Monthly Archives: February 2014

Third-Party Beneficiaries of Municipal Contracts–More on Drury Co. v. Jackson R-2 School District

There does not appear to be an inherent inability at common law for an intended beneficiary to maintain a claim as a third-party beneficiary under a local government contract:

Whenever local law permits third-party beneficiaries to sue on contracts between others, they can sue on comparable local government contracts.

Chester James Antieau, Antieau on Local Government Law, § 32.12  (Sandra M. Stevenson, ed.) (2d ed., Lexis database, through December 2013; Release No. 126).  Were one to review 10A Eugene McQuillen, The Law of Municipal Corporations § 29:136 (3d ed. 2009 rev. vol), one would see, “The right of a third person to sue on a municipal contract has been denied in several decisions. However, in some circumstances such an action may be maintained ….”  McQuillen’s footnotes have such authority as referencing no recovery by an “incidental beneficiary” or “ordinarily, under New Mexico law, the obligations arising out of a contract are due only to those with whom it was made”.  So, without attempting to read each case cited by McQuillen, it would appear that Antieau has better-expressed the view.

Law Mo. Stat. 432.070 states:

No county, city, town, village, school township, school district or other municipal corporation shall make any contract, unless the same shall be within the scope of its powers or be expressly authorized by law, nor unless such contract be made upon a consideration wholly to be performed or executed subsequent to the making of the contract; and such contract, including the consideration, shall be in writing and dated when made, and shall be subscribed by the parties thereto, or their agents authorized by law and duly appointed and authorized in writing.

The school district in Drury Co. v. Jackson R-2 School District, 2014 WL 462916 (Mo. Ct. App., E.D. 2014), takes the position that the statute prevents third-party beneficiary claims against counties, etc.

An initial step in construing a provision, a statute as well as a contract, is ascertainment of the evident sense of the provision as a whole.  Let’s see if the argument is persuasive, particularly in regards to:

  • What particular language in the statute does the school district identify as the basis for holding third-party beneficiaries cannot enforce a written contract?
  • What statutory purposes does the school district identify that would be inhibited by allowing third-party beneficiaries to maintain actions?

More after the break …

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Duty to Obtain Insurance and Third-Party Beneficiary Status–Drury Co. v. Jackson R-2 School District

In the ongoing saga of a governmental entity’s claims a subcontractor cannot sue the governmental entity for failure to obtain insurance covering the subcontractor (discussed previously concerning a brief at 2013 WL 6169464), we now have a brief on behalf of the governmental entity.  Drury Co. v. Jackson R-2 School District, 2014 WL 462916 (Mo. Ct. App., E.D. Jan. 13, 2014). The brief discusses a claim brought by a subcontractor against the governmental entity.  The basis for the claim on which we will focus is the entity entered into a written contract with a prime contractor.  According to the subcontractor’s brief, the written contract provides:

[Respondent] shall purchase and maintain… insurance written on a builder’s risk “all-risk” or equivalent policy… [that] shall include the interests of the. . Subcontractors… in the Project.

More after the break …

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“Hereunder” is Hereinafter Banned Herein–Naeger v. Farmers Insurance Co.

One of the practice pointers I received while practicing on Wall Street is that one should review with skepticism use in contracts of “herein” and like expressions.  Though it’s often clear what’s “here”–sometimes it’s not (whether an entire agreement or a section or something else.  So, for the past decade or so, in teaching either Contracts or the law of Corporate Finance (generally involving construction of corporate financing instruments), I’ve shared concern with that phrasing with students.

I’m not always sure they’ve been convinced.  Behold–a brief quoting a dictionary to define “hereunder”.  Naeger v. Farmers Insurance Co., Inc., 2014 WL 462945 (Mo. Ct. App., W.D.).

The plaintiff/victim was evidently a passenger in a vehicle that was struck by a car being allegedly operated negligently by another.  The victim’s brief recites receipt of $190,000 from underinsured motorist insurance obtained by the operator of the car she had been in, and $50,000 from the insurer of the other driver.  The victim’s brief recites the victim’s policy identifies relevant policy limits of $250,000 for the following coverage  (emphasis removed):

We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an UNDERinsured motor vehicle because of bodily injury sustained by an insured person. The bodily injury must be caused by an accident, and arise out of the ownership, maintenance or use of the UNDERinsured motor vehicle.

