Droz v. Trump

• Decision Date: 24 March 1998
• Docket Number: No. WD,WD
• Citation: 965 S.W.2d 436
• Parties: Clifford J. DROZ, Appellant, v. Laura TRUMP, Respondent. 53650.
• Court: Missouri Court of Appeals

Page 436

965 S.W.2d 436

Clifford J. DROZ, Appellant, v. Laura TRUMP, Respondent.

No. WD 53650.

Missouri Court of Appeals,

Western District.

March 24, 1998.

Russell E. Steele, Kirksville, for Appellant.

Allan D. Seidel, Trenton, for Respondent.

Before SPINDEN, P.J., and LAURA DENVIR STITH and EDWIN H. SMITH, JJ.

EDWIN H. SMITH, Judge.

Clifford J. Droz appeals from the judgment of the Circuit Court of Mercer County in favor of Laura Trump, respondent, on his claim against her for rescission, based on fraudulent misrepresentation, of a real estate contract entered into between them.

The appellant raises three points on appeal. In Point I, he claims in two subpoints that the trial court erred in entering judgment for the respondent on the appellant's claim for rescission because in doing so it erroneously declared and applied the law. He contends that the trial court erroneously declared and applied the law because it held that the appellant was not entitled to a rescission in that: (1) he was required but failed to show actual fraud by the respondent, as opposed to constructive fraud; and (2) he was required but did not make reasonable inquiry which would have uncovered the alleged nondisclosed material fact forming the basis for his fraudulent misrepresentation claim, specifically the existence of the DNR letter and investigation of the property as a hazardous waste site. The claim in Point II is simply a corollary to the claim raised in the second subpoint in Point I. In Point II, the appellant claims that the trial court's finding that he failed to make reasonable inquiry as to the alleged nondisclosed material fact was against the weight of the evidence. In Point III, the appellant claims that the trial court erred in entering judgment for the respondent because the weight of the evidence required judgment be entered for him.

We reverse and remand.

Facts

In 1980, Laura Trump, the respondent, and her late husband, Wallace, purchased a 40-acre tract of land commonly known as the "former Trenton Landfill site." Mr. Trump, who died in August of 1984, was a farmer and used the property to raise a variety of crops. After her husband's death, the respondent enrolled the property in the Conservation Reserve Program (CRP). The annual CRP payments to the respondent were $2,035 per year.

In a letter to the respondent, dated February 20, 1990, the Department of Natural Resources (DNR) advised her that the former Trenton Landfill site was being investigated as an uncontrolled hazardous waste disposal site. After receiving the letter from the DNR, the respondent listed the property for sale with Walden Realty in Trenton on March 28, 1990. The listing agreement made no mention of the DNR letter or investigation.

Clifford Droz, appellant, was interested in purchasing land on which he could raise horses and build or place a home. In this vein, he contacted Wayne King, an agent for Walden Realty, in July of 1990, who showed him the respondent's property. Mr. King disclosed to the appellant the fact that the land had previously been used as a landfill. After the appellant informed Mr. King of his intended purposes for the land, he assured the appellant that the site would be suitable for his intended purposes.

The appellant testified that he would not have purchased the property if he had known it was under DNR investigation or if he had known there was a possibility that he could not use it for his intended purposes. The respondent testified that the existence of a DNR investigation would impact her decision to purchase if she was buying the property. She also stated that since she believed the existence of the DNR investigation was important, she had instructed the realtor, Virgil Walden, to notify any potential buyers of the existence of the DNR letter. She did not know if the existence of the letter was ever made known to the appellant. Mr. Walden denied being told by the respondent that the property was under investigation. Bob Burch, an agent of Walden Realty, testified that the respondent showed him the DNR letter, and that it became part of the Walden Realty file on the property. The respondent and appellant met on one occasion, but the existence of the DNR letter was never discussed.

Marvin Gordon, a loan officer from the Trenton Mercantile Bank, testified that his bank refused to make a real estate loan as opposed to a personal loan to the appellant for the purchase of the site because of potential liability due to the use of the property as a landfill. Mr. Gordon also stated that the DNR letter appeared in the bank file, but he did not recall discussing the letter or its contents with the appellant.

