Fairmont Foods Co. v. Skelly Oil Co., WD

• Decision Date: 04 May 1981
• Docket Number: No. WD,WD
• Citation: 616 S.W.2d 548
• Parties: FAIRMONT FOODS COMPANY, a Corporation, Plaintiff-Appellant, v. SKELLY OIL COMPANY, a Corporation, Defendant-Respondent. 31524.
• Court: Missouri Court of Appeals

Page 548

616 S.W.2d 548

FAIRMONT FOODS COMPANY, a Corporation, Plaintiff-Appellant, v. SKELLY OIL COMPANY, a Corporation, Defendant-Respondent.

No. WD 31524.

Missouri Court of Appeals, Western District.

May 4, 1981.

Kelley D. Sears, Stubbs & Mann, P. C., Kansas City, for plaintiff-appellant.

Frederick Beihl, Allen R. Purvis, J. Scott McCandless, Shook, Hardy & Bacon, Kansas City, for defendant-respondent.

Before MANFORD, P. J., and DIXON and NUGENT, JJ.

DIXON, Judge.

Plaintiff Fairmont suffered a directed verdict at the close of the plaintiff's evidence on both Count I of its petition alleging fraudulent concealment and Count II of its petition alleging breach of nonstatutory warranties in a deed from defendant Skelly conveying real estate.

Plaintiff Fairmont is a company engaged in the business of operating convenience stores under the trade name U-Totem. As a part of an expansion of their store facilities, an agent of the plaintiff contacted two real estate agents who had prepared a list of possible sites for plaintiff's stores. Among the sites listed by the realtors was the land in question, located at 48th Street and Randolph Road in Clay County, Missouri. That tract was owned by the defendant Skelly. The contract of sale, later consummated by the delivery of a warranty deed, followed without any direct contact between the plaintiff and the defendant or any of their agents.

After the real estate closing, plaintiff commenced the construction of a convenience store and, at some point during the construction of the building, it was determined that there was a limitation of access to the site by reason of the condemnation of access rights by the State Highway Department. This difficulty arose long after the closing of the real estate transaction. Other details of the evidence presented will be set forth in connection with the discussion of the points determinative of the case.

The first issue to be determined is the propriety of the trial court's action in sustaining a motion for a directed verdict with respect to Count I. Fairmont asserts that the trial court erred in directing the verdict on the fraud count because a submissible case of fraud was made. In order to establish a cause of action in fraud, Fairmont was required to prove: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of the truth; (5) his intent that it should be acted upon by the representee and in the manner reasonably contemplated; (6) the representee's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; and (9) the representee's consequent and proximate injury. Ackmann v. Keeney-Toelle Real Estate Co., 401 S.W.2d 483, 488 (Mo. banc 1966). Only (8), Fairmont's right to rely thereon is necessarily involved in the determination of Count I.

The plaintiff's proof on this count attempted to show fraud on the part of Skelly upon the basis of the failure to disclose to Fairmont the access limitation upon the property in question. There is no question that Skelly was aware of the limitation of access, and there seems to be no question that this was not directly divulged by Skelly or its agents to Fairmont or its agents. The evidence is inconclusive as to whether the realtors were aware of the limitations of access. Fairmont relies upon the silence of Skelly as constituting a fraudulent concealment. This theory of Fairmont's petition is based upon the case law establishing a duty to speak when there is superior knowledge on the part of one of the parties which is not within the fair and reasonable reach of the other. Barylski v. Andrews, 439 S.W.2d 536 (Mo.App.1969); Alexander v. Johnson Furnace Co., 543 S.W.2d 539 (Mo.App.1976); Parker v. Green, 340 S.W.2d 435 (Mo.App.1960); Hanson v. Acceptance Finance Co., 270 S.W.2d 143 (Mo.App.1954); Vendt v. Duenke, 210 S.W.2d 692 (Mo.App.1948). These cases demonstrate that the duty to speak may arise from inequality of position, a fiduciary relationship between the parties or a demonstration of superior knowledge on the part of one of the parties which is not within the fair and reasonable reach of the other.

These are alternative bases for the imposition of the duty to speak and proof of a fiduciary relationship or inequality of position does not have to be conjoined with superior knowledge of a defendant to establish liability in fraud, although of course, in a given factual setting, such factors may coexist.

The claim of Fairmont in the instant case must rest upon a theory of superior knowledge since Fairmont concedes there is no fiduciary relationship or inequality of position.

The issue in this case really turns on the force of the evidence to show reliance by Fairmont upon the facts as it understood them. The concept of fraud liability based upon nondisclosure couches such reliance in terms of the availability of the information to the plaintiff and the plaintiff's diligence. The rubric of the case law is that the nondisclosed information must not be within the fair and reasonable reach of the party claiming fraud upon the basis of nondisclosure. Put another way, the burden is on Fairmont to show that the nondisclosed information was beyond their reasonable reach and not discoverable by Fairmont in the exercise of reasonable diligence. It is not sufficient, as Fairmont argues, to show that they did not know of the access limitation; they must also shoulder the burden of proving that in the exercise of reasonable diligence they could not have and would not have discovered the existence of the limitation upon access. Necessarily, a failure of proof as to any one element is fatal to the plaintiff's case. Hanson, supra.

Admittedly, in reviewing the action of the trial court in directing a verdict, the plaintiff is entitled to the most favorable view of all the evidence and must be given the benefit of all favorable inferences to be drawn therefrom. Boyle v. Colonial Life Insurance Co. of America, 525 S.W.2d 811 (Mo.App.1975).

Further, "the action of the trial court in granting the motions for directed verdicts at the close of the plaintiff's evidence is a drastic one and 'should be done only when all of the evidence and the reasonable inferences to be drawn therefrom are so strongly against plaintiff that there is no room for reasonable minds to differ.' " Boyle, supra, citing McCarthy v. Wulff, 452 S.W.2d 164 (Mo.1970).

Even by this standard, the evidence does not disclose diligence by Fairmont or any circumstance that would have frustrated ordinary inquiry.

Skelly argues that the information was a part of the public record and that Fairmont, having constructive knowledge, cannot claim nondisclosure. Assuming that the showing made in the evidence that the circuit court records, which disclosed the limitation of access, constituted a public record, that alone does not defeat Fairmont's action although it is a factor which the trial court might consider on the issue of the availability of the information to Fairmont. Osterberger v. Hites Construction Co., 599 S.W.2d 221 (Mo.App.1980).

The record contains no other affirmative evidence of any inquiry by Fairmont and there is affirmative evidence which demonstrates a lack of diligence and inquiry.

The contract for the sale of the land contained a clause which stated that the purchaser took subject to "easements." The contract also contained a clause which allowed the buyer to avoid the transaction if the necessary curb permits could not be acquired. The testimony of Fairmont's witness showed that had the permits been applied for before closing, as anticipated by the contract, the access limitation would have been discovered. Despite this provision, Fairmont "waived" that provision of the contract. The contract also required a preliminary title report, but the record is silent as to both its delivery and its contents. There is no doubt one existed and was at some time delivered to Fairmont. If Fairmont closed the transaction without any title evidence, that would demonstrate a lack of diligence. If Fairmont closed the transaction with the title evidence and...