Blaine v. J.E. Jones Const. Co.

• Decision Date: 29 September 1992
• Docket Number: 59308,Nos. 59307,s. 59307
• Court: Missouri Court of Appeals
• Parties: Steven & Cynthia BLAINE, et al., Appellants, v. J.E. JONES CONSTRUCTION COMPANY, et al., Respondents, Steven & Cynthia BLAINE, et al., Respondents, v. J.E. JONES CONSTRUCTION COMPANY, et al., Appellants.

Page 703

841 S.W.2d 703

Steven & Cynthia BLAINE, et al., Appellants, v. J.E. JONES CONSTRUCTION COMPANY, et al., Respondents, Steven & Cynthia BLAINE, et al., Respondents, v. J.E. JONES CONSTRUCTION COMPANY, et al., Appellants.

Nos. 59307, 59308.

Missouri Court of Appeals,

Eastern District,

Division Two.

Sept. 29, 1992.

Motion for Rehearing and/or Transfer to

Supreme Court Denied

Nov. 5, 1992.

Application to Transfer Denied Dec. 18, 1992.

Stefan J. Glynias, St. Louis, for appellants.

Louis Joseph Garavaglia, Jr., St. Ann, Steven W. Koslovsky, Clayton, Priscilla F. Gunn, St. Louis, John Miller, Jefferson City, for respondents.

SATZ, Judge.

This is a tort action in fraud. Plaintiffs are owners of homes in Westglen Farms Subdivision in St. Louis County. They purchased their homes from defendant, J.E. Jones Construction Company (Jones Company), the company that developed the subdivision and constructed their homes. Plaintiffs sued the Jones Company for fraud, alleging they were induced into purchasing their homes by the Jones Company's fraudulent concealment of its intent to build an apartment complex in the subdivision near their homes.

In several amended petitions, plaintiffs also attempted to establish themselves as the proper representatives of an association or of a class of other purchasers of homes in the subdivision to sue the Jones Company for fraud. The Jones Company's several motions to dismiss the relevant counts in the amended petitions were granted.

Plaintiffs also attempted to join Gordon A. Gundaker Real Estate Company, Inc. (Gundaker) as a defendant, alleging Gundaker acted as the sales agent for the Jones Company, or, in the alternative, alleging Gundaker and the Jones Company conspired to defraud plaintiffs. Gundaker's motions to dismiss the counts containing these allegations were granted.

Plaintiffs submitted their separate claims of fraud to the jury based upon fraudulent concealment. The jury returned separate verdicts for the plaintiffs and judgments were entered accordingly. The Jones Company appeals from these verdicts and judgments. Plaintiffs appeal from the court's dismissal of their representative counts, their conspiracy count and additional counts against Gundaker.

We reverse the judgments in favor of plaintiffs, affirm the court's dismissals of the noted counts, and direct the court to enter judgment in favor of the Jones Company and Gundaker.

Plaintiffs' claim of fraud against the Jones Company was based upon "fraudulent concealment", as alleged in plaintiffs' eighth and final amended petition and as submitted to the jury. Plaintiffs' contention on appeal, as it was at trial, is that the Jones Company owed them the duty to disclose its intent to build an apartment complex in their subdivision near their homes. The Jones Company's failure to disclose the plan, plaintiffs now contend, as they alleged at trial, was a "fraudulent concealment". The Jones Company responds that it did not have this duty to disclose. We agree with defendant.

Fraudulent Concealment/Passive Nondisclosure

A purchaser induced into a contract of sale of land or of a chattel by the fraud of the seller may affirm the contract and sue in fraud for damages or may disaffirm the contract and sue for recission and restitution. E.g., Denny v. Guyton, 327 Mo. 1030, 40 S.W.2d 562, 591 (banc 1931). Whether the particular action for fraud involves land or a chattel and regardless of the remedy chosen, our courts, at times, use the same general definitions of the substantive elements of fraud and of the procedural rules governing that action. The general policy consideration cutting across all these lines is fair conduct.

Generally, then, in law and in equity, one of the essential elements of fraud is a false representation. E.g., Grindley v. Blankenship, 671 S.W.2d 393, 395 (Mo.App.1984). The false representation may be made by spoken words or meaningful affirmative conduct. E.g., Wion v. Carl I. Brown & Co., 808 S.W.2d 950, 954-955 (Mo.App.1991). The spoken words may be completely false or half-truths which convey or create the same impression. E.g., Maples v. Charles Burt Realtor, Inc., 690 S.W.2d 202, 209 (Mo.App.1985). A party who speaks must speak truthfully. Id.

