Who Should Write Settlement Agreements? The Courts?

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Today’s Ruminations is triggered by a court decision that may not have reached the “correct” result. If that suspicion is correct, then why do we promulgate its holding? There’s a simple answer. Had more talent been employed in negotiating the agreement dissected by the court, there would have been no court involvement. There would also be a different blog posting today.

The facts appear to be somewhat simple. They might be simpler had the court shown more of the actual agreement in its written decision. Instead, it gave us its characterization. Normally, when courts do so, they do it in a way that tilts the “story” to support its decision. So, we’ll assume that the characterization is the strongest the court could write to support the outcome. Enough with the mystery – here’s the story.

A fitness center leased space. The lease was subsequently amended, at which time the tenant’s owner signed a personal guaranty. The document was denominated as a limited guaranty, but the only “limitation” was its dollar amount cap. Otherwise, it appears to have been what we call a “come heck or high water” obligation. [Some would give it a different, but similar nickname.] The guaranty expressly said that the guarantor’s liability was “co-extensive with that of” the tenant. [Read more…]

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Chickens, Eggs, And Waivers of Claims

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When a tenant’s property is ruined by rain coming through the roof of its leased space, what caused the damage? Was it the water or was it the landlord’s failure to repair the roof? That’s today’s issue to Ruminate about.

Right after a tenant moved into its space, it noticed the presence of water after what was called, “inclement weather.” We might have called it “rain.” So, it notified its landlord. Without delay, the landlord dispatched someone to investigate. His conclusion was the water was coming from an air conditioning unit. The tenant immediately called an independent HVAC repair company. Its conclusion was that the roof was leaking and the air conditioning unit was fine. The landlord did not make any roof repairs.

After that, each time it rained, water came into the space. After one rainstorm, only four months after the tenant moved in, so much water came in that there was damage to equipment, furniture, interior walls, and to over one million dollars (at retail) of inventory. At that time, the tenant again put its landlord on notice of the leaking roof, the damage caused, and the failure of the landlord to make repairs. The landlord had the roof inspected again. This time, its foreman determined that the water intrusion was the result of the building’s improperly constructed exterior and by something wrong with its downspout. Apparently, the landlord still did nothing, not even in response to repeated notices subsequently sent by its tenant every time water came into the space. A lawsuit followed. [Read more…]

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Did They Guaranty The Lease For Its Extended Term?

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We’ve written about guaranties before, most directly in postings that can be seen by clicking: HERE and HERE. Today, we drill down to the enforceability of a lease guaranty after the lease has been modified, but without notice to or knowledge of the guarantor. Today’s Ruminating is informed by a January, 2018 unpublished opinion from the Maryland Court of Special Appeals. [Readable by clicking: HERE.]

A church’s lease was guaranteed by its Pastor, his wife, and six other church members. The church defaulted and its landlord sued for the remaining rent under a three-year extension properly signed by the Pastor on behalf of the church, but without the knowledge of the six church members. In fact, they didn’t even have a hint that the lease had been extended despite each being some form of “leader” in the church, though those roles appeared to be substantially ceremonial. Their only financial connection to the church was their obligation to tithe to it. The lower court described them as “commercially” unsophisticated.

The lease extension was by way of amendment. The lease did not have an extension option. The additional three-year term was related to a rent reduction sought by the Pastor and agreed-to by the landlord. The church performed until it didn’t with eight months to go in the lease’s term. At that time, by agreement with its landlord, the church vacated its premises. [Read more…]

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Again: Say What You Mean; Mean What You Say!

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It’s been a while since we used these words: “Say What You Mean; Mean What You Say!” Well, we’re back (and, no, this isn’t going to be a dinosaur’s story.) Today, we report on an unremarkable, unpublished January 22, 2018 Order out of a United States District Court in Illinois. That’s what brings us back to those words.

Before we reveal exactly what we saw in that Order, we’ll start with a simple thought: How many times have you seen the following formulation?

