Equimart Ltd., Inc. v. Epperly

• Citation: 545 N.E.2d 595
• Decision Date: 30 October 1989
• Docket Number: No. 55A01-8905-CV-177,55A01-8905-CV-177
• Parties: EQUIMART LTD., INC., Defendant-Appellant, v. Harrison P. EPPERLY, Plaintiff-Appellee.
• Court: Court of Appeals of Indiana

Page 595

545 N.E.2d 595

EQUIMART LTD., INC., Defendant-Appellant, v. Harrison P. EPPERLY, Plaintiff-Appellee.

No. 55A01-8905-CV-177.

Court of Appeals of Indiana First District.

Oct. 30, 1989.

John D. Nell, Richard A. Clark, Wooden McLaughlin & Sterner, Indianapolis, for defendant-appellant.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Equimart Ltd., Inc. (Equimart) appeals the Morgan Superior Court's entry of partial

summary judgment in favor of Harrison P. Epperly (Epperly). We affirm.

FACTS

Equimart is an Indiana Corporation. Epperly was one of the founders and was the principal officer of United Brake Systems (UBS). Epperly owned 80% of the common stock of UBS, and Epperly's wife owned the remaining 20%. Epperly decided to sell UBS and, after negotiations with other prospective buyers failed, began negotiations with Equimart sometime in the late Spring of 1986 to sell all the UBS stock to Equimart. On July 31, 1986, Epperly and Equimart executed an agreement entitled "Letter of Intent."

In the Letter of Intent, Equimart and Epperly stated that they would "attempt, in good faith, to negotiate a definitive purchase agreement to be entered into providing for the sale ... of all the stock (the "Final Agreement")." Record at 90. The Letter of Intent set forth that the purchase price of the stock would be at least Twelve Million Dollars ($12,000,000.00), and that the purchase price could be increased in accordance with certain other provisions in the Letter of Intent. The Letter of Intent set forth various other provisions that were to be included in the Final Agreement, such as an employment agreement between Epperly and Equimart, and a non-competition agreement if Epperly's employment with Equimart should terminate for any reason.

The Letter of Intent provided that Equimart was to pay Twenty-five Thousand Dollars ($25,000.00) to Epperly, in consideration of which Epperly agreed that for a period of one hundred twenty (120) days following the date of the letter, he "shall not discuss or negotiate with any other firm or individual for the sale of the stock." Record at 95. The letter also stated that "[s]hould a Final Agreement be entered into by the parties such consideration shall be applied against and thereby reduce the deferred balance of the Purchase Price." Id.

The Letter of Intent made specific reference to another agreement to be signed:

"7. In addition to the foregoing, consummation of the transaction here contemplated (Buyer's purchase of the Stock from Seller) will be subject to the execution and delivery of a Final Agreement in a form reasonably satisfactory to the parties and their respective counsel. Such Agreement will contain the customary representations and warranties, ... closing conditions, commercial restrictions upon Buyer and other terms as the parties or their respective counsel may agree."

Record at 96.

After the Letter of Intent was signed, Equimart delivered a check in the amount of Twenty-five Thousand Dollars ($25,000.00) to Epperly pursuant to the agreement. In late October, also pursuant to the agreement, an audited financial statement was prepared that raised questions regarding core bank practices which had the effect of reducing the accounts receivable. ¹ Equimart's attempts to secure financing were thus complicated, and Equimart alerted Epperly of this difficulty.

In December, Epperly contacted other persons regarding the sale of UBS. On December 15, 1986, Equimart sent the following letter to Epperly's counsel:

"Enclosed herewith please find an initial unproof and very rough draft Stock Purchase and Redemption Agreement which we have prepared in connection with the contemplated sale.

Walter, PLEASE BE ADVISED THAT THE ENCLOSED DRAFT IS NOT REPRESENTED TO BE FINAL OR BINDING IN ANY RESPECT AND IS SUBJECT

                TO CHANGE AT THE BEHEST OF OUR CLIENT.   The draft is being transmitted, in the interest of time, for your early review and comment only and with a view that you might be apprised of the compilations and disclosures which will be expected by our client from Mr. Epperly
                

We hope to furnish each of you a refined draft, along with corollary documents, later today or tomorrow."

Record at 77 (emphasis added). On December 20, 1986, Equimart tendered a second check for $25,000.00 to Epperly, along with a letter stating that the money was "for extension of the period of exclusivity in accordance with ... [the] Letter of Intent ..." Record at 1219. Epperly returned this check to Equimart. ²

No Final Agreement was ever entered into by Epperly and Equimart, and Epperly sold the assets of UBS to a third party on December 30, 1986. During negotiations with this third party, Equimart represented to Epperly that it would assert a claim of ownership over any proceeds of a sale between Epperly and any third party. Therefore, on December 18, 1986, Epperly filed a complaint against Equimart, seeking a declaratory judgment that Epperly had no obligation or liability to Equimart based on the Letter of Intent. Equimart filed a counterclaim and thirty-party complaint on December 22, 1986, claiming that Epperly had breached the Letter of Intent by entering into negotiations with and selling the assets of UBS to a third party.

On June 10, 1988, Epperly filed a Motion for Partial Summary Judgment, claiming that there was no genuine issue of material fact that the Letter of Intent was merely an agreement to agree and thus created no enforceable rights in Equimart to purchase Epperly's stock. Epperly claimed that his obligation to sell the UBS stock was subject to a second and mutually acceptable Final Agreement and no such Agreement was ever executed. The trial court granted Epperly's motion on April 24, 1989.

On May 3, 1989, Equimart filed its Petition for Certification for Interlocutory Appeal, which the trial court granted on May 7, 1989. On June 16, 1989, we granted permission for Equimart to pursue this Interlocutory Appeal.

ISSUES

Equimart raises two issues for our review, which we have consolidated into the following issue:

Did the trial court err in finding that there was no genuine issue of material fact that the parties intended not to be bound to buy and sell Epperly's stock until a Final Agreement was executed?

DISCUSSION AND DECISION

We first note that Epperly has not favored us with an appellee's brief. Therefore, we may reverse upon a showing by Equimart of prima facie error in the trial court's judgment. Stacey-Rand, Inc. v. J.J. Holman, Inc. (1988), Ind.App., 527 N.E.2d 726, 727; In re Marriage of Tucker (1980), Ind.App., 406 N.E.2d 321, 323.

When reviewing a grant of summary judgment, we use the same standard as that used by the trial court; summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Indiana Rules of Procedure, Trial Rule 56(c); Jackson v. Warrum (1989), Ind.App., 535 N.E.2d 1207, 1210; Seiler v. Grow (1987), Ind.App., 507 N.E.2d 628, 630, trans. denied. In determining if a genuine issue of material fact exists, we construe all matters liberally in favor of the non-moving party; we resolve all doubts in favor of the non-movant and view all facts and inferences therefrom in a light most favorable to the non-movant. Jackson, 535 N.E.2d at 1210.

Equimart correctly observes, citing International Shoe v. Lacy (1944), 114 Ind.App....