Laclede Inv. Corp. v. Kaiser, 40016

• Citation: 596 S.W.2d 36
• Decision Date: 15 January 1980
• Docket Number: No. 40016,40016
• Parties: LACLEDE INVESTMENT CORPORATION, Plaintiff-Respondent, v. Patricia A. KAISER, Executrix of the Estate of Jerry Kaiser, Deceased, and David Moulton, Defendants-Appellants.
• Court: Court of Appeal of Missouri (US)

Page 36

596 S.W.2d 36

LACLEDE INVESTMENT CORPORATION, Plaintiff-Respondent, v. Patricia A. KAISER, Executrix of the Estate of Jerry Kaiser, Deceased, and David Moulton, Defendants-Appellants.

No. 40016.

Missouri Court of Appeals, Eastern District, Division One.

Jan. 15, 1980.

Motion for Rehearing or Transfer to Supreme Court Denied

March 14, 1980.

Application to Transfer Denied April 8, 1980.

Edward P. McSweeney, St. Louis, for defendants-appellants.

M. E. Stokes, St. Louis, for plaintiff-respondent.

SMITH, Judge.

Defendants Jerry Kaiser and David Moulton appeal from a judgment in a court-tried case in favor of plaintiff Laclede Investment Corporation. The suit was grounded upon three theories: express breach by defendants of a loan agreement contract with plaintiff; promissory estoppel based on representations made by defendants which induced plaintiff to lend a limited partnership $425,000; and, recovery by plaintiff as a third party beneficiary for breach of a promise by defendants to complete construction of an apartment project in north St. Louis County, the purported promise being made in articles of limited partnership between Laclede Development Corporation (a separate corporate entity from plaintiff) as a limited partner and defendants as general partners.

The parties stipulated that plaintiff's damages, if it was entitled to recover, were $576,602.37 principal and accumulated interest. Judgment was rendered in that amount. Jerry Kaiser died in the course of the appeal and his executrix Patricia A. Kaiser was substituted as a party.

The judgment is reversed.

This is the second appeal in this case. In the first trial, after a jury verdict for plaintiff, the trial court ordered a new trial because of error in permitting prejudicial closing argument by plaintiff concerning the uncollectibility of any judgment which might be rendered.

This court affirmed in Laclede Investment Corp. v. Kaiser, 541 S.W.2d 330 (Mo.App.1976), holding there was no abuse of discretion by the trial court in granting a new trial. A detailed statement of the facts is included in that decision.

Kaiser and Moulton were partners in K & M Investment Company, a general partnership. In 1969, the partnership borrowed $1,860,000 from Roosevelt Federal Savings and Loan Association to construct the "County Fair" apartment project in north St. Louis County. This loan was secured by a first deed of trust on the apartment project real property which was owned by the general partnership.

Before the project was completed defendants were out of money. They learned through a real estate appraiser that Laclede Gas Company was embarking on a diversification program and might be interested in investing in real estate. Kaiser approached David L. Gardner, vice president, secretary and treasurer of Laclede Investment Corporation, for the purpose of negotiating a loan of money to be used to pay for the completion of the "County Fair" project. Laclede Investment, a subsidiary of Laclede Gas Company, was organized for purposes of managing the diversification program.

Although the initial meeting was with Mr. Gardner, most of the negotiations for the loan were carried on with Donald A. Novatny, a vice president of Laclede Investment and senior vice president of Laclede Gas Company. Kaiser, Moulton and Novatny negotiated during a period of approximately five months prior to June 12, 1970. On that date articles of limited partnership were signed by Kaiser, Moulton and Laclede Development Company, another subsidiary of Laclede Gas Company. The intent of the articles was "to convert and expand the existing K & M Investment Company partnership into a limited partnership by the admission of Laclede Development Company as a Limited Partner and by the re-allocation of the partners' shares of profits and losses." For a $2500 investment Laclede Development became a 50% partner in the project which had an appraised value in excess of $2 million. Also signed was a loan agreement between Laclede Investment and K & M Investment Company, the new limited partnership. The loan agreement was made a part of the articles of limited partnership by reference. The articles, however, were not made a part of the loan agreement.

Laclede Investment loaned $425,000 to K & M Investment Company. Each note contained a clause relieving the makers from personal liability and declaring the sole remedy of the holder to be foreclosure of the deed of trust. ¹ The makers of the note were defendants, the general partners in K & M Investment Company. The notes were incorporated into the loan agreement by express reference.

