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Robb v. Bond Purchase, L.L.C.

Court of Appeals of Missouri, Western District, First Division

June 25, 2019

RANDY ROBB, et al., Appellant-Respondents,
v.
BOND PURCHASE, L.L.C., Respondent-Appellants.

          APPEAL FROM THE CIRCUIT COURT OF CLAY COUNTY The Ho norable Janet Sutton, Judge.

          Before Victor C. Howard, Presiding Judge, Lisa White Hardwick and Gary D. Witt

          Lisa White Hardwick, Judge.

         This appeal and cross-appeal arise from a judgment entered in favor of Randy Robb and his related corporate entities[1] (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 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.

         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 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 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.

         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 U.S. 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.

         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 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 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 ...


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