Robl Constr., Inc. v. Homoly, 13–3607.

• Decision Date: 01 April 2015
• Docket Number: No. 13–3607.,13–3607.
• Citation: 781 F.3d 1029
• Parties: ROBL CONSTRUCTION, INC., a Kansas Corporation, Plaintiff–Appellant v. Andrew G. HOMOLY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

781 F.3d 1029

ROBL CONSTRUCTION, INC., a Kansas Corporation, Plaintiff–Appellant

v.Andrew G. HOMOLY, Defendant–Appellee.

No. 13–3607.

United States Court of Appeals, Eighth Circuit.

Submitted: Sept. 8, 2014.

Filed: April 1, 2015.

Kelsey J. O'Donnell, White GossBowers March, Schulte & Weisenfels, Kansas City, MO, argued (Daniel O. Herrington, on the brief), for appellant.

David W. White, Foland, Wickens, Eisfelder, Roper & Hofer, P.C., Kansas City, MO, argued (Lynn Weddle Judkins, on the brief), for appellee.

Before RILEY, Chief Judge, SMITH and KELLY, Circuit Judges.

Opinion

RILEY, Chief Judge.

In this diversity case, see 28 U.S.C. § 1332(a)(1), (c)(1), Robl Construction, Inc. (Robl Construction), a Kansas citizen, appeals the adverse grant of summary judgment to Andrew Homoly, a Missouri citizen, on Robl Construction's claim that Homoly breached an agreement personally to guarantee 40% of a $431,544.02 loan¹ Robl Construction made to Homoly & Robl, L.L.C. (Company). The district court found Homoly did not personally guarantee any loan from Robl Construction. Because the record and the parties' submissions reveal Robl Construction and Homoly genuinely dispute whether Homoly—by word and deed—authorized Robl Construction's loan to the Company and personally guaranteed repayment in accordance with the terms of the Company's agreements, we reverse and remand for further proceedings.

I. BACKGROUND

On October 29, 2002, Robl Construction, through its president Steve Robl, and Homoly formed the Company to purchase and develop residential real estate. Robl Construction and Homoly executed an operating agreement and a separate Buy–Sell, Option, and Financing Agreement (buy-sell agreement). Both agreements govern the Company's financial affairs and define the members' rights and duties in accordance with Kansas law. The buy-sell agreement controls in the event of an inconsistency.

As the only members of the Company, Robl Construction held a 60% share and Homoly held a 40% share. Steve Robl was the Company's tax matters partner, and his wife, accountant Vera Robl, assisted with the Company's financial records. Homoly primarily worked as a project manager in the field.

In 2004, the Company began to have financial problems. From 2006 to 2011, the Company operated at a loss and needed additional capital to continue operations. Robl Construction was periodically advancing money to the Company, and Steve Robl, Vera Robl, and Homoly discussed whether the Company should make a capital call or treat the advances as a revolving loan.

As relevant to this appeal, § 6.03 of the operating agreement required the consent of both Robl Construction and Homoly before

D) The creation of any obligation or commitment of the Company, including the borrowing of funds, in excess of $10,000; [and]

....

I) Any act which would cause a Member, absent such Member's written consent, to become personally liable for any debt or obligation of the Company[.]

On July 31, 2006, Vera Robl notified Homoly by email that the Company needed “to make a capital call or increase loans on existing inventory.” She advised that Robl Construction had “put in $71,500 so if you go the route of capital call, your share to get caught up would be $47,666.” She asked Homoly to “[l]et [her] know what to do.” When Homoly asked whether the $47,666 included $34,900 Homoly previously contributed, Vera Robl explained,

No, the 71,000 is new money we've put in to cover all the carrying costs of the inventory. To match it, you would need to put in 47,666.... I've been treating the 71,000 like a loan from Robl Const, but I need to know what the plans are—will it be capital and you will match it, or will it be a loan and be repaid?

On August 2, 2006, Homoly responded,

Wow, if my portion is $82,566, does this mean we are in the hole by $206,400? ... I could put in that much money, but it would be a good sized hit for my liquidity.... With that in mind, I guess I would prefer the money from Robl to be considered a loan and then you guys get repaid with interest. If Steve would rather me put in a capital call, however, I will go ahead and write the check.

Vera Robl replied she would not “make any journal entries until [Homoly] and Steve talk this over.” On appeal, Homoly—conceding he left the decision to Steve Robl's discretion—characterizes his response as “ask[ing] Steve Robl, the [Company's] tax matters and financial partner, to clarify which route the [Company] wishes to take.”

