Holliday Investments, INC. v. Hawthorn Bank

• Court: Missouri Court of Appeals
• Decided: December 8, 2015
• Docket: WD78640
• Status: Published

Opinion

In the Missouri Court of Appeals Western District

 HOLLIDAY INVESTMENTS, INC,   WD78640 Appellant,  OPINION FILED: v.   DECEMBER 8, 2015 HAWTHORN BANK,   Respondent.   

Appeal from the Circuit Court of Boone County, Missouri The Honorable Kevin M.J. Crane, Judge

Before Division One: Anthony Rex Gabbert, P.J., Victor C. Howard, and Cynthia Martin,

JJ.

Holliday Investments, Inc. (Holliday) appeals the circuit court’s judgment in favor of

Hawthorn Bank (Hawthorn) on Holliday’s claim that Hawthorn was unjustly enriched by a home

that Holliday built on property later foreclosed upon by Hawthorn. Holliday contends that the

circuit court misapplied the law in striking Holliday’s demand for a jury trial. Holliday argues

that its claim was one of quantum meruit which is an action at law entitling Holliday to a jury

trial upon request, as evidenced by there being an MAI jury instruction for use in quantum

meruit actions. We affirm.

On July 17, 2012, Holliday filed its First Amended Petition against Hawthorn. Therein,

Holliday alleged that in 2008 it built an earth contact home on real estate owned by Richard and Annette Sells (the Sells) during a time that Holliday had a contract with the Sells to purchase the

real estate. Holliday alleged that, after the home was built, Hawthorn loaned money to the Sells

and Sells Farms, Inc., who executed a note and deed of trust encumbering the real estate upon

which the home was built. Holliday alleged that “[o]n information and belief Defendant was

aware or should have been aware at the time it made the aforesaid loan that a third party, the

Plaintiff, was constructing valuable improvements upon the real estate encumbered by the

subject deed of trust.” Holliday alleged that it had an equitable interest in the earth contact home

which provided additional collateral to Hawthorn for which Hawthorn “did not confer value” to

Holliday or anyone else. Holliday alleged that Hawthorn then foreclosed upon the property and

became the owner of the property. Holliday alleged that Hawthorn would be “unjustly enriched”

if it did not “reimburse” Holliday for the value of the home and, that, “[b]ased on quantum

meruit, Plaintiff is entitled to recover the value of said earth contact home from Defendant.”

On August 22, 2014, Holliday requested a jury trial. Holliday argued that its claim was

one of quantum meruit and quantum meruit claims are triable to a jury. Hawthorn objected to

Holliday’s request, arguing that Holliday’s claims were equitable in nature and, therefore,

Holliday was not entitled to a jury. The circuit court issued an order striking Holliday’s demand

for a jury trial and, thereafter, the matter was tried before the court.

Holliday’s evidence at trial presented a time frame different from that alleged in

Holliday’s petition with regard to when Hawthorn issued its loan to the Sells and when Holliday

constructed the earth contact home. Holliday’s own undisputed evidence showed that the Sells

and Sells Farms, Inc. executed a real estate deed of trust as collateral for a loan from Hawthorn.

The deed of trust was recorded on March 12, 2008. On March 25, 2008, Holliday entered into a

contract to purchase the Sells’s turkey business which included 683 acres of land as well as

2 turkey barns, cattle, and equipment located on the farm. The contract price was approximately

2.5 million dollars. Holliday did not conduct a title search prior to entering into the contract.

Holliday and the Sells did not intend for there to be a closing date where all of the real estate and

assets would be conveyed simultaneously in exchange for a total purchase price. Rather, the

parties agreed that, as Holliday freed up capital, it would purchase part of the real estate and

assets that were under contract. This allowed Holliday to engage in Section 1031 exchanges

under the tax code. At least two of these transactions occurred prior to March of 2009. Prior to

each transaction, Holliday conducted a title search that disclosed Hawthorn’s deed of trust

against the real estate, but Holliday did not read the title searches.

In March of 2009, Holliday began constructing an earth contact home that was completed

in September of 2009. Chris Holliday, sole shareholder of Holliday, testified that he could have

built the home on nearby land that he already owned, but chose to build the home on land not yet

owned because the placement of the home in that location was more beneficial to Holliday. He

testified that, the home was built for an Amish employee who oversaw the turkey farm and

needed to be in close proximity to the turkey barns in the event of power failure or other

potentially harmful events. Due to the employee/tenant being Amish, the home had plywood

floors and various fixtures had not yet been installed. Chris Holliday testified that he was not

sure if the home had trim on the doors or windows as his tenant worked on the home himself as

he got the time. It was a part of the employee/tenant’s contract that part of the employee’s pay

was having the home to live in. Chris Holliday testified that, due to the proximity of the home to

the turkey barns and the barns’ odors, the home would not be ideal for most people to live in.