On July 30, 1990, the respondent entered into a real estate contract with the appellant to sell him the 40-acre tract for $20,000. The contract did not disclose the existence of the DNR letter or mention that the property was being investigated by the DNR as a potential abandoned or uncontrolled hazardous waste disposal site. The sale was closed in November, 1990.

On May 23, 1991, the appellant was notified by letter that the DNR intended to place the property on the "Registry of Confirmed Abandoned or Uncontrolled Hazardous Waste Disposal Sites in Missouri" as authorized by § 260.440. Any property placed on the Registry is subject to the provisions of 10 CSR 25-10, which, inter alia, requires DNR approval before any change in use can be undertaken and notification to potential buyers that the property is on the Registry. The DNR letter advised the appellant that he had a right to appeal the decision to list his property on the Registry by notifying the DNR director in writing of his desire to appeal within 30 calendar days of receipt of the notification. Subsequent to the appellant receiving the DNR letter, his attorney sent the respondent a letter dated May 12, 1992, seeking to rescind the real estate contract.

Pursuant to the notice in the DNR letter, the appellant timely filed a notice of appeal and was granted a hearing thereon. Following the hearing, which commenced in March, 1992, and was concluded in June of the same year, the Missouri Hazardous Waste Management Commission ordered that the property be placed on the Registry. The site was officially placed on the Registry on July 17, 1992.

On April 22, 1993, the appellant filed a three-count petition in the Circuit Court of Grundy County, Missouri. In Count I, the appellant sought damages against the respondent, Walden Realty Company, and realtors Virgil Walden and Wayne King for fraudulent misrepresentation. In Count II, the appellant sought rescission of the real estate contract based on fraudulent misrepresentation. In Count III, the appellant sought damages against the respondent for breach of warranty. The respondent filed a motion for a change of judge and a change of venue which were granted. The case was transferred on a change of venue to the Circuit Court of Mercer County, with the Honorable Richard L. Parker assigned to hear the case.

Prior to trial, the appellant voluntarily dismissed Counts I and III of his petition and proceeded to trial solely on Count II for rescission of the real estate contract based on fraudulent misrepresentation. After a judge trial on October 21, 1996, the circuit court entered a judgment on October 28, 1996, in favor of the respondent.

This appeal follows.

Standard of Review

Our review of an appeal of a suit in equity is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Jones v. Teachers Ins. and Annuity Ass'n, 934 S.W.2d 307, 309 (Mo.App.1996). The decree or judgment of the circuit court will be sustained unless there is no substantial evidence to support it; it is against the weight of the evidence; or it erroneously declares or applies the law. Id. In conducting our review, we accept all evidence and inferences favorable to the judgment and disregard all contrary inferences. Id. (citing Pinnell v. Jacobs, 873 S.W.2d 925 (Mo.App.1994)).

I.

In Point I, the appellant claims in two subpoints that the trial court erred in granting judgment to the respondent on the appellant's claim for rescission of the parties' real estate contract based on fraudulent misrepresentation because in doing so it erroneously declared and applied the law. He contends that the trial court erroneously declared and applied the law because it held that the appellant was not entitled to a rescission of the contract in that: (1) he was required but failed to show actual fraud by the respondent, as opposed to constructive fraud; and (2) he was required but did not make a reasonable inquiry which would have uncovered the alleged nondisclosed material fact forming the basis for his fraudulent misrepresentation claim, specifically the existence of the DNR letter and investigation. In this respect, the trial court held that:

"[f]or rescission to be available, there must be a knowing concealment of material fact by [respondent] for which there was a duty to disclose and which fact could not have been made known to the [appellant] from reasonable inquiry. Equitable relief is available to one who cannot protect himself; but not available to one who chooses not to protect himself. In the absence of reasonable inquiry by [appellant] in this case, rescission is not to be granted."

The appellant contends that this was a misstatement and misapplication of the law by the trial court because fraudulent misrepresentation supporting rescission of a real estate contract can be based on constructive fraud, as well as actual fraud, and he was not required to make any inquiry which would have disclosed the DNR letter and investigation. The appellant further contends that he was prejudiced by the trial court's error in misstating and misapplying the law in that he pled and proved fraudulent misrepresentation based on constructive fraud, which based on the evidence entitled him to judgment on his claim for rescission of the parties'...