Meyer v. McGarvie, No. 62628

• Decision Date: 22 June 1993
• Docket Number: No. 62628
• Citation: 856 S.W.2d 904
• Parties: Harlen J. MEYER and George J. Biller, Jr., Plaintiffs-Appellants, v. James B. McGARVIE, Carol B. McGarvie, Michael Zellers, Gloria Zellers, James F. Ferrick, Mary W. Ferrick and St. Louis Corporation, Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 904

856 S.W.2d 904

Harlen J. MEYER and George J. Biller, Jr., Plaintiffs-Appellants, v. James B. McGARVIE, Carol B. McGarvie, Michael Zellers Gloria Zellers, James F. Ferrick, Mary W. Ferrick and St. Louis Corporation, Defendants-Respondents.

No. 62628.

Missouri Court of Appeals,

Eastern District,

Division Two.

June 22, 1993.

Motion for Rehearing and/or Transfer to

Supreme Court Denied July 28, 1993.

Gallop, Johnson & Neuman, Michael A. Kahn, Daniel Vogel, Clayton, for plaintiffs-appellants.

Joseph J. Becker, St. Louis, for defendants-respondents.

CRANDALL, Presiding Judge.

Plaintiffs, Harlen W. Meyer and George J. Biller, Jr., brought an action against defendants, James B. McGarvie, et al., on a guaranty agreement; and the trial court entered judgment in favor of plaintiffs, pursuant to a jury verdict. Plaintiffs appeal from the order of the trial court which granted a new trial to defendants and which granted conditional remittitur in the event the grant of a new trial was reversed on appeal. We reverse and remand in part and affirm in part.

In the fall of 1986, plaintiff, Harlen W. Meyer (Meyer), entered into negotiations with defendant, James B. McGarvie (McGarvie), for the sale of Hawthorn Missouri, Inc. (Hawthorn). Hawthorn was a tarpaulin manufacturing company; and Meyer and plaintiff, George J. Biller, Jr. (Biller), were its sole shareholders. Biller was the plant manager for Hawthorn; Meyer was its financial manager. McGarvie was the representative of St. Louis Corporation, which was a closely-held company owned by him and defendant, James H. Ferrick. The negotiations included the furnishing of financial statements by Hawthorn which reflected Hawthorn's net worth at various times throughout the 1985 and 1986 fiscal years.

After Meyer rejected an initial proposal to buy Hawthorn in November 1986, St. Louis Corporation prepared a "Purchase and Sale Agreement" (sale contract) on February 8, 1987, which contained the essential terms for the sale of Hawthorn. The final sale contract was signed on June 2, 1987, and contained the same terms for the sale as the February 8th sale contract. Closing was set for June 16, 1987. The sale contract provided for a total purchase price of $519,000.00: $200,000.00 at closing; and $159,500.00 to Meyer and $159,500.00 to Biller, payable in three annual installments of approximately $53,166.67 each. The yearly installments were consideration for plaintiffs' performance under a "Consulting and Noncompetition Agreement" (noncompetition agreement) by which each plaintiff had to provide, upon request, up to eighty hours of consulting services for three months after the sale; and by which neither plaintiff could become affiliated with a company that manufactured or sold tarpaulins to existing Hawthorn customers. The sale contract stated that payments under the noncompetition agreement were guaranteed by Ferrick, McGarvie, and defendant, Michael Zellers (Zellers), and their respective wives (all parties to the guaranty agreement collectively referred to as "guarantors"). The guarantors signed a separate "Guaranty" agreement (guaranty) prior to closing. Pursuant to the guaranty, all guarantors "unconditionally" guaranteed the punctual payments of the yearly amounts due plaintiffs. ¹

At closing, Meyer informed Ferrick, McGarvie, and Zellers that he had written two $7,000.00 checks drawn on Hawthorn, one to himself and one to Biller. He explained that a total of $14,000.00 was necessary to cover the potential personal tax liability which he and Biller would incur as a result of a $35,000.00 to $40,000.00 profit made by Hawthorn from April 1, 1987, the beginning of Hawthorn's fiscal year, to June 15, 1987, the day before closing. There was no objection at the closing to the issuance of these checks. Meyer explained that the $14,000.00 figure was an estimate, but stated that he thought that his figures were accurate. After closing, McGarvie declined Meyer's request to go to Hawthorn's plant to conduct a full inventory to verify Meyer's figures. At closing, Hawthorn's financial statements for the fiscal year ending March 31, 1987, indicated that the company was worth in excess of $210,000.00.

