Arnold v. Erkmann, 69416

• Decision Date: 26 November 1996
• Docket Number: No. 69416,69416
• Citation: 934 S.W.2d 621
• Parties: Pamela ARNOLD, Plaintiff/Appellant, v. James H. ERKMANN, d/b/a Executive Financial Services, and American General Securities, Inc., Defendants/Respondents.
• Court: Missouri Court of Appeals

Page 621

934 S.W.2d 621

Pamela ARNOLD, Plaintiff/Appellant, v. James H. ERKMANN, d/b/a Executive Financial Services, and American General Securities, Inc., Defendants/Respondents.

No. 69416.

Missouri Court of Appeals,

Eastern District,

Division Two.

Nov. 26, 1996.

David G. Waltrip, Jones, Korum, Waltrip & Jones, Clayton, for appellant.

V. Scott Williams, Thompson Coburn, St. Charles, for James Erkmann.

Thomas Cummings, Douglas R. Sprong, Armstrong, Teasdale, Schlafly & Davis, St. Louis, for Am. General Securities, Inc.

CRANE, Presiding Judge.

Plaintiff, Pamela Arnold, appeals from the trial court's judgment dismissing her five count action against defendant James Erkmann and defendant American General Securities, Inc., in which she sought damages and other relief arising out of her purchase of a Brangus cow, her calf, and her embryos from defendant Erkmann, and her later execution of a pooling agreement with Erkmann and others to pool the parties' Brangus heifers and embryos.

According to the petition and attached exhibits, Erkmann was an investment broker/dealer doing business as Executive Financial Services in St. Peters, Missouri, and was a registered agent with American General Securities, Inc. (American General) a brokerage firm registered with the National Association of Securities Dealers. Plaintiff contacted Erkmann in December, 1986 for investment advice.

In June, 1987 plaintiff and her husband, James Arnold ¹, purchased Erkmann's Brangus cow (IS2), her natural calf, and her four embryos from Erkmann for $36,800.00, which sum she and James Arnold paid by check to Erkmann. On August 17, 1987 Erkmann asked plaintiff and James Arnold to reimburse him $6,000.00 for transfer fees he had been billed in connection with the four embryos. The petition does not allege that plaintiff and her husband paid the requested transfer fees.

On September 1, 1987 plaintiff, James Arnold, Erkmann, and Erkmann's brother, Christopher Erkmann, entered into an agreement denominated "Single H Brangus Herd Pooling Agreement". The agreement recited that the parties had entered into an agreement to purchase heifers and embryos produced by Riley Brangus Ranch cows and bulls. It further recited the parties intended to maintain their individual ownership pro rata of the Single H herd but intended to pool the calves of the herd in order to spread the risk of loss due to illness or death of the calves and the benefit of "superior produced calves." The agreement further provided that James Erkmann had a 33% interest in the herd, Christopher Erkmann had a 33% interest in the herd, and James Arnold and plaintiff together had a 33% interest in the herd. Plaintiff alleged that a check which she and James Arnold wrote to Erkmann on September 7, 1987 for $6,000.00 was consideration for the pooling agreement.

On June 1, 1988 Erkmann advised plaintiff and James Arnold that Single H sold one of IS2's embryos for $3,000.00 and IS2's calf for $1,500.00 as well as three other embryos for a total sale of $16,000.00, of which $5,500.00 would go to plaintiff and James Arnold. Erkmann gave plaintiff and James Arnold a promissory note for that amount, which he eventually paid.

Exhibits attached to the petition indicate that the cattle were maintained and bred by Riley Brangus Ranch and/or Riley Cattle Co. (hereinafter "Riley"). Riley provided monthly invoices to Single H showing charges incurred for maintenance fees on Single H cows and recipient cows and credits allowed when calves died. In September, 1989 Riley advised James Arnold that it was replacing IS2 with another cow (27P3/T) because of concerns about IS2's genetic background. Plaintiff alleges that from 1988 through 1990 other animals in the Single H herd were sold, died, or were slaughtered, but that she was never given complete information about their disposition or selling price and did not receive any proceeds from any disposition. She further alleged that Christopher Erkmann assigned his 33% interest to James Erkmann without notice or her consent and James Erkmann subsequently assigned his interest to Riley without her knowledge or consent.

Counts I, II, and III seek relief from Erkmann. In Count I of her petition plaintiff seeks damages for fraud arising out of her purchase from Erkmann of his Brangus cow IS2 and her subsequent execution of the pooling agreement with her husband, Erkmann, and Erkmann's brother. In Count II of her petition, she seeks damages for breach of fiduciary duty arising out of the same transactions. In Count III plaintiff seeks an accounting for breach of partnership duties alleged to have been created by the pooling agreement. In Counts IV and V plaintiff seeks damages for fraud and breach of fiduciary duty from American General arising out of Erkmann's cattle transactions with plaintiff. On appeal plaintiff challenges the trial court's dismissal of each of her five counts for failure to state a claim.