If Grantor begins such repair work or to performs such obligations, but fails to promptly and diligently prosecute the same to completion within thirty (30) days of so beginning, … [Ed. – Note the underlined words]

Well, that drives us crazy. Obviously, the parties meant “within thirty (30) days after.” Yes, “after” is obvious in our example, but every time you encounter this formulation, think about whether, in the case in front of you, you really meant to say that the action could happen within the 30 days BEFORE. [Read more…]

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Groceries And Other Definitions Revisited

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Groceries, sandwiches, ice cream, supermarkets, restaurants, department stores, variety stores – oh, the words we use, what do they mean? Today, we revisit one of our most-read blog postings because a federal appeals court revisited the underlying case (again). We’re “talking” about the Winn-Dixie case. Our “take” on that underlying case can be read by clicking: HERE. Ruminations urges readers to refresh their memories now by re-reading our earlier blog posting

Winn-Dixie, a supermarket chain, won a court decision in Florida where the lower court ruled that “groceries” included soup, aluminum foil, and similar items. As a result, it ruled that dozens of “dollar” type stores run by three retailers were in violation of a provision in the supermarket’s lease prohibiting others from selling groceries. Basically, the federal court that first heard the lawsuit looked at an earlier state court ruling, and (kind of properly) treated it as binding on itself, the federal court. [Read more…]

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Waiving Non-Waiver Provisions By Waiving Such Provisions (Again)

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We’ve written about the legal concept of “waiver” too many times to warrant furnishing any links to earlier blog postings. To sum it up succinctly, we’ll start with an example of a pretty familiar provision found in most agreements such as leases and mortgages (to keep us within the real property family). It reads as follows:

All waivers must be in writing and signed by the waiving party. A party’s failure to enforce any provisions of this [lease] will not be a waiver and will not estop that party from enforcing that provision or any other provision of this [lease] in the future.

If an English-speaking visitor arrived from outer space and, after completing its abduction of one or more of the world’s inhabitants, read this, it would think there could be no waiver if it were not given in writing. It would be wrong. Likewise, native-born earthlings should always have some doubt as to whether to rely solely on the ability to read. Context (and established law) matter.

Generally speaking, at least under United States jurisprudence, the Texas Supreme Court, in a clarifying (for Texas) May 12, 2017 decision, wrote the following: [Read more…]

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Real Estate Community Expectations And The Agreements We Reach

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In writing for a broad audience in a somewhat breezy manner, Ruminations frequently fears it is misleading some readers. As hard as we try to incorporate appropriate caveats when expounding on legal principles, Ruminations is quite aware of a built-in shortcoming. It isn’t enough to carefully highlight the limitations of what appears in a blog posting. It isn’t enough to warn that this blog is written to provoke discussion and is not written as a substitute for real legal advice. These blog postings discuss matters of law, but the “law” means nothing in the abstract. It only matters when applied to specific facts being examined. The very same “law” applied to two different situations can produce starkly different  ̶  sometimes seemingly opposite  ̶  results. That’s because the law is intended to support a civil society and, in such a society, outcomes are expected to meet community expectations.

An excellent example of a law crafted to meet community expectations is Article 2 of the Uniform Commercial Code. That’s the part of the “UCC” governing the sale of goods. Basically, it works in a number of ways. One of those ways is to act as a “gap filler.” That’s not something one buys at Home Depot, Lowe’s, or an Ace Hardware store. In this context, a gap filler is a contract provision that the contracting parties didn’t write down. The Act’s “gap fillers” are actually a codification of “what really goes on,” hence part of a “Code.” It codifies practices in the commercial community. Basically, in this role, Article 2’s function is to create rules that persons in that community, the one in which buyers and sellers transact in goods, would expect in the absence of something specifically to the contrary in their specific agreement. [Read more…]

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Grammar And Optical Illusions

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Ruminations has never really figured out when to use “which” and when to use “that.” No matter how many times we read that one is used with dependent clauses and the other is used with independent clauses, the rule never sinks in. We don’t even remember which is used with which. To us, it seems like the optical illusion of a hollow mask where you see either a convex face or a concave face depending on who knows what. Small comfort to us that we think we are in good company in this failing. [To learn more about the hollow mask, click: HERE.]

So, does this have anything to do with legal matters? We think so based on a recent decision out of the Delaware Chancery Court, one pitting lawyers from a pair of top drawer Delaware and Washington DC firms against a similar pair of top draw firms from Delaware and Washington DC. And, like many other disputes we’ve read about in judicial decisions, we just wonder: “How do some of us keep a straight face when making some of these arguments?” [Read more…]

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