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Author Archives: Harry Styron

“Plus interest” is implied by court from contract for deed to defeat buyer’s claim

The contract for deed stated that the purchase price was $30,000, to be paid with $3,000 down and 144 monthly payments of $300. The buyers made 90 payments of $300, for a total of $27,000, and demanded a deed.

While the amount financed was stated to be $27,000, the product of 144 monthly payments of $300 would be $43,200.   On the seller’s motion for summary judgment, the trial judge held that the buyers were not entitled to the deed, because the contract required payment of 144 installments of $300, not 90 installments.

The Southern District Court of Appeals agreed  with the trial judge in Webbe v. Keel, stating:

It is not ambiguous for 144 monthly payments to exceed this contract’s sale price because the time value of money is a judicially-known concept.

Even though the contract did not specifically mention interest on the $27,000, the court apparently saw the buyer’s agreement to pay $16,200 in excess of the $27,000 balance over 12 years to be an agreement to pay interest.

Because the case involved contract interpretation, it could be ruled on by a judge without a trial on a motion for summary judgment, unless the trial judge found that the contract was ambiguous. If the trial judge found the contract to be ambiguous, a trial would be held to obtain evidence outside the text of the contract.

Many agreements to pay money over time that are prepared by amateurs fail to mention the interest rate, how interest is calculated (360-day year or 365-day year, compounding period), early payoff provisions and how payments are to be applied  (on day received or on first day of month if received by 5th, for example).

Webbe v. Keel shows how even a very simple contract can pull the parties into court.

 

St. Louis area stormwater charge is affirmed as illegal tax

Judge Mooney’s dissent notes the enormous cost of dealing with rainwater in urbanized areas, but the other two members of the Missouri Eastern District Court of Appeals were not moved to overturn the trial court holding that a stormwater charge was an illegal tax, not a lawful user fee. The appellate opinion is Zweig v. Metropolitan St. Louis Sewer District.

Under Missouri’s Hancock Amendment, no tax may be imposed without voter approval. Since voters (and non-voters) insist on receiving government services beyond their willingness to tax themselves, governmental units may try to dress a tax in the guise of a service charge. MSD’s monthly stormwater did not pass the “Keller test,” which comprise five criteria that the appellate court characterized (adopting the words of former Missouri Supreme Court justice John Holstein) as “so vague and manipulable that they necessarily result in repetitive litigation and are ultimately unworkable.”

Regardless, the majority for the Eastern District found that at least two of the Keller criteria were not met, since the charge is applied to MSD customers whose rainwater drains outside the MSD area and because the charge is applied without a direct relationship to the service provided. The appellate court accepted the trial court’s conclusion that gave credibility to expert testimony that indicated that there was no relationship between area of impervious surface and stormwater runoff; impervious surface area was the basis for the amount of the charge.

Cassville Aldermen take on Cassville Board of Adjustment to challenge carport variance

It might seem odd to you that the Cassville board of aldermen would appeal a decision of the Cassville board of adjustment, since the board of aldermen appoints the members of the board of adjustment, and both boards are a part of the same city government. It seems odd to me that the point was not raised by the respondent on appeal.

Under Missouri statutes, boards of adjustments have some independence, and the appeal of the board of adjustment’s decision to grant a variance is the novel method that the Cassville board of aldermen chose to maintain the uniform application of their zoning regulations.

In Board of Aldermen of Cassville v. Board of Adjustment and Gerald Shaffer, nobody raised the question of whether the Board of Aldermen had the right to attempt to control the board of adjustment by appeal to circuit court. The Southern District of the Missouri Court of Appeals reversed the decision of the board of adjustment, with the effect of requiring Shaffer to remove the portion of his carport that extend over the setback line.

What are these boards?

A board of aldermen, under Missouri’s statutes for fourth-class cities, is the governing body of the city. It is the city’s legislative body, by adopting ordinances, and also the city’s executive branch, by giving orders to the mayor and city administrator. The mayor doesn’t even vote, except to break a tie.

The board of adjustment is authorized by Missouri’s planning and zoning statutes for cities, (Missouri counties have separate planning and zoning statutes) specifically sections 89. 080 through 89.110. Section 89.090 gives boards of adjustments three kinds of power:

  1. to hear and decide appeals of errors made by the planning and zoning staff,
  2. to hear and decide other appeals, as required by city ordinances, and
  3. to hear and decide applications for variances from the city’s codes relating to construction and alteration of buildings and the use of land.