Relying in part on this email exchange, Robl Construction avers the parties agreed to treat Robl Construction's periodic advances to the Company as a revolving loan. As Robl Construction sees it, Homoly not only requested the loan, but also agreed to be personally liable for 40% of the $431,544.02 debt pursuant to § 8 of the buy-sell agreement, under which Robl Construction and Homoly each “agree[d] to personally guarantee [their proportionate share of] any and all loans” to the Company at the request of the Company and the lender. See Kan. Stat. Ann. § 17–7688(b) (allowing members to opt out of the state's default non-liability rule and “agree to be obligated personally for any or all of the debts, obligations and liabilities of the limited liability company” “under an operating agreement or under another agreement”).

On March 29, 2011, Robl Construction formally demanded that Homoly repay his share of the unpaid loan. When Homoly refused, Robl Construction sued Homoly for breach of contract, seeking $172,617.61 in damages—Homoly's share of the debt. Homoly moved for summary judgment, arguing (1) if the advances to the Company were failed capital calls, Robl Construction could seek, at most, dilution of Homoly's interest in the Company, and (2) if the advances were a loan, Robl Construction failed to meet the conditions precedent in the parties' agreements and to satisfy the statute of frauds with respect to Homoly's alleged guarantee.² In response, Robl Construction insisted the advances were a loan and argued genuine factual disputes precluded summary judgment.

Ostensibly accepting Robl Construction's characterization of the advances as a loan, the district court granted Homoly's motion, “find[ing] the money Robl gave the Company was not a personally guaranteed loan.” Robl Construction appeals.

II. DISCUSSION

Robl Construction and Homoly agree on little, but they do agree Kansas law governs their dispute. See H & R Block Tax Servs. LLC v. Franklin, 691 F.3d 941, 943–44 (8th Cir.2012) (applying state substantive law as specified by contract because Missouri, the forum state in a diversity case, generally enforces contractual choice-of-law provisions). We review de novo the district court's application of state law and its grant of summary judgment. See Bannister v. Bemis Co., 556 F.3d 882, 884 (8th Cir.2009). Summary judgment is required “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

A. Judgment as a Matter of Law

In granting summary judgment to Homoly, the district court decided “there [wa]s nothing in the record showing that Robl [Construction] requested Homoly personally guarantee any such loan as the Buy–Sell Agreement clearly contemplates.” Rejecting Robl Construction's proposed interpretation of the 2006 email exchange between Homoly and Vera Robl, the district court found Homoly's email “may show that Homoly wanted Robl [Construction] to loan the Company money, but it does not indicate that Robl [Construction] requested for Homoly to personally guarantee the loan. Rather, the email communication shows a failed capital call attempt, and Homoly's preference—not request—that Robl loan the money to the Company.”

Robl Construction contends this was error because the district court “premised its holding exclusively on the email exchange and failed to consider other evidence that Homoly” authorized and “personally guarantee[d] the loan.” Robl Construction further asserts “[t]he District Court erroneously stepped into the role of fact finder and failed to resolve all facts and inferences in” Robl Construction's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (“[A]t the summary judgment stage the judge's function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.”); Henrickson v. Drotts, 219 Kan. 435, 548 P.2d 465, 468 (1976) (“A court should be cautious in granting a motion for summary judgment when resolution of the dispositive issue necessitates a determination of the state of mind of one or both of the parties.”). Robl Construction's points are well taken.

B. Kansas Contract Law

Under Kansas law, “[t]he question whether a binding contract was entered into depends on the intention of the parties and is a question of fact.” Reimer v. Waldinger Corp., 265 Kan. 212, 959 P.2d 914, 916 (1998) ; see also Hays v. Underwood, 196 Kan. 265, 411 P.2d 717, 720–21 (1966) (explaining that conflicting evidence and competing inferences as to the existence and terms of a contract present fact questions). “[W]hether a party's duty under a contract was based on a condition precedent is” also a fact question, Cravotta v. Deggingers' Foundry, Inc., 42 Kan.App.2d 700, 215 P.3d 636, 642 (2009), as is the question of breach, see Wichita Clinic, P.A. v. Louis, 39 Kan.App.2d 848, 185 P.3d 946, 959 (2008). “[I]nterpretation of the written terms of a contract, however, [is] a question of law.” Reimer, 959 P.2d at 916.

A contract may be oral, written, or a mixture of both. See, e.g., Chilson v. Capital Bank of Miami, 237 Kan. 442, 701 P.2d 903, 907 (1985). “Whether an ambiguity exists in a written instrument is a question of law for the court.” Hollenbeck v. Household Bank, 250 Kan. 747, 829 P.2d 903, 906 (1992). “[W]here ambiguity or uncertainty is involved, the parties' intent may be determined from all the...