Unlimited Equipment Lines, Inc. v. Graphic Arts Centre, Inc.

Decision Date13 December 1994
Docket NumberNo. 64504,64504
Citation889 S.W.2d 926
Parties25 UCC Rep.Serv.2d 744 UNLIMITED EQUIPMENT LINES, INC., Plaintiff/Respondent, v. The GRAPHIC ARTS CENTRE, INC., and HGK Corp., Defendants/Appellants.
CourtMissouri Court of Appeals

Thomas B. Weaver, Paul N. Venker, Armstrong, Teasdale, Schafly, Davis & Dicus, St. Louis, for appellants.

William J. Travis, Angela B. Desloge, Greensfelder, Hemker, & Gale, P.C., St. Louis, for respondent.

CRANE, Presiding Judge.

Graphic Arts Centre (GAC) and its subsidiary HGK Corporation (HGK) (hereinafter referred to collectively as defendants) appeal from a judgment awarding Unlimited Equipment Lines (UEL) damages and prejudgment interest for breach of contract for failure to honor a first right of refusal. We affirm.

FACTUAL BACKGROUND

At all relevant times UEL was an Indiana corporation engaged in the graphic arts business. It bought and sold specialized printing equipment, handled search and find operations for specialized pieces of printing equipment, handled liquidations of graphic arts businesses by purchase or by auction, purchased other printing businesses or assets as a liquidator, and did equipment appraisals. Paul Geissler was President of UEL.

GAC was a Missouri corporation operating as a holding company for its subsidiaries which were engaged in the graphic arts industry. Its officers included Henry Keeler, Chairman of the Board of Directors, Nick Chiapelas, President, Bradley Bain, Vice President of Operations and Treasurer, and Bob Tyler, Vice President in charge of personnel and security. Bain was chief financial and operating officer. GAC's subsidiary HGK, which was known as Keeler/Morris Printing Company, Inc. during the transactions at issue, was a Missouri corporation engaged in the wholesale and retail printing business.

In late 1989 GAC began experiencing financial problems and made a decision to sell some of its equipment to raise funds. In November, 1989 GAC entered into an agreement with UEL, giving UEL an "exclusive" on the next sale of a printing press by GAC and an "exclusive" on a specific five-color press if the current purchaser was not able to execute on its contract. In early January, 1990 Bain notified Geissler that the five-color press was available for purchase by UEL.

Also in January, 1990 GAC hired Bill Bouchein, a consultant with Cass Business Consultants, Inc., to assist Bain in reorganizing GAC operations to salvage the business. Bouchein's relationship with GAC continued through the time of trial. GAC attempted unsuccessfully to find a buyer for GAC and all its subsidiaries, including HGK. It next attempted to sell off its subsidiaries as operating entities.

On January 12, 1990 UEL entered into a purchase agreement (the "First Agreement") with GAC for a five-color printing press for $240,000. GAC acted for itself and its subsidiary, HGK. Geissler and Bain negotiated and signed the agreement on behalf of UEL and GAC, respectively. Bain presented Chiapelas and Bouchein with a copy of the agreement prior to execution, and both okayed the agreement. Geissler was aware of defendants' need to sell equipment due to their financial difficulties and therefore suggested to Bain that the parties expand on and extend the first right of refusal contained in their November, 1989 agreement. The First Agreement included a first right of refusal provision which, due to clerical error, read: "[GAC] agrees to give first right of refusal to [UEL]. And all equipment is to be In late February and early March of 1990, Geissler, on behalf of UEL, and Bain, on behalf of GAC and its subsidiaries, entered into negotiations with respect to GAC's sale of a four-color printing press to UEL. These discussions included a first right of refusal. Bill Bouchein and Bob Tyler were also involved in the negotiations. Before March 16, 1990 Bouchein communicated to Bain that GAC and its subsidiaries would enter into the agreement to sell on the terms the parties had discussed.

                released for the next twelve months."   UEL paid all of the $240,000 purchase price, except $5,346.55 from the final installment payment which came due August 15, 1990
                

On March 16, 1990 Bain purchased GAC's subsidiary Fordyce Promotional Services, Inc., and resigned his position with GAC. However, Bain continued to maintain an office in GAC's building because Fordyce's operations were also located there. Bob Cockrell took over Bain's position as chief financial officer at GAC.

