Khalil v. 3HB Corp.

• Decision Date: 16 March 2021
• Docket Number: ED 108659,Nos. ED 108660,s. ED 108660
• Parties: Bassam KHALIL, and B-CO, LLC, Respondents/Cross-Appellants, v. 3HB CORPORATION d/b/a Hale Communications, Appellant/Cross-Respondent.
• Court: Missouri Court of Appeals

621 S.W.3d 1

Bassam KHALIL, and B-CO, LLC, Respondents/Cross-Appellants,

v.3HB CORPORATION d/b/a Hale Communications, Appellant/Cross-Respondent.

Nos. ED 108660

ED 108659

Missouri Court of Appeals, Eastern District, DIVISION FOUR.

Filed: March 16, 2021

FOR APPELLANT: Ira Blank, Lawrence Wittels, 8151 Clayton Road, Ste. 201, Saint Louis, MO 63117.

FOR RESPONDENT: Michael Daming, Evelyn Sims, CIBC Place, 1401 S. Brentwood Blvd., Ste. 875, St. Louis, MO 63144.

Gary M. Gaertner, Jr., P.J.

Introduction

3HB Corporation d/b/a Hale Communications (3HB) appeals the judgment of the trial court, consisting of an award of damages and a declaratory judgment in favor of Bassam Khalil (Khalil) and B-CO, LLC (B-CO) (collectively, Respondents), after a jury found in favor of Respondents on their claim for breach of contract. 3HB argues the trial court erred in granting judgment because Respondents failed to make a submissible case for either breach of contract or declaratory judgment, the suit was barred by the statute of frauds, and the trial court gave improper instructions to the jury. Respondents cross-appeal, arguing that the trial court's declaratory judgment failed to correctly declare the rights of the parties under the contract, and that the trial court erred in its calculations of prejudgment interest. We affirm in part and reverse and remand in part.

Background

3HB is a broker of telecommunications and internet services, which matches customers with various providers of these services, in exchange for a commission the providers then pay to 3HB. Khalil, both individually and through his company, B-CO, markets and sells telecommunications and internet services. Khalil, and later B-CO, worked as a referral agent for 3HB, identifying customers that 3HB could match with a provider. In exchange, 3HB paid Khalil and B-CO a portion of the commissions 3HB received from the providers.

This business relationship began in 2006 between 3HB and Khalil, with an oral agreement for Khalil to receive 65 percent of 3HB's commissions from providers for each referred customer for as long as the referred customer remained 3HB's customer. In 2008, 3HB and Khalil agreed to reduce Khalil's commissions to 50 percent. Khalil testified that the majority of his commissions were 50 percent, but there were some instances in which he would receive a commission that was less than 50 percent. For example, if someone else referred a customer to Khalil who he then referred to 3HB, Khalil would split his 50 percent commission with that person and receive only 25 percent himself. Additionally, Khalil testified that on occasion he referred other referral agents to 3HB, and 3HB would give him a one-percent commission for those referrals.

In May of 2015, Khalil formed B-CO in order to handle his referral business through a company, rather than as an individual. Beginning in June or July of 2015, B-CO handled all referrals to 3HB and received commissions from 3HB according to 3HB's prior agreement with Khalil. 3HB agreed to substitute B-CO for Khalil in their business agreement.

In August of 2016, 3HB proposed a new written agreement to Khalil, which Khalil did not accept. Khalil testified that the proposed agreement contemplated him doing more work for less money. Khalil testified that 3HB stopped paying all commissions in September of 2016, and Khalil ceased making referrals to 3HB thereafter. On October 14, 2016, Khalil sent a letter through his attorney seeking payment of commissions.

On November 4, 2016, Respondents filed a petition against 3HB for breach of contract, unjust enrichment, quantum meruit, and declaratory judgment. The trial court held a jury trial in April of 2019, and Respondents elected to proceed on only their claim of breach of contract. The parties agreed that the trial court would dispose of Respondents’ request for declaratory judgment after trial, and that the trial court would determine an appropriate award of prejudgment interest, if any. Respondents presented evidence to the jury regarding past-due commissions, requesting $367,610.48 in damages to Khalil, and $49,560.99 to B-CO. The jury found in favor of Respondents, awarding $220,560.12 to Khalil, and the full requested amount of $49,560.99 to B-CO.

