client privilege, but, after being compelled
to answer, identified David E. Watson as the owner. Watson was Johnson’s friend
of thirty years and the two co-owned another business at the time of the sale.
Finally, the court heard testimony that Johnson maintained a “Cheat Sheet” to
keep track of the shares of CCSB stock that he beneficially owned. This “Cheat
Sheet” was last updated on December 27, 2016, by Totta to reflect that Johnson
was the beneficial owner of Watson’s 17,765 CCSB shares that DEW had
supposedly purchased.
19
Missouri law provides that “[a]fter default, a secured party may sell, lease,
license, or otherwise dispose of any or all of the collateral in its present condition
or following any commercially reasonable preparation or processing.” § 400.9-
610(a). But “[e]very aspect of a disposition of collateral, including the method,
manner, time, place, and other terms, must be commercially reasonable.” § 400.9-
610(b). If the disposition is commercially reasonable, however, the secured party
“may dispose of collateral by public or private proceedings, by one or more
contracts, as a unit or in parcels, and at any time and place and on any terms.” Id.
“Whether a sale is commercially reasonable is a question of fact.” Ford Motor
Credit Co. v. Harris, 386 S.W.3d 864, 867 (Mo. App. 2012).
Bond asserts that the circuit court erred in determining that the sale of
Thistle and Crest’s stock was not held in a commercially reasonable manner
because the finding was against the weight of the evidence. A claim that the
circuit court’s “judgment is against the weight of the evidence presupposes that
there is sufficient evidence to support the judgment.” J.A.R. v. D.G.R, 426
S.W.3d 624, 630 (Mo. banc 2014). Accordingly, “[t]he against-the-weight-of-the-
evidence standard serves only as a check on a circuit court's potential abuse of
power in weighing the evidence, and an appellate court will reverse only in rare
cases, when it has a firm belief that the decree or judgment is wrong.” Ivie, 439
S.W.3d at 206. Indeed, “[a] circuit court's judgment is against the weight of the
evidence only if the circuit court could not have reasonably found, from the record
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at trial, the existence of a fact that is necessary to sustain the judgment.” Id. It is
for these reasons that Bond’s fifth point must fail.
Here, the circuit court found that Bond had engaged in a commercially
unreasonable sale that was structured to allow Bond to acquire Robb’s shares both
at a reduced price and without the danger of outside competition. The evidence of
Bond’s repeated failure to provide pay-off balances, inflation of pay-off amounts,
and the off-market sale of the CCSB shares, supports the court’s finding that Bond
disposed of Robb’s collateral in a commercially unreasonable fashion. Bond,
however, posits that we should view the factual determinations of the circuit court
in a new light—one in which the pre-sale maneuvering was out of an abundance of
caution and a sincere interest in engaging in a commercially reasonable disposition
of the collateral at issue. This we cannot do. “When the evidence poses two
reasonable but different conclusions, appellate courts must defer to the circuit
court's assessment of that evidence.” Id. Bond’s fifth point is denied.
D. Counterclaims
In Point VI, Bond contends the court erred in denying relief on its five
counterclaims because there was sufficient evidence to support the award of a
deficiency judgment against Robb for breach of the promissory notes and personal
guaranties.
To prevail in a suit on the promissory note, Bond had the burden of
demonstrating: (1) the existence of a valid promissory note signed by Robb; (2) the
remaining balance due; and (3) a demand for payment and Robb’s failure or refusal
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to pay, thereby leaving Robb in default. Bank of Houston v. Action Land & Cattle
Co., 521 S.W.3d 304, 306 (Mo. App. 2017). To recover on an action concerning
the contract of guaranty, Bond had to demonstrate: (1) that Robb executed the
guaranty, (2) that Robb unconditionally delivered the guaranty; (3) that Bond
extended credit in reliance on the guaranty; and (4) that Bond is a currently owed a
sum of money that is covered by the terms of the guaranty. ITT Commercial Fin.
Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 382 (Mo. banc 1993).
In denying Bond’s previous points on appeal, we found no error in the circuit
court’s determination that Robb did not have a remaining balance owed to Bond
under the promissory notes. Consequently, the record supports the court’s further
determination that Bond is not entitled to a deficiency judgment on any of its five
counterclaims. Bond’s sixth point is denied.
