Norman W. Geyer v. Florine's Inc., a Nebraska corporation, and Daniel L. Jochum.

This lawsuit arose out of a dispute between Norman W. Geyer and Daniel L. Jochum concerning the distribution of assets and debts after the parties ceased their business relationship. Geyer has filed this appeal from an order of the district court which, inter alia, found that Geyer had failed to prove his entitlement to have Florine's Inc. and Jochum held responsible for a long-term note incurred during the parties' previous business relationship. On appeal, Geyer has challenged the district court's findings regarding the long-term note and the court's findings regarding the value of a building. Finding no error in the district court's order, we affirm.

II. BACKGROUND

In 1980, Geyer, Jochum, and Jerry Jacobi formed Florine's Inc. and took over a retail clothing business with stores in Norfolk and Columbus, Nebraska. Geyer managed the Norfolk store, and Jochum managed the Columbus store. In July 1994, Geyer and Jochum bought out Jacobi's interest in Florine's Inc. To buy out Jacobi, Florine's Inc. took out a long-term note for $101,000, for which Geyer and Jochum personally executed a guaranty. This long-term note is hereinafter referred to as the "Jacobi note."

In November 1994, Geyer and Jochum began discussions about ceasing their business relationship and dividing Florine's Inc. between the Norfolk and Columbus stores. The parties reached a preliminary agreement for the division to occur on January 31, 1995. On January 31, the parties made some cash transfers, but did not fully agree to an appropriate division of the assets and debts, which included the Jacobi note. After January 31, Geyer operated the Norfolk store autonomously and Jochum operated the Columbus store autonomously.

On or about March 10, 1995, the parties met and executed a written "agreement" about their plans for further distribution of assets. This "agreement" indicates that the parties agreed to form a new corporation, Larson Florine, which was to be spun off from Florine's Inc. for purposes of Geyer's operation of the Norfolk store. Geyer testified the parties agreed at the March 10 meeting that Geyer would operate the Norfolk store and Jochum would operate the Columbus store and that they would divide the inventory and assets of Florine's Inc. Geyer testified that the parties did not have any discussion at that time about dividing the various debts. After that meeting, the parties did have some subsequent discussions regarding payment of various debts, including the Jacobi note.

In September 1996, the parties agreed to meet with Jim Krueger, a local banker, and allow Krueger to determine a proper allocation of the remaining assets and debts. The parties met with Krueger and discussed the remaining assets and debts, and Krueger acted as a mediator. Krueger made a written record of the parties' discussions concerning the remaining assets and debts. Geyer testified that at the time of this meeting, the outstanding principal balance on the Jacobi note was $97,796.43. Geyer also testified that during this meeting, the parties agreed on a market value of $45,000 for the Norfolk building. Krueger testified that by the end of this meeting, Jochum agreed on the numbers and values concerning assets and debts, but did not think the bottom line was correct.

After the September 1996 meeting with Krueger, both Geyer and Jochum continued to operate each respective store autonomously. Geyer testified that Jochum's actions after the September 1996 meeting indicated that "[the parties' agreement] was a done deal." In his petition, Geyer alleged that the allocation suggested at the September 1996 meeting included Jochum's being responsible for the Jacobi note. After the September 1996 meeting, Geyer made no payments toward the principal balance of the Jacobi note.

Geyer acknowledged on cross-examination that Jochum never actually said he was agreeing to take responsibility for the Jacobi note. Geyer further acknowledged correspondence between the parties' attorneys indicated that there was no agreement after the September 1996 meeting and that the parties had never reached an overall agreement concerning the appropriate allocation of assets and debts. Geyer acknowledged that the parties made an attempt subsequent to September 1996 to arbitrate their dispute and that the arbitration attempt resulted in a previous lawsuit filed by Geyer. Finally, Geyer acknowledged that in September 1996, part of the parties' alleged agreement required Geyer to pay Jochum approximately $6,600 to balance the allocation, but that he had in fact never paid Jochum this money.

