Savannah Place, Ltd. v. Heidelberg

• Decision Date: 31 October 2003
• Docket Number: No. 25070.,25070.
• Citation: 122 S.W.3d 74
• Parties: SAVANNAH PLACE, LTD., a Missouri Corporation, Respondent, v. Charles and Sandra HEIDELBERG, husband and wife, Appellants, v. Carol JONES and Carol Jones, trustee of the Carol Jones Revocable Trust dated December 31,1987, Respondents.
• Court: Missouri Court of Appeals

122 S.W.3d 74

SAVANNAH PLACE, LTD., a Missouri Corporation, Respondent, v. Charles and Sandra HEIDELBERG, husband and wife, Appellants, v. Carol JONES and Carol Jones, trustee of the Carol Jones Revocable Trust dated December 31,1987, Respondents.

No. 25070.

Missouri Court of Appeals, Southern District, Division One.

October 31, 2003.

Application for Transfer Denied December 23, 2003.

Thomas Y. Auner, Janis L. Prewitt, Springfield, for appellants.

Rodney H. Nichols, John E. Price, Carnahan, Evans, Cantwell & Brown, P.C., Springfield, for respondents.

ROBERT S. BARNEY, Presiding Judge.

Respondent Savannah Place Ltd. ("Savannah Place"), as assignee of two promissory notes, attendant deeds of trust, security agreements and guaranties relating to the two promissory notes, brought suit against Charles Heidelberg and his spouse, Sandra Heidelberg ("Appellants" and/or "Charles Heidelberg" or "Sandra Heidelberg"), to enforce the terms of the guaranties for the payment of the two promissory notes. Respondent Carol Jones, individually ("Carol Jones"), Respondent Carol Jones, as trustee of the Carol Jones Revocable Trust dated December 31, 1987 ("Jones Trust"), and Doug Garges, were also guarantors, but were not sued by Savannah Place.

In response to the suit commenced by Savannah Place, in pertinent part, Appellants seasonably brought a second amended counter-claim in one count against Savannah Place, seeking monetary damages, attorneys' fees, and costs for breach of fiduciary duty.¹

Also, Appellants brought their second amended third-party claim in four counts against Carol Jones and Jones Trust, seeking monetary damages, attorneys' fees, and costs premised on fraudulent misrepresentation, breach of contract, promissory estoppel, and breach of fiduciary duty.

The Circuit Court of Greene County, after a bench trial, made findings of fact and conclusions of law, and entered judgment in favor of Savannah Place on its guaranty claims against Appellants, arising from their obligation under the two promissory notes, and awarded Savannah Place the amount of $1,649,541.55, inclusive of interest and attorneys' fees.

The trial court also entered judgment against Appellants and in favor of Savannah Place on Appellants' second amended counter-claim against Savannah Place, and against Appellants and in favor of Carol Jones and Jones Trust on Appellants' second amended third-party claims against Carol Jones and Jones Trust. Appellants now appeal, raising seven points of trial court error, discussed below.

The record shows that the underlying action arose out of the development of a residential subdivision in Taney County known as Savannah Place ("the subdivision"). The subdivision was owned by Richmond Heights, Inc. ("Richmond Heights"), a Missouri corporation in which Charles Heidelberg, Doug Garges, and Carol Jones were equal shareholders. Carol Jones was President, Charles Heidelberg was Vice-President, and Doug Garges was Secretary.

In connection with the development of the subdivision, Richmond Heights obtained two loans from Capital Bank of Southwest Missouri, predecessor in interest to Union Planters Bank. The two loans were in the amounts of $930,000.00 and $898,000.00, evidenced by two promissory notes, each dated August 31, 1994. The $930,000.00 promissory note was secured by a first deed of trust on the subdivision property and the $898,000.00 promissory note was secured by a second deed of trust on the same real property. As previously related, both promissory notes were personally guaranteed by Appellants, Doug Garges, Carol Jones, and Jones Trust.

Richmond Heights used the proceeds from the $898,000.00 promissory note for infrastructure and the proceeds from the $930,000.00 promissory note for the construction of the first 20 houses at the subdivision. It was contemplated that 192-193 houses would be constructed and sold. When construction began, Charles Heidelberg was overseeing the project.

Home sales in the subdivision began in 1994. The development of the subdivision went according to plan for the first six months to a year. However, the Branson, Missouri real estate market began to weaken, which resulted in the sale of fewer homes in the subdivision. Both loans had original maturity dates of September 6, 1995. Each loan was renewed and extended on several occasions so that both became due and payable on December 6, 1996. All the guarantors signed continuing guaranties with Union Planters Bank at the time of the last extension.