Silence or a passive failure to disclose facts is another matter. Early on, it was said that fraud will not lie for "tacit nondisclosure". Prosser and Keeton, The Law of Torts, § 106 at 737 (5th ed. 1984). This statement reflects the business ethic of caveat emptor "together with a touch of the old tort notion that there can be no liability for nonfeasance, or merely doing nothing." Id.

This statement has been mitigated by limitations and exceptions which almost swallow it up. Thus, we do impose a duty to disclose information where a classical fiduciary relationship exists, or, in an extension of that relationship, where one party expressly or by clear implication places a special confidence in the other. See, e.g., Jones v. Arnold, 359 Mo. 161, 221 S.W.2d 187, 193 (1949); Centerre Bank of Independence v. Bliss, 765 S.W.2d 276, 284 (Mo.App.1988); Fairmont Foods Co. v. Skelly Oil Co., 616 S.W.2d 548, 550-551 (Mo.App.1981). The latter exception is quite often loosely characterized as a relationship where one of the parties has superior knowledge which is not within the fair and reasonable reach of the other. See, e.g., Fairmont Foods, supra, at 550. In these situations, the passive nondisclosure of information, one party has an affirmative duty to disclose information, and that party's failure to disclose the information serves as a substitute for the false representation element required in fraud. Triggs v. Risinger, 772 S.W.2d 381, 382 (Mo.App.1989); see, also, Scott v. Hill, 330 Mo. 490, 50 S.W.2d 110, 111 (1932). But, in these situations, the real question is, as it is here, when is there a duty to speak and disclose.

Duty of the Jones Company/Plaintiffs' Theory of Recovery

Plaintiffs filed eight petitions in this cause, their original petition and seven amended petitions. In their original petition, as we read it, plaintiffs base their claim of fraud on alleged false representations made by the Jones Company or by its agent Gundaker. More specifically, plaintiffs allege: In July 1979, the Jones Company recorded a plan to develop the Westglen Farm Subdivision which permitted the construction of single family homes, as well as 150 multi-family units and about 6 acres of commercial units at the entrance to the subdivision. "At the time the plat was recorded, The Jones Company planned to construct commercial buildings and apartments on the tract of property at the entrance to the subdivision ...." From 1979 through 1986, however, the Jones Company, itself or through its agent Gundaker, allegedly "made representations" to plaintiffs that this tract of land "was to be common ground to the subdivision; was to be condominiums; was to be single family homes; or had not been planned for development." In 1985, the Jones Company allegedly began to construct an apartment complex on the tract in question. The Jones Company had an alleged duty to disclose "its intent to construct apartments and commercial buildings" on this tract. This claim of fraud is clearly based upon false representations, and the claim remains the same through plaintiffs' next five amended petitions.

Then, in their "Sixth Amended Petition", plaintiffs abandon this basis for their claim of fraud and base their claim on the Jones Company's affirmative duty to disclose its alleged plan to build apartments and commercial buildings, the duty apparently being created solely by the business relationship between the Jones Company and plaintiffs. More specifically, plaintiffs make the following allegations: Plaintiffs repeat the allegations describing the Jones Company's recorded plan and its undisclosed intent to build apartments and commercial buildings. The Jones Company, plaintiffs then allege, "had a duty to disclose [to plaintiffs] its intent to construct apartments and commercial buildings or its knowledge that apartments and/or commercial buildings would be constructed at the entrance" to the subdivision. However, plaintiffs allege, no plaintiff "was ... advised of the contemplated construction of apartments and commercial development prior to purchasing [his or her] home." These identical allegations were repeated in plaintiffs last and "Seventh Amended Petition".

To us, these pleadings clearly show that plaintiffs abandoned their original theory of fraud based upon affirmative false representations and chose as their final theory a duty to disclose based upon their relation to the Jones Company. The reason for this change is not expressly discussed by the parties, and it is not readily apparent. However, paralleling this change of theory, plaintiffs were attempting to establish themselves as representatives of an association or of a class of other purchasers of homes in the subdivision. These representative actions either require common issues of law or fact, Rule 52.08(a) (class action), or representatives who will fairly and adequately protect the interests of the association and its members, Rule 52.10 (association action). The possibility that the same representations were not made to all members of the association or of the class may have caused plaintiffs to abandon their original theory and to attempt to establish the commonality required by the Rules by alleging in their final petition that the Jones Company owed the same duty to disclose information of its alleged plan to all purchasers. Plaintiffs stated this in one of their memoranda to the trial court, and tacitly admit this in their brief when they say the allegations in the petitions varied "not because they were unable to state a cause of action for misrepresentation against The Jones Company, but because of their desire to bring their claims as either an association action or a class action."

Be that as...