Brown v. Smith

• Decision Date: 12 May 2020
• Docket Number: WD 82873
• Parties: Shirley S. BROWN, Respondent, v. Stephen L. SMITH, Appellant.
• Court: Missouri Court of Appeals

601 S.W.3d 554

Shirley S. BROWN, Respondent,

v.Stephen L. SMITH, Appellant.

WD 82873

Missouri Court of Appeals, Western District.

OPINION FILED: May 12, 2020

Motion to Modify/Change Opinion Denied June 18, 2020

Brent E. Haden, Columbia, MO, for respondent.

Anthony W. Bonuchi, Kansas City, MO, for appellant.

Before Division Two: Mark D. Pfeiffer, Presiding Judge, Alok Ahuja, Judge and Gary D. Witt, Judge

Gary D. Witt, Judge

Stephen Smith ("Smith") appeals the judgment of the Circuit Court of Saline County denying his counterclaim for specific performance of an option agreement to purchase his sister's one-half interest in property they held jointly. Smith raises two points of error challenging the court's finding that the agreement was unenforceable. We reverse and remand.

Factual and Procedural Background

Smith and Shirley Brown ("Brown") are siblings and the children of Mary Jane Smith ("Mary Jane").¹ The family owned five tracts of land in Saline County, Missouri, totaling nearly 1,000 acres of real property. As part of Mary Jane's estate planning, on August 12, 2004, Smith, Brown, and Mary Jane met with Mary Jane's attorney ("Attorney"), to execute multiple documents that included deeds and conveyances, a cover "Memo," and a "Memorandum of Agreement" that was, in effect, an option agreement. The cover memorandum ("Memorandum") stated:

The undersigned, being the heirs and devisees under the Last Will and Testaments of Twyman Smith, Gertrude Smith and Morris Smith,^{[2 ]} for the purpose of clarifying titles and ambiguities thereto and for the mutual benefit of each of the undersigned as to present and future planning, have executed the conveyances among themselves attached hereto as exchanges of real estate interests for estate planning purposes, not as sales or gifts.

The Memorandum was signed by Smith, Brown, and Mary Jane. According to Attorney, the parties were "swapping interest and ending up so Mary Jane had some income for life" and Smith and Brown "each had some separate ground when she died. All of this was part of what they were doing that day." The five tracts were transferred as follows:

Tract One : Approximately 248 acres. Smith and Brown, as the record owners, transferred their equal interests to Mary Jane via quit claim deed. Mary Jane executed a general warranty deed transferring Tract One to Brown and her heirs, subject to a life estate for Mary Jane.

Tract Two : Twenty acres. Smith and Brown executed a general warranty deed transferring their interests to Mary Jane for life, with the remainder to Brown and her heirs.

Tract Three : 160 acres. Mary Jane transferred her interest to Smith reserving a life estate for herself via general warranty deed.

Tract Four : 165 acres. Brown transferred her remainder interest (which was to follow Mary Jane's life estate) to Smith.

Tract Five : 160 acres. Mary Jane transferred via general warranty deed her interest to Smith and Brown as tenants in common, each with an equal one-half interest, subject to a life estate for Mary Jane. Tract Five is legally described as: The Southwest Quarter of Section Twenty-eight (28) in Township Fifty-two (52) North, Range Twenty (20) West of the 5th Principal Meridian, Saline County, Missouri. ("Tract Five").³

House : Mary Jane executed a beneficiary deed naming Brown as the beneficiary upon Mary Jane's death.

In addition to the Memorandum and conveyances, Smith and Brown executed a Memorandum of Agreement ("Option Agreement") regarding Tract Five that stated:

The undersigned, Stephen L. Smith and Shirley S. Brown, being co-owners of the remainder interest in the Southwest Quarter of Section 28, Township 50, Range 20, following the life estate of Mary Jane Smith, for and in consideration of the mutual covenants herein, agree that, upon the death of the said Mary Jane Smith, the undersigned Stephen L. Smith shall have the option to purchase the one-half interest in fee then owned by Shirley S. Brown for the sum of $84,000.00. Such option shall be exercised by furnishing written notice thereof within thirty days following the death of the said Mary Jane Smith and tender of purchase price within thirty days after such notice. Upon failure to exercise such option by the said Stephen L. Smith, Shirley S. Brown shall have the same option on the same terms and time frame thereafter. Failure by either party to exercise such option shall nullify this Agreement and release the property thereafter.

Nothing herein shall preclude or prevent the parties from earlier purchase or sale on different terms between themselves or otherwise nullifying this Agreement by mutual agreement.