The Sells defaulted on the loan with Hawthorn, and Hawthorn foreclosed its deed of trust

on May 7, 2012. The bank was the sole bidder at the foreclosure sale and became the owner of

3 190 acres, including the real estate upon which the earth contact house was constructed. Chris

Holliday testified at trial that he now owns the earth contact home and the property upon which it

sits. He purchased the home along with 80 acres for $200,000 from an individual who purchased

the property from Hawthorn after Hawthorn foreclosed.

After hearing the evidence, the circuit court found in favor of Hawthorn on Holliday’s

demand for reimbursement for the value of the earth contact home.1 Holliday appeals.

Our standard of review is set forth in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc

1976). Schollmeyer v. Schollmeyer, 393 S.W.3d 120, 122 (Mo. App. 2013). We will affirm the

circuit court’s judgment unless it is unsupported by substantial evidence, it is against the weight

of the evidence, or it erroneously declares or applies the law. Id. at 122-123. We will affirm

under any reasonable theory supported by the evidence. Williams v. State, Dept. of Social

Sercies, Children’s Div., 440 S.W.3d 425, 427 (Mo. banc 2014).

In Holliday’s sole point on appeal, Holliday contends that the circuit court misapplied the

law in striking its demand for a jury trial. Holliday argues that its claim was one of quantum

meruit which is an action at law entitling Holliday to a jury trial upon request, as evidenced by

there being an MAI jury instruction for use in quantum meruit actions.

We find that we need not decide whether Holliday would have been entitled to a jury trial

on a properly pled quantum meruit claim because, even if Holliday could prove that the court

erred in denying a jury trial, Holliday cannot prove that he was prejudiced by that denial.

1 Hawthorn filed a counterclaim against Holliday alleging that from May 7, 2012 through November 26, 2012, and while Hawthorn owned the property, Holliday allowed its cattle to remain on the property without Hawthorn’s consent, failed and refused to remove his cattle from the property, did not pay rent for the property or otherwise compensate Hawthorn for its use, and, therefore, Holliday would be unjustly enriched if not required to reimburse Hawthorn for its use of the property. The court found in favor of Holliday on Hawthorn’s counterclaim.

4 “Quantum meruit is a remedy to enforce quasi-contractual obligations and is generally

justified on the theory of unjust enrichment.” Turner v. Wesslak, 453 S.W.3d 855, 860 (Mo. App.

2014) (internal citation and quotation marks omitted.) “Where there is no formal contract, a

promise to pay for services or materials may be implied by the law.” City of Cape Girardeau ex

rel. Kluesner Concreters v. Jokerst, Inc., 402 S.W.3d 115, 122 (Mo. App. 2013). The essential

elements of a claim of quantum meruit are:

(1) that the plaintiff provided to the defendant materials or services at the defendant’s request or with the acquiescence of the defendant, (2) that the materials or services had reasonable value, and (3) that the defendant has failed and refused to pay the reasonable value of such materials or services despite the demands of plaintiff. County Asphalt Paving, Co. v. Mosley Constr., Inc., 239 S.W.3d 704, 710 (Mo. App. E.D. 2007). ‘The principal function of this type of implied contract is the prevention of unjust enrichment.’ Id. (quoting Bellon Wrecking & Salvage Co. v. Rohlfing, 81 S.W.3d 703, 711 (Mo. App. E.D. 2002)). In quantum meruit, there is no requirement of an express agreement between the parties or a promise on the part of the party to be bound. Id.2

Id. at 122-123.

“To properly and sufficiently establish a claim for unjust enrichment, the plaintiff must

prove three elements: (1) the defendant was enriched by the receipt of a benefit; (2) that the

enrichment was at the expense of the plaintiff; and (3) that it would be unjust to allow the

defendant to retain the benefit.” Brunner v. City of Arnold, 427 S.W.3d 201, 233 (Mo. App.

2013) (overruled on other grounds by Tupper v. City of St. Louis, 468 S.W.3d 360 (Mo. banc

2015)).

While the lines are often blurred with regard to quantum meruit and unjust enrichment,

we recognize these as separate causes of action. Hale v. Wal-Mart Stores, Inc., 231 S.W.3d 215,

2 MAI 26.05, which Holliday argues proves a right to jury trial for quantum meruit claims, instructs that a jury must find for a plaintiff on a quantum meruit claim if it first finds that the plaintiff furnished specified goods or services to the defendant and, second, that the defendant accepted the goods or services.

5 225 n10 (Mo. App. 2007); Johnson Group, Inc. v. Grasso Bros., Inc., 939 S.W.2d 28, 30 (Mo.

App. 1997); See also Patrick v. Koepke Const., Inc. v. Woodsage Const Co., 844 S.W.2d 508, 516

(Mo. App. 1992) (stating that “Missouri courts have tended to blur any distinction between

unjust enrichment and quantum meruit.”) Because quantum meruit is justified on the theory of

unjust enrichment, it is understandable that both generally require that a benefit be conferred and

inequitably retained. However, as shown above, the elements of each claim are not identical.

