Sumners v. Service Vending Co., Inc.

• Decision Date: 24 February 2003
• Docket Number: No. 24932.,No. 24949.,24932.,24949.
• Citation: 102 S.W.3d 37
• Parties: Jerry SUMNERS, Jr., and Carol Sumners, Plaintiffs-Appellants, v. SERVICE VENDING COMPANY, INC., Defendant-Respondent.
• Court: Missouri Court of Appeals

102 S.W.3d 37

Jerry SUMNERS, Jr., and Carol Sumners, Plaintiffs-Appellants, v. SERVICE VENDING COMPANY, INC., Defendant-Respondent.

No. 24932.

No. 24949.

Missouri Court of Appeals, Southern District, Division Two.

February 24, 2003.

Motion for Rehearing and Transfer Denied March 18, 2003.

Thomas W. Millington, Penni M. Groves, Millington, Glass & Love, Springfield, for appellant Jerry Summers, Jr.

Mark J. Millsap, J. Matthew Miller, Baird, Lightner, Millsap & Kollar, P.C., for appellant, Carol Sumners.

Charles B. Cowherd, Scott E. Garrett, Ginger K. Gooch, Husch & Eppenberger, LLC, Springfield, for respondent.

KENNETH W. SHRUM, Judge.

The plaintiffs' declaratory judgment petitions asked that a "Buy-Sell Agreement" between Jerry Sumners, Jr. ("Jerry, Jr.") and Service Vending Company, Inc. ("Defendant") be interpreted as not requiring Jerry, Jr. to sell his stock in the company to Defendant. Defendant's responsive pleadings included a counterclaim for specific performance of the Buy-Sell Agreement. Via summary judgment, the trial court ruled adversely to the plaintiffs and ordered Jerry, Jr. to assign his stock to Defendant.

In Case No. 24932, Jerry, Jr.'s single point urges reversal based on alleged fatal defects in the contract, i.e., it was not supported by consideration, it lacked mutuality of obligation, and it imposed unreasonable restraints on Jerry, Jr.'s "alienation" rights. In No. 24949, Carol Sumners ("Carol"), Jerry, Jr.'s wife, urges reversal on the same theories advanced by Jerry, Jr. Further, she claims a prospective and unreleased "marital property" interest in Jerry, Jr.'s stock (although her name never appeared thereon) and insists the trial court erred when it ruled she had no "ownership interest, title or rights" in the subject stock.

In No. 24932, we reverse the summary judgment for Defendant and against Jerry, Jr. and remand for further proceedings.

In No. 24949, we affirm the judgment for Defendant and against Carol.

STANDARD OF REVIEW

A motion for summary judgment will be granted if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Rule 74.04(c)(3). On appeal from a summary judgment, this court reviews the record in the light most favorable to the party against whom judgment was entered. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376[1] (Mo.banc 1993). This court does not defer to the trial court's ruling granting summary judgment because our review is de novo. Id. at 376[4,6]. Moreover, "[t]he key to a summary judgment is the undisputed right to a judgment as a matter of law; not simply the absence of a fact question." Southard v. Buccaneer Homes Corp., 904 S.W.2d 525, 530[8] (Mo.App.1995).

FACTS

At the time of trial, Defendant's corporate stock was owned as follows: Jerry L. Sumners, Sr. Revocable Intervivos Trust, 104 shares; Toby Sumners, 9 shares; Talbet Sumners, 24 shares; Tyler Sumners, 24 shares; and Jerry, Jr., 24 shares.¹ The stock certificates for these shares contained this endorsement: "The sale, assignment, transfer, pledge or other disposition of the shares of capital stock represented by this certificate are subject to a certain restrictive agreement dated November 20, 1992, a copy of which agreement is on file in the office of the corporation."

On November 20, 1992, each minority shareholder, including Jerry, Jr., signed an identically worded, but separate Buy-Sell Agreement with Defendant. The agreement's recited purpose was to "restrict the transfer of all shares [of Defendant] ... owned by Stockholder" so that when said "Stockholder's employment by [Defendant] is terminated, or upon the death of Stockholder ..., said stock shall not pass to the control of persons whose interest might be incompatible with the interests of [Defendant] and the remaining stockholders." In part, the Buy-Sell Agreement provided:

"III. Retirement, Withdrawal, Termination:"

"A. Termination. If Stockholder retires, withdraws from employment or his employment with the Corporation is otherwise terminated, such event shall constitute an implied offer to the Corporation under the following price and terms."

"B. Price. The redemption price for each share of stock shall be 83,645.83."

"C. Terms. The redemption price of the ... stock ... shall be paid in cash, without interest, within 90 days after termination of employment with the Corporation."

All stock certificates of majority shareholder Jerry J. Sumners, Sr. ("Jerry, Sr.") contained the restrictive endorsement that referenced a November 20, 1992, restrictive agreement. However, Jerry, Sr. never signed a buy-sell agreement with Defendant, neither in his individual capacity nor as trustee of his revocable trust.