Mary Jane was not a signatory to the Option Agreement. The Option Agreement dealt solely with Tract Five and provided the siblings an opportunity to buy each other's interest upon the death of Mary Jane.

Mary Jane died on April 13, 2018. Pursuant to the deed, her life estate in Tract Five was terminated automatically, which vested Smith and Brown each with an undivided one-half interest in the property as tenants in common. On April 24, 2018, Brown sent a letter to Smith stating that she was "revoking [Smith's] option to purchase the property in Saline County in the Southwest Quarter of Section 28, Township 50, Range 20, for which I have not received any consideration." In response, Smith sent a letter to Brown on May 2, 2018, notifying her that he was electing to "exercise said option to purchase" Tract Five under the terms and conditions established in the Option Agreement and subsequently timely tendered the purchase price to Brown's attorney.

Brown filed a petition to partition Tract Five on May 30, 2018 ("Petition"). Smith answered and filed a counterclaim for specific performance of the Option Agreement on June 21, 2018 ("Counterclaim"). The parties agreed that the circuit court should take up the issue of the Counterclaim prior to hearing the Petition's claim for partition, noting that if Smith was successful on the Counterclaim, it would make the partition claim moot. The circuit court held a one-day bench trial on March 14, 2019 ("Trial"). Specifically, the parties stipulated that Smith performed all obligations required to exercise his option, and the sole question before the court was whether the Option Agreement "included consideration, or conversely, whether consideration was absent." Brown argued that legally if the Option Agreement lacked consideration, it could be unilaterally terminated by her at any time before Smith exercised his rights thereunder and her April 24, 2018 letter was an effective termination of the option agreement. In support of this argument Brown relies on HGS Homes, Inc. v Kelly Residential Group, Inc. , 948 S.W.2d 251 (Mo. App. E.D. 1997). Brown argues that when an option contract lacks independent consideration it constitutes a revocable offer which can be withdrawn or revoked at any time prior to its acceptance.

Brown, Smith, and Attorney testified at Trial. Brown admitted in her Answer to Smith's Counterclaim that the purchase price established by the Option Agreement for her undivided one-half interest in Tract Five was approximately equal to the per-acre purchase price of a tract of land that she and her husband had earlier purchased from her parents. Attorney testified that "Mary Jane wanted for [Smith] to have an option to buy [Brown's interest] so [Smith] would own it. But if he didn't exercise his option, then [Brown] would have the same option, based not on inflation farmland value, but on an old figure that they had within the family on other ground[.]"

The circuit court entered its Judgment on May 7, 2019 ("Judgment"). The court found that there was no mutuality of promise under the Option Agreement; it therefore lacked consideration. Further, the court found because neither the Memorandum nor the other conveyances referenced the Option Agreement, or vice versa , those conveyances could not serve as other consideration for the Option Agreement. Thus, the court held that in the absence of consideration, Brown could revoke the Option Agreement at any time prior to Smith giving notice of his intent to exercise his rights under the agreement. The court entered judgment against Smith on the Counterclaim and certified the Judgment for appeal pursuant to Rule 74.01(b).⁴ This appeal followed.

Standard of Review

The standard of review for a court-tried case is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). G.H.H. Invs., L.L.C. v. Chesterfield Mgmt. Assocs., L.P., 262 S.W.3d 687, 691 (Mo. App. E.D. 2008). Thus, the judgment of the trial court will be affirmed unless insufficient evidence supports it, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. The appellate court defers to the factual findings of the trial court, which is in a superior position to assess credibility. Id. It will, however, independently evaluate the trial court's conclusions of law. Id. Contract interpretation and questions of contract ambiguity are issues of law that will be reviewed de novo. Id.

Fedynich v. Massood , 342 S.W.3d 887, 890 (Mo. App. W.D. 2011). "Specific performance is purely an equitable remedy and must be governed by equitable principles." Smith v. Najafi , 584 S.W.3d 389, 394 (Mo. App. W.D. 2019) (quoting ROH Farms, LLC v. Cook , 572 S.W.3d 121, 125 (Mo. App. W.D. 2019) ). "The equitable remedy of specific performance is not a matter of right but is a remedy applied by courts of equity, depending upon the facts in the particular case; and the trial court has judicial discretion within the established doctrines and principles of equity to award or withhold the remedy." Id.

Discussion

Brown raises two allegations of error on appeal. Brown first contends that the circuit court erred in failing to find consideration was established by the mutual promises between Smith and Brown to offer to one another the option to purchase the other's one-half interest in Tract Five. Second, Brown contends that...