The $425,000 loan was insufficient to pay for completion of the project. Kaiser and Moulton spent an additional $160,000 on the project but never completed it. Eventually, Roosevelt Federal Savings and Loan foreclosed. The property was sold at foreclosure for $1,850,000, rendering Laclede Investment's second deed of trust worthless.

Laclede Investment never sued on the promissory notes themselves. It admitted that defendants were not personally liable on the notes because of the exculpatory language. Rather, plaintiff sued defendants for breach of their agreement to complete the project, claiming as damages the loss of its investment. The trial court in its conclusions of law found that Laclede Investment was entitled to recover on each of its three theories. This appeal followed judgment for plaintiff in the stipulated amount of damages.

Plaintiff's contention that it is entitled to recover because of express breach of the loan agreement need not detain us long. While we entertain substantial doubts that the loan agreement contains any promise to complete, it makes no difference whether or not such a promise was made. The notes, which are a part of the loan agreement, provide in clear, unambiguous, and precise language the only remedy available to plaintiff in the event of breach of the loan agreement. That remedy is by way of foreclosure of the security interest and specifically eschews personal liability against the makers of the notes defendants. There is no basis for the conclusion, made by the trial court, that some other unexpressed remedy existed for breach of the loan agreement in view of the exculpatory language of the contract between the parties.

Plaintiff advances the theory that it is not seeking recovery on the notes but instead upon the contract. If this is a distinction, it is one without a difference. The notes are an integral part of the contract. The only provision for repayment of the loan is found in the requirement that notes be executed and in the notes themselves. Without the notes there was no obligation to repay the borrowed money. They were the consideration for the loan agreement. The notes limited the remedy of plaintiff to that specifically provided therein. The trial court erred in its legal conclusion that plaintiff was entitled to recover because of an express promise to complete.

Much the same is true of plaintiff's contention, and the trial court's conclusion, that plaintiff was entitled to recover under the theory of promissory estoppel. This conclusion was based upon promises, allegedly made prior to or contemporaneously with the execution of the loan agreement, that defendants would complete the "County Fair" project. Restatement of Contracts Sec. 90 (1932), sets forth the doctrine of promissory estoppel. It is, in essence, based upon the theory that a promise which induces action or forebearance by the promisee can serve as a substitute for consideration upon such action or forebearance and thereby can become enforceable as a contract. It is similar to the doctrines of unilateral contract and equitable estoppel. Plaintiff, through the use of language lifted from cases, attempts to establish its applicability to the case at bar. But we are cited to no cases, nor have we found any, which have held the doctrine applicable to promises made in the inducement of a fully integrated contract as is here sought by plaintiff. Such a holding would directly conflict with the parole evidence rule. South Side Plumbing Co. v. Tigges, 525 S.W.2d 583 (Mo.App.1975). Here the alleged promise to complete was purportedly made to induce the execution of the loan agreement. There is no contention that the loan agreement did not represent the entire agreement between the parties and nothing of record indicates some other contract existed between these parties. That agreement was fully, completely, and unambiguously set forth in writing and carried full consideration from both sides. Promissory estoppel cannot be utilized to engraft thereon a promise not included in the contract.

Furthermore, even if we were to engraft such a promise to that contract that would not change the remedy for breach of that contract. Plaintiff does not contend and the record does not even hint that such alleged promise was accompanied by any promise to waive the exculpatory provisions concerning remedy. It matters not how many promises are added to the contract expressly, impliedly, inferentially, or by estoppel, the remedy for breach of those promises remains the same. Under that remedy plaintiff cannot recover against defendants. The trial court erred in its conclusion that plaintiff was entitled to recover against defendants on the basis of promissory estoppel.

We turn now to plaintiff's final theory of recovery third party beneficiary contract. This theory is based upon a provision of the limited partnership agreement between defendants and Laclede Development Corporation in which defendants promised to complete the project. ²

Initially it is necessary to deal with the status of our opinion in Laclede Inv. Corp. v. Kaiser, 541 S.W.2d 330 (Mo.App.1976), the appeal from the first trial of this case. In that case we held that the plaintiff made a submissible case on its theory of a third party beneficiary contract. The pleadings as to this issue and the...