Miran Inv. Co. v. Medical West Bldg. Corp.

• Decision Date: 10 April 1967
• Docket Number: No. 52141,No. 2,52141,2
• Citation: 414 S.W.2d 297
• Parties: MIRAN INVESTMENT COMPANY, a Corporation, Respondent, v. MEDICAL WEST BUILDING CORPORATION, a Corporation, Appellant
• Court: Missouri Supreme Court

Page 297

414 S.W.2d 297

MIRAN INVESTMENT COMPANY, a Corporation, Respondent, v. MEDICAL WEST BUILDING CORPORATION, a Corporation, Appellant.

No. 52141.

Supreme Court of Missouri, Division No. 2.

April 10, 1967.

Motion to Transfer to Court En Banc or for Rehearing Denied

May 8, 1967.

William R. Kirby, St. Louis, for respondent.

Rexford H. Caruthers, Guilfoil, Caruthers, Symington, Montrey & Petzall, St. Louis, for appellant.

PRITCHARD, Commissioner.

The principal issue is whether plaintiff fully performed services to defendant during construction of a medical office building, and until its completion, including 'such things as the acquisition of land, securing of financing, construction of a building on an approximate cost basis, securing of leases, supervision, and other services,' so as to be entitled to recover therefor under a written contract dated August 31, 1955.

Plaintiff recovered judgment against defendant for said services $48,180, and interest from the date of filing suit, September 29, 1960, totaling $67,853.50. A jury being waived, trial was to the court.

Defendant was incorporated in 1954 for the purpose of erecting a medical office building at 950 Francis Place in Clayton, Missouri. Its incorporators were Richard J. Zoernig (defendant's president) Maryan Sheppard and Charles R. Judge (defendant's counsel, who served as secretary). Edward A. Pollack was plaintiff's president and Harold Pollack was its secretary-treasurer. The Pollacks also did business as Edward A. Pollack & Son Real Estate Company, for which plaintiff was the holding company.

Harold E. Pollack testified that in the Spring of 1955, Mr. Zoernig, Jr., came to his office and told him of a deal whereby he had contacts with doctors, with some leases already on hand, and that he would need financing to get the building. Zoernig requested a second deed of trust on the building, which Pollacks declined. They suggested to him to get a large first deed of trust to take care of the matter, to which Zoernig agreed. With the assistance of John Merle (connected with Merle-Jung, Inc., builder of the medical building), Pollack contacted several insurance companies and on July 8, 1955, a conditional commitment for a loan was received from Great West Life Assurance Company for $930,000, and a firm permanent loan commitment was obtained September 29, 1955. Prior to that, a conditional construction loan commitment was obtained August 8, 1955 from the First National Bank in St. Louis.

The written agreement was drawn by defendant's counsel, Charles R. Judge, on August 31, 1955, on which date it was executed by the parties: Medical West Building Corporation, first party; John Merle, Jr., R. W. Jung, Jr., Richard Zoernig and Miran Investment Company, second parties; and E. L. Zoernig doing business as Elco Realty Company, third party. It recites:

'Whereas, Second Parties have each rendered valuable services to First Party and will continue to so render services during the construction of a building by First Party, which said services include such things as the acquisition of land, securing of financing, construction of a building on an approximate cost basis, securing of leases, supervision, and other services, which the parties have agreed are reasonably worth, in the aggregate, the sum of One Hundred Seventy-five Thousand ($175,000.00) Dollars; and

'Whereas, First Party is desirous of providing for payment thereof to Second Parties and Second Parties are willing to accept payment in the manner agreed upon herein.' It is then agreed:

'1. First Party agrees to pay and Second Parties agree to accept in full payment of all services rendered to First Party and to be rendered until the completion of a building to be erected by First Party on Francis Place in Clayton, Missouri, the sum of One Hundred Seventy-five Thousand ($175,000.00) Dollars, without interest, payable in the manner hereinafter provided.

'2. All payments made hereunder shall be made to Third Party whom Second Parties hereby irrevocably designate and appoint as their agent for the purpose of receiving such payments, with full authority to do all things in connection therewith and hereby ratifying and confirming all acts so taken.

