Equity Fin. Res., Inc. v. Overman

• Decision Date: 16 March 2021
• Docket Number: WD 83461
• Citation: 619 S.W.3d 538
• Parties: EQUITY FINANCIAL RESOURCES, INC., Respondent, v. Howard OVERMAN, et al., Appellants.
• Court: Missouri Court of Appeals

619 S.W.3d 538

EQUITY FINANCIAL RESOURCES, INC., Respondent,

v.Howard OVERMAN, et al., Appellants.

WD 83461

Missouri Court of Appeals, Western District.

Filed: March 16, 2021

William J. Fleischaker, Carol A. Wetherell, Joplin, for appellant.

Mark J. Murphy, Liberty, for respondent.

Before Division One: Alok Ahuja, P.J., and Thomas H. Newton and Thomas N. Chapman, JJ.

Alok Ahuja, Judge

Equity Financial Resources, Inc., brought suit against Rose Ann, Howard, Tracy, and Taylor Overman, to enforce an agreement in which the Overmans agreed to pay Equity a commission for procuring financing for their agricultural business. Following a jury trial, the Circuit Court of Clay County entered judgment for Equity. The Overmans appeal. They argue that the circuit court's verdict-directing instruction was erroneous, because it failed to require the jury to resolve a critical disputed factual issue, and that the circuit court abused its discretion by refusing to submit an instruction on the affirmative defense of failure of consideration. Because we agree that the verdict-directing instruction was deficient, we reverse and remand for a new trial.

Factual Background

Together with her husband Rodney (who passed away in July 2016), Rose Ann Overman farmed land in Barton County beginning in 1960.¹ Although they began by purchasing an 80-acre tract, the farmland the Overmans owned grew to 1,579 acres by 2017. In 2017, all of the land was titled in the name of Overman and Son Partnership, a partnership comprised of Rose Ann; her son, Howard; Howard's wife, Tracy; and Rose Ann's grandson, Taylor.

The Overmans borrowed extensively to finance their property acquisitions and farming operations. By the end of 2016, the Overmans owed Simmons Bank $4.3 million on a promissory note, and an additional $500,000 on a line of credit, all secured by their farmland. They also owed $500,000 to Deere & Company, secured by some of their farm equipment.

The Overmans wished to refinance their debt, but were unsuccessful in locating alternate financing on their own. In April 2017, they contacted Gail Murphy, President of Equity, for assistance in locating replacement financing.

Equity and the Overmans entered into two agreements in April 2017. Under the first agreement, the Overmans agreed to pay Equity an hourly rate to prepare a business plan to present to potential lenders. Pursuant to this agreement, Equity developed a plan which proposed that the Overmans refinance their existing debt with two new loans at a 5% interest rate: a twenty-year loan for $4,680,310; and a seven-year loan for $700,000. The Overmans paid Equity $7,500 for development of the business plan.

The second agreement required Equity to use its best efforts to assist Overman and Son Partnership in obtaining financing. Equity was to be paid a 1% commission upon closing of a new loan. The agreement contained a provision giving Equity the exclusive right to seek financing for the Overmans for one year, and specifying that the Overmans would owe Equity a commission if they independently obtained financing. The exclusivity provision stated:

APPLICANT agrees that EQUITY shall have the EXCLUSIVE right for the period of 365 days from the date of this agreement to attempt to arrange financing for APPLICANT with a bank, lender, or other financial resource upon terms and conditions suitable to the APPLICANT. ... During this EXCLUSIVE time period, APPLICANT agrees not to attempt to arrange financing on their own without the express written consent of EQUITY. If the APPLICANT, without the assistance of EQUITY, obtains financing from a suitable bank, lender, or other financial resource during this EXCLUSIVE time period, APPLICANT agrees to compensate EQUITY as set forth [elsewhere in the agreement].

Following execution of the commission agreement, Murphy began working to secure financing for the Overmans. Murphy also communicated with the Overmans’ existing lenders, Simmons Bank and Deere & Company, to forestall foreclosure on their farmland and repossession of their equipment.

Murphy was unable to secure replacement financing during 2017. In late November or early December 2017, Deere & Company repossessed some of the Overmans’ equipment. Rose Ann testified at trial that Simmons Bank also advertised a foreclosure sale for the Overmans’ property for January 4, 2018.

Because Equity had not secured financing, Rose Ann contacted Conterra Bank in Iowa. Conterra agreed to issue the Overmans a three-year "bridge loan" of approximately $5.43 million, at an annual interest rate of 8.08%. Rose Ann testified that the proceeds of the Conterra loan fell approximately $120,000 short of what the Overmans needed to respond to the existing collection efforts, which required them to sell a tractor to pay what was due to Deere & Company and regain possession of their other farm equipment. The proceeds of the Conterra loan were disbursed on January 3, 2018 – the day before Simmons Bank's foreclosure sale was scheduled to occur.

