Monthly Archives: September 2013

Frustrated by a Builder’s Insolvency Following the Financial Crisis? People’s Nat’l Bank v. Mark S. Mehlman Realty, Inc., 2013 WL 3971037 (Mo. Ct. App., E.D.)

Here we have a puzzling discussion of the defense of frustration of purpose.  A lender makes a $3.1 million loan, expecting the loan proceeds will be used to purchase lots for sale to a specific builder, who subsequently became insolvent, it appears.  The question involves a deficiency of $1.2 million following a foreclosure sale (the lender being the winning bidder).  The borrower’s brief claims:

In response, Appellants have asserted the doctrine of commercial frustration as an affirmative defense to Respondent Bank’s claim for deficiency judgment, because the parties agreed that the continued existence of a third party home builder was essential to Appellants’ performance of the Loan Agreement, and its failure has destroyed the purpose and object of the contract..

Even if the borrower’s performance of the loan agreement were frustrated, the lender would be entitled to recovery of the principal amount in restitution.  E.g., Far West Federal Bank, S.B. v. Director, Office of Thrift Supervision, 787 F.Supp. 952 (D. Or. 1992) (citing Restatement (First) of Restitution § 150 (1937)), aff’d, 119 F.3d 1358 (9th Cir. 1997). The borrower’s brief does not mention restitution at all (not particularly informative in this regard), so it is not clear from the brief whether this is a quibble about recovery of some part of accrued interest.

But, should the defense be available in any case?  One would think not ….

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If a Car Dealer Says, “it is what it is; you have to pay it”, Should You Believe it? Does the Question Answer Itself?

Fired for a girlfriend’s vehicle purchase.  No cause of action, or can we think of something?

Here we have the basics of the allegations, as framed by the appellate court:

Hedrick began working for Wolfe in October, 2010. On May 26, 2012, Hedrick approached the General Sales Manager, Jason Brink (“Brink”), about his live-in girlfriend’s desire to purchase a Honda. Brink quoted Hedrick a price that was about $600 above that car’s normal price point. Hedrick asked why the price was higher and Brink replied that “it is what it is; you have to pay it.” Following this, Hedrick and his girlfriend shopped around and received a quote from another Honda dealer that was $1,000 below the price that Hedrick received from Brink. Hedrick’s girlfriend then purchased the car from the competing Honda dealer. On June 1, 2012, Brink asked Hedrick whether his girlfriend had purchased the Honda elsewhere and Hedrick confirmed that she did. Later that night, Brink informed Hedrick that he was terminated, stating “[a]s your employer, I can’t have somebody work for me who bought a car somewhere else, so I have to let you go.”

Following his termination, Hedrick submitted a written request for a service letter. Wolfe subsequently issued Hedrick a letter that stated in part:

We do, however, fully expect our employees and members of their household to purchase new Honda vehicles from our dealership … Based on the fact that you or the person with whom you live as husband and wife … purchased a new Honda Accord SE from a direct competitor on or about mid-late May without giving the Company the opportunity to meet the price quoted, we made the decision to terminate the employment relationship …

The odious circumstances are provided by Hedrick v. Jay Wolfe Imports I, LLC, 404 S.W.3d 454, 456 (Mo. App. W.D. 2013).

The court rejects a creative claim that the circumstances fit into a public policy exception to at-will employment:

Hedrick contends that Missouri has a clear public policy of allowing citizens to freely conduct business and that by patronizing his employer’s competitor for a better price in purchasing a Honda, he and his live-in girlfriend acted in accordance with a public policy that Missouri encourages. He asserts that his termination falls under the public policy exception because he was terminated for acting in accordance with public policy. We disagree.

Id. at 458.

Let’s see if we can find an alternative way to frame the claim, shall we?

