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Steelhead Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC

Court of Appeals of Missouri, Western District

October 31, 2017

STEELHEAD TOWNHOMES, L.L.C., et al., Respondents,
CLEARWATER 2008 NOTE PROGRAM, LLC, et al., Appellants.

         Appeal from the Circuit Court of Cass County The Honorable William B. Collins, Judge

          Before Division One: Gary D. Witt, P.J., and Alok Ahuja and Edward R. Ardini, Jr., JJ.

          Alok Ahuja, Judge.

         Steelhead Townhomes, LLC and its principals sued Clearwater 2008 Note Program, LLC and other affiliated persons and entities in the Circuit Court of Cass County. Steelhead's petition alleged that Clearwater and its affiliates had engaged in misconduct which resulted in the unjustified foreclosure of real property owned by Steelhead. Following a bench trial with an advisory jury, the circuit court entered judgment in Steelhead's favor on its claims for breach of fiduciary duty and unjust enrichment, and awarded it $650, 000 in compensatory damages.

         Clearwater appeals. We affirm.

         Factual Background

         Barney Ashner and Daniel Waldberg (both now deceased) were in the business of developing residential real estate in the greater Kansas City area. In 2008, one of the banks that financed a number of Ashner and Waldberg's projects, TeamBank, was facing regulatory scrutiny, and was seeking to raise capital by offering customers reduced payoffs on their existing loans.

         Ashner and Waldberg met with principals of Clearwater REI, LLC ("REI") in the Fall of 2008. REI is a private investment fund based in Idaho, and the parent company of Clearwater 2008 Note Program, LLC ("Clearwater"). Ashner and Waldberg's primary contact at REI was Dan Welker, an employee who investigated investment and loan opportunities for REI (some of which were implemented through Clearwater). Welker was charged with putting together deals for "opportunistic value investments, " in which REI would purchase real-estate properties from banks and other sellers at "deep discounts."

         Welker, Ashner and Waldberg discussed a variety of real-estate-related business opportunities. One project involved the property at issue in this litigation: the Legends at Raymore. In December 2008, the Legends at Raymore project had two components: (1) nineteen existing townhomes which Ashner and Waldberg had constructed, with financing from TeamBank; and (2) the contemplated construction of sixty-eight additional townhomes. TeamBank was offering Ashner and Waldberg a reduced payoff amount for their existing loan at the Legends. Welker, Ashner and Waldberg contemplated that REI would invest in the Legends project in two ways: first, it would provide loan financing to refinance the TeamBank loan on the existing nineteen townhomes; and second, REI would then assume an equity position in the development of the additional townhomes. The parties were also discussing additional potential joint projects. The only transaction which actually closed, however, was the refinancing of the TeamBank loan on the existing nineteen townhomes at the Legends.

         Steelhead was created on March 2, 2009 by Waldberg and Ashner for the purpose of consummating the loan from Clearwater to refinance the TeamBank loan. On March 5, the parties closed on a loan for $1.562 million. The loan was memorialized in a Loan Agreement, a Promissory Note Secured by Deed of Trust, a Deed of Trust, and a Repayment Guaranty signed by Ashner and Waldberg. The closing of the transaction was hurried due to TeamBank's pending takeover by the Federal Deposit Insurance Corporation ("FDIC"). As a result, the loan documents are not a model of clarity concerning the exact terms of the transaction. For example, the documents are inconsistent concerning the maturity date for the loan. Although the Note defines the "Maturity Date" for the loan as July 5, 2009 (four months after the loan's inception), the following paragraph states that "all outstanding principal and all interest accrued thereon and unpaid shall be due and payable on the first anniversary of this Note." The Loan Agreement and Deed of Trust refer to the debt as a four-month loan. The documents are also confusing concerning the availability of, and cost for, any extensions of the loan. The documents also erroneously list unrelated parties as "Borrowers."

         In June 2009, Steelhead sought refinancing for the Clearwater loan through Great Western Bank. Great Western sent a refinance letter to Clearwater. Welker stated to REI's principals that the earliest closing date for the refinance would be July 10, "five days after the note is due." As a result, Welker said "a modest penalty is in order along with telling [Waldberg] we are beginning foreclosure work whether or not we actually are. Nothing focuses the mind like the threat of a good hanging . . . ."

         After Clearwater commenced the foreclosure process on the Legends at Raymore property in July, Waldberg disclosed the impending foreclosure to Great Western. Great Western withdrew its offer to refinance the loan as a result. At the same time, Welker continued to pressure Waldberg to pay a $78, 100 late fee, telling Waldberg that Welker was "getting a lot of fucking pressure" and that Clearwater is a "fee-driven company."

         Clearwater foreclosed on the townhomes, which had an estimated value substantially in excess of the outstanding amount of the Steelhead loan. The properties also generated $18, 000 in rent per month.

         In October 2009, Steelhead, Ashner, and Waldberg filed a petition against Clearwater and REI, as well as various affiliated individuals. The plaintiffs' amended petition stated thirty-three counts. Clearwater asserted eight counterclaims against Steelhead, Ashner and Waldberg.

         The trial court entered an order enforcing the contractual jury waiver and Idaho choice of law provision in the loan documents. The claims and counterclaims were tried to the court; the court submitted twenty-four of the plaintiffs' affirmative claims to the advisory jury. At trial, one of the principal issues in dispute between the parties was whether the parties' loan agreement contemplated a twelve-month or instead a four-month loan, and therefore whether the defendants acted wrongfully in declaring a default on the loan, and foreclosing on the Legends townhomes, in June and July 2009. The plaintiffs sought common damages on their various claims, consisting principally of the lost equity in the foreclosed townhomes (i.e., the amount by which the fair market value of the townhomes exceeded the outstanding Clearwater debt), and the rental income retained by Clearwater following the foreclosure.

         Of the twenty-four claims submitted to the advisory jury, the jury ruled in the defendants' favor on all but one. On the sole claim on which it found for any of the plaintiffs, the jury awarded Steelhead a judgment of $650, 000 on its claim for breach of fiduciary duty against Clearwater. The circuit court followed the advisory jury's verdict. The circuit court entered judgment for Clearwater on all claims except for Steelhead's claim for breach of fiduciary duty, and its claim for unjust enrichment (which had not been submitted to the advisory jury). The circuit court awarded Steelhead compensatory damages of $650, 000 on both the breach of fiduciary duty and unjust enrichment counts. The court denied Clearwater relief on all of its counterclaims.

         The case was originally appealed to this Court in Case No. WD78422. We dismissed that appeal for lack of a final judgment, based on our conclusion "that the circuit court did not resolve Steelhead's counts in its first amended petition for promissory estoppel, prior material breach, unclean hands, negligent and malicious breach of contract against Clearwater, negligent misrepresentation against Clearwater, and equitable estoppel." Steelhead Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC, 504 S.W.3d 804, 806 (Mo. App. W.D. 2016). On remand, the parties stipulated to the dismissal with ...

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