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Cygnus Sbl Loans, LLC v. Hejna

Court of Appeals of Missouri, Western District, Third Division

March 5, 2019

MICHAEL J. HEJNA, ET AL., Appellants.

          Appeal from the Circuit Court of Jackson County, Missouri The Honorable S. Margene Burnett, Judge

          Before: Mark D. Pfeiffer, Presiding Judge, Lisa White Hardwick, Judge, Anthony Rex Gabbert, Judge


         Michael J. Hejna and Monique C. Hejna ("Hejna" collectively), Gordon A. Gundaker, Jr., and Gordon A. Gundaker, Jr. as trustee of the Gordan A. Gundaker, Jr. Revocable Trust dated January 6, 1997 ("Gundaker" collectively), [1] appeal the circuit court's grant of partial summary judgment to Cygnus SBL Loans, LLC.[2] Appellants contend the circuit court erred, 1) in denying Appellants' motions to transfer venue, 2) in denying Appellants' motions to strike the affidavit of Mante Dzakuma, 3) in finding Respondent had standing to sue, 4) in entering summary judgment on Count VI of Respondent's petition without determining the Deed in Lieu Agreement invalid, 5) in entering summary judgment on Count VI after accepting additional materials raising new facts and evidence, and 6) in entering summary judgment on Count VI against Gundaker without Respondent showing Gundaker executed and delivered a guaranty, that credit was extended in reliance upon a guaranty, or that amounts remained due under an enforceable obligation. We affirm.

         Background and Procedural Information

         Gunnett, LLC ("Gunnett") is a Missouri limited liability company. Its members are Gordan Gundaker, Michael Hejna, and Steve Stinnett. Gunnett entered into a loan with Premier Bank in 2006, borrowing approximately $8.3 million. The loan was secured by real property ("Property") located in Christian County, Missouri. Members of Gunnett, along with Monique C. Hejna, Deborah Stinnett, and Gordon A. Gundaker in his capacity as trustee of the Gordon A. Gundaker, Jr. Revocable Trust dated January 6, 1997 (collectively "Guarantors"), each executed and delivered guaranties in 2006 promising repayment of the loan. From 2006 to 2010, Gunnett renewed the note six times. The last note renewal was on January 15, 2010, in the principal amount of $8, 160, 175, with a maturity date of January 15, 2011. Guarantors amended and restated their guaranties on January 15, 2010.

         Premier Bank was closed in 2010 by the Missouri Division of Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver with authority to handle and dispose of Premier Bank's assets, liabilities, and operations. The note matured on January 15, 2011, and was unpaid. As part of the FDIC's liquidation of Premier Bank, CADC/RADC VENTURE 2011- 1, LLC (CADC), a Delaware limited liability company, received the original loan promissory note from Gunnett, endorsed in blank, together with all related loan documents.[3] Sabal Financial Group, L.P. ("Sabal") was a disclosed agent for CADC. Mante Dzakuma was an asset manager for Sabal and a disclosed agent for CADC. Karick M. Brown was a portfolio manager with Sabal and a disclosed agent for CADC.[4]

         In 2012, CADC, acting through Sabal, contacted Gunnett and Guarantors about repaying the indebtedness. On or about July 6, 2012, Gunnett, Guarantors, and CADC executed a Deed-in-Lieu Agreement (the "DIL") related to the loan. Therein Guarantors agreed to each "execute and deliver to Lender" promissory notes for specified amounts, referenced in the DIL as "Deficiency Notes;" these notes were collectively equal to the overall deficiency amount in proportion to each Guarantor's liability under the guaranty. A developer agreement, lease agreement, and agreements to convey certain documents were also included in the DIL. The Deficiency Notes stated they were to replace the original guaranties. The DIL provided for the revival of Guarantors' liability under the loan and guaranties if the DIL or any related payments failed. The DIL and the maturity dates of the Deficiency Notes provided Guarantors three years, to July 6, 2015, to sell the Property in order to reduce or extinguish the deficiency amount. On July 6, 2015, the deficiency remained unpaid.

         On October 28, 2015, Respondent filed a Petition against Guarantors to collect the deficiency. Count I through Count III of the Petition alleged breach of each Deficiency Note as a written contract for repayment of a debt. Guarantors defended the suit by alleging the Deficiency Notes were unenforceable because Guarantors had never delivered the notes as required under the DIL. (Copies of signed Deficiency Notes were delivered to Respondent, but not the original Deficiency Notes.) Respondent then amended its petition and added an alternative count (Count VI) alleging breach of the original guaranties.

