David Hodges Farm, Inc. v. Prudential Ins. Co. of America

Decision Date10 July 1986
Docket NumberNo. 85-2252,85-2252
Citation795 F.2d 661
PartiesDAVID HODGES FARMS, INC., an Arkansas Corporation, Appellant, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

H. David Blair, Batesville, Ark., for appellant.

Phillip Carrol, Little Rock, Ark., for appellee.

Before ROSS, Circuit Judge, BRIGHT, Senior Circuit Judge, and MAGILL, Circuit Judge.

BRIGHT, Senior Circuit Judge.

David Hodges Farms, Inc. (Hodges Farms) appeals from an adverse judgement 1 dismissing by directed verdict Hodges Farms' action against Prudential Insurance Company for breach of contract, deceit, and negligent misrepresentation. On appeal, Hodges Farms argues that the substantial evidence supported each of its theories of recovery, and, therefore, the district court erred in directing the verdict against Hodges Farms. For the reasons discussed below, we affirm.

I. BACKGROUND

Hodges Farms is an Arkansas corporation whose stock is held by David Hodges and his wife. In 1981, Hodges Farms owned a one-half interest in a Mississippi farm called Labelle Plantation, with the other one-half interest held by David's brother, Kaneaster Hodges, Jr. The Hodges brothers were also partners in a family law firm.

During 1981, the relationship between David and Kaneaster began to deteriorate, eventually resulting in the dissolution of their law partnership in October. Prior to this time, the Hodges brothers had been negotiating with Howard C. Westmoreland, a representative of Prudential Insurance Company, about the possibility of forming a joint venture with Prudential and the brothers. Under the joint venture, Prudential would buy a one-half interest in Labelle Plantation, and become partners with Kaneaster and Hodges Farms in the operation of the farmland. The parties had not yet put the proposal in writing or submitted it for approval to Prudential's investment committee.

Following the breakdown of the relationship between David and Kaneaster, the parties apparently realized that a joint venture with both brothers participating would not work. Kaneaster began negotiating separately with Westmoreland regarding a joint venture between only Kaneaster and Prudential. Under this proposal, Prudential would hold an eighty percent interest in the joint venture, and Kaneaster would own the remaining twenty percent. The joint venture would acquire Labelle Plantation, including the one-half interest held by Hodges Farms.

The terms of the proposed joint venture were reduced to writing only once, in a letter drafted by Kaneaster's broker following a meeting between the broker, Kaneaster, and Westmoreland on October 19, 1981. The letter outlined the terms of the joint venture, but expressly stated that it "in no way represent[ed] a binding contract," and acknowledged that the proposal remained subject to acceptance by David Hodges. The letter contained provisions for the signatures of Kaneaster and Westmoreland. It contained no provision for David's signature.

The broker sent the letter to Westmoreland, who changed some of the terms, signed the letter and returned it to the broker on October 28, 1981. In the accompanying cover letter, Westmoreland informed the broker that Prudential had "deleted [the joint venture] from our pipeline," but that he had requested that the project "be added back to our backlog." He stated that they should know within a few days whether Prudential had funds for the project. "In the meantime," he wrote, "let's proceed on the basis that we can get it approved."

Kaneaster's broker never showed the modified proposal letter to Kaneaster. At trial, Kaneaster testified that he did not know whether he would term the changes "a counteroffer or whether it's just trying to continue the negotiations." Kaneaster stated that it "would have been hard for me to live with some of the changes [Westmoreland] made."

On the same day that Westmoreland returned the proposal letter to Kaneaster's broker, he met with David regarding the sale of Hodges Farms' interest in Labelle. At this meeting, Westmoreland and David discussed a tentative price for the land, as well as a closing date for the sale. During the meeting, Westmoreland showed David a report that he had sent the previous day to his supervisor in Prudential. In the report, Westmoreland summarized thirteen projects in various stages of negotiation; the joint venture with Kaneaster was listed sixth on the list. Westmoreland wrote in his report that he hoped that Prudential would be able to find money to pursue at least the first eight projects. At the October 28th meeting, however, Westmoreland told David that Prudential would not entertain any new proposals within the next ninety days because of uncertainty over funding.

On October 30, David wrote to Westmoreland confirming the price and closing date discussed in their prior meeting. On November 3, Kaneaster and David informed brokers listing Labelle for sale that they were removing the property from the market. Kaneaster also contacted an area bank to secure a line of credit in anticipation that the joint venture would proceed.

The record reveals that the Hodges brothers were aware throughout these negotiations that any agreement reached by the parties remained subject to the approval of Prudential's investment committee and availability of funding. In late November, Westmoreland notified the brothers through a broker that Prudential had placed a moratorium on investments such as the parties were contemplating. The broker stated that Westmoreland wanted to assure David and Kaneaster, however, that the proposed venture would "be at the top of the list when funds were available." The broker asked the brothers to contact him as to whether they wanted to "call off the negotiations or leave [the] purchase to be approved as soon as funds are available."

David quickly wrote the broker that he wanted "to continue with the agreement made with Prudential Insurance Company concerning its purchase of Labelle Plantation." He continued:

Mr. Westmoreland indicated to me the only contingency that would prevent Prudential Insurance Company buying Labelle Plantation was having funds available. Based on your letter of November 25, that will cause a delay but I wonder if it is possible for the [Prudential investment] committee to approve the purchase of Labelle Plantation subject to funds being available, or, in the event they discontinue the program, then there would be no obligation on the part of Prudential or, if they on a permanent basis do not have any funds, then they would not be obligated.

* * *

* * *

Obviously I am counting on Prudential being back in the market with funds in order to complete the transaction. If funds are not forthcoming, then Prudential would not be under any obligation to complete the transaction and we would continue to operate the farm. * * *

What I am suggesting is that we develop a written agreement that will be satisfactory to the sellers and purchasers with the one contingency being the fact that Prudential must have funding for this program at a time within the sole discretion of Prudential.

Westmoreland rejected the purchase procedure outlined in David's letter, but emphasized that Prudential would, "if and when monies for purchases becomes [sic] available, give this case our first priority." Westmoreland also informed Kaneaster that he could not be sure when Prudential would return to the market, but he thought it would be within the next 120 days. As Kaneaster told David when relating this conversation, however, Westmoreland "made it very clear that there could be no assurances of that." At the end of February, the brothers were told that Westmoreland's supervisor remained very pessimistic about the availability of any funds for the joint venture in 1982 or in the early part of 1983.

The Hodges brothers then attempted to find other buyers for their farmland. Land values took a dramatic plunge during the several months that the Hodges brothers had the farm off the market, however, and the brothers were unable to find a buyer willing to purchase such a large tract of land.

David Hodges Farms brought this action for breach of contract, deceit, and negligent misrepresentation....

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