Tag Archives: jurisdiction

Jurisdiction of Small Claims Court–Seeking Money as Specific Performance

In Schler v. Coves North Homes Ass’n, 2013 WL 6516030 (Mo. Ct. App. W.D.), we have an assertion that a claim seeking monetary compensation involves equitable claims and hence is outside the jurisdiction of a Small Claims Court.  The claim involves failure to make repairs, brought by a homeowner against an association, allegedly required under the recorded covenants, conditions and restrictions.  Here’s what the association argues:

The unequivocal claim that the Declaration requires the Association to repair or fund the repair of the Schlers’ patio, porch, steps, or anything else, makes this suit one for specific performance. It is axiomatic that regardless of the terminology used, courts look to substance and not form in determining what the “true cause” of action is. By way of analogy only, there is the case of DeVitre v. Orthopedic Center of Saint Louis, LLC, 349 S.W.3d 327, 331-332 (Mo. 2011) (en banc), in which the Court essentially pointed out that regardless of the terminology used, e.g., calling the claim one for breach of fiduciary duty, assault, battery, libel, false imprisonment, tortious interference with contract, etc., where the “true cause” was one of medical negligence, the legal principles applicable to medical malpractice suits would be applied.

Here, the Schlers’ “true cause” is one of specific performance, even though Mindy L. Schler testified at trial that she didn’t want the trial court to order the Association to specifically perform, i.e., to make the repairs, because she didn’t trust the Association to honor the order, and instead wanted the money paid to them. [TR. 84/13 to 85/2.]

This argument is curious.  In the ordinary case, where a promisee claims a promisor failed to fulfill a contractual promise, the promisee claims a contract “requires” an obligor to perform some act.  A claim for money damages for failure to perform a contractual obligation is not inherently one for specific performance.  The homeowner’s association’s argument would make all claims for money damages for breach of contractual obligations equitable.  It obviously proves too much.

Now, there are certainly some anomalies.  The requirement for “mutuality of obligation”, now typically discredited in the U.S., allowing a seller to receive specific performance of a contract for sale of land because the buyer would have a right to specific performance, is one such anomaly.  But the homeowner’s association’s argument goes beyond that, in a way that would make equitable all claims for money damages for breach of contractual promise.  A puzzling argument indeed.

Books and Records Request under DGCL 220–Keeping Board Minutes Private

A shareholder makes a demand to review board minutes under DGCL 220.  The “Memorandum Supplementing Order Affirming Judgment Pursuant to Rule 84.16(b)”, dated Aug. 20, 2013, from the Western District, describes the shareholder as:

“demanding, pursuant to Delaware General Corporation Law Section 220, to inspect and copy “the minutes of the Company’s Board of Directors and Nominating Committee from January 2009 to the present date.” [The shareholder] explained that the purpose of the demand was “to confirm that the Company’s Directors satisfied their fiduciary duties and maintained board independence, as opposed to the entrenchment of management, in connection actions taken since January 1, 2009.” A week later, [the issuer’s] legal counsel sent a response to [a stockholder] declining the demand for several reasons, including that the demand failed to state a proper purpose under Delaware law, was not made in good faith, and failed to consider [the issuer’s] legitimate interest in protecting the confidentiality of nonpublic corporate records.”

This author is somewhat displeased that the court’s discussion of this matter is in a memorandum not generally available (i.e., not available through Westlaw or Lexis).  Does this not present an issue of the type as to which practicing lawyers should have guidance?

By way of background, Delaware law provides shareholders have the right to inspect books and records for proper purposes under DGCL 220.  This right is important, because the Delaware law is that if a derivative lawsuit is brought without demand having been first made, discovery is stayed pending determination of whether demand was excused is determined.  As the Drexler et al. treatise (§ 42.03[2]) explains,

More after the break …

Continue reading