Mercantile Bank of Sikeston v. Moore

• Decision Date: 27 November 1996
• Docket Number: Nos. 20314,20315 and 20331,s. 20314
• Citation: Mercantile Bank of Sikeston v. Moore, 935 S.W.2d 762 (Mo. App. 1996)
• Parties: MERCANTILE BANK OF SIKESTON, Plaintiff-Appellant, v. J. Handy MOORE, Dorothy Moore, and J.R. Dupont, Defendants-Respondents, and Cross-Appellants, and Fredoon S. Nury, L.S. Nury, Sarkis V. Sarabian, Virginia Sarabian, Dale P. Smith, and Betty M. (Smith) Fritts, Defendants.
• Court: Missouri Court of Appeals

Page 762

935 S.W.2d 762

MERCANTILE BANK OF SIKESTON, Plaintiff-Appellant, v.J. Handy MOORE, Dorothy Moore, and J.R. DupontDefendants-Respondents, and Cross-Appellants and Fredoon S. Nury, L.S. Nury, Sarkis V. Sarabian, Virginia Sarabian, Dale P. Smith, and Betty M. (Smith) Fritts, Defendants.

Nos. 20314, 20315 and 20331.

Missouri Court of Appeals,

Southern District,

Division One.

Nov. 27, 1996.

Motion for Rehearing and/or

Transfer Denied Dec. 19, 1996.

Application to Transfer Denied Jan. 21, 1997.

Phillip J. Barkett, Jr., Dempster, Barkett, McClellan & Edwards, Joseph P. Fuchs, Sikeston, for plaintiff-appellant Mercantile Bank of Sikeston.

Manuel Drumm, Drumm, Winchester & Thornton, Sikeston, W. Edward Reeves, Ward & Reeves, Caruthersville, for defendants-respondents and cross-appellantsJ. Handy Moore and Dorothy Moore.

Philip R. Dupont, Blackwell, Sanders, Matheny, Weary & Lombardi, L.C., Kansas City, for defendant-respondent and cross-appellantJ.R. Dupont.

GARRISON, Judge.

This case involves three consolidated appeals from the same judgment.In Case No. 20314, Mercantile Bank of Sikeston (Mercantile) contends that the trial court erred in reforming a promissory note to provide that DefendantDorothy Moore has no personal liability on it.In Case No. 20315, DefendantsJ. Handy Moore and Dorothy Moore complain about Mercantile's $21,771.03 judgment against them based on their guaranty of a promissory note.In Case No. 20331, DefendantJ.R. Dupont contends that the court erred in awarding Mercantile a $120,817.31 judgment against him based on his liability under the same guaranty.We reverse and remand based upon the issues in Case No. 20314, but otherwise affirm.

FACTS

The factual and procedural history of this case is lengthy and complex.In fact, this is the second time issues relating to it have been before us on appeal.SeeMercantile Bank of Sikeston v. Moore, 792 S.W.2d 653(Mo.App.S.D.1990).

Pentad, Ltd.(Pentad) was a limited partnership.DefendantsJ. Handy Moore and J.R. Dupont(Dupont) were among the five limited partners who each owned 20% of the stock in the general partner, Moore-Dupont Wineries, Inc.(Moore-Dupont).Mercantile provided financing to Pentad under two promissory notes dated September 5, 1984.One was in the principal amount of $250,000 and was secured by a deed of trust on real estate (the "$250,000 note").The other was for $200,000 and was secured by personal property (the "$200,000 note").

On October 9, 1984, each of the limited partners and their spouses signed a "Limited Continuing Guaranty"("Limited Guaranty" or "20% Guaranty").It provided that the limited partners and their spouses guaranteed the first $100,000 of the combined indebtedness under the $200,000 and $250,000 notes.It also provided that after the combined original indebtedness of those notes was reduced by $100,000, each partner and his spouse personally guaranteed 20% of the remaining balance due.

On December 17, 1984, Mercantile made a $150,000 loan to Moore-Dupont and a $25,000 loan to Pentad.¹On the same date, DefendantJ. Handy Moore, as well as the other limited partners and their spouses, executed documents entitled "Continuing Guaranty" in favor of Mercantile by which they guaranteed all obligations of Moore-Dupont "now or hereafter existing"(the "100% Guaranty" or "unlimited guaranty").

On April 12, 1985, Mercantile made a $125,000 unsecured loan to Pentad.Unlike the earlier loans, the note for this loan was not signed in behalf of Moore-Dupont and was signed by the individual limited partners and their spouses.Specifically, as it relates to this appeal, J. Handy Moore signed this note immediately before the designation "Ltd. Ptnr.," and Dorothy Moore signed it immediately before the words "his wife."

The business venture of Pentad did not do well and there were defaults under Mercantile's various loans.As a result, in May, 1987 Mercantile foreclosed and sold the real estate described in the deed of trust securing the $250,000 note.In June, 1987 it also sold the personal property which was security for the $200,000 note.As a result, Mercantile realized and applied $100,000 to the $250,000 note and $62,000 to the $200,000 note.

