Monthly Archives: October 2013

Executive Board of the Missouri Baptist Convention v. Windermere Baptist Conference Center, 2013 WL 5775055 (Mo. Ct. App., So. Dist.)

Here we have some interesting allegations.  The alleged facts include the following, in brief (summarized by your author):

The governing documents of the Missouri Baptist Convention (MBC) provide that all charters for its agencies will include various provisions giving MBC retained control.

Windermere Baptist Conference Center, an agency of MBC, was formed in 2000.  However, MBC alleges that MBC’s executive director, while acting in that capacity, arranged for charter amendments for the newly-formed agency that did not include provisions that could have been created to effect to the required retained control.  (An interesting provision in the nonprofit corporation law, Mo. Stat. 355.606, allows articles to provide a third party with a veto any articles or bylaw amendment.) It is further alleged that the then executive director was not fully candid in communicating as to the circumstances.

The brief’s quite long.  This is only a summary of a part of the pertinent allegations.

This particular claim was evidently disposed-of, against the plaintiffs, on the basis of the statute of limitations and a purported release.  The alleged circumstances don’t sound so good.  If the matter ultimately gets to a determination on the merits, it may provide some helpful guidance on pertinent Missouri principles.

Continuing Our Discussion of an Obligation Perfectly-Well Expressed

A few days ago, we commented on whether contract language adequately indicates a choice that employment is for a term (not at-will).

Tettamble attempts to apply interpretative guidelines–somewhat tedious ones–formulated long-ago. In brief, they require contract language be very clear if it is to opt-out of the default principle that employment is at-will.  Where a tedious, counter-intuitive interpretative principle is long-standing, it is helpful to assess the context in which the principle developed.  If the contextual legal framework has changed, would it not make sense to re-assess the tedious, counter-intuitive principle?

… More after the break

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Instinct with an Obligation Perfectly-Well Expressed: Tettamble v. TCSI-Transland, Inc., 2013 WL 4854763 (Mo. App. S.D. 2013)

Does an employment agreement adequately specify a term by stating:  “Compensation for Vice President – Driver Resources: $1,250 per week for 52 weeks = $65,000.00” (employee’s brief at 5)?  Tettamble says, “No.”  Is the prior authority indicating a term has not been stated comparable to that in Tettamble?  Well, let’s see.

Brookfield v. Drury College, 123 S.W. 86, 94 (Mo. App. 1909), states:

The law in this state has been well stated that an indefinite hiring at so much per day, or per month, or per year, is a hiring at will, and may be terminated by either party at any time, and no action can be sustained in such case for a wrongful discharge.

Fair enough.  So, we will see the following as giving rise to at-will employment:

“A. All the contract as made by Mr. Harris was one hundred and fifteen dollars a month; did not say when it started or when it was to end.”

Evans v. St. Louis, I.M. & S. Ry. Co., 24 Mo.App. 114 (1887).

 “$12.50 per week for myself and $7.50 per week for my son Arthur, who is 24 years old and grown up in the business, a good hand, and $5 per week for another helper ….”

Harrington v. F.W. Brockman Commission Co., 81 S.W. 629 (Mo. App. 1904).

The Tettamble court describes prior authority as holding the following statements create at-will employment:

salary is to be $12,000 per year

(citing Campbell v. Sheraton Corp. of America, 253 S.W.2d 106, 110 (Mo. 1952))

your compensation for the year 1991–92, effective July 1991, computed at an annual rate, will be:

Salary
$47,600.00
Annuity Contribution
$ 5,474.00

Your first monthly salary payment based on this rate will be made on July 31, 1991.

(citing Clark v. Washington University, 906 S.W.2d 789 (Mo. App. E.D. 1995)).

What’s the difference?  So, in Tettamble, the writing does not simply state a dollar amount per period.  Rather, it states two dollar amounts and two periods.  The court’s reading of the provision gives no effect to the language “for 52 weeks = $65,000.00”—it’s surplusage.  So, what’s the second, longer period, and the second, larger dollar amount to mean, if not to express a term?  And, of course, a construction resulting in some language being surplusage is disfavored, and reading additional language referencing $65k and 52 weeks as not specifying a term results in that language being surplusage.

It seems that the Missouri approach is traceable to Finger v. Koch & Schilling Brewing Co., 13 Mo. App. 310 (1883).  So, what’s Finger’s authority?  Prevailing counsel in Finger cites Wood on Master and Servant, sec. 134, for the proposition that an engagement at “so much per year” is not for a term.  So, what does Wood on Master and Servant say?