The attorney who had represented Jochum during the parties' attempted allocation of the assets and debts testified that his correspondence with Geyer's attorney affirmatively indicated there was no agreement between the parties. Specifically, Jochum's previous attorney testified that he received an October 1996 letter from Geyer's counsel suggesting the parties had reached an agreement, but that he responded with a November 8 letter advising there was not an agreement. Similarly, Jochum's previous attorney testified that he received a May 24, 1997, letter from Geyer's counsel suggesting that the parties had reached an agreement as a result of the September 1996 meeting and that he responded with a June 4 letter advising that there was no agreement and that the parties were continuing to negotiate. This attorney for Jochum further testified that the parties came to "some type of understanding on arbitration that subsequently didn't materialize" in late 1998.

Between September 1996 and December 2000, Jochum was the only party to make payments on the Jacobi note. In December 2000, Jochum made a demand to Geyer that Geyer pay the remainder of the Jacobi note. Jochum's previous counsel testified that Jochum stopped paying on the Jacobi note "when [he] though that [he] had paid [his] fair share of the note." Jochum's wife also testified concerning the Jacobi note. She testified that Jochum had been diagnosed with Alzheimer's disease and that he was not able to testify about the events at issue in the present lawsuit. She testified that Jochum had paid 57 percent of the Jacobi note when he stopped paying it and demanded that Geyer pay the rest. According to the record, after the parties bought out Jacobi, Jochum owned 57 percent of Florine's Inc. and Geyer owned 43 percent. Jochum's wife further testified that there was never any indication to her that Jochum had ever agreed to pay all of the Jacobi note.

Jochum's wife also testified concerning the value of the Norfolk building. She testified that the Norfolk building was purchased in 1991 for $60,000. Geyer presented the testimony of an appraiser, who assessed the market value of the Norfolk building, as of January 1995, at $41,000. The appraiser testified that using an income approach, the range of value for the building would be $44,000 to $55,000.

On June 4, 2001, Geyer filed a petition, alleging that Jochum had breached an agreement as to the allocation of the assets and liabilities and seeking a declaratory judgment. On July 26, Jochum filed an answer in which he generally denied the allegations of the petition and set forth a counterclaim, affirmatively alleging that the parties had never reached an agreement as to the terms of the allocation and alleging that he had paid his portion of the Jacobi note. On August 15, Geyer filed a reply, in which he alleged that Jochum's conduct represented an agreement concerning the allocation and that Geyer had reasonably relied upon Jochum's conduct and representation.

Trial in this lawsuit was conducted to the bench over the course of several individual days between August 21 and November 15, 2002. The trial record consists of 648 pages of testimony and 74 exhibits and displays the parties' dispute concerning the proper allocation of a variety of assets and liabilities, including, but not limited to, the Jacobi note and the Norfolk building. Because the issues on appeal are primarily limited to those two items, we will not detail the evidence presented regarding other assets and liabilities.

On February 19, 2003, the district court entered an order in this case. The court found that Geyer had alleged the existence of an express agreement, part written and part oral. The court further found that Geyer had proven only an agreement to agree, but that he had failed to prove that the parties ever actually reached an agreement concerning the distribution of the assets and liabilities. The court noted that Geyer further argued an agreement existed based on Jochum's conduct, but the court found that Geyer failed to plead an implied contract in his petition. Nonetheless, the court concluded that even if Geyer had properly pled an implied contract, he had failed to prove the existence of an implied contract. The court further concluded, based on the evidence, that Jochum continued to pay on the Jacobi note because he knew that he owed a portion of it, pursuant to his ownership interest in Florine's Inc. and the personal guaranty he and Geyer had executed. The court then divided the remaining assets and liabilities, which included allocating the Jacobi note and valuing the Norfolk building. The court allocated the Jacobi note as of January 31, 1995, and ordered that each party be given credit for payments made on the note since that time. The court further indicated that the Norfolk building should be valued "at its book value of $54,275." This appeal followed.

III. ASSIGNMENTS OF ERROR

Geyer has alleged, consolidated and restated, four errors on appeal. First, Geyer asserts that the district court erred in finding that he failed to prove an enforceable agreement, either express or implied. Second, Geyer asserts that the district court erred in allocating the Jacobi note so that Geyer was held responsible for a portion of it, including interest which had accrued on the note since January 31, 1995. Third, Geyer asserts that the district court erred in not ruling on estoppel or laches. Fourth, Geyer asserts that the district court erred in valuing the Norfolk building at book value, rather than market value.

IV. ANALYSIS

1. Existence of Contract

Geyer first challenges the district court's findings that Geyer failed to prove the existence of an enforceable agreement and that Geyer failed to plead and prove the existence of an implied contract. We find that the district court was not erroneous in concluding that Geyer failed to satisfy his burden to prove the existence of an enforceable agreement, either express or implied.

