Missouri State Contract Cases 2012 (Part 15): Lost Profits and Constructive Eviction

by Brian Rogers on January 15, 2013

in Missouri Contract Cases

Midwest Coal LLC v. Cabanas

In an action for fraudulent misrepresentation, the Missouri Court of Appeals, Western District affirmed the trial court’s grant of summary judgment in favor of the defendant, concluding that the plaintiff, a coal company, was unable to prove damages for lost profits.

Lost profits are generally not recoverable as damages, because they are too speculative; however, they are recoverable with sufficient proof to provide a rational estimate of the amount of lost profit. In this case, however, the plaintiff had never turned a profit and was unable prove its case. (“With no history of profitability, Plaintiff cannot present sufficient evidence to prove lost profits from an existing commercial business.”)

The plaintiff argued, though, that because it sought lost profits with respect to a single transaction, it wasn’t required to prove the profitability of its entire business. The plaintiff relied on Missouri cases in which the plaintiff recovered its lost profits on a specific contract or transaction. Appellate courts in two of those cases held that a plaintiff is not required to prove past profitability when it sues for damages arising directly out of a breach of contract. The third court affirmed an award of lost profits from a single transaction on a fraudulent misrepresentation claim. Even so, the plaintiff was unable to prove lost profits in the transaction at issue, because it couldn’t prove that there was even a market for the plaintiff’s blended-coal product.

The appellate court further held that even if it treated the plaintiff as a new business, which requires a stronger showing of the basis for lost profits but does not require proof of past profitability, the plaintiff would still fall short.

Whelan Security Co. v. Kennebrew

I discuss this case, which involved the enforceability of non-competition and non-solicitation clauses in the employment agreements of former employees, in Non-Competes in Missouri.

Scott Salvage Yard, LLC v. Gifford

The Missouri Court of Appeals, Eastern District upheld a jury award of compensatory and punitive damages in an action for fraudulent inducement. The defendant, a salvage yard owner, promised the plaintiff, a metal recycler, that he would provide a certain number of cars for crushing and recycling, knowing that he would not do so. He also deposited a $25,000 check he had agreed to hold until the work was completed and extracted an additional $10,000 from the plaintiff the day before evicting the plaintiff from his salvage yard.

Whyzmuzis v. Plaza Shoe Store, Inc.

The Missouri Court of Appeals, Southern District upheld a trial court’s judgment in favor of a tenant in a constructive eviction action. At issue was whether the tenant or lessor was responsible for structural roof repairs in a triple-net lease where responsibility for structural repairs wasn’t expressly allocated to either party. The appellate court applied a six-factor test set out in the California case, Hadian v. Schwartz, 884 P.2d 46 (Cal. 1994):

  1. Comparison of the cost of the curative action to the rent reserved.
  2. The lease term.
  3. Relationship of the benefit to the lessee vs. the lessor.
  4. Whether or not the curative action was structural.
  5. Interference with the lessee’s use of the premises during the curative action.
  6. Likelihood that the parties contemplated the curative action.

Fischer v. First American Title Insurance Co.

The Missouri Court of Appeals, Western District upheld the trial court’s granting of judgment notwithstanding the verdict in a title insurance coverage dispute. The title insurer had refused to defend its insured in an adverse possession action citing a parties in possession exclusion in the policy, which stated, “This policy does not insure against loss or damage, and [the insurer] will not pay costs, attorney’s fees or expenses that arise by reason of … [r]ights or claims of parties in possession not shown by the Public Record.” The appellate court held that the term “parties in possession” wasn’t ambiguous although it wasn’t defined in the policy.

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