“[I]f A agrees with B to work for him eight months for $104, or $13 a month, this will not only be treated as a contract for eight months’ service, but also as an entire contract, performance of which is a condition precedent to a recovery of any portion of the wages ….

H. G. Wood, A Treatise on the Law of Master and Servant § 134, at 273 (1877).

(Note that courts long-ago would have been more willing to provide that, where the agreement was for a term and not divisible, an employee in breach of an employment for a term would have been unable to recover anything, an outcome rejected in Britton v. Turner, 6 N.H. 481 (1834)–Britton reflecting the modern trend.)

Do we really think there is a meaningful difference between the following:  An agreement to work—

$1,250 per week for 52 weeks = $65,000.00

and

for 52 weeks for $65,000, or $1,250 a week

Perhaps we need another tedious rule of construction.  I don’t know; what about contra proferentem?

The background on construction of employment allegedly for a term is somewhat complex.  We plan to devote our next post to more detail on that.

 

Operating Agreement Drafted “with Minimal Input from Legal Counsel”

“The operating agreement that governed the Company (the ‘Operating Agreement’) was drafted by the members of the Company themselves with minimal input from legal counsel.” Brief of Respondents at 7. From this we can expect the participation of litigators will follow. Magruder v. Pauley, 2013 WL 5525832 (Mo. App. W.D. 2013) does not disappoint.

An operating agreement for an LLC, awkwardly referencing the parties as “partners”, provides for a buy-out of a withdrawing member, based on “an appraisal of the business … commissioned and paid by the company and/or remaining partners.” The trial court orders an appraisal and a buy-out on the indicated terms.

The Court hereby orders said Defendants to commission and pay for an appraisal of the company, either jointly or by causing the Company to do so, and thereafter to purchase Magruder’s share in the Company for 1/4 the appraisal value.

So, the appraiser makes a number of errors in the appraisal. The withdrawing member seeks to have them corrected; the appraiser won’t unless the withdrawing member pays. The remaining members inexplicably fail to pay. So, we have a mess.

On appeal, the withdrawing member seeks, and gets, a determination of the value of the firm and a buy-out order.

The LLC agreement contemplates recovery of attorneys’ fees. What do the remaining LLC members say about that (on p. 14 of their brief):

That provision of the Operating Agreement applies if any member of the Company obtains a judgment against another party that is a member of the Company “by reason of breach of” the Operating Agreement. … The trial court’s judgment on Appellant’s specific performance claim made no finding that the Operating Agreement was breached. The actual breach of contract claim was dismissed.

Come on. Is it plausible that an award of specific performance is not “by reason of breach of” the governing contract? Time to open the checkbook some more.

The brief also makes reference to the operating agreement not stating the time-frame in which the appraisal or the payment to the withdrawing member are to be made.  OK; fine; not drafted by counsel; whatever; a reasonable time.  Let’s move on.

The remaining members’ brief is not entirely devoid of cogent analysis.  It notes trial testimony that defendants made all required  capital contributions to the LLC, but the withdrawing member did not.  Of course, a well-drafted operating agreement would explicitly address the consequences of failure to meet a capital call.

HCI Investors, LLC v. Fox, 2013 WL 5525841 (Mo. App. W.D. 2013)–Abdicating Determination of Financial Terms … to Counsel??

As a reader of legal opinions, your author sometimes gets the sense that an appellate court, faced with a difficult issue, simply avoids the problem by making alternative findings that moot the choice.  This aftertaste is brought to your author by HCI Investors, LLC v. Fox, 2013 WL 5525841 (Mo. App. W.D. 2013).

Evidently Hillcrest Bank, owned through a holding company, had substantial non-performing assets.  To address the problem, those in charge came up with a plan under which non-performing assets would be sold to LLCS, to be owned by holding company shareholders who elected to participate.  Whether membership had its “privileges” is another question–LLC members were subject to capital calls.  The incentive to participate:  Participating bank holding company shareholders who participated could obtain, for free, additional shares of the holding company in the amount equal to 25% of the non-participating shareholders’ interests.  Oh, so here we have the stick.

Although in a Missouri court, the holding corporation had been incorporated in Kansas, which referenced Delaware corporate law in unsettled matters, says the court.  So, the court is not looking to a Rodd Electrotype close corporation approach.

It might be something of a tricky matter to determine whether this transaction is subject to entire fairness or the business judgment rule (more on that below).  But, not to worry, the court avoids the question, assuming the entire fairness standard applies, and then defers to the trial court’s determination that entire fairness has been met.

More after the break …

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