Artilla Cove Resort, Inc. v. Hartley
| Decision Date | 22 April 2002 |
| Docket Number | No. 24140.,24140. |
| Parties | ARTILLA COVE RESORT, INC., Berton R. Leman and Gwendolyn A. Leman, Husband and Wife, Plaintiffs-Respondents, v. Earl D. HARTLEY and Eileen Hartley, Husband and Wife, Defendants-Appellants. |
| Court | Missouri Court of Appeals |
Glenn P. Green, Thomas M. Benson, Lowther, Johnson, Joyner, Lowther, Cully & Housley, LLC, Springfield, for appellants.
Daniel R. Wichmer, Lathrop & Gage, L.C., for respondents.
Earl D. Hartley and Eileen Hartley (defendants) appeal a judgment in an action for fraudulent misrepresentation brought by Artilla Cove Resort, Inc., Berton R. Leman and Gwendolyn A. Leman (referred to, collectively, as "plaintiffs"). This court affirms.
This case was tried before the court without a jury. Appellate review is undertaken pursuant to Rule 84.13(d). The judgment will be affirmed unless it is not supported by substantial evidence, is against the weight of the evidence or erroneously declares or applies the law. Parnell v. Sherman, 899 S.W.2d 900, 901 (Mo. App.1995). This court defers to the trial court's superior ability to judge the credibility of witnesses. Id. Evidence and permissible inferences consistent with the findings of the trial court are accepted and contradictory evidence disregarded. Id.
In 1995 defendants owned Artilla Cove Resort. The resort is located in Stone County, Missouri, near Table Rock Lake. It consists of ten rental units, a main building, and a commercial dock. The main building includes the resort office and owner's residence. Laundry facilities, a storage area, and two of the rental units are in the basement of the main building.
Mr. and Mrs. Leman were interested in buying a resort. A realtor showed them Artilla Cove Resort. The real estate listing described the resort as in "excellent" condition. Mr. and Mrs. Leman toured the resort. The basement of the main building was "jam packed full of stuff." The east basement wall was covered with plywood with shelving alongside it. Mr. Leman was asked whether their tour of the basement included going everywhere downstairs or whether they just walked in, looked around, and went back upstairs. He answered:
Pretty much just kind of walked in. The—The downstairs was—was loaded with stuff, junk and storage, and a little of everything, and there was kind of a path through it. We were able to walk through and get a general idea of what was there, but she was—was pretty chock full of stuff so you really couldn't look into every nook and cranny.
The Lemans asked defendants questions about the resort. He explained, "So we kind of relied on—on that [sic] they told us." He continued,
Mr. and Mrs. Leman visited Artilla Cove Resort twice after the realtor showed them the property. They ultimately contracted to buy the resort. The sale was closed November 7, 1995. The real estate on which it was situate was conveyed to Artilla Cove Resort, Inc., a corporation formed by Mr. and Mrs. Leman. The Lemans began operating the resort three days after the closing.
In March 1998, the Lemans decided to tear out the shelving that was along the plywood wall in the basement and have new shelving installed that would be more substantial. Mr. Leman had a contractor come to the resort. Mr. Leman testified:
[W]e asked him to go tear those old things down and put us up a new set of shelves. And upon doing, he started taking the old shelves and cupboards out, got them out of the way, and was looking at how he was going to install the new shelves that we had asked him to put up for us, and he was having a problem figuring out he [sic] could anchor them onto the wall.
The contractor began looking for studding behind the plywood wall to use as anchors for new shelves and cupboards, but could not find any. Mr. Leman told the trial court, "And he would push on the wall and be soft in one area and he's [sic] push on it somewhere else and be hard and he asked me if I knew anything about [sic] and I said I hadn't a clue."
They decided to take some of the plywood wall down to see what was behind it. Mr. Lehman told what they found:
[The wall] had been secured at the top by furring strips nailed to the ceiling, and then furring strips nailed to the floor, approximately three to four inches from the base of the cinderblock [sic] wall. And then the plywood was, in turn, nailed to the top and bottom there, with furring strips between the sheets of plywood to hold them together.