E. Denial of Attorneys’ Fees and Costs
In Point VII, Bond contends that it was entitled to an award of attorneys’
fees and costs as the “prevailing party” in this action.
“If a contract provides for the payment of attorney’s fees in the enforcement
of a contract provision, the trial court must award them to the prevailing party.”
Kansas City Live Block 139 Retail, LLC v. Fran’s K.C. Ltd., 504 S.W.3d 725, 736
(Mo. App. 2016) (internal citation and quotations omitted). The “prevailing party is
the party prevailing on the main issue in dispute, even though not necessarily to
the extent of its original contention.” Miller v. Gammon & Sons, Inc., 67 S.W.3d
613, 625 (Mo. App. 2001) (internal citation and quotations omitted).
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Here, both parties agree that the main issues in dispute are: (1) whether the
2011 Hillcrest Note was modified and extended; and (2) whether Bond was entitled
to collect the late fees and penalties prescribed in the four promissory notes. Bond
did not prevail on these issues below and, based on our disposition of this case,
Bond is not the prevailing party on any of its nine points on appeal. Consequently,
Bond’s seventh point on appeal is denied.
F. Tortious Interference and Other Affirmative Relief
In Point IX, Bond asserts that the circuit court erred in granting judgment in
favor of Robb on his claim that Bond tortiously interfered with a business
expectancy. Bond contends there was no evidence that it had knowledge of the
business expectancy – i.e. Robb’s impending sale of the CCSB stock – with which
Bond allegedly interfered.
“To prove a claim for tortious interference with a contract or business
expectancy, the plaintiff must demonstrate: (1) a contract or a valid business
expectancy; (2) defendant's knowledge of the contract or relationship; (3)
intentional interference by the defendant inducing or causing a breach of the
contract or relationship; (4) absence of justification; and (5) damages resulting from
defendant's conduct.” W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 19 (Mo. banc
2012). To be entitled to relief under this cause of action, Robb, in regards to the
element of Bond’s knowledge, had to demonstrate that Bond either “had actual
knowledge of the existence of the [business expectancy] and of [Robb’s] interest in
it, or [that Bond] had knowledge of such facts and circumstances that would lead a
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reasonable person to believe in the existence of the [business expectancy] and
Robb's interest in it.” Howard v. Youngman, 81 S.W.3d 101, 113 (Mo. App.
2002) (internal citation and quotations omitted).
Bond contends the evidence at trial only demonstrated that Bond was aware
that Robb had thought about selling its CCSB shares. However, the record reflects
additional evidence indicating that Bond had knowledge of Robb’s discussions
concerning the sale of the CCSB stock or any related loan with CCSB. At trial,
Bond itself entered several exhibits containing email communications between
Robb, Johnson, Alvey, and Thomson. One such email, sent from Johnson to Robb
on August 5, 2015, stated: “[R]andy[,] you paid 1000 of interest but owe
[$]17,200 of interest on other 3 notes[.] When can we get this paid[?] [A]lvey
says you have offers to buy your stock? [W]hat is pricing[?] [W]e can look at
releasing the shares if it gets us paid off[.]” Robb responded six days later asking
if Johnson had a few minutes to speak over the course of the next few days.
Johnson stated that he would like to have update first and requested that Robb
provide him with a date by which Robb would repay the interest that was past due
on the notes.
Bond argues that this email exchange merely communicated a potential sale
and that Bond still had no knowledge of any “detail regarding the identity of the
buyer, the sale price or the expected sale closing date.” Knowledge of these
details, however, is not necessary to support a claim of tortious interference with a
business expectancy. “It is enough to show that defendant had knowledge of
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facts, which, if followed by reasonable inquiry, would have led to a complete
disclosure of the contractual relations and rights of the parties.” Id. (internal
citation and quotations omitted).