The board of adjustment has the power to reverse, affirm or modify decisions of the planning and zoning board and its staff.

Under section 89,110, persons aggrieved by the decision of the board of adjustment may appeal the board’s decision to the circuit court of the county. Rather than hear evidence, the circuit court reviews the record of the proceedings of the board of adjustment, as though the circuit court were an appellate court.

Why did the Cassville board of aldermen take this matter so seriously?

Was the Cassville board of aldermen aggrieved by the decision of the board of adjustment to allow  Mr. Shaffer to have a carport that extended closer to his property line than the five feet allowed by Cassville zoning regulations?

In most challenges to the right of a party to appeal a board of adjustment’s decision, Missouri courts have been reluctant to give that right to just anyone who claims to be aggrieved. In other cases, neighbors who did not protest the decision at the board of adjustment hearing have been denied the right to appeal, as has a St. Louis alderwoman.

Regardless of the issue of whether the Cassville board of aldermen had the right to appeal the decision, the aldermen apparently wanted to hold the board of adjustment to compliance with the standards of the Cassville ordinances pertaining to variances.

Variances for structures and uses

Variances from strict application of zoning codes are allowed when the board of adjustment (or another board having such powers) has determined that the criteria for granting variances have been met. Cassville’s ordinances required that all five criteria contained in the ordinance be met, all highly subjective except that the hardship alleged to exist must not have been created by the owner or applicant and that the condition for which the variance is required must be unique to the property.

The Court of Appeals judges agreed with the Cassville aldermen’s contention that nothing about the Shaffer property was unique and that the alleged hardship–which was that visitors might have to walk to his door in the rain–was trivial.

 

Strong Towns: a nice idea

Structures that keep expanding bear the risk of collapsing under their own weight. As towns and cities grow, they have more and more roads and sewer and water lines to maintain. Even though developers are generally required to install streets and sewer and water lines, at least part of the cost maintaining and replacing these facilities falls on local governments, i. e., taxpayers.

Through a mention on the always interesting land-use blog Austin Contrarian, I learned about Strong Towns, an organization whose mission statement makes the claim that our preference for growth by adding infrastructure should be replaced by a focus on getting a higher return on existing infrastructure. The existing approach, Strong Towns argues, causes economic stagnation and decline and a dependence on public subsidies, because it is a “Growth Ponzi Scheme.”

While many of the ideas mentioned on the Strong Towns website, especially the blog, include concepts that are common with New Urbanism, the Strong Towns movement is founded on the forecasts of civil engineers–not the dreams of idealistic planners–who believe that that the mechanism of developers adding infrastructure to facilitate growth is financially unsupportable.

In Missouri, where much growth takes place outside incorporated towns and cities, homeowner associations (HOAs) rather than local governments have the burdens of maintaining and replacing some of the infrastructure for planned communities and subdivisions. At the same time, no funding system is in place to support the public infrastructure (arterial roads, sewer plants, etc.) which serve planned communities that have HOAs. In addition, HOAs have their own problems, especially their dependence on volunteers to handle complex issues.

The hard reality is that residential developments rarely generate enough sales tax or property tax to make the residential development pay its way in the long run. Unless we want to raise property taxes, we need to get more from the infrastructure we’ve got.

Subdivision developer gets nailed for assessments and has no special developer rights

Missouri Western District Court of Appeals just affirmed a trial court’s judgment in a way that will resound with homeowners’ association (HOA) boards across the state, many of which are struggling to raise sufficient revenues to take care of streets and amenities, even though many of the developer-owned lands that benefit from the streets are apparently exempt from assessments.

Lenders that have foreclosed on developers may find that this opinion undermines the lenders’ ability to claim to enjoy the developer’s exemption from assessments on lender-owned land. Parties purchasing land from lenders, hoping to have the status of the former developer, may find themselves heavily in debt to the HOA, perhaps blaming the lenders who sold them the land.

In Woodglen Estates Association v. Dulaney, Dulaney obtained 17 parcels of land from the FDIC. This land had once been owned the original developer Braeman, then passed through the hands of a few different parties, before ending up with the FDIC, which had taken the parcels of land from a failed bank.

The Woodglen Estates Association hired an auditor to review its finances. The auditor discovered that land owned by Dulaney had not been assessed for several years. The association then sued Dulaney, and Dulaney asserted two defenses:

  • As successor to the original developer, Dulaney should be exempt from assessments on land it owned.
  • Much of the land that Dulaney owned in Woodglen was in “parcels,” not having been subdivided into “units,” so that it should not be assessed.

