Kratky v. Musil

• Decision Date: 23 June 1998
• Docket Number: No. WD,WD
• Parties: Dusan KRATKY, Appellant, v. Jan J. MUSIL, Respondent. 54340.
• Court: Missouri Court of Appeals

Page 371

969 S.W.2d 371

Dusan KRATKY, Appellant, v. Jan J. MUSIL, Respondent.

No. WD 54340.

Missouri Court of Appeals,

Western District.

June 23, 1998.

John E. Curran, Julie J. McNitt, Curran and Clifford, Osage Beach, for appellant.

W. Gary Drover, Camdenton, for respondent.

Before LAURA DENVIR STITH, P.J., and HANNA and RIEDERER, JJ.

LAURA DENVIR STITH, Presiding Judge.

Dusan Kratky sued his longtime friend, Jan Musil, for fraud connected with Mr. Musil's purchase, at a foreclosure sale, of property previously owned by the two jointly. Mr. Kratky alleged that Mr. Musil had represented, until twenty-four hours before the sale, that they would purchase the property together at the foreclosure sale, and that he had relied on these misrepresentations to his detriment, resulting in his loss of the property. The case was tried to the court. The court entered judgment for defendant Musil finding that Mr. Kratky had failed to prove Mr. Musil knew his representations were false and intended Mr. Kratky to rely on them, and that he failed to prove that he had a right to rely on these representations.

Mr. Kratky appeals, alleging that the trial court's ruling is not supported by substantial evidence in that the evidence only supported the conclusion that he had a right to rely on Mr. Musil's representations because he had a confidential relationship with Mr. Musil. Because we find that substantial evidence supported the trial court's determinations on all three issues, and because we find that Mr. Kratky failed to either plead or prove a confidential relationship existed at the relevant time, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Dusan Kratky and Jan Musil have known each other since 1969. In March 1976, Mr. Musil and a cousin of Mr. Kratky, Miloslav Svec, bought 440 acres of real estate in Missouri from Phillip Banks, Jr. and William F. Lawless under a long-term land contract. In May 1976, Mr. Kratky bought one-half of Mr. Svec's one-half interest in the property; he thus had a one-quarter interest in the property. In April 1978, Mr. Kratky bought Mr. Svec's remaining interest in the property, leaving Mr. Kratky and Mr. Musil each owning a one-half interest. In 1981, Mr. Banks and his wife Marjorie, by power of attorney, conveyed this property by warranty deed to Mr. Kratky and Mr. Musil in exchange for a promissory note for $96,500.00, signed by both Mr. Kratky and Mr. Musil, and a deed of trust. Payments were to be made at General Acceptance Company at Eldon, Missouri in monthly installments of $1,050.00.

In October 1989, Mr. Kratky executed a quit claim deed to one-half of the property to Mr. Musil. In exchange, Mr. Musil executed a quit claim deed to the other one-half of the property to Mr. Kratky and his wife. As a result, each fully owned one-half of the property rather than having a one-half interest in the whole property. The parties apparently did not alter their payment arrangements with Mr. Banks; thus, both were still liable on the promissory note as to the entire amount due on the property as a whole. The parties' customary payment practice was for each to separately pay one-half of the monthly amount due. They both often sent in late payments over the years and had received twenty to thirty notices from General Acceptance, on behalf of the lender, concerning these unpaid installments. General Acceptance had never refused a late payment, however.

In November 1989, Mr. Musil, Mr. Musil's girlfriend, Mr. Kratky and Mrs. Kratky were in a serious car wreck. Mr. Musil's girlfriend died. Mr. Musil and Mrs. Kratky were both seriously injured and hospitalized for an extended period of time. Mr. Kratky brought suit against Mr. Musil concerning the car accident. According to Mr. Musil, Mr. Kratky tried to convince him that he was responsible for the accident and, thus, for his girlfriend's death. Mr. Musil thereafter decided these allegations were untrue, and that Mr. Kratky had made them only in order to get money from him in the lawsuit. At that point, Mr. Musil stopped speaking to Mr. Kratky. They thereafter communicated only through Mrs. Kratky, and, as the trial court noted, "[a]fter receiving the acceleration notice and prior to the foreclosure sale, Defendant Musil had advised Plaintiff Kratky's wife that he wanted nothing more to do with them."