The foundation wall behind the plywood was made of cinder block. It was bulging from the outside into the basement. A door frame that had been installed alongside the plywood wall was adjacent to the protrusion of the foundation wall near the center of the frame, but the base of the door frame was "pushed ... out about four inches or so." There was an area midway along the foundation wall that Mr. Lehman explained was "where the largest area of bulge or collapsing was taking place." It had a quarter inch crack that ran "almost the entire length of the room." The plywood wall had been constructed to look "plumb," although the foundation wall behind it was bulged and cracked. At one place, the foundation wall was bowed inward up to five and one-half inches. There were other areas of the wall that had cracks horizontally and vertically.
Ben Anderson, an engineer with Scott Consulting Engineers, inspected the wall. He stated that the bow was due to earth pressure. Seven and one-half feet of the eight-foot wall was underground. The wall supported the earth on the outside of the basement, the floor joist, the outside wall that was above ground, and the roof of the building that was built over the basement. Mr. Anderson stated the wall was not structurally sound; that it was in danger of imminent collapse. He recommended a temporary shoring system that plaintiffs' contractor built to prevent further movement until the wall could be replaced.
Defendants' first point on appeal is two-fold. It asserts the trial court misapplied the law by applying the wrong burden of proof in evaluating the evidence; that the trial court applied the preponderance of evidence standard of proof but should have required proof by clear and convincing evidence. Point I further asserts the judgment was against the weight of the evidence in that the evidence was not sufficient to prove defendants had knowledge that the basement wall of the main building was defective.
The trial court entered written findings of fact and conclusions of law. Its conclusions of law include the declaration that plaintiffs were required to prove their case by a preponderance of the evidence. Defendants' argue this was error; that Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104 (Mo. banc 1996), requires fraudulent misrepresentation to be proven by clear and cogent evidence.1
The language in Rodriguez on which defendants rely states:
The function of the standard of proof is to "allocate the risk of error between the litigants and to indicate the relative importance attached to the ultimate decision." Addington v. Texas, 441 U.S. 418, 423, 99 S.Ct. 1804, 1808, 60 L.Ed.2d 323, 329 (1979). The clear and convincing standard specifically is used
in civil cases involving allegations of fraud or some other quasi-criminal wrongdoing by the defendant. The interests at stake in those cases are deemed to be more substantial than mere loss of money and some jurisdictions accordingly reduce the risk to the defendant of having his reputation tarnished erroneously by increasing the plaintiff's burden of proof.
Id. Missouri already requires this higher standard of proof in several types of civil cases. See [Kansas City v.] Keene [Corp.], 855 S.W.2d [360] at 377 [(Mo.banc 1993) ].
Rodriguez reviewed the purpose of punitive damages and concluded punitive damages were like other issues for which the applicable standard of proof was clear and convincing evidence; that "the remedy [of punitive damages] is so extraordinary or harsh that it should be applied only sparingly." Id. Rodriguez held that the clear and convincing evidence standard would thereafter apply in Missouri to common law punitive damages claims. Id. at 111.
The same argument that defendants make in this case regarding the applicability of the clear and convincing evidence standard of proof was made in Brandt Distributing Co., Inc. v. Federal Insurance Co., 247 F.3d 822 (8th Cir.2001). Brandt was a contract action that sought recovery on a fire insurance policy. The insurer denied coverage on the basis that "(1) Brandt [the insured] concealed or misrepresented its alleged involvement in causing the fire, and (2) Brandt was involved in intentionally causing the fire, either directly or indirectly." Id. at 823. The trial court instructed the jury that the burden of proof for the insurer's affirmative defense of arson was the "greater weight of the evidence" rather than a "clear and convincing" standard. Id. at 824. On appeal, Brandt contended this was error; that because of the language in Rodriguez Missouri law, the law applicable in the case, required a clear and convincing evidence standard in order to support a defense of arson.
Brandt summarized the burden of proof as follows:
In Missouri, it is well established that the burden of proof of an insurer is to prove its allegations of arson as a defense to coverage by a preponderance of the evidence. McCreery v. Continental Ins. Co., 788 S.W.2d 307, 310 (Mo.App. 1990). Nonetheless, Brandt argues that Rodriguez changed the law and that the burden should be greater because the interests at stake reflect more than the loss of money, specifically the defendant's reputation. Brandt...
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