Braun v. Lorenz

• Decision Date: 11 June 1979
• Docket Number: No. KCD,KCD
• Citation: 585 S.W.2d 102
• Parties: Marcus BRAUN, Respondent, v. David M. LORENZ, Patricia M. Lorenz and B. Sterling Ambrose, Appellants. 30010.
• Court: Missouri Court of Appeals

Page 102

585 S.W.2d 102

Marcus BRAUN, Respondent, v. David M. LORENZ, Patricia M. Lorenz and B. Sterling Ambrose,

Appellants.

No. KCD 30010.

Missouri Court of Appeals, Western District.

June 11, 1979.

Motion for Rehearing and/or Transfer to Supreme Court Denied

July 12, 1979.

Application to Transfer Denied Sept. 11, 1979.

Billy S. Sparks, David R. Odegard, Kansas City, for appellants.

Don M. Jackson, Kansas City, for respondent.

Before SHANGLER, P. J., and WASSERSTROM and CLARK, JJ.

CLARK, Judge.

This action emanates from an agreement, now contested, but which purported at the time made to resolve prior disputes between appellants and respondent. Asserting claims as to his investment in a corporation known as International Oil Development Company, and a debt owed him by appellant Ambrose, respondent had filed suit against appellants in the United States District Court. On the eve of trial of that case, the subject agreement was made, was reduced to writing and was signed. Interpretation of the settlement agreement again divided the parties and generated this suit.

In the corporate transactions during relevant time periods, various names appear by reason of merger and change of corporate name. Except where otherwise required, the name "Oil Co." will be used to designate the corporation originally named International Oil Development Company, as well as successive combined and surviving companies.

In this suit for alleged breach of the settlement agreement, no issue was joined as to the execution of the agreement or its validity as a document binding the parties to obligations and conferring enforceable rights. Indeed, partial performance has eliminated from contest some subjects of the agreement. By the terms of settlement respondent was obligated to dismiss the federal court suit with prejudice and he did so. Respondent was required to vote his Oil Co. stock and support a corporate merger and that merger was concluded and stock was exchanged. The Ambrose debt was liquidated, as agreed, by a transfer to respondent of Oil Co. stock which had been pledged as collateral security.

Remaining at issue are the rights and obligations created by paragraph 3 of the December 1967 agreement, none of which it has been claimed were performed. The significance of the terms employed requires that the disputed paragraph be quoted in full:

"3. Party of the First Part hereby agrees to exchange Twenty-Four Thousand Eight Hundred (24,800) shares of International Oil Development Company, Inc. stock for Forty-Nine Thousand Six Hundred (49,600) shares of Southern Motel Investors, Inc. stock, said transfer of stock shares to be completed as soon as possible after the date hereof, and further agrees that said shares of stock shall be placed on the market at a price of no less than Two Dollars and 70/100 ($2.70) per share net to Party of the First Part; however in the event PArty of the First Part does not realize and/or recover the sum of Seventy-Seven Thousand Three Hundred Dollars ($77,300.00), with interest thereon at Six (6%) percent per annum from date of each respective purchase by him of International Oil Development Company, Inc. stock, from the sale of Southern Motel Investors, Inc. stock within a period of Two (2) years from the date hereof, then Parties of the Second Part hereby agree and do guarantee to Party of the First Part, payment to Party of the First Part any and all monies representing the difference, if any, remaining between the sale of Southern Motel Investors, Inc. stock and $77,300.00, including interest thereon, and upon the receipt of said payment from Parties of the Second Part to Party of the First Part, Party of the First Part hereby agrees to surrender, deliver and/or release any and all shares of the remaining Forty-Nine Thousand Six Hundred (49,600) shares of Southern Motel Investors, Inc. stock to Parties of the Second Part."

Material facts are essentially undisputed, the evidentiary contest on trial having centered on expressions of opinion and interpretation. From the trial transcript of 579 pages, the following essential facts and circumstances emerge.

As of the date of the agreement, shares of stock in Oil Co. and its predecessors were not registered for public offering and trading as required for third party transactions. The parties were aware that the stock was unregistered. Commencing in March 1968, respondent contacted securities dealers to enlist their aid in marketing the Oil Co. stock, but he was informed by the brokers that they were prohibited from offering any stock publicly which was not registered with the Securities and Exchange Commission or the Missouri Commissioner of Securities. Attempts by respondent himself to procure a sale of any of the stock were unsuccessful and at the conclusion of the two-year period specified in paragraph 3 of the agreement, respondent held the same Oil Co. shares as at the outset, subject only to the merger, transfers and name change described above.