As a result of Mr. Musil's hospitalization, Mr. Banks told Mr. Musil that they did not have to pay on the note while he was in the hospital. Mr. Musil nonetheless made his one-half of the payments for December 1989 and January 1990; Mr. Kratky did not. Mr. Kratky made his one-half of the payments for February and March, 1990; Mr. Musil did not. Neither party paid anything for April, May, June or July, 1990. In July, 1990, General Acceptance Co., through its president Diane Procter, sent a letter to Mr. Kratky and Mr. Musil which stated that:

This is to put you on notice that it will be necessary for you to begin making payments on a regular, prompt basis, commencing August 10, 1990.

In addition, it will be necessary that you bring your account current by January 10 1991. Your account is eight months delinquent, totaling $7,875.00.

Mr. Kratky made his one-half of the August 10, 1990 payment; the check was dated August 12, 1990. Mr. Musil did not make this payment. On August 20, 1990, Diane Proctor therefore sent another letter to the parties on behalf of General Acceptance Co. The letter stated:

Enclosed is a copy of the letter I sent to you on July 19, 1990. As stated in this letter, you were required to begin sending regular payments by August 10, 1990. As of today, we have received only a partial payment, $525.

If the balance of this payment, $525, is not paid within seven days we will commence legal action against you. I can assure you this will be a very costly procedure for you, which you may wish to avoid by complying with the July 19 letter.

If you do not intend to pay or cannot pay and want to deed the property back, or if you are in bankruptcy at this time, please advise.

Mrs. Kratky testified that she called Mr. Musil when she received the August 20, 1990 letter and asked him if he had made his payment. Mr. Musil told her that he had made the payment and that he would straighten this out with Mr. Banks. In fact, however, Mr. Musil had not made his payment, nor did he do so within seven days as required by this letter. Mr. Kratky, who believed that the amount due had been paid, also did not contribute the moneys due within the seven-day period. Mr. Musil later testified that he had talked to Mr. Banks, and had been told he would have to make the payment, but that Mr. Banks had not indicated that the payment must be paid on time. Because his payments were often late and he had previously received several letters demanding payment but which were not acted on, Mr. Musil testified that he did not believe that Mr. Banks would "make [a] big deal of [the payment being] even a month late." Mr. Musil thus did send a check, but it was dated August 30, 1990.

Mr. Banks' office did not accept the late payment this time. On September 6, 1990, Mr. McElyea, an attorney and trustee under the deed of trust, sent the parties a letter which stated:

Enclosed you will find the check you [Mr. Musil] sent Phil Banks dated August 30, 1990 for $525.00. I have been contacted by Diane Procter of Mr. Banks' office concerning foreclosure of the Deed of Trust. As you will recall I am named as Trustee on the Deed of Trust and at their request as Trustee have been requested to commence foreclosure proceedings. If you want to try to resolve this matter, my suggestion would be that you contact Diane Procter at General Acceptance Company to discuss how the matter might be resolved.

It is my understanding that the note has been accelerated and the only payments that will be accepted at this point would be a payoff of the note. However, you need to talk to Diane Procter concerning any other possible alternatives.

After receiving this letter, Mrs. Kratky testified that she again called Mr. Musil. She claims that when she asked him what had happened, Mr. Musil "said that he thought that he made the payment on time and for whatever reason now, what we have to do is just pay it off." She also claimed that Mr. Musil said he had the money to pay his portion of the note off. Ms. Kratky testified that she told Mr. Musil that it would take some time for them to raise their portion of the amount needed to pay off the note.

The initial notice of foreclosure sale was sent on September 20, 1990. Mr. Musil planned to pay his one-half of the balance of the note with money his attorney had promised he would receive from a settlement of a lawsuit. Both parties evidently assured the other, at various times, that they thought they had obtained the money they needed, but in each case the hoped-for financing fell through. By October 14, 1990, however, Mr. Kratky had in fact obtained financing for his share of the amount due to pay off the note. Mrs. Kratky testified that she called Mr. Musil and informed him that they had their portion of the money. She claims he told her to set up an appointment with the trustee so that they could pay off the note. She made this appointment for October 15, 1990, one day before the scheduled foreclosure sale.

On the day of the appointment, Mrs. Kratky called the trustee, who informed her that Mr. Musil had explained that he did not, in fact, have the money to pay off his portion of the note. The Kratkys went to Mr. Musil's house. Mrs. Kratky testified that Mr. Musil told them he did not have the money and that he had previously told them he did because he thought he would have it. When Mr. Kratky asked why he did not let them know that the money had fallen through sooner so that they could try to raise it themselves, Mr. Musil said, "I don't want to talk to you, I don't want to do business with you. Friends don't sue friends, and this is what...