Mercantile then commenced efforts to collect the deficiencies under those notes.It took the position that the 100% Guaranty applied, and that each of the limited partners and spouses were liable for the entire remaining amounts owing under the $200,000 and $250,000 notes.On July 8, 1987, the attorney for the Moores wrote Mercantile's attorney, enclosing a check for $66,379.19, which was 20% of the principal and accrued interest owing on those two notes.His letter stated that the $66,379.19 was calculated pursuant to the 20% Guaranty and not the 100% Guaranty, that no amounts were included for attorney fees because they were not mentioned in the 20% Guaranty, and that the check was tendered with the understanding that Mr. and Mrs. Moore would be completely discharged under the two notes in question.Mercantile's attorney returned the check, saying that the bank did not agree with the terms of the letter, and reiterated its claim that the Moores were liable for all of the amounts owing under the notes.

On December 2, 1987, Mercantile wrote a letter to J. Handy Moore which contained three settlement proposals relating to all of the amounts it claimed under various loans to Pentad and Moore-Dupont, including the $200,000, $250,000 and $125,000 notes.The letter stated the combined balance owing on the $200,000 and $250,000 notes, and it also claimed attorney fees of $10,647.08.In response, an attorney for the Moores and Dupont wrote Mercantile's attorney on December 7, 1987.Although none of Mercantile's proposals called for such a response, he forwarded a check which represented full payment of one loan (unrelated to the issues here) and 40% of the principal and interest owing under the $200,000 and $250,000 notes (20% each in behalf of the Moores and Dupont).He stated that, in return, the Moores and Dupont were to be released from further liability on the $200,000 and $250,000 notes, including any liability for attorney fees.

On December 9, 1987, Mercantile's attorney responded to the December 7 letter, returning the check and reiterating the bank's earlier offer to settle as stated in its December 2 letter.The attorney also suggested that, since the Moores and Dupont apparently did not contest liability for at least 20% of the $200,000 and $250,000 notes, they should pay that proportional share and litigate the extent of any remaining liability under those notes.On September 29, 1988, however, J. Handy Moore made what was apparently an unconditional payment to Mercantile in the amount of $65,000, which was applied equally to the $200,000 and $250,000 notes.

Although Mercantile had contended that the 100% Guaranty applied to the $200,000 and $250,000 notes, a judgment was entered in 1991 reforming that guaranty to provide that it applied only to obligations of Moore-Dupont executed on or after December 17, 1984(the date of the 100% Guaranty).As a result, the 100% Guaranty did not apply to the $200,000 and $250,000 notes.

Thereafter, Mercantile filed the amended petition under which the case was tried without a jury.That petition was in three counts.Counts I and II were against the limited partners and their spouses (except Mrs. Dupont) based on their liability on the $250,000 and $200,000 notes under the 20% Guaranty.Count III claimed liability of the spouses of the limited partners (except Mrs. Dupont) on the $125,000 note.Mrs. Moore alleged affirmative defenses to Count III.She also filed a counterclaim seeking to reform the $125,000 note on the theory that the note was prepared by the mutual mistake of the parties, in that they had previously agreed that it would impose no personal liability on her.

The trial court found for Mercantile under Counts I and II and entered a judgment in its favor against J. Handy Moore and Dorothy Moore in the amount of $21,771.03, after finding that Mr. Moore had earlier paid $65,000 on the notes.²It also entered a judgment against Dupont in the amount of $120,817.31 as his liability for 20% of the amounts owing under those notes, including interest and attorney fees.On Count III, the court found in favor of Dorothy Moore and against Mercantile on its claim on the $125,000 note.It also found for Dorothy Moore on her counterclaim and entered judgment reforming the $125,000 note "according to the intent and mutual understanding of the parties, by stating in the body of [it] that [she] has no personal liability on [the note], but that her signature on [it] is [sic] intended by the parties thereto to release her marital interest in any real property owned by Pentad...."

These appeals followed.

STANDARD OF REVIEW

In this court-tried case, the standard of review is as provided in Rule 73.01 and interpreted in Murphy v. Carron, 536 S.W.2d 30, 31-32(Mo. banc 1976).Consequently, the judgment will be affirmed unless there is no substantial evidence to support it, unless it is against the weight of the evidence, or unless it erroneously applies or declares the law.Id. at 32.Credibility of witnesses and the weight to be given their testimony is a matter for the trial court, which may believe none, part or all of the testimony of any witness.Matthews v. Moore, 911 S.W.2d 664, 668(Mo.App.S.D.1995).

CASE NO. 20314

In its sole point relied on Mercantile contends that the trial court erred in reforming the $125,000 note to provide that it created no personal liability on Dorothy Moore.In support, it primarily contends that the evidence did not satisfy the required standard of proof.

A party seeking reformation of a written instrument must show that the parties had a prior agreement which the writing failed to accurately incorporate because of a mistake.CMI Food Service v. Hatridge Leasing, ...