The court's finding that the parties, at most, entered into an agreement to agree was made as a result of Geyer's petition seeking a declaratory judgment which set forth the relative rights of the parties concerning the remaining assets and liabilities of their business relationship. As such, we treat the court's conclusion as a factual finding made by the trial court in the exercise of its equity jurisdiction and review it de novo on the record, bearing in mind that where credible evidence is in conflict on a material issue of fact, an appellate court will consider and may give weight to the fact that the trial court heard and observed the witnesses and accepted one version of the facts rather than another. See Nebraska Nutrients v. Shepherd, 261 Neb. 723, 626 N.W.2d 472 (2001).

To create a contract, there must be both an offer and an acceptance; there must also be a meeting of the minds or a binding mutual understanding between the parties to the contract. Nebraska Nutrients v. Shepherd, supra. A contract is not formed if the parties contemplate that something remains to be done to establish contractual arrangements or if elements are left for future arrangement. Id. An agreement to make a future contract is not binding upon either party unless all terms and conditions are agreed upon and nothing is left to future negotiation. Id.

In the present case, the record reveals no evidence to support the conclusion that Geyer and Jochum ever entered into an express contract, either written or oral. Geyer's own testimony was that in November 1994, the parties began discussions about dividing the assets and liabilities, and that they agreed to do so at a later time, in January 1995. Geyer's testimony further indicates, however, that the parties did not reach a meeting of the minds in January 1995 concerning the distribution of the various assets and liabilities. Rather, the record indicates that over a period of years, the parties negotiated back and forth concerning the proper allocation, never coming to a complete agreement. Further, specifically with respect to the Jacobi note and the value of the Norfolk building, the record does not contain any evidence of any express agreement between the parties. Geyer himself testified repeatedly that the parties never finalized an agreement. Accordingly, we find no error with the district court's conclusion that Geyer failed to prove the existence of an express agreement.

Geyer's argument on appeal, although alleging both an express agreement and an implied agreement, consists primarily of assertions that Jochum's conduct is evidence that the parties entered an enforceable agreement. Geyer's argument on appeal is almost exclusively an argument that an agreement should be implied based on the conduct of the parties, and the conduct of Jochum specifically, rather than an argument that the record actually contains any evidence of an express agreement. We similarly find no merit to this assertion.

The term "implied or inferred contract," or "implied in fact contract," refers to that class of obligations which arises from mutual agreement and intent to promise, when the agreement and promise have simply not been expressed in words. Turner v. Fehrs Neb. Tractor & Equip., 259 Neb. 313, 609 N.W.2d 652 (2000); Kaiser v. Millard Lumber Inc., 255 Neb. 943, 587 N.W.2d 875 (1999). An implied contract arises where the intention of the parties is not expressed but where the circumstances are such as to show a mutual intent to contract. Id. To have an implied contract, there must be evidence of mutual intent; without such evidence there cannot be an implied contract. Turner v. Fehrs Neb. Tractor & Equip., supra.

On appeal, Geyer argues that the parties' conduct, and Jochum's conduct specifically, is sufficient to prove the existence of an implied contract. Geyer argues that each party operated his store autonomously and that Jochum generally acted in accordance with the proposals made at the September 1996 meeting, in which, according to Geyer, it was proposed that Jochum would assume the entire Jacobi note. The evidence, however, indicates only that the parties may have agreed to the distribution of some of the assets and liabilities, not that any specific agreement existed concerning either the Jacobi note or the value of the Norfolk building. With respect to the Jacobi note specifically, the record indicates that Jochum continued to make payments on the Jacobi note, but the record also indicates that Geyer and Jochum had executed a personal guaranty making them each personally responsible for the note. The record further indicates that Jochum paid only 57 percent of the Jacobi note, corresponding with his 57 percent ownership in Florine's Inc., in whose name the note was made. The record contains evidence that the parties continued to attempt to negotiate a final settlement, including allocation of the Jacobi note, over a period of years. Finally, the record indicates that the alleged "mutual intent" to agree, brief for appellant at 33, would also have required Geyer to pay Jochum approximately $6,600 as a sort of property settlement, but shows that Geyer never made this payment. Under all of these circumstances, we cannot find error with the district court's conclusion that even if such issue had been properly raised by the pleadings, Geyer failed to prove the existence of an implied contract. This assignment of error is without merit.