When Murphy heard that the Overmans had secured financing from Conterra, he demanded that they pay Equity its 1% commission on the loan amount. The Overmans refused. In February 2018, Equity filed this lawsuit in the Circuit Court of Clay County (the forum specified in the loan commission agreement), asserting claims for breach of contract and quantum meruit.

A jury trial was held in September 2019. Equity submitted only its claim of breach of contract. The jury found in Equity's favor, and awarded it $54,300, 1% of the principal amount of the Conterra loan. The circuit court's judgment also awarded Equity $26,685.84 in attorney's fees, and pre-judgment interest in the amount of $8,220.87.

The Overmans appeal.²

Discussion

I.

The Overmans’ first Point argues that the verdict-directing instruction for Equity's breach of contract claim (Instruction No. 6) failed to require the jury to decide a disputed factual issue. As submitted, Instruction No. 6 read:

Your verdict must be for plaintiff if you believe

First, plaintiff and defendants entered into an agreement whereby plaintiff agreed to use its best efforts to obtain financing for defendants and defendants agreed to pay plaintiff 1% of any financing obtained by defendants during the term of the contract , and

Second, plaintiff performed its agreement, and Third, defendants failed to perform their agreement, and

Fourth, plaintiff was thereby damaged.

(Emphasis added.) The Overmans argue that the emphasized portion of paragraph "First" was erroneous because it did not require the jury to decide an essential, disputed issue: whether the financing Rose Ann obtained from Conterra was "suitable." We agree.

The Overmans preserved the issue raised in their first Point by making a specific objection to the verdict director during the on-the-record instruction conference, and by re-asserting that objection in their timely-filed new-trial motion.

"Whether a jury was properly instructed is a question of law that this Court reviews de novo. " Edgerton v. Morrison , 280 S.W.3d 62, 65 (Mo. 2009) (citation omitted). To reverse on grounds of instructional error, the party claiming instructional error must establish (1) that the instruction at issue misdirected, mislead, or confused the jury; and (2) prejudice resulted from the instructional error. Sorrell v. Norfolk S. Ry. Co. , 249 S.W.3d 207, 209 (Mo. 2008).

"Where a dispute exists as to one or more of the terms of the agreement relied on by the claimant to support recovery, that issue must be hypothesized in the verdict directing instruction. Failure to do so is prejudicial error." Penberthy v. Nancy Transp., Inc. , 804 S.W.2d 404, 407 (Mo. App. E.D. 1991) (citations and internal quotation marks omitted). "Because ‘[t]he purpose of the verdict[ ] directing instruction is to hypothesize propositions of fact to be found or rejected by the jury,’ the verdict directing instruction ‘must hypothesize the facts essential to the plaintiff's claim.’ " Hervey v. Mo. Dep't of Corr. , 379 S.W.3d 156, 160 (Mo. 2012) (quoting Lasky v. Union Elec. Co. , 936 S.W.2d 797, 800 (Mo. 1997) ; first alteration added by Hervey ).

Equity was only entitled to a commission if the Overmans independently obtained "suitable" financing. The parties’ agreement provided that Equity would endeavor to secure financing for the Overmans "upon terms and conditions suitable to" them; the agreement also provided that the Overmans would owe Equity a commission only if they independently secured financing "from a suitable bank, lender, or other financial resource."³

The agreement does not further define what would be deemed "suitable" loan terms, or a "suitable" lender. "To ascertain the original intent of the parties to a contract, we will give the words of the contract their natural, ordinary, and common sense meaning," and may refer to a dictionary to supply that commonly understood meaning. Behrick v. Konert Farms Homeowners’ Ass'n , 601 S.W.3d 567, 573 (Mo. App. E.D. 2020) (citations and internal quotation marks omitted); see also , e.g. , TCN Invs., LLC v. Superior Detail , 588 S.W.3d 245, 251 (Mo. App. W.D. 2019). Common dictionary definitions of the term "suitable" are: "adapted to a use or purpose,"⁴ or "such as to suit; appropriate; fitting; becoming."⁵

The Overmans’ briefing suggests that the term "suitable" in the contract contains a latent ambiguity. We do not find the term to be ambiguous, since it has a single, commonly understood meaning. Instead, the term is general, and required the jury to make a case-specific factual determination whether the "suitability" condition was satisfied by the Conterra loan. In a similar fashion, courts have recognized that issues of "reasonableness" or "materiality" in contract disputes present factual issues for jury determination. See , e.g. , Guengerich v. Barker , 423 S.W.3d 331, 339 (Mo. App. S.D. 2014) ("The materiality of a breach [of contract] is a question of fact." (citations omitted)); G & J Holdings, LLC...