Tindall v. Holder

• Citation: 892 S.W.2d 314
• Decision Date: 21 December 1994
• Docket Number: Nos. 19018,19033,s. 19018
• Parties: Mary Cox TINDALL, Individually and on behalf of the shareholders of Burger Max, Inc., Plaintiff-Respondent, v. Larry K. HOLDER and Cherie L. Jordan, Individually and in their capacities as officers and directors of Burger Max, Inc., and Burger Max, Inc., Defendants-Appellants, and Karlyn M. Holder, Counterclaimant/Cross-Appellant.
• Court: Court of Appeal of Missouri (US)

Page 314

892 S.W.2d 314

Mary Cox TINDALL, Individually and on behalf of the

shareholders of Burger Max, Inc., Plaintiff-Respondent, v. Larry K. HOLDER and Cherie L. Jordan, Individually and in their capacities as officers and directors of

Burger Max, Inc., and Burger Max, Inc.,

Defendants-Appellants,

and

Karlyn M. Holder, Counterclaimant/Cross-Appellant.

Nos. 19018, 19033.

Missouri Court of Appeals,

Southern District,

Division One.

Dec. 21, 1994.

Steven E. Marsh, Hulston, Jones, Gammon & Marsh, Springfield, for defendants-appellants Larry K. Holder and Cherie L. Jordan and counterclaimant/cross-appellant, Karlyn M. Holder.

William L. Mauck, Yates, Mauck, Bohrer, Elliff, Croessmann & Wieland, Springfield, for plaintiff-respondent Mary Cox Tindall.

SHRUM, Chief Judge.

Mary Cox Tindall (Plaintiff) submitted her case to the trial court by a second-amended petition that contained five counts. Plaintiff prevailed on Count IV only, a civil conspiracy count. Count IV seeks damages from Larry K. Holder (Larry) ¹ and Cherie L. Jordan (Jordan) for their alleged conspiracy to defraud Plaintiff of her property interests in Burger Max, Inc., a Missouri corporation (Burger Max). On that count, the trial court entered judgment against Larry and Jordan for $1 actual and $25,000 punitive damages.

Larry filed a counterclaim with three counts, only two of which are before us. Count I seeks contribution from Plaintiff, as a co-guarantor, for one-half of the unpaid balance of a promissory note that Larry bought from a Springfield bank. Karlyn M. Holder (Karlyn), not otherwise a party, joins with her husband by a separate pleading in asserting Count I of the counterclaim. The trial court entered judgment for Plaintiff and against both Larry and Karlyn on Count I of their counterclaim.

Count III of the counterclaim is a defamation claim based on statements by Plaintiff about Larry in a letter sent by Plaintiff to Burger Max shareholders. As a pretrial matter, the trial court sustained Plaintiff's motion to dismiss Count III of the counterclaim. It denied Larry's later requests to amend Count III.

In No. 19018, Larry and Jordan appeal from the money judgment against them on Count IV of Plaintiff's action. Larry also appeals in No. 19018 from the judgment that denies him relief on Count I of his counterclaim and the order that dismissed Count III.

In No. 19033, Karlyn appeals from the judgment denying her relief as prayed for in Count I of the counterclaim.

FACTS

The genesis of this litigation was a fast-food business venture of Plaintiff and Larry known as Burger Max.

The proposal for the business was first made to Plaintiff by Larry in mid-1985. Larry and Karlyn owned land in Springfield, Missouri, on which Larry wanted to open a fast-food drive-through. Larry, however, lacked experience in that type business. Through their earlier business dealings and acquaintanceship, Larry knew Plaintiff was experienced in the restaurant and retail food business and, thus, approached Plaintiff about being a "partner." Plaintiff was interested and her subsequent meetings and discussions with Larry led to the incorporation of Burger Max, Inc.

The articles of incorporation provided for three directors for Burger Max. Although no organizational meeting occurred, Plaintiff testified she understood and agreed that the original directors were herself, Larry, and Jordan; and that the corporate officers were as follows: Larry, president; Jordan, secretary; and Plaintiff, vice-president. Jordan was not an investor or paid employee of At first, Plaintiff and Larry were the only investors, each putting in approximately $23,000. Conflicting evidence abounds about the agreed division of shares regarding voting. Plaintiff insisted at trial that the division as originally agreed was 50/50, whereas Larry maintained it was 51 percent for him, 49 percent for Plaintiff. Plaintiff's stock certificate was not delivered to her until September 1987 by which time this suit had been filed and people other than Plaintiff and Larry had invested in Burger Max.

Burger Max. She was an employee of American Home Products, Inc. (AHP), a firm owned by Larry that sold cookware and related merchandise. Jordan was also an employee of AHP Acceptance Inc. (AHP Acceptance), another firm owned by Larry. AHP Acceptance financed consumers' purchases from AHP.

