BLAW Exam 4: Key Case Summaries & Definitions

[Case 16-1] Personal Rights: In Re Magness

Parties: Magness/Redman (Plaintiff/Appellant) v. Dayton Country Club (Defendant/Appellee)

Question: Was the assignment of rights by Magness/Redman valid?

Court's Decision: The Bankruptcy court determined that the membership was not general, but a special golfing membership that pertained to a selected few, was sufficiently personal that it could not be assigned to a third party. Magness/Redman appealed this judgement. The court affirmed the bankruptcy court's decision.

Extra:

General Policy/Rule in favor of assignments. When someone is a participant to a contract, any rights that they have may be assigned gratuitously or for consideration (money) to a third party.

That said, there are limitations to assignments:

1. "Contract is highly personal in nature"

[Case 16-2] Aldana v. Colonial Palms Plaza, INC

Parties: Aldana (Plaintiff/Appellant) v. Colonial Palms Plaza, INC (Defendant/Appellee)

Question: Was the assignment valid considering the anti-assignment provision?

Court's Decision: The court found that the anti-assignment provision applied to the right to occupy the premise. It DID NOT APPLY to the construction allowance, because the assignment was merely a right to monetary payment. The assignment is valid.

Extra:

The Colonial Palm Plaza entity is the landlord for Abby's Cakes (Tenant). Under their contract they had included a anti-assignment provision.

The lease also contained a construction allowance that would reimburse the tenant up to $11,250 for the tenant improvement costs to the premises.

The requirement for the construction allowance was that the tenant had to front the money for the improvements. Only after the tenant paid, would the landlord reimburse. The Tenant doesn't have the money for improvements.

Robert Aldana provided $8,000 to Abby's cakes, and in return received the assignment to the construction allowance. Aldana notified the landlord of his assignment to the reimbursement, but the landlord did not follow the assignment.

[Case 16-3] Mountain Peaks Financial Services, INC v. Roth-Steffen

Parties: Catherine Roth-Steffen (Plaintiff/Appellant) v. Mountain Peaks financial services, INC (Defendant/Appellee)

Question: Did the statute of limitations apply on the debt that Mountain Peaks was trying to collect? Why or Why not?

Court's Decision: The court agreed that rights of the assignee should precisely mirror the rights of the assignor. Therefore, Mountain Peaks prevails and is entitled to the debt payment.

Extra:

Long-Term Doctrine: The assignee stands in the precise shoes of the assignor, so whatever rights the assignor has are applicable to the assignee as it states.

This doctrine is in place so that the assignee is in no better or worse place than the assignor was.

Catherine Roth-Steffen has student loan debt. She has consolidated (taken out a loan to pay for debt) all of them except one worth $123,000.

Mountain Peak collects the loan contract, pursuant to assignment. They intend to collect the money from Catherine.

The original lender was under protection and immune from the statute of limitations. The Federal law stated that this particular qualified lender did not have to worry about statute of limitations.

Catherine Roth-Steffen's argument: Mountain Peak has waited far too long, and so the statute of limitations is up to collect the debt.

Mountain Peaks Argument: Since the original lender was immune from the statute of limitations, they would as assignees, also be immune.

[Case 16-4] Federal Ins. Co v. Winters

Parties: Federal Insurance. Co. (Plaintiff) v. Winters Roofing Company (Defendant)

Question: When Winter delegated his duty to a third party, does he still remain liable for damages?

Court's Decision: Rules in favor of the insurance company and set forth the notion that when a person delegates their obligation to a third party, BOTH the third party and delegator remain liable.

Extra:

Winters Roofing company had to install and repair a leak in the roof under contract with a homeowner.

He delegated the duty to repair the roof to a third party.

Third party agrees to repair the roof. He uses a blowtorch to repair the damages, and the house burns down. $800,000 in damages.

The insurance company pays for the damages and pursues Winters.

Winters claims he isn't responsible for the payment, because he delegated the duty away to a third party.

[Case 16-5] Stine v. Stewart

Parties: Mary Stine (Plaintiff) v. Mary Ellen Stewart (Defendant)

Question: Was Mary Stine the intended third-party beneficiary of the contract between Mary Stewart and her Husband?

Court's Decision: The court ruled in favor of Stine and found Mary Stine to be the intended creditor beneficiary. The contract between Mary Stewart and her husband specifically stated Stine to be the intended beneficiary should the house be sold.

Extra:

Mary Stine is the mother of Mary Ellen Stewart.

Stine loans $100,000 to her daughter and son in law so they may afford a house. She has no security or mortgage interest in the house, but she does have a promissory note.

During the course of the marriage the couple paid back $50,000.

Mary Ellen Stewart divorces. During the division of marital property, the daughter and son-in-law agree that the son-in-law would have the house, up until the time he should sell the house.

Whatever money is acquired when selling the house, should go to the remaining $50,000 owed to the mother-in-law (Stine). If there was anything left still owed to the mother-in-law, then he and another party would be responsible for the remaining balance.

He sells the house, and after he pays back the bank loan. There was only $6,600 dollars left over. He does not pay his mother-in-law.

[Case 17-1] Silvestri v. Optus Software, Inc.

Parties: Mike Silvestri (Plaintiff) v. Optus Software, Inc. (Defendant)

Question: Was the termination of Mike Silverstri enforceable by Optus Software? and why/why not?

Court's Decision: The court found that the SUBJECTIVE standard applied to this employment contract, and that Optus was within its rights applying that standard.