The appellate court looked at the line of Missouri case law that holds that the special rights and privileges of a developer, typically reserved in the declaration of covenants for the subdivision, do not automatically pass with ownership of the developer’s real estate. These rights, called “developer rights,” “declarant rights” or “development rights,” may be assigned, but a party claiming to hold these rights has to be able to prove to have acquired them by assignment. Dulaney had no proof of assignment of declarant rights.

To make matters worse for Dulaney, the Woodglen declaration did not contain an exemption for the developer’s real estate–which is a common feature of declarations–and the appellate court noted that developers do not receive an automatic exemption. Under current Missouri law, other than in condominiums, a developer may lawfully reserve an exemption from assessment for its own real estate. The original developer simply failed to create the exemption when filing the declaration and made the mistake of including land in the declaration that was not ready to be developed.

Dulaney argument that its “parcels” were not subject to assessment, since only “units” and “unit owners’ could be assessed. The appellate court noted that some of the declaration’s provisions were ambiguous when addressing the respective rights of owners of units and parcels, but the assessment provisions were clear:  ”each owner shall be obligated to pay to the Board such sum as shall have been established….,” without distinguishing between owners of units and parcels. The legal description attached to the declaration had included Dulaney’s parcel, placing this land under the provision of the declaration.

For lenders, the lesson is that any loan documents for a development loan should include a security interest in the declarant rights, and any documents showing the recovery of the developer’s real estate should include a specific assignment of the declarant rights. When the lender sells the former developer’s property, the conveyances to the purchaser should include the assignment of declarant rights. These issues are covered in more detail in this essay.

Elected representatives trump democracy, as Missouri legislature overrides initiatives

When a million Missourians adopt an initiative petition, why should our elected representatives be allowed to override the voice of the people? According to Howard Wright’s blog post, it’s because they can.

Wright describes how our elected representatives have acted to undermine legislation adopted through the initiative petition process provided for in the Missouri Constitution. In particular, Missouri’s puppy mill initiative adopted in 2008 was overturned by the General Assembly in 2009. After Missouri voters approved a minimum wage law in 2006 with a 76% majority, the Missouri House of Representatives attempted to repeal this law, though the bill died in the Senate.

A citizen group called “Your Vote Counts” is attempting to amend the Missouri Constitution to impose a requirement of a 75% vote of the General Assembly to override the voters. Wright suggests that the initiative procedure is a check against the power of dominant political parties, which could otherwise block the will of the vast majority of the voters.

 

HOA needs to get the owner’s name right to collect assessments

Whenever a homeowner association (HOA) gives me an account for collection, the first thing I do is verify the name in which the lot or unit is held. Frequently, the books of the HOA show owner as an individual or couple, often with a nickname.

Failure to keep track of the name in which property is held can defeat a claim for assessments, as shown in River Oaks Homes Association v. Lounce, a case that originated in Jackson County, Missouri.

The HOA obtained a judgment against Zeria Lounce, individually and as trustee of her living trust, for several years’ worth of delinquent assessments. Lounce appealed to the Western District of the Missouri Court of Appeals, claiming that the trial court erred in finding her personally liable and in finding the trust liable.

The River Oaks covenants provided that assessments were secured by a lien against the lot assessed and were also a personal obligation of  ”the person who was the Owner of such property at the time when the assessment fell due.” Fifteen months after purchasing her townhouse in River Oaks in 1993, Lounce conveyed it to her living trust, with herself as trustee.

Nobody paid the assessments after 2004, and the HOA sued Lounce in her individual capacity. After filing suit, the HOA discovered that Lounce had put the property in the name of her trust and added Lounce, as trustee, as a defendant in the suit. Because the covenant provided for the personal liability of the Owner only, the court of appeals reversed the judgment against Lounce, as an individual.

The court of appeals didn’t let the trust off the hook, stating that the payment obligation ran with the ownership of the property, regardless of whether the HOA was aware of the change in ownership.

Here are the lessons for associations:

  • Pay attention to the county records of ownership. The county assessors’ websites (in most counties in Missouri) are a fairly reliable place to look for the names in which property is held; the recorder’s office is the best authority, though not always the most accessible online. This is important for making sure the proper parties are casting votes in elections, as well as for collections.
  • Ask your collection agency or lawyer to confirm the owners’ identities when preparing liens, sending demand letters and filing collection suits.