Except for a September 1987 shareholder meeting, the shareholders and directors of Burger Max never held a formal meeting at which minutes were taken, corporate resolutions adopted, or other business formally voted on or recorded. Major corporate decisions for Burger Max were made informally, either by Larry acting alone or at frequently held meetings between Larry and Plaintiff. Once the restaurant building was constructed, Plaintiff was employed by Burger Max and given full management responsibilities over the restaurant.

The restaurant building was completed and opened in May 1986. It was constructed on land owned by Larry and Karlyn and leased to Burger Max by them. Larry was the only officer or director who signed the lease on behalf of Burger Max. The lease term was ten years with an option for one additional ten-year period. Rental was $1,500 per month for the first three years with provision for increasing the rent thereafter. The lease provided that upon default in the payment of rent, the Holders could terminate the lease and take possession of the premises.

The money required to build and equip the restaurant came primarily from a $200,000 loan made to Burger Max by Empire Bank. As security, Burger Max pledged its restaurant equipment, fixtures, and inventory. As additional security, Larry and Karlyn gave Empire Bank a second deed of trust on the restaurant building site and on their AHP real estate. They also pledged the Burger Max lease. Finally, to enable Burger Max to obtain the loan, Larry and Karlyn signed an agreement guaranteeing the payment of Burger Max's loan. Plaintiff signed a loan guaranty agreement identical to that signed by the Holders.

From the beginning, the restaurant struggled financially. Consequently, by July 1986, Burger Max had to borrow money to operate or Plaintiff and Larry had to put more money in it. At Larry's suggestion--with which Plaintiff did not disagree--Burger Max began borrowing from Larry's finance company, AHP Acceptance. By December 1986, Burger Max had borrowed $45,000 from AHP Acceptance. As with all other transactions, this borrowing occurred without formal board approval or authorization. The instrument evidencing Burger Max's $45,000 debt to AHP Acceptance was signed, "Larry K. Holder, President Burger Max, Corp." and "Mary L. Cox, ² Vice President Burger Max, Corp." That document required Burger Max to repay the loan in 120 monthly payments. However, the loan document had no acceleration clause, i.e., no provision by which AHP Acceptance could declare any unpaid balance due if Burger Max defaulted in making payments.

In 1986, Larry and Plaintiff first discussed franchising Burger Max stores and selling stock in a public offering. Eventually they decided to sell stock to others, and as their first step, hired an attorney to represent them. As we describe some of the events occurring after the decision to "go public," we note that directors and officers of Burger Max continued to act informally without minutes, formal votes, or records. Moreover, Plaintiff denied both participation in and prior knowledge of some actions we now describe.

In March 1987, Burger Max's articles of incorporation were amended to increase its On June 17, 1987, a check for $43,644.80 was drawn on the new investor account to pay off Burger Max's loan to AHP Acceptance. Although Burger Max's account with AHP Acceptance was delinquent, the loan document lacked an acceleration clause. Larry offered evidence that the prepayment occurred upon the advice of Burger Max's accountant, i.e., to "clean up" the prospectus. Plaintiff testified she knew nothing of the prepayment to AHP Acceptance until after it occurred and never agreed that Burger Max should prepay.

authorized capital stock and its board of directors to seven. Four additional directors were "selected" for Burger Max. A prospectus for Burger Max was prepared, additional stock certificates were printed, and the solicitation of investors began. By early summer 1987, new investors had paid approximately $180,000 for Burger Max stock. New investor money was not deposited in Burger Max's operating account but, rather, in a new account where only Larry or Jordan could withdraw it.

By July 1987, relations between Plaintiff and Larry had deteriorated. On August 6, 1987, Larry terminated Plaintiff's employment at Burger Max and ordered her off the premises.

On September 3, 1987, a formal shareholder meeting was held. At that meeting all new shareholders were offered an opportunity to withdraw their investment and most did. Burger Max continued to operate the restaurant until it was finally closed in late December 1987 or early January 1988.

Burger Max's lease was terminated by Karlyn in September 1987 for nonpayment of rent. Burger Max defaulted on the loan from Empire Bank and when not otherwise paid by co-guarantors, Larry and Karlyn bought the note along with the security instrument in January 1988. They foreclosed and sold the collateral. Larry and Karlyn paid $10,000 for items not bought by outside buyers. After the proceeds of the sale were applied, the balance on the Burger Max note was $160,150.

In early 1988, a newly formed corporation called Speedy's, Inc., rented the Burger Max building from Larry and Karlyn and opened a drive-through restaurant at that site. Some equipment formerly owned by Burger Max was used by Speedy's, Inc. Both Larry and Jordan were shareholders in Speedy's. That store was also unsuccessful financially and closed within two to three months.

The litigation that evolved from the Burger Max...