Honigmann v. Hunter Group, Inc., 50721

• Decision Date: 14 July 1987
• Docket Number: No. 50721,50721
• Citation: 733 S.W.2d 799
• Parties: Ernest J. HONIGMANN, Plaintiff/Respondent-Cross Appellant, v. HUNTER GROUP, INC., et al., Defendants/Appellants-Cross Respondents.
• Court: Missouri Court of Appeals

Page 799

733 S.W.2d 799

Ernest J. HONIGMANN, Plaintiff/Respondent-Cross Appellant, v. HUNTER GROUP, INC., et al., Defendants/Appellants-Cross Respondents.

No. 50721.

Missouri Court of Appeals,

Eastern District,

Division Four.

July 14, 1987.

Francis L. Ruppert, Clayton, for defendants/appellants-cross respondents.

Tom P. Mendelson, University City, for plaintiff/respondent-cross appellant.

GARY M. GAERTNER, Presiding Judge.

This is an appeal from a judgment following a jury verdict in the Circuit Court of the County of St. Louis. The respondent, Ernest Honigmann, sued appellant, Hunter Group, Inc. ¹ for breach of contract. In addition, Honigmann sued Robert Cranston (President of Hunter Group, Inc.) and Barry Todd (Vice-President of Hunter Group, Inc.) for tortious interference with his contractual relationship with Hunter Group, Inc. and tortious interference with business expectancy. The jury found in favor of Honigmann on all three counts and awarded him $29,000.00 in actual damages for breach of contract, $29,000.00 in actual damages for tortious interference with business relations, and $5,000.00 in punitive damages against each of the two individual appellants. ²

Appellants raise a total of eight points on appeal. Appellants challenge the submissibility of respondent's case, claim error in the trial court's denial of appellants' motion for a directed verdict, and find error in the admission of alleged hearsay evidence. We affirm.

The evidence shows that Honigmann purchased a business brokerage franchise ³ from Hunter Group, Inc. (then known as American Business Brokers, Inc. ⁴ ) on April 10, 1980. In July, 1981, Honigmann contacted James Bryant, president of Dixie Cream Flour Company, on the basis of a tip that Bryant was seeking to sell his company. Bryant informed Honigmann that he was interested in selling the business, but that he did not need Honigmann's services at that time because he had a potential buyer. Bryant nonetheless took Honigmann on a tour of the company's facilities and told him that he would be in contact should his potential buyer not complete the deal. Honigmann kept in touch with Bryant over the following months. Bryant then contacted Honigmann in May, 1982, and requested that Honigmann search for a buyer, since Bryant's own negotiations had not produced a sale. Bryant refused to sign Hunter Group, Inc.'s general listing agreement, apparently because of a prior negative experience with a broker. He orally agreed, however, to pay a commission of 10% of the sale price should Honigmann deliver a buyer. Honigmann thereafter obtained financial and corporate information from Bryant about Dixie Cream and prepared a written descriptive profile of the business.

On June 2, 1982, Honigmann and his associate, Dee Quest, introduced Bryant and Michael Whitworth, a prospective buyer. At that time, Bryant signed a "Seller Commission Form" in lieu of a general listing agreement, which provided that Bryant would pay Honigmann a 10% commission if the business were sold to Whitworth. The Franchisor's inter-franchise newsletter of June 18, 1982 stated that "Ernie [Honigmann] has an offer based on a seller commission form [for Dixie Cream]." After three weeks of negotiations, the deal fell through.

Honigmann and Quest met with Bryant shortly after the negotiations with Whitworth terminated. Bryant reconfirmed his desire for them to locate a buyer as well as his intention to pay the commission if they delivered a buyer. Towards this end, Honigmann renewed his efforts to find a buyer. He also updated his written profile of Dixie Cream's financial data on July 14, 1982.

According to Honigmann's testimony, he learned in August, 1982, from Dee Quest that appellants Cranston and Todd had introduced a prospective buyer to Bryant and that Todd had asked Quest to refrain from further contacting Bryant. Honigmann further testified that he never consented to appellants' intervention in the Dixie Cream effort. The testimony of Cranston and Todd is contradictory on this point. Appellants contend that after they learned about the failed Bryant-Whitworth negotiations, they sought and expressly received Honigmann's approval and consent before entering into the Dixie Cream sale activity. Cranston also testified that they would not have pursued the sale without Honigmann's consent.

The evidence further showed that around July 1, 1982, Cranston met with Jim Streett, who was seeking to purchase a business. Cranston informed him about Dixie Cream and Streett eventually purchased Dixie Cream in late December, 1982.

