BV Capital, LLC v. Hughes, ED 102521

• Citation: 474 S.W.3d 592
• Decision Date: 15 September 2015
• Docket Number: No. ED 102521,ED 102521
• Parties: BV Capital, LLC, Respondent, v. Larry Hughes, Appellant, and Third Street Investors, et al., Defendants.
• Court: Court of Appeal of Missouri (US)

474 S.W.3d 592

BV Capital, LLC, Respondent,

v. Larry Hughes, Appellant,andThird Street Investors, et al., Defendants.

No. ED 102521

Missouri Court of Appeals, Eastern District, Division One.

Filed: September 15, 2015

Rehearing Denied November 5, 2015

Matthew A. Jacober, 7701 Forsyth Blvd., Suite 500, St. Louis, MO 63105, Attorney for Appellant.

Steven M. Hamburg, 231 South Bemiston, Suite 1111, Clayton, MO 63105, Attorney for Respondent.

ROBERT G. DOWD, JR., Presiding Judge

Larry Hughes appeals from the trial court's grant of summary judgment against him and in favor of BV Capital. We reverse and remand.

In 2006, Hughes, Darius Miles, Carrie Dunne, Marshall Faulk, Cornell Haynes, II, and Scott Rosenblum formed Third Street Investors, LLC ("TSI") to acquire and redevelop real property located at 800–814 North Third Street, St. Louis, MO 63102 ("the Property"). TSI was owned by Hughes, Miles, and North Meramec Investors, LLC ("NMI"). NMI was owned by Faulk, Haynes, Rosenblum, and Dunne.

Truman Bank made a loan to TSI in relation to the Property. In return, TSI executed a promissory note payable to Truman Bank in the original principal amount of $2,082,500.00. To secure full and prompt repayment of the promissory note, TSI executed and delivered to Truman Bank, as grantee, and Trucorp, Inc., as trustee, a deed of trust with future advances and future obligations on the Property owned by TSI. In addition, Dunne, Faulk, Haynes, Miles, and Rosenblum executed guaranties to be personally liable for certain percentages of the debt in the event there was a default on the promissory note. Hughes also executed a guaranty to be liable for 20% of the loan. This guaranty and the circumstances surrounding it are the subject of this appeal.

TSI opened and operated the Skybox Restaurant on the Property from 2008 until 2010. The payments on the note were often late, real estate taxes became delinquent, and the restaurant failed. On September 16, 2001, the promissory note, as modified by the seven modifications, matured and became due and payable by TSI to Truman Bank.

As of January 13, 2012, the amount due was $2,089,682.19, which included principal, interest, late charges, and a release charge. On January 20, 2012, Truman Bank notified TSI and the guarantors, not including Hughes, of the maturity of the promissory note and demanded payment, but payment was not made.

Truman Bank filed a petition against TSI and the guarantors, not including Hughes, for failing to pay sums due on the promissory note and for breaching their guaranties. Truman Bank also sought the appointment of a receiver to take possession and control of the Property until a foreclosure sale.

Truman Bank failed on September 14, 2012, and the Federal Deposit Insurance Corporation took over as receiver. On December 19, 2012, the promissory note and other loan documents were negotiated to Simmons First National Bank ("Simmons"), and Simmons was substituted for Truman Bank as the plaintiff. Simmons decided to sell the loan, and Hughes made an offer of $500,000.00 to buy it. However, BY Capital made a better offer and on May 17, 2003, the promissory note and other loan documents were negotiated and transferred to BV Capital, and BV Capital became the plaintiff instead of Simmons. BV Capital subsequently sold the Property for $500,000.00, which partially reduced the debt.

BV Capital amended its petition to include Hughes as a defendant based on his guaranty. BV Capital then filed a motion for summary judgment against TSI, Dunne, Faulk, Haynes, Miles, Rosenblum, and Hughes.¹

Hughes filed a motion in opposition to BV Capital's motion for summary judgment, in which he claimed there were several genuine issues of material fact and, as a result, BV Capital was not entitled to summary judgment.

