Ditto, Inc. v. Davids

• Citation: 457 S.W.3d 1
• Decision Date: 12 November 2014
• Docket Number: WD 77297
• Court: Court of Appeal of Missouri (US)
• Parties: Ditto, Incorporated, Appellant, v. Heather Davids, Chris Davids and Revive Lee's Summit, LLC, f/k/a Ditto Lee's Summit, LLC, Respondents.

457 S.W.3d 1

Ditto, Incorporated, Appellant

v.Heather Davids, Chris Davids and Revive Lee's Summit, LLC, f/k/a Ditto Lee's Summit, LLC, Respondents.

WD 77297

Missouri Court of Appeals, Western District.

OPINION FILED: November 12, 2014

Motion for Rehearing and/or Transfer to Supreme Court Denied December 23, 2014

Application for Transfer Denied March 31, 2015

Stephen B. Millin Jr., Kansas City, MO, for appellant.

Scott R. Ast and Michele F. Sutton, Kansas City, MO, for respondents.

Before Division Three: Karen King Mitchell, Presiding Judge, Cynthia L. Martin, Judge and Gary D. Witt, Judge

Opinion

Cynthia L. Martin, Judge

Ditto, Inc. (“Ditto”) appeals the trial court's grant of summary judgment in favor of Heather Davids (“Heather”), Chris Davids (“Chris”),¹ and Revive Lee's Summit, LLC f/k/a Ditto Lee's Summit, LLC (“Revive”) (collectively “the Defendants”) on Ditto's breach of contract claim. Ditto asserts that the grant of summary judgment was erroneous because: (1) the contract between Ditto and the Defendants had a definite term and was not terminable at will as a matter of law; (2) summary judgment should not have been granted based on the affirmative defense of equitable estoppel when the Defendants did not properly plead that defense; and (3) alternatively, material facts remained in genuine dispute regarding the affirmative defense of equitable estoppel preventing the entry of judgment as a matter of law. We reverse and remand.

Factual and Procedural History

Ditto is a Missouri corporation that was formed in 2005. So Yun (“Yun”) is the sole shareholder and president of Ditto. Ditto owns and operates used clothing stores throughout the Kansas City metropolitan area.

Yun approached Heather, a frequent customer, about the possibility of collaborating to open a Ditto store in Lee's Summit. Ultimately, Ditto and Heather executed a contract denominated a “Joint Venture Agreement” (“JVA”) in March or April 2010.² The JVA outlined the parties' obligations with respect to opening and operating a Ditto store in Lee's Summit in leased space identified by address and square footage. The lease anticipated by the JVA was referenced as Exhibit B (“Lease”). The JVA was effective upon its execution, and provides in Article 4 that it will “continue in full force and effect until the Parties' obligations as set forth in this JVA have been completed.” At or near the time the JVA was signed, the Lease was signed by Heather as the tenant and by Ditto as the guarantor.

Heather and her husband Chris thereafter began operating the Lee's Summit Ditto store through an entity known as Ditto Lee's Summit, LLC, a limited liability company (“Ditto LLC”). Ditto LLC was wholly owned by Chris. However, the JVA was never formally assigned to Ditto LLC, and Heather remained the obligor under the JVA.

In September 2012, Heather and Yun met to discuss the business relationship with Ditto, as Heather had become dissatisfied with the relationship. According to Yun:

[A]t that time [Heather] asked about the ending to the Joint Venture Agreement. I told her there was no end date; it's an ongoing agreement as long as she was using the Ditto name. At that point she stated that she did not agree with that, and she and her husband discussed the current situation and wanted to end the relationship and re-brand.

....

I said that was not an option, and if that is what she wanted to do then we needed to contact our attorneys.

Following that meeting, attorneys for Ditto and Heather began negotiations to see if an agreement could be reached to terminate the JVA.

In connection with those negotiations, Ditto's attorney sent Heather's attorney a letter on September 12, 2012. The letter acknowledged Heather's desire to terminate the JVA. The letter asked Heather to propose terms for terminating the JVA. Heather's response does not appear in the record. However, the record does contain a letter from Ditto's attorney to Heather's attorney dated September 20, 2012,³ rejecting terms proposed by Heather. In that letter, Ditto's attorney indicates that “my client is satisfied with continuing the JVA as it currently stands” and that “Ditto is entitled to payments of 6% until July, 2012⁴ and 5% of the gross receipts monthly, which would continue indefinitely.”

Heated communications continued between the parties' attorneys regarding, among other things, whether the JVA constituted a franchise agreement and whether Heather was in breach of the JVA. On November 12, 2012, Ditto's attorney sent Heather's attorney an email which claimed that the JVA “is of unlimited duration,” and is thus terminable at will. Ditto's attorney threatened that if an agreement regarding termination of the JVA could not be reached, Ditto “will be forced to terminate the at-will contract and take over the store.”