We affirm the judgment dismissing Counts I, II, IV and V for failure to state a claim. We find Count III states a claim for an accounting and reverse the judgment dismissing Count III and remand.

On review of a trial court's order dismissing a claim for failure to state a claim upon which relief can be granted, we accept all properly pleaded facts as true, we give the pleadings their broadest intendment, and we construe all allegations favorably to the pleader. Baugher v. Gates Rubber Co., Inc., 863 S.W.2d 905, 907 (Mo.App.1993). We consider any attached exhibits as part of the petition for all purposes. Id.; Rule 55.12.

A petition must contain a short and plain statement of the facts showing that the pleader is entitled to relief. Rule 55.05. Facts must be alleged to support each essential element of the cause to be pleaded. Berkowski v. St. Louis County, 854 S.W.2d 819, 823 (Mo.App.1993). However, we do not accept the pleader's conclusions. Id. Where the petition contains only conclusions and does not contain the ultimate facts nor any allegations from which to infer those facts, a motion to dismiss is properly granted. Id.; ITT Commercial Finance Corp. v. Mid-Am. Marine, 854 S.W.2d 371, 379 (Mo. banc 1993).

CLAIMS AGAINST JAMES ERKMANN

Count I

For her first point plaintiff asserts that the trial court erred in dismissing Count I against Erkmann because she alleged all of the elements of a claim of fraud. Erkmann responds that plaintiff failed to allege a misrepresentation of existing fact on which she had the right to rely which was false when made.

To state a claim for fraudulent misrepresentation, a plaintiff must plead facts which support each of the following elements:

(1) a false, material representation;

(2) the speaker's knowledge of its falsity or his ignorance of its truth;

(3) the speaker's intent that it should be acted upon by the hearer in the manner reasonably contemplated;

(4) the hearer's ignorance of the falsity of the representation;

(5) the hearer's reliance on its truth;

(6) the hearer's right to rely thereon; and

(7) the hearer's consequent and proximately caused injury.

State ex rel. PaineWebber v. Voorhees, 891 S.W.2d 126, 128 (Mo. banc 1995); Stavrides v. Zerjav, 848 S.W.2d 523, 528 (Mo.App.1993). The rules governing the pleading of fraud are more precise than those which generally govern pleading a claim for relief. Miller v. Ford Motor Co., 732 S.W.2d 564, 565 (Mo.App.1987). The circumstances of each element of fraud must be stated with particularity. Id.; PaineWebber, 891 S.W.2d at 128; Rule 55.15. The fraud must clearly appear from the allegations of fact and be independent of conclusions. Miller, 732 S.W.2d at 565. Failure to properly plead any essential element of fraud is fatally defective and renders the petition subject to dismissal. Id.; Mullen v. G.M.A.C., 919 S.W.2d 7, 8 (Mo.App.1996).

In her brief plaintiff sets out thirteen of the forty-six allegations constituting Count I and argues that these allegations sufficiently allege the elements of fraud in connection with her purchase of the cow IS2 for $36,800.00 and her execution of the pooling agreement for $6,000.00. We will consider the allegations with respect to each of these transactions.

a. Cattle Purchase

Plaintiff alleges the following representations were made with respect to the cow IS2:

32. Although the Brangus cattle market collapsed in 1986, as the result of a change in the tax laws, Defendant Erkmann represented to Plaintiff in 1987 that the Brangus cattle industry was lucrative and their investment therein was safe with adequate security and that they could expect substantial returns to commence within six (6) weeks after the purchase of IS2 on June 13, 1987, and thereafter, on a regular basis.

33. Defendant Erkmann further represented IS2 was highly valuable and of great breeding potential, and its market value was therefore $36,800.00.

The prediction of future success and profitability contained in paragraph 32 is not a misrepresentation of past or existing fact and cannot be the subject of a fraud action. To constitute fraud, the alleged misrepresentation must relate to a past or existing fact. Titan Const. Co. v. Mark Twain Kansas City Bank, 887 S.W.2d 454, 459 (Mo.App.1994) . Statements and representations as to expectations and predictions for the future are insufficient to authorize a recovery for fraudulent misrepresentation. Arnott v. Kruse, 730 S.W.2d 597, 600 (Mo.App.1987). In particular, predictions and projections regarding the future profitability of a business or investment cannot form a basis for fraud as a matter of law. Trotter's Corp. v. Ringleader Restaurants, 929 S.W.2d 935, 940 (Mo.App.1996).

The representations that the Brangus cattle industry was lucrative and that the cow IS2 was highly valuable and of great breeding potential are non-actionable, non-specific opinions and commendatory trade talk. Puffing and sales propaganda are ordinarily not representations which can be the basis for a cause of...