On or about March 22, 1990, First Wisconsin, GAC's largest creditor, demanded a substantial cash payment from GAC. First Wisconsin threatened to seize GAC's equipment and shut down GAC if the payment was not made. Consequently, GAC needed to show First Wisconsin a written agreement signed on behalf of the buyer, UEL, to prove that funds would be available. In order to expedite the execution of the agreement, Geissler telefaxed a draft of a proposed agreement and UEL letterhead to Bain on March 22. Acting as an intermediary at Geissler's request, Bain typed the proposed agreement on UEL stationery and signed the document as "Agent for UEL, Inc." Bain delivered it to either Bob Cockrell or Bob Tyler. This agreement (hereinafter the "Second Agreement") also gave UEL a first right of refusal on all equipment to be sold by GAC and its subsidiaries. The contract provides: "Should [HGK], J. Lewin Bookbinding, or [GAC] determine additional equipment is necessary to be sold during the next (9) nine months, [HGK] grants [UEL] First Right of Refusal to purchase the specified equipment."

Bouchein received the Second Agreement on either March 22 or March 23, 1990. He saw the first right of refusal provision but never communicated to Geissler or Bain that it was unacceptable. Bouchein gave a copy of the Second Agreement to Bob Cockrell, acting chief financial officer of GAC, prior to the April 4, 1990 closing date so that Cockrell would be aware of UEL's wire transfer of the $470,000 purchase price to First Wisconsin.

The parties closed on the Second Agreement on or about April 4, 1990. UEL paid the purchase price of $470,000 by wire transfer directly to First Wisconsin. After UEL took title to the four-color printing press and other equipment, UEL leased the press back to GAC in order to assist GAC in staying in business.

After closing on the Second Agreement, Bouchein and Geissler met several times to discuss UEL's purchase of part of GAC's remaining assets and also discussed selling the remaining company to UEL as an ongoing concern. Bouchein agreed to sell many of GAC's assets to UEL for $590,000. Geissler obtained a financing commitment for that amount from Cass Bank, an affiliate of Bouchein's employer, Cass Business Consultants. However, Geissler was unable to contact Bouchein after that point.

On August 1, 1990, GAC and HGK, without notice to UEL, sold all HGK's wholly owned furniture and equipment and rights under a Master Equipment Lease Agreement to Jefferson Printing Company, another printing business, for $691,000 pursuant to an Assets Purchase Agreement. That agreement broke down the purchase price as follows: $680,000 for furniture, equipment and rights and obligations under the lease; $1000 for the name and customer lists, sales materials, and plates and dies; and $10,000 to be paid upon execution of the Assets Purchase Agreement. A copy of the Second Agreement, initialed by Henry Keeler, was attached as an exhibit to the Assets Purchase Agreement. This sale took place within the twelve months from the date of the First Agreement and within the nine months from the date of the Second Agreement.

UEL filed an action against GAC and HGK for breach of contract for failure to honor its rights of first refusal. Defendants filed a counterclaim for $5,346.55, which was the unpaid portion of the final installment payment on the First Agreement. The parties waived a jury trial. After a bench trial, the trial court issued findings of fact, conclusions of law, and an order awarding UEL $410,000 in damages which represented the difference between the contract price of $690,000 and the orderly liquidation value of $1.1 million. The court also awarded UEL $89,171 prejudgment interest. The court awarded defendants $5,346.55 plus $1,063 interest on their counterclaim. Defendants timely appealed.

On appeal defendants challenge the validity of the provisions granting UEL a first right of refusal, the scope of those provisions and whether they were breached by the sale to Jefferson Printing. They also challenge whether the first right of refusal provisions were authorized or ratified. They assert the trial court erred in admitting expert testimony on the equipment's value and in excluding evidence of UEL's past profits. Finally, they challenge the award of damages and prejudgment interest. 1

ANALYSIS

On review of a court-tried case we sustain the judgment of the trial court unless there is no substantial evidence to support it, it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We accept the evidence and inferences favorable to the prevailing party and disregard all contrary evidence. Behen v. Elliott, 791 S.W.2d 475, 476 (Mo.App.1990). We defer to the factual findings of the trial judge, who is in a superior position to assess credibility. Brawley v. McNary, 811 S.W.2d 362, 365 (Mo. banc 1991). However, we independently evaluate the court's conclusions of law. Bradley v. Mullenix, 763 S.W.2d 272, 275 (Mo.App.1988).

I. First Right of Refusal

A first right of refusal, or preemptive right, requires the seller, when or if he or she decides to sell, to first offer the property to the holder of the right, either at a stipulated price or at the price and on the terms the seller is willing to sell. Barling v. Horn, 296 S.W.2d 94, 98 (Mo.1956). The right does not give its holder the...

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