In Fischer, Spuhl, Herzwurm & Associates, Inc. v. Forrest T. Jones & Co.,
586 S.W.2d 310, 315-16 (Mo. banc 1979), the court ruled that plaintiffs properly
pled the knowledge element of tortious interference by alleging that the defendants
had “entered into illegal ‘tying’ agreements, under which [school] districts could
obtain group accident and health insurance only if they purchased group life
insurance, and other anticompetitive agreements that caused school districts to
refuse to deal with [plaintiffs and other competitors.]” Although the allegations did
not state that the defendants specifically knew about the particular expectancy of
each competitor, the court found the pleading sufficient to show “that [defendants]
knew their activities tortiously interfered with the business relations of [their]
potential competitors, and that [the plaintiffs] were potential competitors.” Id. at
316. We find the circumstances of Fischer sufficiently analogous to the factual
findings before us.
Here, the record indicates that Bond had knowledge of a potential buyer for
the CCSB shares prior to moving forward with the foreclosure. The circuit court
determined that Robb was prevented from closing the stock sale and subsequent
loan with CCSB because Bond had ignored Robb’s repeated requests for pay-off
balances on the four notes. The court determined that Bond had engaged in this
disregard because it had learned of a potential buyer for Robb’s shares, which Bond
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wanted to secure for itself. Further, the circuit court determined that once Bond
actually did provide the requested information, it provided intentionally inflated pay-
off balances on each of the four notes in order to prevent Robb from closing with
another buyer. Finally, the court found that Bond conducted a commercially
unreasonable foreclosure sale of Robb’s CCSB shares to allow Johnson to acquire
beneficial control of the CCSB shares at a fraction of the market price.
As in Fischer, the circuit court found that Bond had engaged in the anti-
competitive, spurious accounting to prevent other competitors from having an
opportunity to buy the stock. See id. Bond had knowledge that a potential buyer
existed and could have, with reasonable inquiry, determined the terms of the
business expectancy. See Howard, 81 S.W.3d at 113. Consequently, Bond’s
ninth point is denied.
In Point VIII, Bond argues the court erred in granting judgment in favor of
Robb on Robb’s affirmative claims for relief. Bond contends that the collective
errors asserted in the preceding points require us to reverse the judgment of the
circuit court. Bond offers no further argument and relies solely on points that we
have denied herein. Accordingly, Bond’s eighth point is also denied.
II. Robb’s Appeal
Robb’s two points on appeal concern the circuit court’s calculation of offsets
and damages. In his first point, Robb contends he should be awarded the
difference between the $10.00 share price that the court determined would have
been realized if the shares were disposed in a commercially reasonable manner and
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the $7.03 and $7.10 per share price Crest and Thistle, respectively, received credit
for after the foreclosure sale. We note that the circuit court’s judgment includes a
determination that Robb “is entitled to damages or offsets for the $3.00
difference.” 6 However, the court failed to include the offset in the damage
calculations. We therefore reverse the circuit court’s award of damages and
remand the issue back for a calculation of damages in light of its previous
determination that Robb is entitled to the award of an offset.
In Point II, Robb contends the circuit court should have limited his liability
pursuant to Section 400.9-626, which, inter alia, limits debtor liability after a
secured party fails to dispose of collateral attached by a security interest in a
commercially reasonable manner. In light of our reversal of the damages award,
we need not decide whether the court was obligated to apply this limitation. On
remand, however, the circuit court should consider the award of offset interest as
a mechanism to which Robb may be restored to the position he would have
occupied without Bond’s wrongful action. In so doing, the court can, but is not
required to, award such offset interest. Section 400.9-625(b). We caution, as
Bond has suggested, that Robb not be given a second chance to prove damages it
did not sufficiently demonstrate in the original action. Additionally, in making its
determination after our remand, the circuit court should consider the operation of
6
On page thirty-five of the judgment, the circuit court stated: “The Court has determined that
[Robb] is entitled to damages or offsets for the $3.00 difference in the $7.00 per share price
purportedly realized by the commercially unreasonable foreclosure sale and the minimum $10.00 per
share price that would have been realized by a commercially reasonable sale or upon the refinancing
of the legitimate debt by CCSB Financial Corp[.]”
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Section 400.9-626 on the award of any damage amount. Point II is therefore
granted, to the extent that the issues raised therein may be addressed on remand.
CONCLUSION
The judgment of the circuit court is affirmed in part, reversed in part, and
remanded for further proceedings consistent with this opinion.
_____________________________
LISA WHITE HARDWICK, JUDGE
ALL CONCUR.
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