Further, the amount of recovery is different for each cause of action. Johnson Group, Inc., 939

S.W.2d at 30. For a quasi-contract based upon quantum meruit, recovery is based upon the

reasonable value of the goods or services furnished to the defendant. Id. For a quasi-contract

based upon unjust enrichment, recovery is not the actual amount of the enrichment, but the

amount of enrichment which would be unjust for the defendant to retain. Id.

Here, Holliday insists that its claim is one of quantum meruit entitling it to a jury.3 Yet, at

trial, Holliday abandoned a necessary element to prevail on such a claim. Holliday admitted at

trial that it had erred in alleging that Hawthorn accepted the land as collateral after the home was

already built upon the land; Holliday admitted that the home was built after Hawthorn had a

properly recorded lien on the property. Holliday advised the court that it was abandoning the

allegation in its petition that “[o]n information and belief Defendant was aware or should have

been aware at the time it made the aforesaid loan that a third party, the Plaintiff, was constructing

valuable improvements upon the real estate encumbered by the subject deed of trust.”

3 At trial, Holliday distinguished quantum meruit and unjust enrichment by their forms of recovery and averred to the court: “[W]e have a quantum meruit claim; we don’t have an unjust enrichment claim. Those are not the same thing. They’re similar, but they’re not the same thing.”

6 Nevertheless, Holliday argued that Hawthorn’s knowledge of the home was irrelevant to

its claim of quantum meruit. Holliday argued that the bank had approximately 683 acres of

collateral which had a certain value, and Holliday added to that value by building a house on that

property. To recover on its claim of quantum meruit, Holliday argued that it only needed to

prove that a benefit was conferred to Hawthorn by Holliday, and that it was unjust for Hawthorn

not to pay for it. Holliday argued that it was not necessary that Hawthorn acknowledge or

appreciate that it had received a benefit. Holliday further argued that MAI 26.05, the jury

instruction for quantum meruit claims, proved its contentions by only requiring that a benefit be

conferred and unjustly retained. Holliday makes these same arguments on appeal.

We find that, not only do these arguments misstate the law, but they also reveal that

Holliday’s evidence would not have supported submission of a claim of quantum meruit to a

jury. Although a claim for quantum meruit does not require the existence of an express

agreement between parties, it still requires that valuable goods or services were provided at the

request, or with the acquiescence, of the beneficiary. By their nature, requests and acts of

acquiescence require some form of knowledge. MAI 26.05, which Holliday argues proves its

right to jury trial, advises that a jury must find for a plaintiff on a quantum meruit claim if it first

finds that the plaintiff furnished specified goods or services to the defendant and, second, that the

defendant “accepted” the goods or services. Acceptance, by its nature, also requires some form

of knowledge. Holliday admitted at trial that Hawthorn had no knowledge of, and did not

acquiesce in, Holliday’s construction of the home upon the property. Thus, Holliday’s

undisputed evidence in support of its petition does not support the elements of a quantum meruit

claim and, therefore, the issue could not have been submitted to a jury had there been one. “Any

issue submitted to the jury in an instruction must be supported by substantial evidence from

7 which thee jury could reasonably find such isssue.” Hayess v. Price, 3113 S.W.3d 6445, 650 (Mo.

banc 2010) (internal quotation om mitted). “Su ubstantial evvidence is evidence whicch, if true, is

probativee of the issuees and from which the ju ury can decidde the case.”” Id. (internnal quotationn

omitted).. Consequen ntly, even if Holliday cou uld prove enntitlement to a jury, it cannnot prove tthat 4 denial off a jury in thiis case was prejudicial. p

Holliday’s H po oint on appeaal is denied and m the circuitt court’s judggment.5 a we affirm

Anthhony Rex Gabbert, Judgge

ur. All concu

4 We W emphasize that, characterrization of a casse in terms of llaw or equity, tthereby determ mining entitlem ment to a jury, ‘“deepends on the issue i ngs”’ and not thhe evidence preesented at trial. See State ex rel. tendered by the pleadin Diehl v. O’Malley, 95 S.W W.3d 82, 89 (M Mo. banc 2003)) (quoting Lee v. Conran, 111 S.W. 1151, 11153 (1908)). Here, however, because b Hollidaay’s own undissputed evidencce established tthat it was not entitled to a juury trial and, therefore, Holliday H failed d to show any prejudice p basedd upon the triall court’s rulingg as to the rightt to a jury trial,, we need not ad ddress Hollidayy’s pleadings in i this case. 5 Although A not addressed in Ho olliday’s point relied on, Hollliday contends in the body off its brief and m more extensively y in its reply brrief that, becau use it sought on nly money dam mages, its claimm was an actionn at law entitlinng it to a jury trial. Claims of errror raised in th he argument portion of a brieff that are not raaised in the poiint relied on arre not preserved for f our review.. Cordes v. Wiilliams, 201 S.W W.3d 122, 1311 (Mo. App. 20006). We decliine to review thhis claim ex grratia.