Ary Jewelers, LLC v. Krigel
| Decision Date | 31 December 2003 |
| Docket Number | No. 88,991.,88,991. |
| Citation | 277 Kan. 27,82 P.3d 460 |
| Parties | ARY JEWELERS, L.L.C., Appellee, v. SCOTT KRIGEL, INDIVIDUALLY AND AS TRUSTEE OF THE SCOTT W. KRIGEL REVOCABLE TRUST, Appellants. |
| Court | Kansas Supreme Court |
Sanford P. Krigel, of Krigel & Krigel, P.C., of Kansas City, Missouri, argued the cause, and Karen S. Rosenberg, of the same firm, was with him on the briefs for appellants.
Barry L. Pickens, of Spencer Fane Britt & Browne, LLP, of Kansas City, Missouri, argued the cause, and Michael C. Leitch, of the same firm, was with him on the briefs for appellee.
The opinion of the court was delivered by
This case involves a dispute over escrowed funds. ARY Jewelers, L.L.C., (ARY) contracted to buy Krigel's, Inc., which owned and operated a jewelry business in several Midwestern states. After the sale failed, a Johnson County District Court granted summary judgment to ARY and ordered return of its $1.5 million in escrow. Scott Krigel, individually and as trustee of the Scott W. Krigel Revocable Trust which owned the company stock (collectively the Krigels), appealed not only the grant of summary judgment to ARY but also the denial of their own summary judgment motion based upon breach of contract. We transferred the case from the Court of Appeals on our own motion pursuant to K.S.A. 20-3018(c).
The issues on appeal, and this court's accompanying holdings, are as follows:
1. Did the district court err in granting summary judgment to ARY because the court misinterpreted the contract? No.
2. Did the district court err in granting summary judgment because genuine issues of material fact remained on the issue of estoppel? No.
3. Did the district court err in granting summary judgment because genuine issues of material fact remained on the issue of waiver? No.
4. Did the district court err in denying the Krigels' motion for summary judgment because the court misinterpreted the contract? No.
Consequently, the judgment of the district court is affirmed.
Krigel's, Inc., a family-owned Kansas corporation operating jewelry stores across several Midwestern states, began having financial problems early in 2000 and soon became insolvent. Scott Krigel (Scott), on behalf of the Scott W. Krigel Revocable Trust, began to seek a buyer for the family business. On November 21, 2000, following extended negotiations with Gohar Husain, both Scott on behalf of his trust and Husain on behalf of ARY signed a Stock Purchase Agreement (SPA), which provides the basic dispute in this case.
The SPA called for Krigel's, Inc., to file for Chapter 11 bankruptcy. After approval of the bankruptcy court and sale closing, ARY was to purchase all of the stock of Krigel's, Inc., with $50,000 escrowed at Assured Quality Title Company. Upon closing, ARY was also to pay 60% of the debt owed to each of Krigel's, Inc.'s unsecured creditors and assume responsibility for or pay off all debt Krigel's, Inc., owed to its only secured creditor, Foothill Capital Bank (Foothill Capital). ARY's obligation to Krigel's, Inc.'s unsecured creditors approximated $6 million. ARY's obligation to Foothill Capital approximated $8 million at the time the parties signed the SPA.
The same day as the SPA's execution, Husain, again on behalf of ARY, and Scott, on behalf of himself and Krigel's, Inc., signed a Consulting and Noncompetition Agreement for Scott Krigel (consulting agreement). It required ARY to hire Scott as a consultant for up to 1 year and forbade him from competing with ARY in the area of existing Krigel's, Inc., stores for 2 years. In exchange for these considerations, ARY was to pay Scott $1,450,000 from a second escrow account it funded at Assured Quality Title. In short, ARY's cash obligation at closing totaled $7.5 million — the $6 million to Krigel's, Inc., unsecured creditors and the $1.5 million for the company stock and Scott's considerations.
The SPA provided at paragraph 9, and the consulting agreement at paragraph 19, that if ARY failed to provide proof of its ability to pay unsecured creditors prior to Krigel's, Inc., bankruptcy filing or if it failed to pay the unsecured creditors on the effective date of the bankruptcy plan, then the Krigels would immediately be entitled to the escrowed $1.5 million.
Of great importance to this case is paragraph 4(c) of the SPA, which contains the "Foothill Capital financing condition." It provides as follows:
Paragraph 5(c) repeats the unfulfilled condition's nullifying effect on the SPA but provides for the possibility of waiver. It states in relevant part:
Paragraph 6(a) of the SPA repeats the waiver possibility. It states in relevant part:
Under paragraph 8(d), a waiver is required to be submitted to the opposing party in writing: "All notices, requests, demands, and other communications required or permitted to be given hereunder shall be in writing . . . ." Paragraph 8 continues at subsection (e) with integration language:
(Emphasis added.)
Following the agreements' execution, all parties agreed Scott would lead the negotiation for continued financing with Foothill Capital because Krigel's, Inc., had a working relationship with the bank. Four days before the December 19, 2000, closing date, Thomas Morgan, Vice President of Foothill Capital, notified ARY and Scott of his company's interest in providing ARY bankruptcy emergence financing as follows:
Morgan went on to propose loan terms significantly different than what Foothill Capital had granted Krigel's, Inc., prior to its insolvency. After Scott reviewed a copy of the letter, he concluded it did not satisfy the requirement of Foothill Capital's consent under SPA paragraph 4(c). Nevertheless, he forwarded it via email to ARY's Husain with the following endorsement:
In an affidavit submitted to the district court, Max Jevinsky, ARY's attorney, claimed that on December 19, 2000, he notified Krigel's, Inc., by letter that Foothill Capital had not consented to continued financing within the terms of paragraph 4(c). Nevertheless, he requested an extension of the consent period to January 18, 2001. His letter provided:
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