Lehman v. Auto. Invs., LLC

• Decision Date: 14 July 2020
• Docket Number: No. ED 107864,ED 107864
• Citation: 608 S.W.3d 733
• Parties: Richard C. LEHMAN and Michelle D. Koo, Respondents, v. AUTOMOTIVE INVESTMENTS, LLC, Donald M. Davis, and Michael Shanahan, Jr., Appellants.
• Court: Missouri Court of Appeals

608 S.W.3d 733

Richard C. LEHMAN and Michelle D. Koo, Respondents,

v.AUTOMOTIVE INVESTMENTS, LLC, Donald M. Davis, and Michael Shanahan, Jr., Appellants.

No. ED 107864

Missouri Court of Appeals, Eastern District, DIVISION TWO.

Filed: July 14, 2020

Motion for Rehearing and/or Application for Transfer to Supreme Court Denied August 18, 2020

Application for Transfer Denied November 3, 2020

Thomas B. Weaver, Paul L. Brusati, Armstrong Teasdale LLP, 7700 Forsyth Blvd., Suite 1800, St. Louis, MO 63105, Jack B. Spooner, David D. Mattern, Spooner Law, LLC, 34 N. Brentwood Blvd., Suite 210, St. Louis, MO 63105, for Automotive Investments, LLC and Michael Shanahan, Jr.

Donald M. Davis, pro se.

Timothy C. Sansone, Zachary S. Merkle, Sandberg Phoenix & von Gontard P.C., 600 Washington Ave. – 15^th Floor, St. Louis, MO 63105, for respondents.

OPINION

Lisa P. Page, Judge

Michael Shanahan, Jr. ("Shanahan"), Donald M. Davis ("Davis"), and Automotive Investments, LLC ("AI") (collectively, "Appellants") appeal the trial court's judgment entered in favor of Richard C. Lehman ("Lehman") and Michelle D. Koo ("Koo") (collectively, "Respondents"). Appellants raise seven points on appeal.¹ Both parties filed motions for appellate attorney fees, which were taken with the case. We affirm the judgment of the trial court. Additionally, we grant Respondents’ motion for attorney fees on appeal and remand to the trial court for the sole purpose of determining reasonable appellate attorney fees.

BACKGROUND

AI is a limited liability company, co-founded in March of 2009, by Lehman and another member for the purpose of investing in automotive dealerships. Davis was admitted as a member in May of 2009. Shortly after AI was founded in 2009, it invested in Gateway Buick GMC, Inc. ("Gateway"; f/k/a Ken Behlmann Automotive Services, Inc.). In 2012, Lehman acquired his co-founder's interest in AI so he and Davis were the only members. Shanahan was admitted as a member in 2013, and Davis became "dealer operator" of Gateway, which entailed him managing the day-to-day business of the dealership. In May of 2015, Lehman transferred his interest in AI to himself and Koo (his wife), as joint tenants by the entireties.

On or about August 11, 2015, the parties executed a Membership Interest Purchase and Redemption Agreement ("Purchase Agreement"), in which it was agreed Respondents would sell their interest in AI to Shanahan (making Shanahan and Davis AI's sole members) and AI would pay the amount of $4.8 million to Respondents. The Purchase Agreement provided for AI to pay a lump sum of $1.35 million. In addition, AI executed a Promissory Note ("Note") that set forth the terms of AI's payment of the $2.85 million balance. Shanahan and Davis also executed an Unlimited Joint and Several Guaranty ("Guaranty"), in which Shanahan and Davis "jointly and severally and absolutely and unconditionally" guaranteed payment of the amounts agreed to under the Purchase Agreement and Note.

On November 29, 2016, after Appellants failed to make any payments, Respondents filed their petition asserting claims related to the Purchase Agreement, Note, and Guaranty, and subsequently filed their first amended petition on May 24, 2017. In their first amended petition, Respondents asserted AI had breached the Note (Count I), AI had breached the Purchase Agreement (Count II), and Shanahan and Davis had breached the Guaranty (Count III). In response, Appellants raised numerous affirmative defenses. Relevant to this appeal, Appellants argued they were not liable under the terms of the Purchase Agreement, Note, and Guaranty because the Purchase Agreement, which was incorporated in the Note and Guaranty, was "null and void ab initio " because the consent of General Motors, LLC ("GM") for the transaction had not been obtained before December 31, 2015, as required by Section 7 of the Purchase Agreement.

A bench trial was held on the matter on January 9, January 15, and January 30, 2019. It was undisputed Appellants failed to pay Respondents pursuant to the Purchase Agreement or Note; rather, the trial focused on Appellants’ affirmative defenses why they were not liable for the agreed-upon amounts under the terms of the Purchase Agreement, Note, and Guaranty.

