Opinion ID: 820514
Heading Depth: 2
Heading Rank: 4

Heading: Commercial Frustration

Text: Hazelwood claims the doctrine of commercial frustration relieves Hazelwood of its obligations under the loan agreements and guaranty. We disagree. The Supreme Court of Missouri has not expressly adopted the doctrine of commercial frustration, see Ellis Gray Mill. Co. v. Sheppard, 222 S.W.2d 742, 748 (Mo. 1949) (recognizing the doctrine had not been adopted in Missouri as of 1949), although the doctrine has been applied by one of Missouri’s intermediate appellate courts, see Howard v. Nicholson, 556 S.W.2d 477, 481-82 (Mo. Ct. App. 1977). The Howard court explained, “if the happening of an event not foreseen by the parties and not caused by or under the control of either party has destroyed or nearly destroyed either the value of the performance or the object or purpose of the contract, then the parties are excused from further performance.” Id. We assume for the sake of discussion the Supreme Court of Missouri would recognize the commercial frustration doctrine as expounded by Howard. Cf. Friedberg v. Chubb & Son, Inc., 691 F.3d 948, 951 (8th Cir. 2012) (“We must predict how the Supreme Court of [Missouri] would rule, and we follow decisions of the intermediate state court when they are the best evidence of [Missouri] law.”). Applying the Howard standard, Hazelwood is not entitled to relief. We suspect methane gas contamination during environmental remediation of a landfill is a foreseeable risk. See Conlon Grp., Inc. v. City of St. Louis, 980 S.W.2d 37, 40-41 -12- (Mo. Ct. App. 1998) (concluding the loss was foreseeable and the commercial frustration doctrine did not apply when a real estate developer discovered severe structural defects in a 100-year-old building the developer had planned to refurbish). We need not address this contingency directly. Even if the methane gas contamination were an unforeseeable occurrence, the contamination did not result in “a total or practically total destruction of the purpose or object of the transaction.” Howard, 556 S.W.2d at 483. In its statement of facts, Hazelwood declares “[t]he Loan was made for the stated purpose of the environmental remediation by third-parties and the commercial real estate development of the Property by” HLC. HLC already has acquired the property and can still pursue “environmental remediation” and ultimately “commercial real estate development of the Property.” Hazelwood’s plan may have “become less profitable,” or Hazelwood may even “sustain a loss,” Restatement (Second) of Contracts (Restatement) § 265 cmt. a (1981), but loss of profit is not a sufficient ground to cancel a contract under the commercial frustration doctrine, which requires the “total or practically total destruction of the purpose or object of the transaction,” Howard, 556 S.W.2d at 483. See also Restatement § 265 cmt. a. The district court did not err in granting summary judgment to the bank on its breach of contract claim against HLC, or the breach of guaranty claim against McKee.