Empire Gas Corp. v. Small's LP Gas Co., s. 12215

CourtCourt of Appeal of Missouri (US)
Writing for the CourtTITUS; FLANIGAN
Citation637 S.W.2d 239
PartiesEMPIRE GAS CORPORATION, a Missouri corporation, et al., Plaintiffs-Respondents, v. SMALL'S LP GAS COMPANY, et al., Defendants-Appellants.
Docket NumberNos. 12215,12483,s. 12215
Decision Date11 June 1982

Page 239

637 S.W.2d 239
EMPIRE GAS CORPORATION, a Missouri corporation, et al.,
SMALL'S LP GAS COMPANY, et al., Defendants-Appellants.
Nos. 12215, 12483.
Missouri Court of Appeals, Southern District, Division Three.
June 11, 1982.
Motion for Rehearing or to Transfer to Supreme Court Denied
July 6, 1982.
Application to Transfer Denied Sept. 13, 1982.

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James Robertson, Edward Tynes Hand, Bruce M. Berman, Wilmer, Cutler & Pickering, Washington, D. C., for plaintiff-respondent Empire Gas Corp.

John Hall Dalton, J. Michael Mowrer, Dalton, Treasure & Mowrer, Kennett, for plaintiffs-respondents Empire Gas Corp. and Jerry L. Redfern.

Michael O'N. Barron, St. Louis, James E. Reeves, Ward & Reeves, Caruthersville, for defendants-appellants E. T. Small, Julia T. Small, Eric T. Small and Craig T. Small.

TITUS, Judge.

Empire Gas Corporation (Empire) and its trustee petitioned the Dunklin County Circuit Court to foreclose security interests in

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real and personal property given by Small's LP Gas Company (Small's) as part of a transaction involving Small's purchase from Empire of liquid propane (LP) gas facilities situate in Malden, Sikeston and Lilbourn, Missouri. Also named as defendants were members of the Small family by reason of their personal guaranty given for Small's performance of its obligations. Small's and its guarantors answered and counterclaimed for fraudulent misrepresentation as to the number of consumer LP gas tanks which Empire purportedly represented were involved in the sale of the three facilities. The counterclaim was jury-tried and resulted in a $650,000 verdict for defendants. Empire's foreclosure suit was tried to the court. Following this and pursuant to trial and after-trial motions, the trial court sustained Empire's motion on the counterclaim for judgment notwithstanding the verdict and conditionally sustained Empire's motion for a new trial because of an instruction error. With respect to Empire's foreclosure suit and after allowing the defendants a $457,000 credit for lost or unconfirmed consumer LP gas tanks, the circuit court entered judgment for Empire and against Small's and the individual defendants in the sum of $1,358,045.90. Both actions of the trial court were denominated as final judgments for purposes of appeal. Small's did not appeal 1 but the individual defendants did and their appeals were ordered consolidated in this court.

The sale of the three plants by Empire to Small's on March 27, 1979, was evidenced by a duly executed "Agreement for Sale of Corporate Assets" and an attached duly executed "Addendum to Agreement for Sale of Corporate Assets." By the agreement Empire agreed to sell and Small's agreed to buy the three plants for $1.3 million, with no money down and the principal, plus interest, to be paid in 120 monthly installments pursuant to a promissory note annexed to the agreement. The note was secured by Small's assignment to Empire of security interests in real and personal property pursuant to a deed of trust and two security agreements and the personal guaranty for Small's performance executed by members of the Small family. By the addendum (requested by Small's) it was agreed, inter alia, that Small's would have 60 calendar days from the closing date to verify the existence of the number of consumer LP gas tanks listed as being sold and that Empire would thereafter have a like period in which to confirm or find any tanks that Small's was unable to locate. The addendum further provided that if the number of tanks thus found was less than the number listed, Empire would credit Small's payments with the value of the missing tanks plus interest. However, if the found tanks exceeded the number listed, the excess tanks would be returned to Empire.

The necessary elements of Small's cause of action to be proved were: (1) Empire's representation to Small's that the three LP plants being sold "had more than 2,800 liquid propane gas storage tanks;" (2) the falsity thereof; (3) its materiality; (4) Empire's knowledge of its falsity; (5) its intent that the representation should be acted on by Small's in the manner reasonably contemplated; (6) Small's ignorance of its falsity; (7) Small's reliance on its truth; (8) Small's right to rely thereon; and (9) Small's consequent and proximate injury. Cotner v. Blinne, 623 S.W.2d 615, 616(1) (Mo.App.1981); McGuire v. Bode, 607 S.W.2d 165, 166(1) (Mo.App.1980). For Small's to make a case on fraudulent misrepresentation, it had a particularly heavy burden of proving (Cantrell v. Superior Loan Corp., 603 S.W.2d 627, 634(2) (Mo.App.1980) ) each of the nine elements, supra. Yerington v. Riss, 374 S.W.2d 52, 57(3) (Mo.1964). Albeit it is seldom susceptible of proof by direct evidence, fraud is never to be presumed (Miller v. Higgins, 452 S.W.2d 121, 124(3) (Mo.1970) ) and the establishment of each of the nine elements of fraud enumerated above is necessary for recovery,