The trial court entered judgment in Respondents’ favor on March 27, 2019, concluding AI had breached the Note and Purchase Agreement and Shanahan and Davis had breached the Guaranty. The court rejected Appellants’ affirmative defense that the Purchase Agreement was null and void ab initio because GM's consent to the transaction was not obtained by December 31, 2015. Specifically, the court found it was Shanahan's and Davis’ obligation under Section 7 to use "commercially reasonable efforts" to obtain GM's consent prior to the deadline and they failed to do so. As a result, the trial court concluded that, because it was Appellants’ obligation to use commercially reasonable efforts to obtain GM's consent to the transaction, "they cannot now rely on their own breach as the basis to relieve them of further obligations." The court further concluded Shanahan and Davis had breached the terms of the Guaranty, in which they "jointly and severally and absolutely and unconditionally" guaranteed payment of the amounts promised under the Purchase Agreement and Note and agreed that no act but full payment would alter their liability for the amounts. Thus, the court held Respondents were entitled to recover the full amount due pursuant to the terms of the Purchase Agreement and Note, as well as statutory and contractual interest. Respondents were also awarded attorney fees under the terms the Purchase Agreement, Note, and Guaranty.

This appeal follows.

DISCUSSION

Appellants assert seven points on appeal. In sum, Appellants argue: the trial court erroneously declared the law in placing the burden of proof on Appellants to show they made commercially reasonable efforts to obtain GM's consent (Point One); the trial court's finding that Appellants did not make commercially reasonable efforts to obtain GM's consent was both unsupported by substantial evidence and against the weight of the evidence (Points Two and Three); the trial court's finding that Appellants, and not Lehman, were the first to breach the Purchase Agreement was unsupported by substantial evidence (Point Four); the trial court's finding that Appellants were estopped from arguing the Purchase Agreement was void was unsupported by substantial evidence (Point Five); and the trial court misapplied the law in excluding Davis’ testimony on GM's approval process because of a lack of foundation and in excluding Shanahan's testimony on an attorney's statements to him regarding GM's consent because it was hearsay (Points Six and Seven). Appellants’ Points One through Five are related, so we address those points collectively and thereafter address their Points Six and Seven.

Points One – Five: Appellants’ Breach of the Purchase Agreement and Affirmative Defenses

Standard of Review

Generally, we will affirm the judgment of the trial court in a court-tried case unless the judgment is unsupported by substantial evidence, is against the weight of the evidence, or erroneously declares or applies the law. Nicolazzi v. Bone, 564 S.W.3d 364, 370 (Mo. App. E.D. 2018) (citing Ivie v. Smith, 439 S.W.3d 189, 198–99 (Mo. banc 2014) ); Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We view the evidence in the light most favorable to the judgment, accepting all evidence and inferences favorable to the judgment as true and disregarding all contrary evidence and inferences. O'Gorman & Sandroni, P.C. v. Dodson, 478 S.W.3d 539, 542 (Mo. App. E.D. 2015). "We defer to the trial court's judgment on contested issues of fact, but we review issues of law de novo. " Central Parking System of Mo., LLC v. Tucker Parking Holdings, LLC, 519 S.W.3d 485, 493 (Mo. App. E.D. 2017). Ultimately, when reviewing an appeal of a court-tried case, we are primarily concerned with "the correctness of the result, not the route taken to reach it," and we will therefore not disturb a trial court's correct ruling even where the trial court may have provided a wrong or insufficient reason for it. Id. ; see also O'Gorman & Sandroni, P.C., 478 S.W.3d at 543.²

Analysis

On appeal, it is undisputed Appellants failed to comply with the contract and obtain GM's consent to the transfer of Respondents’ interest by December 31, 2015. However, Appellants assert that it was somehow Respondents’ responsibility to meet the burden of proof for their affirmative defense that AI, Gateway, Shanahan, and Davis used commercially reasonable efforts to obtain GM's consent and that Shanahan specifically did everything he personally could to do so. These arguments are wholly unpersuasive.

First, "[a]n affirmative defense seeks to defeat or avoid a plaintiff's cause of action, and alleges that even if plaintiff's petition is true, plaintiff cannot prevail because there are additional facts that permit the defendant to avoid legal responsibility." Templeton v. Cambiano, 558 S.W.3d 101, 104 (Mo. App. W.D. 2018) (internal quotations omitted). "Defendants carry the burden of proof on all affirmative defenses." TA Realty Assocs. Fund V, L.P. v. NCNB 1500, Inc., 144 S.W.3d 343, 347 (Mo. App. E.D. 2004) ; see also Black & Veatch Corp. v. Wellington Syndicate, 302 S.W.3d 114, 127 (Mo. App. W.D. 2009).

Moreover, if the terms of a contract are "unequivocal, plain, and clear, the court is bound to enforce the contract as written." HCI Investors, LLC v. Fox, 412 S.W.3d 424, 440 (Mo. App. W.D. 2013) (quoting Malan Realty Investors, Inc. v. Harris, 953 S.W.2d 624, 626–27 (Mo. banc 1997) ). "It is the most basic principle of contract law that parties are bound by the terms of the contracts they sign and courts will enforce contracts according to their plain meaning, unless induced by fraud, duress, or undue influence." Smith v. Keystone Mut. Insur. Co., 579 S.W.3d 275, 280 (Mo. App. E.D. 2...