On October 29, 2013, the trial court entered its judgment granting BV Capital's motion for summary judgment as to TSI and Haynes, who failed to file a response to BV Capital's motion and failed to deny any of the uncontroverted facts alleged by BV Capital. The trial court's judgment ordered TSI to pay $2,554,595.70 plus attorneys' fees and Haynes to pay $510,919.14 plus costs and attorneys' fees.

On March 5, 2014, the trial court entered its judgment granting BV Capital's motion for summary judgment with respect to Hughes. The trial court ordered Hughes to pay a total of $586,119.90 to BV Capital. The trial court subsequently dismissed Faulk from the lawsuit with prejudice. BV Capital also dismissed Miles, on whom it never established service of process, from the suit without prejudice.

Hughes appeals from the trial court's grant of summary judgment against him, and the only issue on appeal is the grant of summary judgment the trial court entered against Hughes.

Our review of summary judgment is de novo. Jefferson ex rel. Jefferson v. Missouri Baptist Medical Center, 447 S.W.3d 701, 705 (Mo.App.E.D.2014). The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially. ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). We review the record in the light most favorable to the party against whom judgment was entered, without deference to the trial court's findings, and accord the non-movant the benefit of all reasonable inferences from the record. Jefferson ex rel. Jefferson, 447 S.W.3d at 705. Summary judgment is appropriate where the moving party has demonstrated, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. Id. As the trial court's judgment is founded on the record submitted and the law, an appellate court need not defer to the trial court's order granting summary judgment. Id.

In his first point, Hughes argues the trial court erred in considering Exhibit P. We disagree.

Only evidence that is admissible at trial can be used to sustain or avoid summary judgment. Weltmer v. Signature Health Services Inc., 417 S.W.3d 856, 863 (Mo.App.E.D.2014). To be admissible as evidence, a document must meet a number of foundational requirements, including relevancy, authentication, the best evidence rule, and hearsay. Id. A trial court has considerable discretion in deciding whether to admit or exclude evidence. Bowolak v. Mercy East Communities, 452 S.W.3d 688, 699 (Mo.App.E.D.2014). We defer to the trial court's evidentiary rulings and will reverse only if the court clearly abused its discretion. Id. Upon finding an abuse of discretion, this court will reverse only if the prejudice resulting from the improper admission or exclusion of evidence is outcome-determinative. Id.

Exhibit P is Hughes' guaranty to be personally liable for 20% of the debt on the promissory note. Hughes alleges Truman Bank did not possess his signed guaranty when it made the initial loan. Further, Hughes contends Truman Bank did not possess his signed guaranty when it modified the loan seven times. Hughes maintains his guaranty was a business record, but it was not admissible because it was not properly authenticated as a business record, and, as a result, it was inadmissible hearsay.

We find the trial court did not abuse its discretion in considering Exhibit P in the context of its grant of summary judgment. Exhibit P's authenticity is not being questioned. Hughes admits the guaranty contains his signature. Hughes only denies that the guaranty was executed in connection with TSI's note to Truman Bank. Hughes also denies the guaranty was part of Truman Bank's TSI loan file. These matters are peripheral to the authenticity of Exhibit P and can be determined by other evidence regarding Exhibit P's origin and effect. Therefore, we find the trial court did not err in considering Exhibit P. Point denied.

We will next address Hughes third point on appeal because of its dispositive nature. In his third point, Hughes argues the trial court erred in granting summary judgment in favor of BV Capital because BV Capital failed to prove its prima facie case for breach of guaranty against Hughes as Hughes's guaranty was not delivered to Truman Bank and Hughes's guaranty was not relied upon by Truman Bank in extending credit to TSI. Alternatively, Hughes contends whether his guaranty was delivered to Truman Bank and whether it was relied upon by Truman Bank in extending credit to TSI are issues of fact that must be determined by a trier of fact.

A guaranty is a contract in which a guarantor agrees to become secondarily liable for the obligation of a debtor in the event the debtor does not perform the primary obligation. Capitol Group, Inc. v. Collier, 365 S.W.3d 644, 648 (Mo.App.E.D.2012). The rules governing construction of contracts generally apply to the construction of a guaranty. Id. However, the liability of a guarantor is to be strictly construed according to the terms of the guaranty agreement and may not be extended by implication beyond the strict...