According to the brief, there are a variety of limits on this coverage, one of which, as reported by the brief, is this:

 We will not provide insurance for a vehicle other than your insured car or your insured motorcycle, unless the owner of that vehicle has no other insurance applicable hereunder.

So here we have one of those cryptic usages of “herein”, “hereunder”, etc.  Who knows what the sentence means.

Another exclusion recited by the brief is:

This coverage does not apply to bodily injury sustained by a person:
3. If the injured person was occupying a vehicle you do not own which is insured for this coverage under another policy.

The victim’s counsel, relying on some out-of-State authority, makes a thoughtful argument–it surely would be an awkward state of affairs if coverage by other insurers aggregating less than the policy limit under the plaintiff’s own underinsured motorist coverage would operate to eliminate coverage under the plaintiff’s own underinsured motorist coverage.  Victim’s counsel seems to categorize the victim’s insurer as taking that position.  Perhaps the insurer/defendant will clarify–there is a cryptic reference in the brief to the $190,000 having been “settled”, although not in reference to policy limits, unlike the $50,000 from the other driver’s insurer.


Claims of Decreasing Compensation without 30 Day’s Notice–Stanbrough v. Vitek Solutions, Inc.

In Stanbrough v. Vitek Solutions, Inc., 2014 WL 462927 (Mo. Ct. App., E.D.), we have an interesting claim brought by an employee.  It appears from the brief that the employee was working for a firm that does repair work for the employer’s customer–a cable, telephone, internet provider enterprise (Charter Communications).  One of the claims is the employer’s compensation of the employee mirrored amounts payable by the client to the employer, and that decreases violate Missouri law concerning decreasing an employee’s compensation without advance notice.  The brief’s discussion of this matter, in full, is as follows:

III. The Trial Court erred in Concluding that Material issues of disputed fact did not exist to preclude Summary Judgment on Appellant’s breach of contract claims against Appellee.

A Missouri employer may not unilaterally decrease an employee’s pay absent 30 days’ notice. Mo. Rev. Stat. § 290.100.

On several occasions, Appellant inquired to a Vitek supervisor why his pay fell short of the agreed-upon “piece rate” compensation owed to him. On those occasions, Vitek’s supervisor responded that Appellant’s pay only included the “piece rate” items that Charter Communications had paid Vitek. LFRA at 10:1058; 1064. Nowhere does Vitek assert that its agreement to pay Appellant based on the “piece rate” schedule was contingent upon the vagaries of Charter’s subsequent actions after Appellant had provided such services to Charter’s customers. It follows that Vitek’s motion for summary judgment should be denied as to Appellant’s claim under Mo. Rev. Stat. § 290.100.

That’s an interesting way to posture a claim.  I’m interested to see how it works-out.

Curious Computation of Damages–Lane v. Newberry

Fifty grand for being locked-out of a small restaurant?  I don’t understand.  A business with curious profitability is at issue in Lane v. Newberry, 2014 WL 284536 (Mo. Ct. App. W.D.).

We’ve identified some facts in the landlord/appellant’s brief. We will proceed discussing this framing of the facts, understanding that there may be a difference between appellant’s position and the respondent’s views.

A commercial landlord changed the locks, claiming tenant being in breach (the claim of breach entitling the landlord to change the locks evidently being rejected by the trial court).  Evidently possession was restored a few days later.

According to landlord’s brief, the tenant received a judgment in $50,100 in connection with claims that the landlord had improperly interfered with possession.  Landlord claims, it appears, access was prevented for a few days, and that the interruption occasioned a few hundred dollars in damage to the premises (such as locks and an alarm).

It would seem it would be a very profitable business that would account for such large damages.  What is it?  Evidently a 670 square foot establishment, known as The Dam Bar-N-Grill.  Must be “dam” profitable.

More after the break ….

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