Missouri State Contract Cases 2012 (Part 14): Personal Guarantee and the Voluntary Payment Doctrine

Lafarge North America, Inc. v. Miller

The Missouri Court of Appeals, Western District reversed the trial court’s grant of summary judgment in favor of Lafarge North America in its claim against Miller, the sole owner of a limited liability company, holding that material facts were in dispute as to whether Miller had agreed to personally guarantee Tiger’s obligations.

An employee of Tiger Ready Mix LLC, Miller’s company, had stamped Miller’s signature on a credit application and agreement to buy bags of concrete from Lafarge. When Tiger failed to pay several invoices, Lafarge sued Tiger for the debt and Miller on his purported personal guarantee. The appellate court quoted at length from Capitol Group, Inc. v. Collier, an opinion from earlier in the year in which the court stated that it would be difficult to prevail in an action to enforce a personal guarantee contained in a commercial contract where the individual didn’t sign the agreement twice — once in his capacity as an agent of the company and once in his individual capacity. (“While our caselaw does not hold that the only way an agent can be liable under a guaranty of this nature is by signing twice, this is the preferred method because it ‘clearly manifests his intent to assume personal liability.'”)

The bar is even higher when the issue is whether an employee of a company had apparent authority to agree to a personal guarantee on behalf of a company’s officer. Although the court discussed possible circumstances where apparent authority could arise (such as if the company officer had communicated to the contract’s counterparty in such a way that gave rise to apparent authority), the court noted that “Lafarge points to no Missouri case in which a court has found, on a summary judgment motion, that an employee of a corporation could bind an officer of that corporation in his personal capacity, via the employee’s apparent authority, on a guaranty agreement” (emphasis in original).

Clearly, the bar for creating an enforceable personal guarantee in a commercial agreement when a company’s officer signs the agreement only once is formidable, and that’s especially true when the officer didn’t sign the agreement himself. However, the court did state that if the evidence had been undisputed that Miller had signed the personal guarantee with his own hand, it might have agreed that the agreement was sufficient to bind Miller to a personal guarantee. Here is the language from the contract:

IN CONSIDERATION FOR SALES TO APPLICANT ON OPEN ACCOUNT, THE UNDERSIGNED INDIVIDUALLY AND UNCONDITIONALLY GUARANTEES TO LAFARGE AND ITS SUCCESSORS, THE PROMPT PAYMENT OF SAID ACCOUNT IF NOT PAID WHEN DUE BY APPLICANT. APPLICANT AND THE UNDERSIGNED FURTHER AGREE TO REIMBURSE LAFARGE FOR ALL ATTORNEY’S FEES, COURT COSTS, AND OTHER CHARGES, IF THIS ACCOUNT SHOULD BE PLACED IN THE HANDS OF AN ATTORNEY FOR COLLECTION.

Ozark Mountain Granite & Tile Co. v. DeWitt & Associates Inc.

The Missouri Court of Appeals, Southern District affirmed a judgment in favor of a subcontractor on breach of contract and quantum meruit theories for supplying and installing granite in the JQH Arena at Missouri State University.

The School District of Kansas City Missouri v. Missouri Board of Fund Commissioners

In a somewhat lengthy opinion arising out of the Kansas City School District desegregation litigation, the Missouri Court of Appeals, Western District held that a settlement agreement between the school district and the State of Missouri was not an enforceable contract because neither party had the power to enforce it (“the Agreement was not an enforceable contract upon its execution, as its object was beyond the power of the State and the School District to effectuate”). However, the agreement had been incorporated into a court order which was enforced. The appellate court stated, “It is readily apparent, therefore, that the Settlement Agreement did not become an independently enforceable contract upon its indispensable approval by the Federal District Court, and incorporation into the Approval Order. Its terms as approved and modified are no doubt binding on the State and the School District, but only to the extent and because said terms were incorporated and merged into one or more Federal District Court Orders.”

The opinion also contains a discussion of the action for money had and received and the affirmative defense of the voluntary payment doctrine, which is difficult to overcome. The court quoted the Missouri Supreme Court’s restatement of the voluntary payment doctrine in Carpenter v. Countrywide Home Loans, Inc., 250 S.W.3d 697 (Mo. banc 2008): “The doctrine provides a person, who voluntarily pays money with full knowledge of the facts, in absence of fraud or duress, cannot recover it back and is a recognized defense to an action for money had and received.” A mistake of law isn’t sufficient to overcome the doctrine.

Anglin Family Investments v. Hobbs

The Missouri Court of Appeals, Southern District affirmed a trial court’s judgment that rescinded a contract for deed when a quarter-acre portion of a five-acre plot was lost to adverse possession.

Coverdell v. Countrywide Home Loans, Inc.

When Countrywide refused to approve a short-sale of property the loans to which Countrywide was the servicer, the would-be purchasers brought claims against Countrywide for breach of contract (based on a third-party beneficiary theory), tortious interference, and negligent and fraudulent misrepresentation. The trial court granted Countrywide’s motion for summary judgment and the Missouri Court of Appeals, Southern District affirmed the judgment.

In Category: Missouri Contract Cases

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