Extra:

The express condition was documented in words because Mike was under a two-year employment contract. The contract was conditional, because it contained a satisfaction clause.

The satisfaction clause provided an out for the Optus Software should they fail to remain satisfied with Mike's Performance. Meaning they could terminate his employment earlier than two-years.

Mike Silvestri's argument: The satisfaction clause should trigger the application of an objective standard to evaluate the satisfaction. He believes his performance was perfect and that the Optus Software fired him because of consumer complaints.

Objective Standards: Deal with mechanical fitness or utility.

Subjective Standards: Deal with personal taste, judgement, and opinion.

[Case 17-2] Hochster v. De La Tour

Parties: Hochster (Plaintiff) v. De La Tour (Defendant)

Question: Can Hochster file a lawsuit against De La Tour for his Anticipatory Breach?

Court's Decision: The court found that Mr. Hochster should be able to take De La Tour at his word. De La Tour told him that he would breach the contract and so it should be up to Hochster whether he wants to file a lawsuit right away or wait until the date of performance.

Extra:

De La Tour commissioned Hochster to act as a tour guide for a summer tour.

The contract had been created and perfected a substantial amount of time before the tour.

Two weeks before the tour was to start De La Tour tells Hochster that he will not be using his services, nor will Hochster be receiving compensation. Essentially, De La Tour will be announcing that he will breach the contract (Anticipatory Breach/Repudiation).

Hochster filed a lawsuit right after receiving the announcement. He was counting on the commission to keep his financial status.

De La Tour thinks Hochster jumped the gun and should not be allowed to maintain a lawsuit before the date they were scheduled to depart.

[Case 17-4] Northern Corp. v. Chugach Electrical Association

Parties: Norther Corp (Plaintiff) v. Chugach Electrical Association (Defendant)

Question: Can Northern be discharged from their obligations? and why/why not?

Court's Decision: The court determines that this is not objectively impossible for Northern to complete their performance. However, the court invokes the doctrine of commercial impracticability. This occurs because the performance has become so unduly burdensome for Northern. So Northern is discharged from their obligations.

Extra:

Northern is in a performance contract with Chugach. Northern has an obligation to repair/upgrade damage to the Cooper Lake Dam.

The parties agreed that the performance of the repair job would be completed using heavy, pickup tricks. These trucks would load stones and rocks from a quarry to the dam as soon as the lake was sufficiently frozen.

The lake becomes "Sufficiently frozen" with the minds of both parties, but the truck ends up falling through the ice. The driver is saved, but the truck is not.

The parties wait even more months for the lake to "Sufficiently" freeze over. They send more trucks across the lake, but the trucks fall into the ice. The drivers and trucks are both lost.

At this point, Northern wants the contract cancelled for Impossibility. They want their obligations discharged due to impossibility.

Chugach's argument: It is possible to perform the contract, but it's just that they can't use the frozen lake as a roadway. They have to use the long, alternate route to fix the dam.

The court must determine objective impossibility, not subjective impossibility. Only this type of impossibility can discharge obligations.

[Case 18-2] Arrowhead School District v. Klyap

Parties: Arrowhead School District (Plaintiff) v. Kylap (Defendant)

Question: Does Kylap have to pay for the liquidated damages? and why?

Court's Decision: The court found that the claim for damages was not punitive towards Kylap. Even though the damages were hard to quantify, there was a time/quality difference when the school had to search for a replacement. So, the payment for the liquidated damages was upheld as enforceable.

Extra:

Kylap agreed to teach middle schoolers at a Montana school. More specifically, he would teach various middle school levels (6th, 7th, and 8th grade).

This would involve him teaching Math, English, physical education classes.

When he signed the contract with the school, there was a liquidated damage provision included. This means that if there is a breach of contract, it may be difficult to prove the economic losses or the money damages.

The liquidated/stipulated damage would amount to 20% of his salary.

A few weeks before school starts Kylap says that he will breach the contract and will not perform.

The school has to go and find a replacement for all the subjects Kylap was meant to teach. They were able to find applicants for the job, and for hired them for a lower salary.

The school files a lawsuit against Kylap for $4,000 (20% of his salary) for the liquidated damages.

Kylaps: Argument: The Liquidated damages should not be enforced because there were no economic losses to the school. This enforcement would be akin to punishment, rather than recoupment.

[Case 18-3] Prestenbach v. Collins

Parties: Prestenbach (Plaintiff) v. Collins (Defendant)

Question: Was specific performance available to remedy Prestenbach? and why?

Court's Decision: The court ruled in favor of Prestenbach and found that specific performance was available. It only mattered that he would be able to pay at the time of closing, not at the time of exercising his option.

Extra:

Specific Performance is a remedy that can be pursued for the ownership of property that is sufficiently rare and unique, such that no monetary damage will suffice, essentially it is irreplaceable.

Real Estate is always rare and unique. It is always applicable for the specific performance doctrine.

Prestenbach wishes to enforce his option contract to purchase 150 acres of land from Collins for $500,000. The option contract is to pay for the property within a year.

This option contract stated that Prestenbach would put $25,000 as down payment. The remaining $475,000 would be made through a combination of a $225,000 USDA loan and $250,000 financing agreement with Collins.

One nuance was that the option is irrevocable for the three months. Collins is bound to the contract for three months, any time after that he may revoke the contract with notice.

Collins receives a better deal and tries to talk Prestenbach out of the deal.

Prestenbach exercises his option, and Collins argues that specific performance should not applied because Prestenbach was not able to pay cash in full as a part of exercising the option.