Appellants made no payment to respondent on or subsequent to December 20, 1969 although respondent had informed them prior to expiration of the two-year period that little or no prospect for any open market sale of Oil Co. stock existed. As of January 1970, respondent was aware that controversy over performance of the agreement impended. At that time, however, respondent learned of a proposal for another corporate merger in which Oil Co. stock would be exchanged for that of Clark Manufacturing Company, a concern not previously related to any financial transactions among the parties. Upon inquiry, respondent learned that appellants intended to support the merger and vote their stock accordingly. Respondent concluded on available information that the Clark Company was not financially sound but he resolved any doubts in favor of the merger as an opportunity for him to realize the minimum per share price of $2.70 provided in the agreement.

Respondent also was aware of rights available to him under Section 351.405, RSMo 1969 as a shareholder dissenting from the merger plan and that payment of the fair value of his Oil Co. shares could be demanded. Respondent elected to vote his shares in favor of the merger and received two shares of Clark Company stock for each share of Oil Co. stock. Although the Clark Company stock was unregistered as of the merger early in 1970, restrictions on sale of the Clark Company stock were removed in October 1971 by an opinion letter from counsel. Respondent retained ownership of the Clark Company stock until 1974 when that company was adjudicated bankrupt. The subject action was thereafter filed and this appeal follows a jury verdict which awarded respondent $77,300.00 and interest.

Appellants assert error in the giving of Instruction No. 5, the damage instruction, and Instruction No. 6 in which appellants were charged with the burden of proof on the issue of mitigation of damages. Error is also claimed in failure of the trial court to enter judgment for appellants notwithstanding the verdict for the reason that respondent failed to offer any evidence of damage. We conclude that the jury was erroneously instructed and reverse and remand for a new trial.

Respondent's theory of the case as briefed and argued on appeal is that paragraph 3 of the December 1967 agreement obligated appellants to pay respondent $77,300.00 in settlement of the federal court suit with payment deferred for two years and conditionally to be reduced by amounts realized, if any, through sale by respondent of Oil Co. stock during the interval. Upon receipt by respondent of payment of the settlement, appellants would be entitled, under respondent's theory, to receive Oil Co. stock, not as a purchase transaction but as an incident to settlement of the monetary obligation incurred to conclude respondent's claims earlier advanced. Appellants' interpretation, however, viewed the agreement as one in which appellants contracted to purchase Oil Co. stock from respondent after two years if, by such date, respondent had not earlier sold the stock on equal or more advantageous terms.

A fundamental issue in this case was, therefore, the construction and intent of the agreement either as a promise for payment in settlement of respondent's claims, or a contract to purchase respondent's stock. The applicable language of the document in paragraph 3 is, at best, equivocal and cannot independently be assessed as clearly supporting either view. Whatever may be the conclusion on this account, the trial record demonstrates the manifest dispute generated on the issue and the divergent positions of the parties.

In an apparent attempt to submit the case to the jury on the contract payment obligation theory, respondent presented and the court gave a verdict directing instruction patterned after MAI No. 26.02 modified as follows:

"Instruction No. 2.

"Your verdict must be for plaintiff if you believe:

"First, plaintiff substantially performed his contract obligations by placing the stock referred to in the contract on the market for a period of two years, and

"Second, defendants failed to pay any money to the plaintiff at the end of two years from the date of the contract, and

"Third, because of such failure, defendants' contract obligations were not substantially performed, and

"Fourth, plaintiff was thereby damaged.

"MAI 26.02 Modified, Requested by Plaintiff."

Instructions on damages and mitigation of damages were also given as follows:

"Instruction No. 4.

"If your verdict is for plaintiff, then in assessing damages you must take into consideration the amount, if any, which plaintiff could have realized by the exercise of due diligence in selling the Oil and Properties, Inc. or Clark Manufacturing Company stock after the two year contract period.

"MAI 6.0. (6.01) Modified, Submitted by Defendants."

"Instruction No. 5.

"If you find the issues in favor of the plaintiff, then you must award the...