         After service of both the initial petition and First Amended Petition, Appellants filed motions to transfer venue, arguing the DIL's forum selection clause was unenforceable because the original Deficiency Notes were not delivered. The motions were denied.

         Respondent filed a motion for partial summary judgment on September 9, 2016. For Count VI, Respondent requested a determination of Appellants' liability only on the breach of guaranties claim. The guaranties provided for an interest component that continued to accrue. Respondent requested that determination as to damages be made separately from underlying liability. Appellants opposed summary judgment and filed separate motions to strike the affidavit of Mante Dzakuma, which had been included with Respondent's summary judgment motion.

         On January 12, 2017, the court denied the Motion to Strike, and on January 17, 2017, entered an order partially granting and partially denying summary judgment. Partial summary judgment was granted on Guarantors' liability under their original guaranties. Summary judgment was denied on the remaining counts.

         On January 20 and 23, 2017, Appellants filed motions to disqualify the judge arguing that Respondent's counsel's wife's father was first cousin to the judge's law clerk's grandfather. The court informed the parties that the relationship had no connection and did not affect the court's ability to preside over the case, but the judge, nevertheless, recused himself on January 25, 2017. Before ordering the case transferred for reassignment, the judge vacated the partial summary judgment and order denying the Motion to Strike.

         The case was reassigned on January 26, 2017. On November 2, 2017, the court denied the Motion to Strike and found after reviewing the pleadings that there was no issue of material fact regarding Count VI, Respondent's claim for breach of contract on the original guaranty. The court granted Respondent's motion for summary judgment as to Count VI only.

         Thereafter, Respondent dismissed Counts I through V. On December 1, 2017, Respondent filed a Motion for Entry of Final Judgment in which Respondent waived its claim for interest, attorney's fees, and costs available under the original guaranties. Respondent requested that the $2, 597, 874 debt, which was the amount owed pursuant to the Deficiency Notes had they been delivered, be declared the final judgment amount. Gundaker objection to the motion. Appellants also filed motions to reconsider the partial summary judgment, which the court denied. Gundaker then filed another motion to transfer venue. On January 8, 2018, the court entered an order denying all pending motions and objections and setting for trial the remaining issues as to "interest, attorneys' fees, and court costs."

         On February 2, 2018, Respondent filed a Motion for Entry of Final Judgment on Count VI citing Rule 74.04 and seeking final judgment on the amount of damages. Appellants did not respond to this motion. On March 15, 2018, the circuit court entered final judgment. This appeal follows.

         Standard of Review

         The standard of review for an appeal challenging the grant of a motion for summary judgment is de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Accordingly, we do not defer to the trial court's decision, but instead use the same criteria that the trial court should have employed in initially deciding whether to grant Respondent's motion. Barekman v. City of Republic, 232 S.W.3d 675, 677 (Mo. App. 2007) (internal citations omitted). Under Rule 74.04, the court considers the motion, the response, the reply, and the sur-reply in making a ruling on motions for summary judgment. Rule 74.04(c)(6). We review the record in the light most favorable to the party against whom judgment was entered and accord that party the benefit of all inferences which may reasonably be drawn from the record. Barekman, 232 S.W.3d at 677. Summary judgment is appropriate where the moving party has demonstrated, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. ITT Commercial Fin. Corp., 854 S.W.2d at 376. "Facts set forth by affidavit or otherwise in support of a party's motion are taken as true unless contradicted by the non-moving party's response to the summary judgment motion." Id.

         Points on Appeal

         Motions to Transfer - Hejna's Point I, Gundaker's Point V

         Appellants argue that the circuit court erred in denying their motions to transfer venue because no defendant resided in Jackson County and the Deficiency Notes containing the forum selection clause were never delivered.

         "To the extent that a court bases its venue ruling on factual matters and inferences, this court reviews the trial court's ruling under an abuse of discretion standard." McCoy v. The Hershewe Law Firm, P.C., 366 S.W.3d 586, 592 (Mo. App. 2012). "To the extent to which the venue decision is governed by the interpretation of a statute, the ruling is a question of law, and accordingly this court reviews the ruling to determine whether the trial court misinterpreted or misapplied the law." Id.

