Fallert Tool & Engineering Co., Inc. v. McClain, s. 39013
| Decision Date | 20 March 1979 |
| Docket Number | Nos. 39013,39029,s. 39013 |
| Citation | 579 S.W.2d 751 |
| Court | Missouri Court of Appeals |
| Parties | FALLERT TOOL & ENGINEERING COMPANY, INC., Plaintiff-Respondent-Appellant, v. Eugene F. McCLAIN and Jacqueline E. McClain, Defendants-Third Party Plaintiffs-Appellants-Respondents, v. Charles B. FALLERT and Catherine E. Fallert, Third Party Defendants- Respondents-Appellants. |
Frank N. Gundlach, Armstrong, Teasdale, Kramer & Vaughan, St. Louis, for plaintiff-respondent and appellant on defendant's second counterclaim.
William R. Kirby, St. Louis, for defendants-appellants on appeal.
Paul Taub, St. Louis, for defendant-third party plaintiffs-appellants-respondents.
This is a fraud action brought by Fallert Tool and Engineering Company, Inc. (Fallert Tool), a corporation, against Eugene F. McClain and Jacqueline E. McClain, defendants. The dispute arises out of the sale of a machine shop business by the McClains to Fallert Tool. Fallert Tool's petition contains two counts, the first for fraud and misrepresentation and the second for punitive damages. A third count for rescission of the contract was subsequently dismissed.
The McClains filed two counterclaims against Fallert Tool and Charles B. Fallert and his wife, Catherine E. Fallert, individually. The first counterclaim prayed for judgment on a note given in part payment of the purchase price; the second counterclaim sought replevin of the machine tools which were purchased by Fallert Tool.
The trial court, after jury verdicts, rendered judgment for $63,195 in favor of Fallert Tool on the fraud count of the petition and in favor of the McClains on the punitive damage count of the petition. There was a judgment in favor of the McClains on both their first and second counterclaims. The judgment on the first counterclaim on the note was in the sum of $57,195, including interest and attorneys' fees.
The McClains appeal from the judgment in favor of Fallert Tool on count one of the petition. Fallert Tool and the Fallerts individually appeal from the judgment against them on the second counterclaim. The appeals were consolidated upon joint motion of the parties. No appeal was taken from the judgment on the note.
The McClains contend that the trial court erred in: (1) denying their motion for a directed verdict at the close of all the evidence and their motion for a new trial; (2) giving and reading to the jury the verdict-director, Instruction No. 3; (3) permitting evidence of a loan obtained by Fallert Tool and the interest it was required to pay; (4) admitting into evidence and reading to the jury a letter written by Fallert Tool to Eugene McClain; (5) permitting Charles Fallert to testify to self-serving questions, answers and conversations that he had with third persons; and (6) giving and reading to the jury damage Instruction No. 4.
Fallert Tool and the Fallerts individually claim that the trial court erred in not rendering judgment in their favor on the replevin counterclaim.
Affirmed in part; reversed in part.
The McClains, as sole proprietors, owned the McClain Tool Company from 1961 to 1974. They offered the business for sale in 1973 and listed it with an agency. They were unsuccessful in selling it and in early 1974 they listed it with a different agency who advertised the offer to sell in the St. Louis Post-Dispatch. In response to that advertisement, Charles B. Fallert visited with Eugene McClain at the machine shop which was located on Manchester Road in the City of St. Louis.
Charles Fallert had been a toolmaker at Emerson Electric Company for three years, then a toolroom foreman and a manufacturing engineer over a period beginning in 1941 and ending in 1973 when he left Emerson. He had always planned on opening up a tool and die shop of his own and it was with this ambition in mind that he answered the McClain advertisement.
During subsequent negotiations, Charles Fallert was permitted to inspect the inventory and machines after the closing hour of the shop, but McClain would not permit him to talk to any of the three employees. A price of $58,000 was finally agreed upon. Both parties were represented by counsel and a sales contract was drafted, revised three or four times, and finally signed by the parties. Charles Fallert formed the plaintiff corporation and took over the business in May of 1974.
In accordance with the sales contract, cash in the sum of $17,000 was paid when the sale was closed and a note for $41,000 with interest at eight per cent per annum was taken by the McClains for the balance of the purchase price. The note was signed by the Fallert Tool and Engineering Company, Inc. and the Fallerts individually.