The trial court entered an award of damages consistent with the jury's verdict. The trial court also awarded Respondents prejudgment interest calculated at nine percent per annum from the date Respondents filed their petition. The trial court further entered declaratory judgment in favor of Respondents, finding that "the jury expressly found that an agreement existed between each respective Plaintiff and [3HB] whereby [3HB] was contractually obligated to pay commissions to the respective Plaintiff while [3HB] was receiving commissions from customers referred by either Plaintiff." However, the court was unable to determine from the general verdict which specific commissions 3HB was obligated to pay, and thus "d[id] not have sufficient evidence to order the ongoing contractual payments with particularity."

Respondents filed a motion to amend the judgment, requesting greater specificity regarding future commissions. Respondents further moved to amend the award of prejudgment interest. The trial court agreed the interest calculations were incorrect and amended the judgment only with respect to the amount of prejudgment interest. This appeal and cross-appeal follow.

Discussion

3HB disputes all aspects of the trial court's judgment: the award of damages for breach of contract, the award of prejudgment interest, and the declaratory judgment. Regarding breach of contract, 3HB argues in Point II that Respondents failed to make a submissible case of breach of contract in that they failed to present sufficient evidence of their damages, a necessary element of their cause of action. In Point IV, 3HB argues that the trial court erred in entering judgment because the oral contract between 3HB and Respondents is unenforceable in that it violates the statute of frauds. In Point V, 3HB argues that the trial court erred in entering judgment upon the jury's verdict because the trial court gave improper instructions that misled the jury. Regarding the declaratory judgment, 3HB argues in Point I that the trial court erred in entering such judgment because Respondents failed to make a submissible case for declaratory judgment in that they failed to prove they lacked an adequate remedy at law, had a justiciable controversy, and that their case was ripe for judicial determination. Finally, regarding the award of prejudgment interest, 3HB argues in Point III that prejudgment interest was not appropriate because the parties did not agree to such an award, the amount owed was not liquidated, and Respondents made no definite demand for payment until trial.

Respondents’ cross-appeal addresses only the trial court's declaratory judgment and award of prejudgment interest. In Point I, they argue that the trial court did not correctly declare and calculate the terms of the agreement between the parties and the commission payments due. In Point II, they argue that the trial court's amended judgment inaccurately calculated the amount of prejudgment interest due. We address each aspect of the trial court's judgment, along with each party's associated arguments, in turn.

Breach of Contract

1. Statute of Frauds

In Point IV, 3HB raises a threshold argument that the oral contract between 3HB and Respondents is unenforceable because it violates the statute of frauds in that it contemplates multi-year contracts between the parties. We disagree.

3HB properly raised this issue as an affirmative defense. Section 432.010¹ requires "any agreement that is not to be performed within one year from the making thereof" to be in writing in order to be enforceable. However, "Missouri law is clear that the statute of frauds defense is inapplicable if the agreement was capable of being performed within one year." Bailey v. Hawthorn Bank, 382 S.W.3d 84, 98 (Mo. App. W.D. 2012) (quoting Adams v. One Park Place Investors, LLC, 315 S.W.3d 742, 748 (Mo. App. W.D. 2010) ) (internal quotations omitted). "Our cases, hold, consistently, that a contract is not unenforceable under the statute of frauds if it could possibly be performed in compliance with its terms within one year, even though the actual performance is expected to continue over a much longer period." Crabb v. Mid-Am. Dairymen, Inc., 735 S.W.2d 714, 716 (Mo. banc 1987).

Here, while the evidence at trial did reflect several accounts wherein commissions continued over the course of several years, there was also testimony that there was no guarantee how long the customers would continue their services with the providers, and that customers could terminate their services at any time. Therefore, even though the parties expected each commission arrangement to last longer than one year, each was capable of being performed within one year. Accordingly, the statute of frauds does not render the oral agreement for commissions here unenforceable. Point denied.

2. Evidence of Damages

In Point II, 3HB argues that the trial court erred in denying 3HB's motion for judgment notwithstanding the verdict (JNOV) because Respondents failed to make a submissible case for breach of contract in that they failed to present sufficient evidence of their damages. We disagree.

In reviewing the denial of 3HB's motion for JNOV, we must determine whether Respondents presented a submissible case by offering evidence to support every element of their claim for breach of contract. See Fleshner v. Pepose Vision Inst., P.C., 304 S.W.3d 81, 95 (Mo. banc 2010). We view the evidence in the light most favorable to the jury's verdict and give Respondents the benefit of all reasonable inferences, disregarding all conflicting evidence and inferences. See id.

In order to make a submissible claim for breach of contract, Respondents had to present evidence supporting the following...