Carelessness about ownership can result in the loss of the ability to collect, shifting the burdens to the paying members of the HOA.

 

 

Non-compete can be enforceable without geographic limit

The basic rule is that a non-compete covenant with an employee will not be enforced unless it is reasonable in duration and with respect to the geographic area it applies to. Otherwise, employees would be trapped in jobs, because they wouldn’t be able to work if they left the employer.

But a St. Louis judge’s order was reversed by the Missouri Court of Appeals for the Eastern District in Whelan Security Co. v. Kennebrew, even though the non-compete covenant did not define the geographic area where the former employee was prohibited from competing with his former employer.

The trial judge had granted summary judgment in the employee’s favor, after having reviewed the employment contract that prohibited Kennebrew from soliciting business from Whelan’s customers or going to work for Whelan’s competitors for 12 months after leaving Whelan. Within four months after separating from Whelan, Kennebrew successfully went after one of Whelan’s customers. The trial court concluded that Kennebrew’s employment agreement was invalid, because it was ”overbroad” and “not reasonable as to time and space.”

The appellate court applied a different rule of law, stating:

a restrictive covenant without geographic limitations is not per se unreasonable if the prohibition is against the solicitation of the employer’s clients and customers.

The geographic scope of Kennebrew’s contract was essentially defined by the location of Whelan’s customers.

Non-compete agreements are recognized and limited by statute in Missouri. The statute, section 431.202 RSMo,  creates a presumption that a one-year duration is reasonable, but allows an employer to prove that a longer period might be appropriate under the circumstances.

 
 

 

 

 

 

 

Addressing water supply issues in the Western Ozarks

Imagine this headline:

Taneycomo trout die as officials refuse to release water from Table Rock Lake

It’s not far-fetched. Something similar happened in the fall of 2011 below Lake Tenkiller, in the Ozarks of eastern Oklahoma, where low water levels resulting from the prolonged drought left that reservoir with no unallocated water. You can get an idea of the reactions from this article in the Sequoyah County Times.  All the water in Tenkiller was spoken for, and the trout fishery suffered.

What’s this about allocation of water? In reservoirs managed by the Corps of Engineers and other federal agencies, the reservoir storage capacity is allocated to various uses. For example, some of the storage capacity in Table Rock Lake is allocated to the Southwest Power Administration, a government agency that sells electricity to private and public utilities. In some reservoirs, some of the capacity is allocated to municipal water supplies or industrial users of water, such as Sequoyah Fuels, mentioned in the article about Lake Tenkiller. The Corps of Engineers is also obligated to store and release water to meet statutory mandates relating to maintenance of adequate water levels for barge traffic downstream. In the western United States, a “recreational allocation” is made to support the whitewater rafting industry.

Water scarcity is moving east, and the pace seems to be accelerating. Jim Milton’s blog, Oklahoma Water Law, does a great job covering water supply issues in Oklahoma and neighboring states. On his blog, you can read about Oklahoma’s proposed comprehensive water plan and conflicts between rural water districts and municipalities, the Tenth Circuit Court of Appeals upholding Oklahoma’s statutes prohibiting the export of water to another state, and the fight over water in Sardis Lake, where Oklahoma City’s attempt to buy the water has been blocked, at least for now, by the assertion of federal power. In reviewing recent blog entries, I was struck by the intensity of the water disputes in eastern Oklahoma and Kansas; Missourians need to pay attention to what is occurring just over the state line.

The Tri-State Water Resource Coalition has been exploring the alternatives for future water supplies for the Western Ozarks. Its annual conference, Securing Our Water Future, will be held in Springfield on November 17 and 18. I’ ll be giving a short presentation at this conference to contrast Missouri’s lack of any allocation system with the ways that surface water and groundwater are allocated in Kansas and Oklahoma. A copy of the text of my presentation is here.

Missouri and Arkansas have had the luxury of pretending that water is free. Unfortunately, the supply is finite. The Tri-State Water Resource Coalition is providing leadership and a forum for discussion. We need wise leaders to learn from the experiences of Kansas and Oklahoma, so that we can be better stewards of the water we all need.

Elements of Ozarks civil litigation: a woman, an oral agreement, cattle, a pig, a shotgun, a deputy

Real estate law practice in the rural parts of the Ozarks, at least at the level of taking phone calls from prospective clients, often involves unwritten agreements, a woman’s role, cattle, guns, vehicles, accusations of trespass and calling the sheriff. Once in a while, a case makes it to the appellate court, as in Manley v Meyer, which has these common ingredients.

