Garbo v. Hilleary Franchise Systems, Inc.

• Decision Date: 04 April 1972
• Docket Number: No. 34142,34142
• Parties: Blue Sky L. Rep. P 71,026 John GARBO and Rachel Garbo, Plaintiffs-Appellants, v. HILLEARY FRANCHISE SYSTEMS, INC., et al., Defendants-Respondents. . Louis District
• Court: Missouri Court of Appeals

Page 491

479 S.W.2d 491

Blue Sky L. Rep. P 71,026

John GARBO and Rachel Garbo, Plaintiffs-Appellants, v. HILLEARY FRANCHISE SYSTEMS, INC., et al., Defendants-Respondents.

No. 34142.

Missouri Court of Appeals, St. Louis District.

April 4, 1972.

Vincent E. Hartigan, Jr., St. Louis, for plaintiffs-appellants.

Stein & Seigel, Hyman G. Stein, Lewis, Rice, Tucker, Allen & Chubb, F. Wm. McCalpin, St. Louis, for defendants-respondents.

DOERNER, Commissioner.

The petition filed by plaintiffs in this case contained two counts, but we are here concerned with only the second. The court sustained the separate motions of two of the defendants to dismiss Count II for failure to state a claim upon which relief could be granted, dismissed that Count with prejudice as to all of the defendants, and designated its order as a final and appealable order. Plaintiffs thereupon filed their alternative motion to set aside the dismissal, for a rehearing, and for leave to dismiss without prejudice. The court overruled that motion on January 29, 1971, and plaintiffs appealed.

Plaintiffs' notice of appeal specified that their appeal was taken from the court's order of January 29, 1971, that is, the order overruling the plaintiffs' foregoing alternative motion. As defendants correctly point out, an order overruling a motion for a new trial or one for similar post-hearing relief is not an appealable order. However, it is the spirit of our code to sustain an appeal which is actually an attempt in good faith to appeal from a final judgment. Woods v. Cantrell, 356 Mo. 194, 201 S.W.2d 311, and we therefore deny defendants' request that we dismiss the appeal. Walker v. Thompson, Mo., 338 S.W.2d 114.

In their amended petition plaintiffs alleged that defendant Hilleary Franchise Systems, Inc., was a Missouri corporation, with offices in St. Louis County, and was engaged in the restaurant business for profit; that Harry L. Hilleary, Frederick Hernon, Russell A. Spengel, Adam Aronson, John C. Cahil, Donald S. Hilleary and Paul Brackman, at various times were directors of that corporation; that at various times the defendant corporation, acting through its agents, servants and employees, 'entered into and sold to plaintiffs various investments which were known as limited partnership certificates'; that at all times mentioned in the petition Section 409.010 through Section 409.418 of the Revised Statutes of Missouri (V.A.M.S.), which regulated the sale of various securities, were in full force and effect; 'That the certificates of limited partnership sold and issued by the defendant corporation to the plaintiffs were securities within the meaning of said aforementioned Missouri Statutes'; that the defendant corporation failed to register said securities as required by that statute; that Section 409.411 makes all of said transactions voidable at the election of the purchasers, and that in compliance with that statute the plaintiffs did within two years of the issuance and sale of said security demand of the defendant corporation a return of the money paid for said security 'but that said individual defendant has failed and refused to return these funds to the plaintiffs despite the fact that plaintiffs have tendered said securities to * * *' the defendant corporation; and that by virtue of Section 409.411 the named individual defendants, being directors of the defendant corporation at various times when said securities were issued, are personally liable to return said funds to plaintiffs but have failed and refused to do so. Plaintiffs' prayer was for judgment against the individual defendants in the sum of $13,500.00, for interest of 6% from January 1, 1969, for a reasonable attorneys fee, for its costs, and for such other and further relief as to the court may seem just.

Two of the individual defendants, Paul Brackman and Adam Aronson, filed separate motions to dismiss Count II of plaintiffs' petition for the reason that said Count failed to state a claim upon which relief can be granted.

Thereafter the plaintiffs filed as an exhibit to their petition a copy of a document titled 'Certificate of Limited Partnership.' By so doing the plaintiffs made the Certificate a part of their petition for all purposes, and it must be considered in passing upon the sufficiency of the petition, the decisive issue here presented. Civil Rule 55.14, V.A.M.R.; Commonwealth Ins. Agency, Inc. v. Arnold, Mo., 389 S.W.2d 803; Crouch v. Tourtelot, Mo., 350 S.W.2d 799; Travelers Indemnity Co. v. Chumbley, Mo.App., 394 S.W.2d 418. Because of the relative importance the Certificate plays in resolving that issue we deem it necessary to set forth the Certificate in its entirety.

