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Fifth District affirms Judge Chapman’s order enforcing settlement agreement in dispute over Lake of the Ozarks property

By Heather Isringhausen Gvillo | Sep 26, 2016

The Fifth District Appellate Court affirmed Madison County Associate Judge Thomas Chapman’s order enforcing a previous consent order regarding property in Lake of the Ozarks.

Justice Judy Cates delivered the Rule 23 decision on Sept. 21 with Justices Thomas Welch and Richard Goldenhersh concurring.

The appellate court concluded that Chapman did not err in granting defendants Gary and Davi Claxton’s motion and ordering plaintiffs Richard and June Gross to sell a Lake of the Ozarks property to the defendants for the appraised value in accordance with the settlement.

The parties entered into a contract for deed on Nov. 1, 2004, where the plaintiffs agreed to sell their vacation home at the Lake of the Ozarks to the defendants for $300,000.

According to the contract, the defendants were required to provide $10,000 in earnest money and then make $1,000 payments per month for five years with a final balloon payment on Dec. 1, 2009.

However, during the fall of 2009, the defendants found that they could not make the final balloon payment of approximately $276,000.

The plaintiffs agreed to extend the contract until Dec. 1, 2010.

The defendants made their monthly payments for the year but, again, found that they could not make the final balloon payment.

The plaintiffs were unwilling to provide another extension, so they served the defendants with a notice of default and intent to declare a forfeiture on Dec. 7, 2010.

Then in February 2011, the plaintiffs filed a complaint against the defendants for breach of contract, conversion and fraud.

In May 2011, the plaintiffs filed a motion to restore to themselves immediate possession of the property.

The defendants replied with a motion to compel the plaintiffs to accept a payoff of the balance after they obtained a loan to pay the full remaining balance of the home.

However, the plaintiffs refused to accept the payoff.

The defendants also alleged they had a verbal agreement with Gary Prewitt, a local business owner, to purchase the property for $550,000, but he failed to complete the purchase after the plaintiffs contacted him. They claim they would have been able to pay off the contract if the plaintiffs hadn’t interfered with negotiations.

They later filed a counterclaim against the plaintiffs alleging tortious interference with a business expectancy.

On Oct. 26, 2011, the parties reached a settlement. They agreed to “use their best efforts” to sell the property for a minimum of $600,000. If the property didn’t sell, then the plaintiffs agreed to allow the defendants to purchase the property for the appraisal price.

Prewitt made several offers below the asking price, which the defendants refused to accept.

By Aug. 3, 2012, the plaintiffs filed a motion to vacate or modify the settlement agreement. They argued that while Prewitt’s offers were below the asking price, they exceeded the appraised value.

They claim the defendants “fraudulently concealed their bad faith intention to reject bona fide contract offers, knowing that if bona fide offers were rejected, a provision in the consent order would allow them to purchase the property for the appraisal price, and thereafter sell the property at a substantial profit, without having to share any profits with the plaintiffs.

The circuit court denied their request.

Then on Dec. 10, 2014, the defendants filed a motion to enforce the consent order, requesting the court to order the plaintiffs to accept the appraisal price of $200,000 for the property.

The plaintiffs argued that the appraisals obtained by the parties did not represent the true market value of the property. Instead, they argue that Prewitt’s offers reflect the true market value for the property and that the defendants acted in bad faith in rejecting the offers.

On March 12, 2015, the court found that the parties were unable to sell the property at the agreed upon sale price of $600,000. Further, the $200,000 appraisal was less than the contract balance owed to the plaintiffs, and that under the terms of the consent order, the defendants were required to pay $200,000 to the plaintiffs.

“The court determined that the consent order was not procedurally or substantively unconscionable, and that there was no bad faith,” the appellate court wrote.

As a result, the circuit court granted the defendants’ motion to enforce the consent order and upon tender of $200,000, the plaintiffs were to execute and deliver a warranty deed for the property to the defendants.

The plaintiffs appealed.

The appellate court agreed with the circuit court’s ruling.

“In this case, the plaintiffs have not established that the enforcement of the consent agreement was unconscionable, or that the defendants acted in bad faith in rejecting Gary Prewitt’s offers to purchase the property,” Cates wrote.

“Perhaps, both parties overestimated the actual value of this property to Gary Prewitt, or the market value to another qualified buyer. Even so, the value was a known variable to the parties when they negotiated the settlement and entered into the consent order, and that variable, with attendant risks, does not render the enforcement of the consent order unconscionable,” she continued.

Madison County Circuit Court case number 11-L-164

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