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Payne v. Cunningham

Court of Appeals of Missouri, Eastern District, Fourth Division

April 24, 2018

AARON PAYNE, et al., Plaintiffs/Appellants/Cross-Respondents,
WAYNE CUNNINGHAM, et al., Respondents/Cross-Appellants.

          Appeal from the Circuit Court of St. Louis County Honorable Joseph S. Dueker


          Lisa Van Amburg, Judge.

         Aaron Payne and Dominic Petrulli (Appellants) appeal the trial court's directed verdict in favor of Wayne Cunningham and Southtown Dodge, Inc. (Sellers) in this contract dispute involving the sale of the dealership. We reverse and remand.


         In 2016, the parties negotiated a Stock Purchase Agreement (SPA) by which Sellers would sell Southtown Dodge to Appellants and their colleague Curtis Pratt (collectively Buyers) in two phases. First, Buyers were to purchase 21% of the dealership for $500, 000 cash. Second, and only after the dealership's debt was paid down to a specific amount, Buyers would acquire the remaining 79% for $3 million pursuant to a promissory note secured by the shares. For both phases, Buyers' respective equity holdings were to be 49% for Payne, 36% for Petrulli, and 15% for Pratt. The closing for phase one was to occur May 31. Deliverables at closing included a shareholders' agreement, employment agreements for Buyers and Cunningham, a lease amendment, stock certificates, and the purchase price. However, on May 31, Buyers still hadn't secured financing to pay the purchase price and needed additional time to do so. As a result, on that date, the parties executed the SPA and closing documents, Cunningham signed the share certificates, and all were placed in escrow with Sellers' counsel pending payment. The parties dispute whether and to what extent Cunningham agreed to extend the time for payment. Appellants claim that Cunningham granted them an undefined extension (the "escrow agreement") and then refused Payne's offer to write a check on June 27. Sellers expressly rescinded the entire transaction by email later that day (June 27). Buyers tendered a cashier's check July 18; Sellers rejected it.

         Appellants filed a petition for declaratory and equitable relief [1] alleging breaches of contract (specifically the SPA and the escrow agreement) and seeking a declaration of rights and injunctive relief. Appellants amended the petition twice, eliminating the words "for declaratory and equitable relief" from the title and adding prayers for damages and specific performance. Before trial, the court requested clarification as to the nature of Appellants' cause of action. The exchange included the following excerpts (redacted for brevity).

Court: What are we proceeding on? … So now you are saying you are proceeding under declaratory judgment because on Friday you said you weren't.
Counsel: … It's a claim for specific performance, and we do want you to declare the parties' rights and obligations under the contract.
Court: But are we doing a declaratory judgment?
Counsel: Yes, your Honor.
Court: … How did you plan on proceeding here?
Counsel: So, the factual issues are for a jury to decide, and, if they return a verdict in favor of the plaintiffs, then it is up to you to grant the relief that you deem appropriate. … At its core, this case is a breach of contract claim, Judge. … Under the equitable clean-up doctrine, you do the remedy consistent with the factual findings of the jury.
Court: I'm trying to figure out what you would be asking the jury to decide as it relates to declaratory judgment.
Counsel: To decide whether or not the contract was wrongfully terminated.
Court: Isn't that like a breach of contract?
Counsel: Correct. That's what we've pleaded.

         The parties proceeded to trial, where Appellants sought to prove the existence of the escrow agreement, specifically that Cunningham gave Buyers an undefined extension of time to secure financing. At the close of Appellants' evidence, Sellers moved for directed verdict on the basis that Appellants failed to make a submissible case for declaratory judgment by failing to show that they had no adequate remedy at law. Appellants insisted that the claim was for breach of contract where monetary damages were inadequate, warranting a declaration of rights and specific performance. After a lengthy debate, the trial court granted Sellers' motion for directed verdict, reasoning that Appellants merely asserted a breach of contract claim, so declaratory judgment was improper. However, the court denied Sellers' motion for attorney fees as the prevailing party under the SPA.

         Appellants assert that the trial court erred in that: (1) they have no adequate remedy at law because Pratt was a necessary party and refused to join Appellants' suit for breach of contract, (2) they had no adequate remedy at law because the transaction required ongoing collaboration with Sellers, (3) they made a submissible case for breach of contract warranting specific performance, particularly in that monetary damages are inadequate, and (4) they are entitled to a jury trial on factual issues under §527.090 RSMo (2016). Sellers cross-appeal and assert that the trial court erred in denying their motion for attorney fees.

         Standard ...

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