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as a failure to establish any one single element is fatal to recovery. Kreutz v. Wolff, 560 S.W.2d 271, 278(13) (Mo.App.1977); Fredrick v. Bensen Aircraft Corporation, 436 S.W.2d 765, 769(2) (Mo.App.1968).

Eric Small assumed "management duties" with Small's about 1974 and was its manager and negotiation representative concerning the purchase from Empire in 1979. At trial Small was asked as to what had occurred before the sale and purchase papers were executed relative to the number of consumer LP gas tanks involved and which ostensibly were listed on three computer printouts "placed with the contract." In answer thereto Small testified Empire's representative stated that with the possible exception of about 20 tanks all could be found, but added: "If there is (any tanks missing) we'll take care of it. It would be our problem. We'll take it off the purchase price, and we'll handle the situation or something like to that effect." In partial keeping with this assurance and at Small's insistence, the executed addendum to the contract, as above noted, provided that after closing, Small's had 60 days to verify the existence of the tanks listed as being sold and that thereafter Empire would have 60 days to verify Small's missing tank claims. The addendum bound Empire to credit Small's on the purchase price of the three plants with the value of all tanks discovered by both to be lost or missing.

After completion of the transaction in March 1979, Small's operated the three LP plants. However, it made only one principal payment and one interest payment, approximately $26,000, on its $1.3 million obligation to Empire. In May 1979, Small's told Empire 1,300 consumer tanks were "lost" (At trial Eric Small testified that when this message was transmitted, about 200 additional tanks had actually been found); the court calculated the value of such tanks to be $457,000. 2 Following Small's May 1979 notice to Empire concerning "lost" tanks, Empire found many such tanks but failed to find others. In any event, as Small's had made but one principal and interest payment on its indebtedness Empire filed its petition to foreclose the deed of trust, security agreements, etc., on December 20, 1979.

Before a party may be permitted to recover for false and fraudulent representations, it must be established that the one allegedly defrauded relied upon the truth of the representations claimed to be false. Hereford v. Unknown Heirs of Tholozan, 315 S.W.2d 412, 421(8) (Mo.1958); Younger v. Hoge, 211 Mo. 444, 458, 111 S.W. 20, 23(4) (1908); Hutchings v. Tipsword, 363 S.W.2d 40, 47(11) (Mo.App.1962); 37 C.J.S. Fraud, § 29, pp. 269-270. Where there is a mutual recognition of the uncertainty of a given fact, it cannot be said that either party relied on or had a right to rely upon that fact. Reliance upon representations is an essential element in an action for fraud and absent that element no cause of action for fraud exists. Ralston Purina Co. v. Swann, 161 S.W.2d 39, 41(2) (Mo.App.1942).

Accepting Eric Small's testimony that Empire's representative initially stated that all the involved customer LP tanks save 20 could be located, this statement was immediately followed by and made a part of assurances that should any tanks be found missing Empire would take care of the matter by deducting the value of the missing tanks from the sale price. The truth or falsity of statements should not be wrung from isolated portions thereof but rather from the entire utterance. All doubts should be entertained in favor of good faith in determining whether an entire statement constitutes a misrepresentation. Emily v. Bayne, 371 S.W.2d 663, 667 (Mo.App.1963). But even assuming, which we do not, that the isolated assurance by Empire that all but 20 tanks could be located, it is plain there was a failure of proof that Small's did, in fact, rely upon that precontractual representation. If Small's did indeed

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rely upon that particular representation, why did it insist upon and secure inclusion of the addendum which, in effect, provided that Small's would be obligated to pay for only those tanks whose existence could be confirmed after a post-contractual 120 day investigation by both buyer and seller? In legal effect, the addendum amounted to a contractual agreement that Small's was not to rely on the representations made by Empire but was to rely upon its own and Empire's investigation which both had a legal duty to make. Bank of America National Trust & Sav. Ass'n v. Vannini, 140 Cal.App.2d 120, 295 P.2d 102, 108 (1956). As the addendum obligated Small's only to pay for such tanks as could actually be found within 120 days after execution of the agreement, Empire's alleged oral representation as to the...

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