Contract Law

Brian Daniel Rogers, Esquire

Summary judgment reversed for failure to establish that no material factual disputes existed or that judgment was appropriate as a matter of law. Melson v. Traxler, No. 72795 (Mo. App. W.D., November 1, 2011), Martin, J.

Plaintiffs Darrel and Mellony Melson (the “Melsons”) and First National Trust Company filed suit asserting various counts in equity against defendants Carl and Martha Traxler (the “Traxlers”) and David Knight in an effort to prevent foreclosure of residential real estate owned by the Melsons. The property was encumbered by two deeds of trust. One of the deeds of trust had been granted to the Traxlers to secure seller financing debt incurred by Keith and Chastity Samuel (the “Samuels”) when they purchased unimproved land for development of the residential neighborhood in which the Melsons built their home. The other deed of trust had been granted by the Samuels to Boone County National Bank to secure construction financing for infrastructure improvements necessary for residential construction. Boone County National Bank and the Traxlers agreed, upon “contemporaneous request,” to issue partial releases of their deeds of trust so that the buyers of each lot took title to their lot free and clear. When the Melsons purchased a lot on the encumbered land from the Samuels, a partial release of the deed of trust was not issued by the Traxlers although a partial release was obtained from the bank.

The Samuels defaulted on their promissory note to the Traxlers. A few years after the default, the Traxlers apparently realized they still held a deed of trust on the Melsons’ lot, and they recorded a notice of deed of trust lien on the Melsons’ lot and threatened foreclosure. The Melsons and First National Bank and Trust Company, which held a deed of trust on the Melsons’ lot, sued in order to prevent foreclosure. The trial court granted the plaintiffs’ motion for summary judgment, and the defendants appealed.

Reversed. The court held that the Traxlers’ deed of trust was unambiguous, and it imposed no obligation on the Traxlers to execute partial deeds of release. The court rejected the argument of the Melsons and First National Bank and Trust Company that the Traxlers’ release of liens with respect to other lots in the housing development modified the deed of trust by a course of conduct to impose an unwritten duty on the Traxlers to execute partial releases.

Judgment for interest and attorneys’ fees against contractor and surety affirmed. Brooke Drywall of Columbia, Inc. v. Building Construction Enterprises, Inc. No. 73355 (Mo. App. W.D., November 8, 2011), Mitchell, P.J.

The defendant contractor failed to complete a construction project for a university on time because of a worldwide steel shortage. The plaintiff subcontractor also failed to complete its work on time. The university withheld payment from the defendant and the defendant in turn withheld payment from the plaintiff. The subcontractor sued for payment and the parties settled for the full principal amount after lengthy litigation. The parties litigated the issues of whether the subcontractor was entitled to attorneys’ fees and interest on the principal amount. The circuit court found that the contractor and the surety that had guaranteed payments due from the contractor to its subcontractors were both liable for interest and attorneys’ fees.

Affirmed. The court of appeals held that the subcontractor was entitled to interest on the principal amount under the terms of the subcontract. The court also held that the subcontractor was the “prevailing party” in the litigation. Although the parties settled for the principal amount, they litigated the issue of interest, and the subcontractor prevailed on that issue. Thus, without reaching the question of whether obtaining a favorable settlement alone would render the subcontractor a prevailing party, the subcontractor was a prevailing party under the subcontract because a court awarded it interest and was thus entitled to attorneys’ fees. The court further held that the surety was liable under the surety bond for the contractor’s obligations toward the subcontractor, including interest and attorneys’ fees.