'CERTIFICATE OF LIMITED PARTNERSHIP

'THIS CERTIFICATE is made this 28th day of November, 1969 by and between HILLEARY FRANCHISE SYSTEMS, INC., a Missouri corporation with its principal place of business at 11715 Administration Dr., St. Louis, Mo. 63141, hereinafter called the 'General Partner', and the other persons named in paragraph 3 hereof collectively called the 'Limited Partners'.

'1. Name, Business, and Location. The parties hereto hereby form a limited partnership pursuant to the Uniform Limited Partnership Law of Missouri under the name of John Henry's of Clearwater, Florida to operate a general restaurant and cocktail lounge under the provisions of a John Henry's Franchise Agreement. The Franchise Agreement shall be entered into by and between Hilleary Franchise Systems, Inc., as Franchisor, and the Partnership, as Franchisee, under the name of John Henry's of Clearwater, Florida. The principal place of the business shall be in Clearwater Florida.

'2. Term. The Partnership shall begin on November 28, 1969 and shall continue until the Partnership is terminated as follows:

(I) By mutual consent of all of the partners; or

((II) By the expiration of the term of the John Henry's franchise agreement including any extension thereof which for this John Henry's will be 20 years from the date the John Henry's restaurant established by the franchisee commences business plus the 3 five year options if exercised.

'3. Capital and Profit Sharing. The persons comprising this Limited Partnership, and their respective shares of the profits are as set forth on Exhibit I, which is attached hereto, and is a part hereof. Each of the partners shall contribute to the capital of the Partnership in cash the amounts shown on Exhibit I. The net profits of the Partnership shall be divided among the partners, in the proportions set opposite their respective names on Exhibit I.

'4. Management. No Limited Partner shall have any responsibility for, nor participate in, the conduct, control or management of the business or affairs of the Partnership, except as an employee of the Partnership. The responsibility for the conduct, control and management of the business affairs of the Partnership shall be borne by the General Partner exclusively. In this connection, the General Partner is hereby authorized and directed to execute with itself a John Henry's Franchise Agreement for and on behalf of the Partnership and to deliver to itself such Franchise Agreement and such other instruments, documents and certificates and to take such other and further action as the General Partner deems necessary or desirable in order to carry out the Partnership's obligations thereunder and to carry out the Partnership's business purpose.

'In addition to its other duties and obligations hereunder, the General Partner shall (a) install and activate in the said restaurant and cocktail lounge the system, methods and procedures peculiar to and now used in operating John Henry's Restaurants, (b) train and supervise key personnel for the said restaurant and cocktail lounge, (c) obtain sketches, elevations, floor plans and equipment layout for the said restaurant and cocktail lounge, and (d) select a full time on-the-premises manager whose compensation will be paid by the Partnership. The General Partner shall receive no fee for its management services; in lieu of such management fee the general partner shall receive the royalty provided in the Franchise Agreement payable to the General Partner monthly, which shall be three per cent (3%) of the total dollar amount of gross sales. The term 'gross sales' shall include the selling price of all merchandise of any sort whatsoever sold in, upon or from any part of the said restaurant and cocktail lounge or otherwise, exclusive of sales taxes imposed by any governmental agency or authority.

'The General Partner is specifically authorized and empowered, for and on behalf of the Partnership, to deal with itself in all matters relating to the organization, establishment, operation and management of the Partnership business. The General Partner is at present and in the future may engage in any other business ventures of any nature or description, independently or with others, including, but not limited to the general restaurant and cocktail lounge business. The Partnership shall have no responsibility to pay losses, if any, of such other businesses, nor shall the Partnership receive any share of the profits, if any, of such other businesses.

'5. Payments to General Partner. The General Partner is authorized to pay to itself (a) a franchise fee for the purchase of the franchise and royalties set forth pursuant to the Franchise Agreement, (see paragraph 4 above) (b) all expenses and costs it incurs for and on behalf of the Partnership (c) interest at the rate of 6.0% on all funds advanced or loaned to the Partnership and (d) any other and all expenses, costs, out-of-pocket expenses, advances and monies loaned by the General Partner to, for, or on behalf of the Partnership.

'6. Banking. All funds of the Partnership shall be deposited in such name or names and in such checking account or accounts as shall be designated by the General Partner, and may be commingled in a joint account with funds of other...