During the remainder of July, Biller provided consulting services by acquainting Zellers, who was the new plant manager for St. Louis Corporation, with Hawthorn's operations. St. Louis Corporation did not request Meyer to provide consulting services.

In January 1988, plaintiffs received the first installment payments from St. Louis Corporation. St. Louis Corporation deducted $5,000.00 from the $53,166.67 as an offset to the $7,000.00 which each plaintiff had taken at closing. McGarvie claimed that the deduction was warranted because it was doubtful that Hawthorn had made a profit during the fiscal period from April 1, 1987, through July 15, 1987. In January 1989, St. Louis Corporation paid the second installment payments to plaintiffs. By this time, an accounting firm had established that for the period between April 1, 1987, through July 15, 1987, Hawthorn had actually experienced a loss of $22,820.00, which amount included the $14,000.00 taken by plaintiffs at closing. Accordingly, St. Louis Corporation deducted $2,347.97 from each of the second payments, which reflected the remaining $2,000.00 of the original $7,000.00, plus interest. When the final installment payments came due in January 1990, St. Louis Corporation did not pay either plaintiff.

Plaintiffs brought the present action against defendants on the guaranty. The individual defendants raised the affirmative defense of fraudulent misrepresentation, alleging that plaintiffs, by misrepresenting the financial status of Hawthorn, induced certain of them to sign the sale contract and induced the guarantors to sign the guaranty; and that plaintiffs signed the noncompetition agreement without an intent to perform. Thereafter, St. Louis Corporation intervened, alleging the same fraud and also alleging breach of the noncompetition agreement. The case was tried to a jury. The jury returned verdicts in favor of plaintiffs and awarded them each $80,666.67, which amount consisted of the final installment payment of $53,166.67 plus costs and attorney's fees. The court added prejudgment interest and entered judgment in the amount of $92,976.66 for each plaintiff.

Defendants then filed their motion for new trial, alleging, inter alia, instructional error in that the instructions submitted to the jury required defendants to prove fraudulent inducement by clear and convincing evidence. The trial court granted defendants' motion for new trial on that ground, denied the motion on all other grounds, and vacated the verdicts in favor of plaintiffs. The court also conditionally granted remittitur of the total award of $55,000.00 of attorney's fees to plaintiffs and reduced that award by $20,000.00, in the event the court's order granting the new trial was reversed on appeal.

We first consider whether the trial court erred in granting defendants' motion for new trial on the basis of instructional error. Defendants' motion for new trial posited that the clear and convincing standard of proof was improper and that the proper burden of proof was a preponderance of the evidence standard, as set forth in MAI 3.01 [1986 Revision]:

In these instructions, you are told that your verdict depends on whether or not you believe certain propositions of fact submitted to you. The burden of causing you to believe a proposition of fact is upon the party who relies upon that proposition. In determining whether or not you believe any such proposition, you must consider only the evidence and the reasonable inferences derived from the evidence. If the evidence in the case does not cause you to believe a particular proposition submitted, then you cannot return a verdict requiring belief of that proposition.

Generally, an appellate court will be more liberal in upholding a trial court's decision to grant a new trial than it will be if the trial court denies a new trial. Craft v. Scaman, 715 S.W.2d 531, 534 (Mo.App.1986). However, a trial court's authority to grant a new trial is discretionary only as to questions of fact, not as to matters of law. McTeer v. Clarkson Const. Co., Inc., 807 S.W.2d 174, 176 (Mo.App.1991). Instructional...