Manley had an unwritten agreement with William and Linda Meyer that allowed Manley to put cattle on 57 acres owned by the Meyers. Under the agreement, Manley could also hunt, cut hay, and ride ATVs on the property for a payment of $1,000 for a one-year period.

Over something else, the Meyers filed a suit against Manley, which they settled under the terms of a written agreement filed with the court, requiring Manley to pay the Meyers the sum of $1,000 for rent and $125 for a pig. In addition, Manley was required to remove his cattle from the Meyers’ pasture before a deadline of September 10, 2008. The Meyers were required to return a shotgun and a camper to Manley.

Manley picked up a few of the cows on September 9, but the Meyers told him not to use ATVs, dogs or horses to assist with the roundup. The Meyers offered to put up a pen with cattle panels to catch the cattle, if Manley would supply feed to lure them in. By December, Manley had been unable to schedule a time to pick up the remainder of the cattle, apparently because the times he suggested were inconvenient for the Meyers. But Manley continued to deliver feed to the locked pen.

On December 2, Mrs. Meyer asked Manley to deliver additional feed, but Manley insisted that he was going to pick up the cattle that afternoon and would bring the sheriff with him. At the pen, Mr. Meyer refused to let Manley have the cattle unless Manley gave three calves to the Meyers as compensation for feeding the cattle. Manley refused, and Mr. Meyer told him that he needed to leave because he was trespassing. The deputy advised that his orders were to keep the peace, and that if Manley could not have his cattle, he had to leave.

A few months later, Manley sued the Meyers for $28,000, alleging conversion of his cattle, his shotgun and several cattle panels and breach of the settlement agreement. Meyers fired back with a claim for $2,340 for hay fed to the cattle, $1,500 for boarding the cattle, and $500 for fence repair.

At a trial before a judge without a jury, Manley testified about the value of his cattle and shotgun, the number of cattle (they had calves and the calves had calves while on the Meyers’ pasture). The Meyers made no objection to Manley’s testimony about the value of his shotgun or the cattle. The judge awarded $28,000 to Manley for breach of the settlement agreement requiring them to return his cattle and shotgun and denied the Meyers’ counterclaim entirely.

The Meyers appealed. They claimed that Manley didn’t introduce sufficient evidence about the number of calves born and surviving and the value of the cattle for which he did not have papers showing the amount paid for them. They also claimed that Mrs. Meyer had no part of the refusal of the return of the cattle.

If the $28,000 judgment were only against Mr. Meyer, then Manley could not require that it be satisfied out of the assets jointly owned by Mr. Meyer and Mrs. Meyer. When a party refuses to pay a judgment, the holder of the judgment has the right to enlist the assistance of the courts (through garnishment) and the sheriff (through levy and execution) in seizing the assets of the judgment debtor. Typically, almost everything that married couples have is jointly owned, so the Meyers were attempting to avoid the effect of the judgment by claiming that Mrs. Meyer had nothing to do with it. But the appellate court noted that Mrs. Meyer had signed the settlement agreement requiring the return of the cattle and shotgun, so that she was jointly liable, even though only her husband had the key to the lock on the cattle pen.

Now imagine that you, blog reader, are a judge on the court of appeals. There was no detailed judgment from the trial court, which might have included specific findings of fact and legal conclusions to indicate which rules of law the judge applied. In the appeal, Manley did not file a brief that would have contained legal arguments to refute those made by the Meyers.

As appellate judge, you would be relieved to know that the appellate court has rules that apply when the judgment of the trial court does not include findings of fact and conclusions of law. When no party has asked that the judge make written findings and conclusions, the appellate court presumes that “all fact issues were found in accordance with the judgment” and that the judgment will be upheld “under any reasonable theory presented and supported by the evidence.” And the trial judge is given great deference as to his evaluation of the credibility of the witnesses and his weighing of the evidence.

In other words, the trial court’s judgment will be affirmed absent an incredibly blatant misstatement of a rule of law. Most experienced lawyers will ask for written findings of fact and conclusions of law before the start of the trial. At the end of the trial, the judge will ask one or both lawyers to prepare findings and conclusions to submit to the judge, which the judge will review, amend and sign. Sometimes, the judge has not made up his mind at the conclusion of the trial and the findings and the conclusions assist the judge in making a decision.

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