Tag Archives: agency

Alleged Good Faith Obligations Concerning Credit Insurance–Vantage Credit Union v. Chisholm

So here we have a circumstance that requires some thought to put in order.  The brief reports summary judgment was granted for the lender. That seems difficult to support. Briefs are at Vantage Credit Union v. Chisholm, 2014 WL 1872072 (Mo. Ct. App., E.D.); and 2014 WL 1458186 (Mo. Ct. App., E.D.)

A lender, Vantage, offers debtors disability insurance. A debtor, Chisholm, makes the payments for the insurance, and then allegedly has a covered disability. The lender’s employee, one Berry, allegedly promises to assist in making a claim. The lender subsequently disclaims any obligation, as recited in the debtor’s brief.

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Keeping Contract Benefits Without Ratification? American Burglary & Fire, Inc. v. Aspect Software, Inc.

Here we have an interesting argument:

Does ratification arise from acceptance of benefits under a contract, and performing duties under a contract, where the putatively ratifying party is not aware of all the terms?

American Burglary & Fire, Inc. v. Aspect Software, Inc. (E.D. Mo. No. 99472), involves a contract to monitor fire and burglar alarm system.  Pertinent facts referenced in the respondent’s (Aspect’s) brief may be summarized:

Evidently ABF had installed a system on buildings owned by Quilogy. Aspect acquired the buildings “as part of a merger transaction” in January 2010.  Contracts dated May 2010 concerning ongoing monitoring at the building were signed by ABF and, purportedly on behalf of Aspect by one Buxton, who had been an employee of Quilogy but had no authority to act on behalf of Aspect.

Buxton was described in appellant’s brief as one who had been the “building supervisor at Quilogy”.  Appellant’s brief goes on to note:

According to the testimony of Bob Nagy, corporate controller for ABF, ABF sent over salesman Greg King to execute a new sales contract with Aspect.  Larry Buxton, the building supervisor at Quilogy, signed the original contract with ABF.  When Mr. King went to Aspect to execute a new sales contract, Larry Buxton was on site and signed the contracts dated May 27, 2010, for the monitoring and servicing of Aspect’s businesses….  Gene Butcher, [Aspect’s] witness, admitted to being present for the signing of the ABF contracts and asking that the billing be changed to Aspect Software and not Quilogy.

It appears Aspect used the services from ABF until some time during or after August 2010.  Respondent’s brief notes that in 2010, “Aspect had a Hirsch Electronics’ alarm system installed … and, at that time, stopped using the ABF alarm system and started paying Hirsch Electronics for its alarm monitoring services.”  The brief indicates payments to ABF continued until May 2011, but then discontinued payments.

One could examine the issue of apparent authority.  One of this author’s favorite illustrations of apparent authority is referenced in Kanelles v. Locke, 1919 WL 922 (Ohio App) (quoting Curtis v. Murphy, 22 N.W. 825 (Wisc. 1885):

A traveler who goes to a hotel at night and finds a clerk in charge of the office, assigning rooms, etc., has the right to assume that such clerk represents the proprietor and has authority to take charge of money which may be handed him for safe-keeping.

It would seem clearly not thoughtful to maintain on-premises one who had formerly made arrangements for the owner and not clarify to those with whom the former agent had contracted the termination of authority.  The analogy is not putting some new, unauthorized person behind the counter at the hotel.  It’s change of ownership of the hotel, allowing the clerk to stay behind the counter but claiming the clerk’s authority has terminated.


But we will turn to the examination of ratification, discussed in only cursory terms by respondent.  Here is the part of respondent Aspect’s brief concerning whether it ratified the contract:

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Writing Requirement in Contracting With Counties, Etc.

Mo. Rev. Stat. 432.070 requires a writing for any of the following to contract: counties, cities, towns, villages, school townships, school districts and other municipal corporations.  Gill Construction, Inc. v. 18th & Vine Authority, 157 S.W.3d 699, 708 (Mo. App. W.D. 2004) notes, “A contract made in violation of the statute is ‘void rather than voidable.’”  Somewhat interestingly, Mays-Maune & Associates, Inc. v. Werner Bros., Inc., 139 S.W.3d 201 (Mo. App. E.D. 2004), holds a claim in restitution cannot be made against a school district, by virtue of this statue of frauds provision.