As to Jerry, Jr.'s stock, he paid $43,750 for twelve shares on June 1, 1987 (83,645.83 per share), and on June 30, 1990, he paid the same amount for twelve more shares. When Jerry, Jr. made those purchases, no restrictions on alienation existed. The restrictions were added to his certificates after he signed the Buy-Sell Agreement.

On January 1, 2000, Jerry, Jr. terminated his employment with Defendant. Thereon, Defendant demanded it be allowed to redeem Jerry, Jr.'s stock in Defendant at the contract price, i.e., $87,500, and tendered that sum to him. Jerry, Jr. refused to accept payment and filed this declaratory judgment suit. He asked the court to declare the Buy-Sell Agreement unenforceable for lack of consideration and mutuality of obligation; that the court declare his stock was not validity restricted; and that it order reissuance of Jerry, Jr.'s stock certificates without restriction. Later, Carol filed a separate declaratory judgment petition in which she asked the court to declare the Buy-Sell Agreement unenforceable as to her marital interest in the stock. Defendant's responsive pleadings included a counterclaim that sought to have the Buy-Sell Agreement specifically enforced.

On April 24, 2002, the trial court sustained Defendant's motions for summary judgment against Jerry, Jr. and Carol and denied Jerry, Jr.'s request for summary judgment against Defendant. In doing so, the court declared the Buy-Sell Agreement was "supported by sufficient and valid consideration" in that "minority shareholders (sons) were protected from having any non-family members (except any directly chosen by the founding majority shareholder-father) from becoming participants in this closely held, family owned corporation." After finding that paragraphs I-A and IV of the Buy-Sell Agreement "appear to completely restrict any transfer of the shares and ... therefore make the Agreement void as illusory[,]" the court relied on the "savings" language of paragraph IX to delete the two void provisions and declare that a complete and binding agreement remained that gave Defendant "a first right of refusal to repurchase shares at a predetermined price upon ... termination of employment ... of a minority shareholder."² The court found Carol's claim to a marital interest in the stock "has no relevance in this case." With these findings made, the court ordered Jerry, Jr. to endorse and deliver his stock certificates to Defendant.

Jerry, Jr. and Carol filed separate notices of appeal from the summary judgment thus entered. We ordered their appeals consolidated.

DISCUSSION AND DECISION (No. 24932)

In No. 24932, Jerry, Jr. maintains, inter alia, that the trial court erred in sustaining Defendant's motion for summary judgment because the Buy-Sell Agreement "lacked any mutuality of obligation and was unsupported by consideration." Here, the mutuality of obligation doctrine is inexorably intertwined with the consideration issue; consequently, we consider them together.

Consideration, which is a basic element of a valid contract, Allison v. Agribank, FCB, 949 S.W.2d 182, 188[14] (Mo. App.1997), is something of value that moves from one party to the other. Reed, Roberts Associates, Inc. v. Bailenson, 537 S.W.2d 238, 240[1] (Mo.App.1976); Melton v. ACF Indus., 404 S.W.2d 772, 777[7] (Mo.App.1966). In Greenberg v. Morris, 436 S.W.2d 734, 738 (Mo.1968), consideration was defined as:

"`a benefit to the party promising, or a loss or detriment to the party to whom the promise is made.' `Benefit,' as thus employed, means that the promisor has, in return for his promise, acquired some legal right to which he would not otherwise have been entitled, and `detriment' means that the promisee has, in return for the promise, forborne some legal right which he otherwise would have been entitled to exercise. In other words, legal consideration contemplates two parties and ordinarily some consideration must flow from both parties." Id. at 738[6] (citations omitted) (emphasis supplied).

A bilateral contract is one in which there are mutual promises between the parties to the contract, and each party is both promisor and promisee. Coffman Indus., Inc. v. Gorman-Taber Co., 521 S.W.2d 763, 769[4] (Mo.App.1975). A contract that contains mutual promises imposing some legal duty or liability on each promisor is supported by sufficient consideration to form a valid, enforceable contract. Allied Disposal, Inc. v. Bob's Home Serv., Inc., 595 S.W.2d 417, 419[2] (Mo. App.1980).

On the other hand, a promise is not good consideration unless there is mutuality of obligation, so that each party has the right to hold the other to a positive agreement. Huttig v. Brennan, 41 S.W.2d 1054, 1062[9] (Mo.1931). "`Mutuality of contract means that an obligation rests upon each party to do or permit to be done something in consideration of the act or promise of the other; that is, neither party is bound unless both are bound.'" Aden v. Dalton, 107 S.W.2d 1070, 1073[3] (Mo. 1937) (quoting Gillen v. Bayfield, 329 Mo. 681, 46 S.W.2d 571, 575 (1931)).

Here, Jerry, Jr. maintains the Buy-Sell Agreement was not valid and enforceable because consideration did not flow from both part...