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unPeeling the Impact of Assignments on MMPA Rights

Can a seller, in a transaction covered by the MMPA, by assigning rights and delegating duties pretermit the other’s rights under the MMPA?  There appears to be some question.  Peel v. Credit Acceptance Corp., 2013 WL 2301095 (Mo. App. W.D. May 28, 2013), and prior authority, raise some interesting questions.  We below provide a somewhat complicated discussion of certain issues raised.  As an introduction, let us not provide some basic observations under the common law of contracts (understanding that FTC rules also may apply):

  • An obligor cannot assign rights without the consent of the obligee if the assignment operates to materially affect the rights of the obligee.
  • An assignment of the right to payment under a contract, where the payee’s performance is subject to the MMPA, would materially affect the rights of the obligee if the assignment operated to eliminate protections in the debt collection process that would be otherwise available absent the assignment.
  • It would appear that a party cannot consent to elimination of protection of the MMPA.  There would not seem to be a useful reason not to apply that to consenting to an assignment in circumstances that operated to eliminate MMPA protections.
  • Were a court to determine an assignee of a debt representing deferred payments from a payor benefitting from the MMPA was not subject to the MMPA, effectiveness of the assignment would therefore require the assignor remained liable for any practice engaged-in by the assignee that would be actionable had there not been an assignment and it had been performed by the assignor.

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Omission of Intent to Terminate Auto Financing — Oliver v. Ford Motor Credit Co.

Can omission of an intent to terminate a line of business be actionable?

Oliver v. Ford Motor Credit Co., 2013 WL 3971057 (Mo. Ct. App. W.D.), examines alleged omission of a plan to terminate wholesale financing for Mazda dealers, in connection with the purchase of a Mazda dealership.  The buyer of the dealership alleges the finance arm sought to facilitate another firm’s sale of a Mazda dealership in connection with addressing financial difficulties of the dealership to be sold and another dealership.  The buyer’s brief further references an allegation concerning what the brief describes as a “promise of permanent, captive financing”.

The brief further references allegations that the purchase of the dealership was consummated in late 2007 and that, less than a year later, the dealership received notice indicating the financing would be terminated.  The brief makes reference to allegations the financing arm had plans, in some stage of formulation and development, at the time the dealership was purchased, as to terminating financing at some time in the future.

Of course, this author cannot express a view as to the actual facts.  So, no view on the actual facts is presented here.  Rather, let us focus on an aspect of the way the brief discusses claims and the lower court’s treatment of some claims.

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Paying 2 Years’ Rent for 3 Years Rental? Central Stone Co. v. Warning, 2013 WL 3191815 (Mo. Ct. App., E.D.)

During the term of a long-term lease, the parties chose to enter a new lease.  Appellant’s brief notes:

The parties were two years into a three year written lease for the Oyster Farm when this new lease was created…. The new lease was for 2010 through 2012…. The new lease stated that “The cash rent shall be paid each year in the following method: By April 1 of each year of the contract.” …. Sivill intentionally changed the rent payment due date from December 31, to April 1…. The old lease stated rent was due on December 31. The new lease said the rent was due April 1…. No discussion was held by the parties that rent was due or was not due for year 2010….

Central Stone Company did not receive a lease payment before the May 3, 2010 lease was signed…. Central Stone Company’s position was that the rent was already a month overdue when the lease was signed…. Yet, Central Stone Company management decided not to ask for the rent when the lease was signed…. Central Stone Company did not ask Daniel Warning for rent on the Oyster Farm in 2010. … Nor did Central Stone Company ask Daniel Warning for rent money in 2011, prior to its April 13, 2011 letter terminating the Oyster Farm lease….

Daniel Warning did not plant landlord’s Oyster Farm land in 2010 as this Mississippi bottoms farm was wet.

Daniel Warning made no payment for 2010 rent in 2010….

Appellant’s brief reports the new lease was signed May 3, 2010.  So, should the lessee only have to pay two years’ rent?  That does not seem entirely reasonable, particularly in light of the fact that this was an adjustment to an ongoing lease arrangement.

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