An appellate brief in Drury Co. v. Jackson R-2 School District, 2013 WL 6169464 (Mo. Ct. App. E.D.) discusses a related question:  Whether this writing requirement bars enforcement of a written agreement within the statute by a third-party beneficiary.  The basic circumstances are a subcontractor alleges it has been harmed by the school district’s alleged failure to obtain insurance the district’s contract with the prime contract obligated the district to obtain.

The brief reports the claim was dismissed:

On November 18, 2010, the Circuit Court entered a “Judgment on Motions to Dismiss,” stating summarily: “The motion of Defendant, Jackson R-2 School District to dismiss Count I of Plaintiff’s Petition is SUSTAINED. Count I of Plaintiff’s petition is dismissed without prejudice. Gill Construction, Inc. v. 18th & Vine Authority, 157 S.W.3d 699 (Mo. App. W.D., 2005).”

The cryptic reference to Gill is evidently to that court’s determination that municipal ordinances did not satisfy the writing reqirement (though it could perhaps be to the court’s deference to the trial court’s determination as to a claim the municipality was not liable as a principal).

Gill states, “The purpose of Section 432.070 is to protect municipalities.”  “Protect” presumably does not mean allow to chisel–I mean avoid liability for failure to perform properly authorized obligations.  Gill references City of Kansas City v. Southwest Tracor Inc., 71 S.W.3d 211 (Mo. App. W.D. 2002).   Southwest Tracor, at 215-16, explains the purposes in greater detail (citations omitted):

The statute recognizes that municipal corporations represent the public and should be protected from the unauthorized actions of their agents. The purpose of the statute is to provide protection for municipalities; not parties who seek to impose obligations upon government entities. To that end, “ ‘[a] court should unhesitatingly enforce compliance with all mandatory legal provisions designed to protect a municipal corporation and its inhabitants.’ ” City of Washington, 533 S.W.2d at 558.

… A party contracting with a municipality is charged with the knowledge of the requirements set out in the statute. As a result, “any contract entered into by a municipality beyond the scope of its power is void and not merely voidable.” [Software A.G. of N. Am., Inc. v. City of Columbia, 903 S.W.2d 641, 643 (Mo.App. W.D.1995)]  “ ‘[I]t is … ultra vires for a Missouri municipality to incur a liability in the nature of a contractual obligation … not within the scope of its corporate powers or one not expressly authorized by law.’ ” Duckett Creek Sewer Dist. of St. Charles County v. Golden Triangle Dev. Corp., 32 S.W.3d 178, 183 (Mo.App. E.D.2000) (quoting Donovan v. Kansas City, 352 Mo. 430, 175 S.W.2d 874, 882 (banc 1943)).

Allowing recovery by an intended beneficiary under a properly authorized contract, memorialized in writing, does not implicate the referenced purposes. This does, however, seem to be the type of circumstance where a court may extract some snippet from a prior case, repeat it as mantra, and find the absence of a writing between the sub and the governmental entity a basis to avoid liability.

A finding for the district, of course, will result in increased transaction costs, as each subcontractor would evidently need to get a separate agreement signed by the governmental entity.  One supposes that each such separate agreement would be required to be properly authorized.  And one would expect the increased costs of contractors in assuring compliance, and the risk of noncompliance, will ultimately increase amounts charged on covered contracts.

At best a Pyrrhic victory in the offing for governmental units.

Why Not a Duty to Read One’s Own Form? Woods of Somerset, LLC v. Developers Surety & Indemnity Co.

The typical case of a dispute as to an adhesion contract involves claims literal terms should not be binding on the recipient of the supplied form. A court may recite the bromide that one has a duty to read the contracts one signs.  Well, should not the party who is responsible for the form take responsibility for its own failure to read or understand its  own form?  In this man-bites-dog category falls Woods of Somerset, LLC v. Developers Surety & Indemnity Co., 2013 WL 5311922 (Mo. App. W.D. 2013).

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Lender Gone Wild–Cacioppo v. Citibank, N.A., 2013 WL 3283923 (Mo. Ct. App., W.D.)

So a bank allegedly gets an application for a business credit card over the phone.  It allegedly does not receive a paper application. A business record, attached to the brief, notes a $30,000 credit limit.

So, what’s the basis for extending the credit?  What was the due diligence in extending the credit?  The mother’s maiden name of the individual allegedly responsible for the application, as reproduced on a document identified as a business record of the lender and attached to the appeal, is “RADIOACTIVEX” (allegedly with some attempt by the lender to justify this as potentially a password).  The brief further reports “[n]either the social security number nor the date of birth listed were linked with [the putative borrower] in the testimony.”