During the development of the subdivision a dispute arose with Colt Construction, Inc. ("Colt Construction"), a contractor hired by Richmond Heights to construct houses. Colt Construction sued Richmond Heights and Carol Jones and filed a lis pendens on the subdivision property. The lis pendens apparently further impeded lot and house sales in the subdivision. Because Richmond Heights had no money to defend the lawsuit, Carol Jones paid the attorneys' fees.

Later, as part of a settlement agreement with Colt Construction, the lis pendens was removed, after Carol Jones released a third deed of trust encumbering the subdivision that secured a prior loan Carol Jones had made to Richmond Heights.²

In the fall of 1996, there were numerous discussions concerning the problems associated with the subdivision. Discussions took place regarding the possibility of filing for bankruptcy protection, the possibilities of foreclosure on the subdivision, Carol Jones' decision not to advance any further loans to Richmond Heights, and Carol Jones' refusal to agree to any further extensions of the loans, now held by Union Planters Bank. Also of concern was the Colt Construction litigation.

By this time, the shareholders had become disenchanted with each other. In particular, Carol Jones was critical of Charles Heidelberg's handling of the construction project vis-a-vis Colt Construction. Carol Jones refused to lend any more money to Richmond Heights so long as Charles Heidelberg and Doug Garges "were involved in the project." These discussions culminated in Carol Jones, on December 13, 1996, acquiring the shares of stock in Richmond Heights held by Charles Heidelberg and Doug Garges, for $100.00 each.

Meanwhile, the Union Planters Bank loans matured on December 6, 1996, and were not paid by Richmond Heights. The loans were not extended. On or about December 31, 1996, Union Planters Bank initiated foreclosure proceedings on both deeds of trust. A trustee's sale on the second deed of trust was scheduled for January 28, 1997, and the foreclosure sale on the first deed of trust was scheduled for a later date.

At a special joint meeting of the directors and shareholders of Richmond Heights—consisting of Charles Heidelberg and Doug Garges as directors, together with Carol Jones as director and sole shareholder—there was unanimous consent given to Carol Jones, or an entity controlled by her, to bid on the real estate which was the subject of the foreclosure sale scheduled for January 28, 1997.³

On January 21,1997, Carol Jones caused Savannah Place, Ltd., to be formed and incorporated. She was the sole director, sole shareholder, President, and Secretary of this new corporation. She then transferred all of the shares of Savannah Place to Jones Trust.

On January 28, 1997, Savannah Place acquired the Union Planters Bank loans, evidenced by an assignment of the two promissory notes and attendant deeds of trust, together with "[a]ll other security agreements, financing statements, guaranties and security documents of any kind securing the Notes" for the total sum of $1,035,466.13—paying $921,115.82 for the first promissory note and $114,350.31 for the second promissory note.⁴

Savannah Place then proceeded with the foreclosure sale on the second deed of trust at approximately 1:00 p.m. on January 28, 1997. Savannah Place was the sole bidder at the foreclosure sale and acquired the subdivision for a bid of $100,000.00, representing all but $14,350.31 of the amount due on the $898,000.00 promissory note secured by the second deed of trust, thereby leaving a $14,350.31 deficiency. The foreclosure sale on the first deed of trust, securing the $930,000.00 promissory note, was cancelled. According to the record, the first deed of trust has never been foreclosed upon or released of record.

Then, as previously set out, Savannah Place brought suit against Appellants based on their personal guaranties of the amounts then due under each of the two promissory notes. The trial court, inter alia, entered judgment in favor of Savannah Place in the total amount of $1,649,541.55, inclusive of principal, interest and attorneys' fees and denied all of Appellants' causes of action in their second amended counter-claim and second amended third-party claims. This appeal followed.

"The applicable standard of review is provided by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976)." Martin v. McEvers, 104 S.W.3d 785, 787 (Mo.App. 2003). "Thus, the judgment of the trial court will be affirmed unless it is against the weight of the evidence, it is not supported by substantial evidence, or it erroneously declares or applies the law." Bus. Men's Assurance Co. v. Graham, 984 S.W.2d 501, 505-06 (Mo. banc 1999).

"We view the evidence and all permissible inferences in the light most favorable to the judgment, disregarding all contrary evidence." Black v. Adrian, 80 S.W.3d 909, 911 (Mo.App.2002). "Due deference is afforded the trial court with respect to the credibility of witnesses and the weight given their testimony." Id. This is so "`even if the evidence could support a different conclusion.'" Martin, 104 S.W.3d at 787 (quoting King v. King, 793 S.W.2d 200, 202 (Mo.App.1990)). "This [C]ourt gives considerable deference to the evidentiary and factual evaluations by the trial court; however, no such deference is given where the law has been erroneously applied." Bush Constr. Machinery, Inc. v. Kansas City Factory Outlets,...