Sd Investments v. Michael-Paul, L.L.C.
| Citation | 90 S.W.3d 75 |
| Decision Date | 27 August 2002 |
| Docket Number | No. WD 60255.,WD 60255. |
| Parties | SD INVESTMENTS, INC., Respondent, v. MICHAEL-PAUL, L.L.C., et al., Appellants. |
| Court | Court of Appeal of Missouri (US) |
Marion E. Winter, Parkville, for appellants.
Patrick J. Doran, Kansas City, for respondent.
Before LISA WHITE HARDWICK, Presiding Judge, JOSEPH M. ELLIS, Judge and RONALD R. HOLLIGER, Judge.
Appellant Michael-Paul, L.L.C. owns a piece of real property located at 101 Southwest Boulevard in Kansas City, Missouri ("the property"). Up until May 30, 2000, Michael-Paul was owned by Verlin Boes and Robert Garcia, each of whom held a fifty-percent interest in the corporation.
Respondent SD Investments, Inc., was formed in the State of Kansas on February 26, 1998. Roland G. Cornell and Fred Wallace were made the directors of the corporation. Mr. Cornell was named President, Secretary and Treasurer of SD Investments and was issued 950 of the 1000 shares of stock issued by the corporation. Mr. Wallace was named vice-president and was issued the remaining 50 shares in the corporation.
On March 1, 1998, SD Investments' board met and authorized Mr. Wallace to hire Ralph Sander as General Manager of the restaurant the corporation was going to open in Kansas City, Smokin' Joe's Bar-B-Q. In February 1999, Sander negotiated a lease of the property between SD Investments and Michael-Paul. On February 19, 1999, Boes and Garcia signed the lease for Michael-Paul. On February 22, 1999, Sander signed the lease on behalf of SD Investments, representing himself to be the owner and president of SD Investments. In addition, Mr. Sander's wife, Jana Sander, signed the lease as a guarantor for SD Investments.
Section 9 of the Lease contained an option clause which provided that in exchange for $1,000.00 consideration, during the term of the lease, SD Investments would have an option to purchase the property for $275,000.00 plus the costs of any improvements made to the property by the Michael-Paul after April 1, 1999.
On September 20, 1999, Michael-Paul agreed to loan SD Investments $30,000.00. In conjunction with that loan, SD Investments and Michael-Paul executed the "First Amendment to Commercial and Industrial Lease Agreement." In relevant part, the amendment provided: WHEREAS, Landlord is willing to loan monies to Tenant, specifically, $30,000.00, to complete the aforesaid improvements of Tenant to the Premises if, first, all such monies loaned are used for improvements to the Premises and for no other purposes and, second, if Tenant provides security to Landlord for the repayment of all monies loaned, said security consisting of an assignment to Landlord of and termination of Tenant's option to purchase the Premises under Section 9 of the Lease, a new option to purchase, however, to be given to Tenant upon Tenant's payment to Landlord of all monies borrowed, together with interest;
NOW, THEREFORE, in consideration of the premises, including the mutual promises forth herein, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:
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3. Assignment and Termination of Right to Purchase. In consideration of the loan by Landlord to Tenant under this amendment, Tenant hereby assigns to Landlord Tenant's purchase option for the Premises as provided for in Section 9 of the Lease. By this assignment, Landlord and Tenant hereby agree that the purchase option provided for in Section 9 of the Lease is hereby terminated, without refund to Tenant of any monies heretofore paid in consideration of such option; provided, however, that upon Tenant's timely and faithful payment to Landlord of all principal and interest due Landlord under the promissory note provided for in this amendment, Landlord shall grant to Tenant for Ten Dollars and No Cents ($10.00) a new option to purchase the Premises under the same terms and conditions as heretofore provided in Section 9 of the Lease. Tenant expressly understands that should Tenant default in any way in its obligations to pay Landlord under the promissory note provided for in this amendment, Landlord shall be under no duty or obligation to grant to Tenant a new option to purchase the Premises.
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10. Further Acts. In addition to the acts recited in this amendment to be performed by Landlord and Tenant, Landlord and Tenant agree to perform or cause to be performed any and all such further acts as may be reasonably necessary to consummate the transactions contemplated hereby, including Landlord's execution and delivery of a new option to purchase the Premises upon Tenant's payment to Landlord of all monies borrowed and interest accrued under the promissory note provided for in Section 3 of this amendment.
