Student Commentary

A few MU law students are preparing their own commentary on briefed cases. At least this year, we do not have enough student posts to populate a separate site. Those comments students wish to have me post, and make available to a wider audience, will be posted under a separate page here:

http://missouri-k.com/?page_id=786

I expect the first student post to be available some time later this month.

Consolidated Service Group, LLC—“The shingles looked like skunks ….”

The so-called right to cure can arise in a few contexts. It’s better not to conflate them. But that seems on the agenda in Consolidated Service Group, LLC v. Maxey, No. S.D. 33061 (Mo. Ct. App., S.D.). The below blog post analyzes the briefs. The case was the subject of a subsequent decision, 2015 WL 268866.

The basics of the case are as follows:

A contractor, engaged to replace a roof, received defective shingles. The defects were patent.

One may summarize circumstances as presented in the client’s brief (2014 WL 4659565):

“The shingles looked like skunks, in that they were dark shingles with a white stripe running horizontally the length of the shingle.” After the first day, one Benz, agent for the contractor, instructed the workmen not to install defective shingles during the second day of the work. This instruction the workmen failed to follow.

Benz first offered to replace defective shingles individually. That, evidently, would compromise the other shingles, not resulting in the contemplated 30-year roof. The homeowner’s brief reports Benz, in a deposition, admitted that type of repair would damage the surrounding shingles. Some months later, Benz offered to replace the whole roof.

On Benz’s request, the manufacturer sent vouchers to the homeowners’ agent (a relative), in an amount for enough shingles to replace the entire roof and pay up to $4,100 toward labor to install the replacement roof. Benz’s offer to replace the roof was conditioned payment of the initial contract price plus relinquishment to CSG of the vouchers.

The homeowners, evidently having had enough of Benz and CSG, declined to allow Benz to remedy the defect. They ultimately had another firm replace the roof, incurring expenses of almost $3,000 that were not covered by the vouchers.

The trial court was faced with the following question: Is the contractor entitled to recover for a stinky job? It granted summary judgment to the contractor on a breach of contract action.

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Why Do We Still Encounter Issues of Promoter Liability? Menard, Inc. v. Dial-Columbus, LLC

The normal treatment where a promoter purports to enter into a contract on behalf of a corporation that has not yet been formed is that the promoter is personally liable. Here is a summary of the normal treatment:

  • The promoter is personally liable for pre-incorporation contracts.
  • The corporation becomes liable not merely upon formation but upon adoption. This is sometimes referenced as “ratification”. A somewhat tedious observation is that one formally cannot ratify a contract where the person purporting to ratify the contract was not in existence as of the time of the contract. Hence, avoiding tedious distraction is facilitated by referencing this as an “adoption”.
  • Acceptance of benefits constitutes adoption.
  • The promoter is not discharged upon corporation becoming bound, unless creditor assents to substitution (novation).
  • A novation exists where the newly-formed entity accept benefits “if performance is made with the understanding that a complete novation is proposed”.

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Ambiguity from Multiple Writings–F.A.L. Investments, LLC v. Hawthorne Bank

F.A.L. Investments, LLC v. Hawthorne Bank, 2014 WL 1663767 (Mo. Ct. App., W.D., Apr. 1, 2014), presents a number of interesting issues concerning interpretation of a contractual relationship memorialized in multiple writings.

The facts are not stated succinctly in the brief. And what I would like to see, in order to make my own assessment of the merits, a verbatim, unedited extract of from the operative agreements, is not reproduced in one place. So, understanding the brief would require moving back-and-forth between the brief and other documents. And the arrangements are messy, involving obligations owed by an entity, and LLC, and its members in their individual capacities. So, I do not envy the judges.

In essence, the appellant’s brief seems to reference the following basic circumstances:

  • Existing loans extended by the bank were refinanced by the bank.
  • During that refinancing, what had been unrelated personal debts of one of the members of an LLC (one Samson) were secured by a deed of trust on LLC-owned property (other obligations also being secured under that deed of trust).
  • The deed of trust appears to be a form that was not negotiated.
  • The loan agreement has some oblique provision in it, described on page 10 of the brief, as follows:

“Upon the sale of any portion or all of the 179 property,” proceeds were to be divided as follows:

a. agreed expenses and taxes were payable to Green [a borrower];

b. the Borrowers’ Obligations of $1.781 Million were payable to Hawthorne; and

c. “any remaining proceeds” were to be divided equally between Hawthorne and the Greens, with Hawthorn’s share applied “to the Samson Obligations”.

  • The real property is sold to an affiliate at a price the bank thinks inadequate.
  • The borrower claims that, under the loan agreement, the Bank, after other debt is paid, is limited to getting half the proceeds for purposes of satisfying the Samson Obligations. The Bank claims it is not; the sale of the property triggers a separate due-on-sale provision in the deed of trust, entitling the Bank to additional rights.

One can see that the brief here just provides snippets in quotes. To analyze this, I want to see the entire, unedited language.

The case illustrates that the memorialization of an agreement in multiple writings can create ambiguities, because the separate parts may not fit well together. I recently wrote about this problem in an article styled, Side Letters, Incorporation by Reference and Construction of Contractual Relationships Memorialized in Multiple Writings, 64 BAYLOR LAW REVIEW 651 (2012), which can be downloaded for free at:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2254388.

I would think a form deed of trust unlikely to address satisfactorily the arrangements to provide collateral securing multiple obligations, only some of which are intended to be with recourse to the borrower.

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Proving Damages for MMPA Claim–Oitker v. K.C. Waterproofing, Inc.

Missouri authority allows a property owner to testify as to the value of property, in contexts where one might think that the property owner’s testimony would be excluded as being an expert testimony without proof of the ordinary prerequisites to expert testimony. Oitker v. K.C. Waterproofing addresses such an issue. It seems there were problems with the foundation work done by the contractor.

It seems to be the contractor’s position that the client was not entitled to claim that the promised services were worth at least what the contractor charged. Presumably the contractor would not have expressly disagreed at the time the contract was formed.

Let’s see if the contractor’s discussion of the foundation for the damages computation is “all wet”.

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