Bokor v. Holder, 86-139-II
| Decision Date | 08 October 1986 |
| Docket Number | No. 86-139-II,86-139-II |
| Citation | 722 S.W.2d 676 |
| Parties | Zoltan J. BOKOR, Plaintiff-Appellant, v. George W. HOLDER, Jr., Hoboco, Inc., and Robert N. Buchanan, III, Substitute Trustee, Defendants-Appellees. 722 S.W.2d 676 |
| Court | Tennessee Court of Appeals |
Carey J. Thompson, Ashland City, for plaintiff-appellant.
C. Scott Jackson, Farris, Warfield & Kanaday, Nashville, for defendants-appellees.
This is an appeal by plaintiff Zoltan J. Bokor (Bokor) from the dismissal of his suit in which he sought a declaratory judgment as to his rights under an agreement and promissory note. In the event the court should find that he was "without any remaining rights under the agreement," he sought in the alternative, "a monetary judgment for his services rendered ... on the basis of quantum meruit."
Following a bench trial, the trial court dismissed plaintiff's complaint, finding that the forfeiture provisions of the agreement between Bokor and defendant George W. Holder, Jr. (Holder) and the promissory note executed by Bokor in favor of Holder were valid and that Bokor "has no further claim against or interest in the property." The trial court also found that Bokor had failed to carry his burden of proof of showing that he was entitled to a money judgment on the basis of quantum meruit. We affirm.
The pertinent facts are as follows:
Bokor, a land developer and builder, knew of 68.9 acres of land in Davidson County that could be purchased and developed as a subdivision. Bokor did not have sufficient funds to purchase and develop the land.
Through a mutual acquaintance, Bokor and Holder were introduced. Bokor informed Holder that the only money needed to get the venture under way was $280,000 to be used for the purchase of the property and that all development costs would be met from the proceeds of the sale of lots which Bokor said he already had lined up. Bokor assured Holder that the sale of seventy-two lots at $12,000 each were ready to close.
Bokor and Holder were each to contribute $140,000, one-half of the purchase price. Bokor was to obtain a bank loan from a Brentwood, Tennessee, bank for his $140,000. However, his loan did not materialize and Bokor was able to come forth with only $40,000.
On June 8, 1983, Bokor and Holder entered into an agreement to purchase and develop the 68.9 acres of land as a subdivision to be known as Harbor Gate.
Paragraph 2 of the agreement provided that Holder would lend Bokor $100,000. Paragraph 4 provided that if lot sales were not sufficient to meet cash-flow needs, then the parties would contribute an amount "sufficient to cover such needs." Of this amount, Bokor was to contribute 53.75 percent and Holder 46.25 percent.
Paragraph 5 of the agreement provided: "In the event Bokor fails to contribute any amount required under paragraph 2 or 4 above, Holder, at his option, may become the sole owner of the property and Bokor will forfeit any further interest in the property."
On June 16, 1983, Bokor executed a promissory note payable to Holder for $100,000. The note provided in part that Bokor would make "quarterly payments of interest on the first day of each September, December, March and June." It also provided that any cash that was to be distributed to Bokor from the sale of lots in Harbor Gate would be applied to principal and that "in any event, this loan shall be due and payable no later than May 1, 1984, and demand for payment may be made at that time." The note further provided:
In the event [Boker] defaults in making any payments hereunder, [Holder], at [his] option may demand the immediate payment of all accrued interest and outstanding principal. At Holder's option in the event of default, Bokor may be deemed to forfeit his interest in Harbor Gate subdivision in satisfaction of the indebtedness evidenced hereby and he hereby agrees to execute any document convenient to evidence the transfer of all interest in the property to the holder of this note.
The evidence is that Bokor is a very experienced real estate developer and also has considerable experience in the residential and commercial construction businesses. Holder had little experience in these areas but was in a position to provide the financial backing for the project.
Before the property could be developed, it was necessary that a subdivision plat be approved by the Metropolitan Planning Commission. The Metropolitan Government of Nashville and Davidson County required a bond or a letter of credit to secure completion of the development work, that is, the completion of roads and sewers in the subdivision.
The Third National Bank issued its letter of credit in the amount of $464,194. To secure the letter of credit, a deed of trust to the property was given and personal limited guaranties were signed by Bokor and Holder.
Lot sales in Phase I of Harbor Gate did not actually begin to close until January 1984. Most of these sales were made to individuals with whom Bokor had entered into an agreement to construct a quadraplex on the property purchased by the individuals. Holder had no ownership in Bokor's construction activities and received no part of the payments made to Bokor under the construction contracts.
In early 1984, Bokor and Holder each received title to four lots which Bokor valued at $15,000 each for a total of $60,000.
By May 1, 1984, the maturity date of the promissory note, Bokor had made only one of the contemplated interest payments and had repaid no principal. By that same date, twenty-eight lots had been sold for a total of $392,000 and disbursements of $101,000 had been made for the costs of developing Phase I of Harbor Gate.
Phase II of Harbor Gate began in February, 1984. On May 4, 1984, Third National issued letters of credit in the amount of $872,000 for the development of Harbor Gate Phase II. Bokor and Holder each signed limited guaranties at Third National for one-half of the $872,000. An additional $100,000 credit was issued to defendant HOBOCO by Third National. HOBOCO was formed to hold legal title to the property. As of May 1, 1984, Bokor had not advanced any money to be used for development costs. As of May 1, Bokor's cash investment consisted of the $40,000 he had advanced to purchase the property. At that time he had received lots worth $60,000 and profits from the construction of the quadraplexes.
Sales of the lots in Phase I for which Bokor stated he had commitments prior to the signing of the agreement between Bokor and Holder never fully materialized. Lot sales proceeded slowly and were far behind Bokor's expectations. Of the twenty-eight lots which had been sold, twenty-two were of the original fifty-six commitments and an additional six lots had been sold to a Mr. Noureddina. The development cost as of May 1 had far exceeded the cash flow from the sale of lots.
Bokor, on or around May 1, 1984, the date the promissory note was due, told Holder that he had commitments for the sale of approximately sixty additional lots. These lots were in Phase II. Before any of these lots could be sold, the plat for Phase II had to be recorded with the Metropolitan Government of Nashville and Davidson County. A bond or a letter of credit in the amount of $872,000 was required before the Phase II plat could be recorded. As we have stated, the necessary letters of credit were issued by Third National Bank on May 4.
Only sixteen lots were sold in Phase II, and Bokor did not make any payments due under the promissory note. On July 27, Holder sent Bokor a certified letter informing him that he was exercising his option under both the agreement and the promissory note to take complete ownership of the property. Holder assumed complete ownership of the property and Bokor remained on the premises as a contractor for some ninety-two apartment units under construction.
After assuming ownership of Harbor Gate, Holder assumed complete financial...
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