Streett paid approximately $600,000.00 for Dixie Cream. Appellants' testimony was that Street agreed to pay them a fee of $30,000.00, which they considered to be more of a finder's fee rather than a commission because Streett asked them not to perform their usual duties as brokers due to the fact that Bryant refused to negotiate with him if brokers were involved. In point of fact, Streett remitted $20,000.00 in August, 1982, and tendered his final payment of $9,000.00 in early 1983, for a total of $29,000.00. The sum was $1,000.00 less than that agreed upon because of a dispute over the payment of legal services. The checks received from Streett were made out to "Hunter Group," and the funds were deposited into the Franchisor's bank account and treated by it as income.

Todd informed Honigmann in the fall of 1982 that, according to the Franchise Agreement's commission splitting arrangement, ⁵ he would receive 15% of the expected $30,000.00 commission ($4,500.00), since he was the "territorial franchisee" (the one in whose "exclusive territory" the business was located), but that he was not entitled to an additional 20% as the "listing franchisee" because he had not obtained a general listing agreement from Bryant. Honigmann thereafter filed the instant suit.

Our standard of review is both familiar and clear: We view the evidence and reasonable inferences therefrom in the light most favorable to the prevailing party, which in this case is the plaintiff, Honigmann. Ross v. Holton, 640 S.W.2d 166, 170 (Mo.App., E.D.1982).

Appellants' first point alleges that the trial court erred in giving Instruction No. 8, the verdict director for Breach of the Franchise Agreement. They assert that the evidence did not support a finding that Hunter Group, Inc. breached its contract with Honigmann. In essence, appellants contend that Hunter Group, Inc., as Franchisor, had the right under the Franchise Agreement to compete with all of its franchisees, including Honigmann, in the listing and selling of businesses. It is Honigmann's contention that Hunter Group, Inc. breached the contract because it was his understanding that only other franchisees, and not the Franchisor, had the right to list and sell businesses in other franchisees' exclusive territories.

The Franchise Agreement contains the following:

1. FRANCHISE

A. The Franchisor grants to the Franchisee an exclusive Franchise (hereinafter referred to as the "Franchise") to operate a business brokerage office under the name of "[HUNTER GROUP, INC.]" in the territory and marketing area set forth in Section 2, below, and, in connection therewith, to use the [HUNTER GROUP, INC.] systems, forms, materials, expertise, procedures, techniques, names and lists of businesses for sale, all as elsewhere herein set forth.

B. Franchisee further acknowledges and agrees that Franchisee's right to use the name "[HUNTER GROUP]", the systems, operations manual, forms, materials, expertise, procedures, techniques and other information is not exclusive, and that Franchisor, in its sole discretion, has the right to operate, franchise and use any or all of the above or grant the rights to their use to other Franchisees under such terms and conditions as Franchisor may desire, provided that Franchisor may not establish another [HUNTER GROUP, INC.] office in the territory and marketing area set forth in Section 2.

As further explication of the agreement's meaning, appellants point to the following section in the Federal Trade Commission (FTC) disclosure document ⁶ presented to Honigmann before he signed the Franchise Agreement:

[Hunter Group, Inc.]'s Franchisee is granted an exclusive territory, which generally encompasses a territory with a population of approximately 200,000. The size of the Franchise territory is not subject to negotiation. This restriction has been imposed to permit the Franchisee to offer exclusive sales areas, and is based on experience and studies which determined that this size population base is adequate to support a brokerage business.

The Franchisor will not establish another [Hunter Group, Inc.] franchise or a company-owned operation within the exclusive territory. Additionally, the Franchisor will not establish or operate a company-owned outlet or grant a Franchise to engage in a similar business under a different trade name or mark within the Franchisee's exclusive territory. However, the Franchisor and all Franchisees are free to list, sell, and attempt to sell businesses which are not within the exclusive territory of the Franchisee or the Franchisor. In the event Franchisee sells a business outside of its own territory, the commission is split in accordance with the terms outlined in the Franchise Agreement.

The Franchise Agreement does not specifically provide that the Franchisor may compete with its franchisees in the brokering business. The Agreement also contains an explicit fee-splitting arrangement. Further, the FTC disclosure statement states that, "the Franchisor and all Franchisees are free to list, sell, and attempt to sell businesses which are not within the exclusive territory of the Franchisee or the Franchisor." Although not a model of clarity, this sentence describes the overall franchise scheme in which all franchisees and the Franchisor may compete with each other for businesses throughout the franchise system, e.g., not...