2. Allocation of Jacobi Note

Geyer next asserts that the district court erred in allocating the Jacobi note between the parties and making Geyer responsible for a portion of the note. Geyer further asserts that the court erred in allocating the Jacobi note in such a fashion as to make Geyer responsible for interest which accrued on the note prior to the court's allocation. We find no merit to these assertions.

A review of Geyer's brief indicates that Geyer primarily argues that the court erred in allocating to him a portion of the Jacobi note including accrued interest, because of his arguments set forth above that the court erred in finding Geyer failed to prove an agreement concerning the allocation of the Jacobi note. Inasmuch as we have concluded above that the court did not err in so finding, we likewise find no error in the district court's allocation of the Jacobi note according to each party's respective ownership interest in Florine's Inc. Although Geyer argues that there was no way he could have "protect[ed] himself" from the accrual of interest during this period of time, brief for appellant at 34, we note that there is nothing in the record indicating Geyer was ever prevented from making payments toward his share of the Jacobi note. We find this assignment of error to be without merit.

3. Estoppel and Laches

Next, Geyer asserts that the district court erred in not ruling on estoppel or laches. Geyer's argument on appeal is basically that Jochum acted in such a fashion as to represent to Geyer that Jochum was assuming the Jacobi note obligation for a period of nearly 6 years. Geyer further argues that either because of estoppel or because of laches, Jochum should not be allowed to now deny that he was assuming the Jacobi note obligation. Inasmuch as we have concluded above that the record does not contain evidence that Jochum ever made such a representation through his conduct, we likewise find no evidence to support the use of estoppel or laches. This assignment of error is without merit.

4. Value of Norfolk Building

Geyer next challenges the district court's findings concerning the value of the Norfolk building. Specifically, Geyer asserts that the district court erred in valuing the building at book value rather than market value. We find no merit to Geyer's assertion.

We note first that the record was less than impressive concerning the value of the Norfolk building. During Geyer's case in chief, Geyer did not present evidence of the market value of the Norfolk building. Counsel for Geyer and Jochum represented to the court that they had been attempting to get an appraisal completed, but that there had been difficulties in accomplishing it. During Jochum's case in chief, Jochum's wife testified that in her opinion, the Norfolk building was worth $60,000 in January 1995, and that the building was purchased in 1991 for $60,000. Geyer presented rebuttal testimony from the appraiser, who, during the pendency of the trial, had completed an appraisal. The appraiser opined that the fair market value of the Norfolk building in January 1995 was $41,000 and testified on cross-examination that using an income approach, the range of value for the building was $44,000 to $55,000. The appraiser acknowledged, however, that he did not have information concerning the age of the building, that he did not have any personal knowledge about the condition of the building in 1995, and that he did not have any personal knowledge about the condition of the roof or the heating and cooling systems.

Based on the evidence provided, we find no error in the court's conclusion that the fair value of the Norfolk building was $54,275. The court arrived at this value based on an exhibit offered by Geyer, a financial statement concerning the assets and liabilities of Florine's Inc. as of January 31, 1995. That exhibit listed the "Buildings and Other Depreciable Assets" as valued at $172,364 and indicated that the "Accumulated Depreciation" was valued at $128,905. That exhibit, in addition to the testimony that Florine's Inc. purchased the building in 1991 for $60,000 and the testimony of Geyer's appraiser indicating that a fair range of value would be $44,000 to $55,000, leads us to conclude that there is no error in the court's valuation of $54,275, regardless of whether the court referred to this value as "book" value or "market" value. This assignment of error is without merit.

V. CONCLUSION

We find no merit to Geyer's assertions of error. We find no error in the district court's conclusion that Geyer failed to prove the existence of an enforceable agreement, express or implied. We find no error in the district court's allocation of the Jacobi note obligation, including accrued interest, to both Geyer and Jochum in proportion to their ownership of Florine's Inc. We find no error in the district court's failure to use either estoppel or laches to bar Jochum from denying responsibility for the entirety of the Jacobi note. We find no error in the district court's valuation of the Norfolk building. Thus, we affirm.

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Affirmed in favor of Defendent.

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Reported by L. Hargraves