         In disputing venue to the trial court, Appellants acknowledged that Deficiency Notes upon which Respondent's suit was founded contain a forum selection clause designating Jackson County, Missouri as venue for suit. The Deficiency Notes specifically provide "that any litigation initiated by Borrower or Lender in connection with this Note may be venued in either the state or federal courts located in Jackson County, Missouri[.]" Appellants further acknowledged that the Deficiency Notes were named in and were to be incorporated into the DIL entered into by Appellants with Respondent. Appellants contended, however, that delivery of the Deficiency Notes was contingent upon delivery of a "Developer Agreement" that was never created and, consequently, the DIL did not close. Appellants argued that, because Appellants never delivered the original notes, Respondent could not enforce the notes and, therefore, the forum selection clauses within the notes were also unenforceable. We disagree.

         First Motion to Transfer Venue

         "Missouri has long held that freely negotiated forum selection agreements are enforceable 'so long as doing so is neither unfair nor unreasonable.'" GP&W Inc. v. Daibes Oil, LLC, 497 S.W.3d 866, 869 (Mo. App. 2016) (quoting High Life Sales Co. v. Brown-Forman Corp., 823 S.W.2d 493, 497 (Mo. banc 1992)). "The party resisting enforcement of the forum selection clause bears a heavy burden in convincing the court that he or she should not be held to the bargain because it is unfair or unreasonable." GP&W Inc., 497 S.W.3d at 869. "A forum-selection clause is prima facie valid." Hope's Windows, Inc. v. McClain, 394 S.W.3d 478, 484 (Mo. App. 2013). "Where the enforceability of a forum-selection clause is at issue, the proper approach for a court to take is to enforce the clause specifically, unless the challenging party can clearly show that enforcement would be unreasonable and unjust, or that the clause is invalid for such reasons as fraud or overreaching." Id. (internal quotation marks and citations omitted). Whether a forum selection clause that by its terms applies to contract actions also reaches other claims depends on whether resolution of the claims relates to interpretation of the contract. Reed v. Reilly Company, LLC, 534 S.W.3d 809, 811 (Mo. banc 2017) (internal quotation marks and citations omitted). "Missouri law recognizes and enforces incorporation clauses in contracts. Matters incorporated into a contract by reference are as much part of the contract as if they had been set out in the contract in haec verba." Sabatino v. LaSalle Bank, N.A., 96 S.W.3d 113, 118 (Mo. App. 2003) (internal quotation marks and citations omitted).

         All of Respondent's claims within its initial petition involved the DIL, which incorporated the Deficiency Notes. Appellants signed the DIL, therein agreeing to deliver the notes. When Respondent filed suit, Resolution of the claims of all parties necessarily required inquest into the terms and enforceability of the DIL and the Deficiency Notes. Appellants never argued that they did not agree to the forum selection clause or that venue in Jackson County was unfair or unreasonable; Appellants sole contention was that they agreed in the DIL to deliver the signed promissory notes (containing the forum clauses) but, because of an unmet contingency, never followed through with that agreement.

         The DIL states that "simultaneously" with execution of the DIL, Appellants were to execute and deliver the Deficiency Notes. The DIL states that Appellants were to additionally provide at closing other executed original documents, including "Developer Agreement in the form attached hereto as Exhibit H." Nothing within the DIL references the contingency Appellants claim existed; Respondents disputed the existence of a contingency. Nonetheless, Appellants agreed to incorporate the Deficiency Notes containing the forum selection clause into the DIL and allow any litigation in connection with the notes to be venued in Jackson County. Resolution of the parties' dispute as to whether the DIL ever closed required interpretation of that contract.

         Whether Respondents were entitled to enforce the Deficiency Notes under Section 400.3-301[5] as non-holders of the instruments does not impact enforcement of the forum selection clause. Pursuant to Section 400.3-104, a "negotiable instrument" that is a "note" is, with certain requirements, an unconditional promise to pay a fixed amount of money. Hence, the inability to enforce under Section 400.3-301 applies to enforcement of the promise to pay; an agreement as to venue for disputes regarding the Deficiency Notes is a separate issue.

         The circuit court did not abuse its discretion in refusing to transfer venue after Appellants' first motion as allegations within Respondent's petition pertained to enforceability of the contract that contained the forum selection clause.

         Second Motion to Transfer Venue

         Prior to the court's first ruling on venue, Respondent amended the petition to include an alternate count based on Appellants' contentions that the DIL was unenforceable; Respondent's First Amended Petition alleged in Count VI that if the DIL was "undone," then Appellants were liable under their original guaranties. After Respondent amended its petition, Appellant Gundaker provided a supplemental statement in support of the requests to transfer venue. This statement continued to argue that the forum selection clause incorporated into the DIL was ineffective because Appellants never delivered the notes including ...

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