'3. Payments to be made by First Party shall be determined as follows:

'As soon after the close of the fiscal year of First Party as its annual audit has been completed, First and Second Parties, or their authorized representatives will meet, and based upon the certified audit, will determine how much, if any, surplus cash First Party has available for distribution in accordance with this agreement. The parties agree that the term 'surplus cash' means cash over and above the cash needed for working capital and for such reserves as may be required under mortgage loan agreements, particularly with respect to prepaid or advance rental deposits. First Party agrees that, immediately upon the said determination of surplus cash, to pay the amount so determined to Third Party to apply upon the indebtedness herein.

'4. Second Parties, or any of them, may elect to purchase stock of First Party at the par value thereof and to pay for same by crediting First Party with the amount of the purchase price, thereby reducing the obligation provided for herein by such amount; provided, said election shall be made prior to the completion of the building to be erected by First Party, and provided, further that the amount of stock to be so subscribed and purchased shall not exceed Twenty-five Thousand ($25,000.00) Dollars in the aggregate.

'5. Second Parties agree to continue to devote their best efforts to the successful completion of said building.'

On the same date as the written agreement, a second agreement was made dividing the $175,000 fee $65,000 to Merle and Jung, $55,000 to Richard J. Zoernig and $55,000 to plaintiff, with priority of payment to Merle and Jung. In February, 1956, defendant issued 682 shares of $10 par value stock to plaintiff, which credited $6,820 to defendant (leaving $48,180, the amount of principal claimed by plaintiff for its services, for which judgment was given below). 682 shares were also issued to Richard Zoernig and Judge, and 341 shares each were issued to E. L. Zoernig, John Merle and R. W. Jung. Over defendant's objection on the ground that it would violate the parol evidence rule, because the agreement of August 31, 1955 contemplated further services, and the purpose of the answer was to show the agreements fully performed, Pollack was permitted to testify that the $55,000 commission for plaintiff was based upon 3% of the permanent loan and a similar amount for the temporary loan. The issuance of defendant's stock was done pursuant to a third agreement also of August 31, 1955, whereby the second parties and the third party to the first, basic agreement agreed to subscribe to 51% of defendant's stock, to be paid for out of credits for services rendered and to be rendered by the parties thereto.

The completion date of construction of the medical building was specified to be May 1, 1956 (the building then was barely out of the ground). Zoernig had difficulty with leasing, and Merle-Jung, Inc. was confronted with strikes, material shortages, and cost problems with regard to who was to pay for partitions (walls) in the leases during construction. Plaintiff, on August 20, 1956, accomplished a necessary extension of the construction loan to December 5, 1956, and on August 21, 1956 was successful in having the commitment for permanent financing extended to June 1, 1957. Shortly before December 5, 1956, the First National Bank advised that it would not extend the construction loan unless the controlling stockholders would personally guarantee interest and pledge the controlling stock. At that time $729,000 had been drawn against the total commitment. The interest rate was 5 1/2% per annum, and there was on hand, after payment of interest to December 5, 1956, $1,099.60 for that purpose, held by the Lawyers Title Company of Missouri, disbursing agent of construction money. It was agreed by witnesses for both parties that at that time defendant was broke. The unfinished building, its only asset, was threatened with foreclosure. There was no money on hand to complete the building; taxes for 1956 were unpaid; there was due Giraldin Brothers a loan commission; to Lawyers Title Company fees for disbursal and title service, and to Merle-Jung, Inc., money for extras in preparing doctors' suites for occupancy.

The First National Bank had prepared a form of guaranty and pledge agreement of defendant's stock, in accordance with its announced intention not to extend the construction loan without such guaranty and pledge. This form was brought to the Pollacks by John Merle on December 6, 1956, but the Pollacks made a decision not to join the agreement, but did agree to surrender plaintiff's stock in defendant (by letter dated December 6, 1956, 'This is to inform you that effective this date the undersigned relinquishes all their stock in the Medical West Corp. and will turn in the stock certificate to your office tomorrow morning.'), which stock was delivered to Judge the next morning. The stock was reissued and delivered to the bank with the guaranty and pledge agreement which was executed by Merle, Jung, Richard Zoernig, E. L. Zoernig and Judge on December 7, 1956. These guarantors were called upon to advance money for interest, totaling about $5,500, in January, February and March, 1957.

When Edward A. Pollack turned over plaintiff's stock to Merle for delivery to Judge, he testified that he told them 'that is as far as we'll go and that's all.' On Friday, December 7, 1956, Judge wrote to the Pollacks that 'Under these circumstances, since you have decided not to participate in the guaranty, your stock-holdings and claims against the corporation stand surrendered to the participating stockholders.' On December 10, 1956, Harold Pollack called...