Heather's attorney responded with an email dated November 19, 2012 which stated:

[W]e agree with your assertion that the Joint Venture Agreement between Ditto, Inc. and Heather Davids is terminable at will.

Accordingly, Heather Davids hereby terminates the Joint Venture Agreement effective January 15, 2012. Ms. Yun is a guarantor on the commercial lease between Heather Davids and Lee's Summit Investors–98. My clients will make best efforts to facilitate the cancellation of Ms. Yun's ... guarantee on that lease.

My client acknowledges the license extended by Ditto, Inc. to use its “DITTO” trademark will also terminate with the agreement. Therefore, my client will cease using the Ditto mark in its business and return the “Seller's Guide” to Ms. Yun. My client will terminate the use of the “DITTO” trademark for all other purposes and cease any related advertising and marketing identifying it as the “DITTO” brand. She will also change the name of the company to one that does not include the name “DITTO”. Ms. Yun may purchase the “DITTO” store signage from my client at fair market value if the parties can agree to a price. Otherwise, the signage will be destroyed.

Of course, with the termination of the agreement, the royalties paid pursuant to paragraph 1.7 of the Joint Venture Agreement will cease as of January 15, 2013, as well, and my client will provide the final royalty payment on February 15, 2013 as required by the agreement.

Ditto's attorney claims to have advised Heather's attorney on or about November 30, 2012 “that Ditto, Inc. disclaimed any contention or belief that the Joint Venture Agreement was of indefinite duration and, as a result, ‘terminable at will’ by Heather Davids.” Consistent with this contention, Ditto filed a lawsuit on November 30, 2012 against Ditto LLC and Heather seeking, among other things, to enjoin termination of the JVA.⁵

Notwithstanding Ditto's disclaimed contention and the pending lawsuit seeking to enjoin termination of the JVA, Heather terminated the JVA on February 1, 2013. The Defendants changed the name of the Lee's Summit store to “reVive Upscale Resale Clothing,” and made their last payment to Ditto for a percentage of gross sales at the store on or about February 15, 2013. Heather was not able to secure Ditto's release as a guarantor on the Lease.

Ditto filed the instant suit against the Defendants on February 6, 2013. The petition asserted two claims: that the Defendants breached the JVA by terminating the JVA, and that the Defendants breached a fiduciary duty owed to Ditto. The Defendants filed an answer in which they asserted, among other things, an affirmative defense that Ditto's “claims are barred, in whole or in part, by waiver, release, laches, estoppel, disclaimer, novation, lack of consideration, and/or overreaching.” The Defendants also asserted counterclaims against Ditto for unjust enrichment and for money had and received.

After significant discovery, and in the time frame anticipated by the trial court's scheduling order which imposed a firm jury trial date, the parties filed competing motions for summary judgment. The Defendants filed two motions. The first was a motion for partial summary judgment which argued that the JVA had an indefinite term and was therefore terminable at will, requiring judgment in the Defendants' favor on Ditto's breach of contract claim as a matter of law. The second was a motion for summary judgment which asserted: (i) the alternative argument that Ditto was equitably estopped to assert its breach of contract claim because Heather detrimentally relied on Ditto's representations that the JVA was indefinite in its term and terminable at will; and (ii) that no fiduciary relationship existed between Ditto and the Defendants warranting the entry of judgment on Ditto's fiduciary duty claim in the Defendants' favor as a matter of law. Ditto filed a competing motion for partial summary judgment which argued in opposition to the Defendant's motion for partial summary judgment that the JVA had a definite term that was co-extensive with the express 63–month term of the Lease and was therefore not terminable at will. Ditto thus sought judgment in its favor as a matter of law on its breach of contract claim.

The trial court issued an “order and judgment” on January 16, 2014. The order granted both of the Defendants' motions for summary judgment, and denied Ditto's motion for partial summary judgment. The order concluded that the JVA “is clear and unambiguous and created an agreement of indefinite duration” permitting the JVA to be terminated at the will of either party. The trial court thus concluded that the Defendants were entitled to judgment on Ditto's breach of contract claim as a matter of law. The trial court alternatively concluded that the Defendants were also entitled to judgment on Ditto's breach of contract claim because the uncontroverted facts established that Ditto was equitably estopped to contend that the JVA was of a definite duration because Heather detrimentally relied on Ditto's representations that the JVA was of an indefinite duration, “subject[ing] Defendants to the cost of defending this legal action.” Finally, the...