Claiming the Doctrine of Impossibility in the failure to repay a debt isn’t as easy as alleging a business was destroyed due to COVID-19.
“You have to present more evidence because Missouri law is very clear that you have to show that you took every possible option to try and repay the money and that you failed to do so,” said St. Louis attorney John Reeves. “It's not sufficient to show that you weren't able to run your business because of COVID. You have to show more.”
Reeves represented Premier Valet LLC, which sued Premier Valet Services after it failed to pay off a $260,000 loan from 2012. The valet company employed the doctrine of impossibility in its argument that when the pandemic emerged in 2020 - that it could not operate its business due to bars, restaurants and lounges that closed, according to media reports.
“They didn't present any evidence whatsoever as to whether they tried to get other work during that time or did they seek other investors for their business,” Reeves told the St. Louis Record. “In the absence of that, the impossibility doctrine didn't apply.”
The doctrine excuses business obligations when there is an act of God, a third party, or law that interferes with operations, however the Eastern District of Missouri Court of Appeals decided that COVID doesn't excuse a debtor from meeting their financial obligations.
“This was the first time COVID had ever applied to this but basically under the circumstances of this, they got it right,” Reeves said. “Simply saying your business failed, isn't sufficient to say that you couldn't repay the loan.”
Judge Lisa Page wrote in the court's opinion that Premier Valet Services did not try to obtain funds from other sources or attempt to negotiate new terms.
“They defaulted on the note in 2018, two years before COVID hit, but they continued making monthly payments,” Reeves said. “Then they stopped once COVID hit. It's critical to note that this was a suit just for the repayment of money. If it had been something different, like a tenancy case, the ruling might be different.”
Premier Valet Services must now repay the remaining $145,000 debt owed.