The McClains retained the right to complete several open orders although the evidence was not clear as to the exact cut-off date. Eugene McClain also agreed to aid Charles Fallert by familiarizing him with the operation of the business. McClain continued to come to the shop regularly during the period from May to October of 1974 and during that time cooperated with Charles Fallert in the operation of the shop, in addition to completing the jobs which were reserved to McClain by the purchase contract. There was a dispute about whether McClain also took over some orders to which he was not entitled.
Charles Fallert began to make complaints to McClain about the time that McClain left the business for good, or so he thought, in October of 1974. Fallert complained specifically that McClain had misrepresented the business in five respects. The claimed misrepresentations related to statements by McClain as to the number of customers and customer relations, statements as to the amount of business being done by McClain with nongovernment customers, representations that all the work was done in the shop when much of it was subcontracted, statements overstating the value of the machines and equipment and the price originally paid for them and a representation that there were no financial records for the business when, in fact, full journals and ledgers were kept which were concealed from Fallert by McClain.
There were discussions between Eugene McClain and Charles Fallert concerning Fallert's complaints and at one time Fallert proposed to return the machine shop to McClain if McClain would return the purchase price, which McClain refused to do.
The suit was filed by Fallert Tool on April 28, 1975 and the business ceased to operate late in the year 1975.
The McClains' first point relied on is a claim that the trial court erred in overruling their motions for a directed verdict after the close of all the evidence and for a new trial. In six subpoints they contend that there was not substantial evidence to sustain the various misrepresentation charges of Fallert Tool and that two of the charges were not actionable because they were matters of opinion and not representations of fact.
The insufficiency of the evidence to support a verdict may be preserved for review by an appellate court only if the appellant files a motion for a directed verdict at the close of all the evidence and alleges the denial of that motion in a motion for a new trial. Millar v. Berg, 316 S.W.2d 499, 502(1-3) (Mo.1958); Herrman Lumber Company v. Cox, 521 S.W.2d 4, 6(3, 4) (Mo.App.1975). No motion for a directed verdict at the close of all the evidence was made as to Eugene McClain but an oral motion "to dismiss the petition totally as against Mrs. McClain . . . " was made by counsel at the close of all the evidence. This will be considered as a motion for directed verdict as to Jacqueline McClain, but the trial court did not err in refusing to grant it.
Mr. and Mrs. McClain were the co-owners of the business. She signed the sales contract and was a party to it as "Eugene F. and Jacqueline McClain, ('sellers'), doing business as 'McClain Tool Company.' " Eugene F. McClain and Jacqueline McClain, his wife, were the payees of the promissory note in the amount of $41,000 given as part payment of the purchase price and signed by Fallert Tool and the Fallerts, individually, as guarantors. Mrs. McClain worked in the business as bookkeeper and, although the issue of partnership did not arise, there is evidence that the two McClains acted in concert. Because she signed it, Jacqueline McClain made the representations contained in the contract itself. She is also bound by the representations made by Eugene McClain during the negotiations leading up to the final transfer.
Even in the absence of a principal-agent or partnership relationship, a party not actually making the fraudulent representation is liable if he accepted the benefits of the transaction and had either actual or constructive knowledge at the time of the fraud, or at the time he accepted the benefits, that fraud had been committed. In 37 Am.Jur.2d Fraud and Deceit, § 305, it is stated that:
One will be held liable for fraud, however, if he has knowledge thereof and adopts or takes advantage of it. The same has been held to be true where a person participated in the fraud With only constructive knowledge thereof, at least as to liability for compensatory damages. (Emphasis added).
As the bookkeeper and a part-owner of the business, Mrs. McClain knew or should have known of the representations made by her husband.
Where one engages with others in a common enterprise he cannot avoid liability for deceit committed by his associates of which he had no knowledge, but of which he could have informed himself, where he participates in the benefit derived of such deceit. Hornblower v. Crandall, 7 Mo.App. 220, affirmed 78 Mo. 581 (1883). Thus, because there was sufficient evidence to support a verdict against Mrs. McClain, her motion for a directed verdict at the close of all the evidence as to Mrs. McClain was properly denied.
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