On October 7, 1999, SD Investments conducted a special joint meeting of the shareholders and board of directors. At that meeting, Mr. Cornell announced that he was transferring all of his shares of stock in the company to Mrs. Jana Sander and that he was resigning as an officer and director of SD Investments. Mrs. Sander was made a director of the company and was elected president.
In December 1999, Mr. Sander asked Mr. Garcia to help him exercise the option to purchase the property. Mr. Sander agreed to give Mr. Garcia a half-interest in the property if Mr. Garcia would loan him some money and co-sign the loan application. In early 2000, Mr. Garcia and Mr. Sander went to the Mission Bank on several occasions to obtain a loan of $215,000.00 to purchase the property. This agreement was kept secret from Mr. Boes.
On March 3, 2000, Mr. Garcia and Mr. Sander formed a new limited liability company, "Smokin' Joes, L.L.C.," that was to acquire and own the property. Also in early March 2000, Mr. Garcia loaned Mr. Sander $45,000.00. On March 15, 2000, SD Investments paid Michael-Paul the full principal balance plus all accrued interest on the $30,000 promissory note dated September 15, 1999.
On April 4, 2000, Mr. Wallace resigned as an officer and director of SD Investments and tendered his 50 shares of stock back to the company.
Also in early April, Mr. Boes hired a private investigator to investigate Mr. Sander and SD Investments. Through that investigation, Mr. Boes learned that Mr. Sander did not have any ownership in SD Investments and that he was not an officer of the corporation. At that time, Mr. Boes received the 1998 corporate annual report for SD Investments that had been filed on April 21, 1999. That report reflected Mr. Cornell's ownership of the corporation from its inception and that he was president of the corporation.
On April 25, 2000, Mr. Sander hand-delivered to Mr. Boes a letter signed by Mr. Sander and Mrs. Sander stating:
This letter is to inform you that SD Investments, d.b.a.: Smokin Joe's Bar-B-Q intends to exercise the option to purchase, as referred to the lease agreement of March 3, 1999, the property located at 101 Southwest Blvd., Kansas City, Mo. 64108. The intent will be executed on or around May 1, 2000.
A copy of the letter was also mailed to Mr. Garcia.
On April 28, 2000, Mr. Boes sent a letter to SD Investments setting forth several alleged violations of the lease by SD Investments.
On May 2, 2000, an attorney representing SD Investments sent a letter to Michael-Paul stating that SD Investments had exercised its option to purchase the property as set forth in the lease agreement of "February 2, 1999."
On, May 30, 2000, Mr. Garcia sold his interest in Michael-Paul to Mr. Boes. On June 5, 2000, Mr. Boes had the attorney for Michael-Paul notify SD investments that the lease agreement was being terminated effective June 15, 2000, for continuous violations of various terms of the lease.
On June 10, 2000, SD Investments filed its Petition for Equitable Relief and in the Alternative for Damages in the Circuit Court of Jackson County, Missouri. In that petition, SD Investments claimed Michael-Paul had breached the March 20, 1999, Lease Agreement by failing to honor the option clause contained in Section 9 of that agreement and sought specific performance of that clause and/or a declaration of SD Investments rights under that clause. In its answer, Michael-Paul denied that SD Investments had any option to purchase the property or that it was capable of exercising any such option.
On June 21, 2000, Michael-Paul filed a petition for Declaratory and Other Relief in the Circuit Court of Jackson County asking the court to declare the lease invalid based upon Mr. Sander's misrepresenting that he was the president and owner of SD Investments. On September 27, 2000, the two petitions were consolidated into one case.
The trial court heard the matter on November 30, 2000. On January 24, 2001, the trial court entered judgment in favor of SD Investments. In relevant part, the trial court made the following findings and conclusions:
In connection with a $30,000 loan from Michael-Paul to SD Investments, a First Amendment to Commercial and Industrial Lease Agreement was executed by Robert A. Garcia on behalf of the landlord and by Ralph Sander on behalf of the tenant, on September 20, 1999. This instrument was drafted by Michael-Paul's counsel. In this First Amendment, the tenant assigned to the landlord the tenant's purchase option contained in Section 9 of the original Lease Agreement, in consideration of the $30,000 loan. The First Amendment provided that tenant would reaquire this purchase option upon tenant's re-payment of the loan in full. Both Robert Garcia and Ralph Sander testified that SD Investments repaid the loan in full on March 15, 2000. The First Amendment states that this purchase option would reissue to the tenant for the nominal consideration of Ten Dollars and No Cents ($10.00). Ralph Sander testified that SD Investments provided consideration in excess of...
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