Heberer v. Shell Oil Co.

• Decision Date: 20 January 1988
• Docket Number: No. 69293,69293
• Citation: 744 S.W.2d 441
• Parties: Lewis HEBERER, Plaintiff-Appellant, v. SHELL OIL COMPANY, a corporation, and E.L. Minton, Defendants-Respondents.
• Court: Missouri Supreme Court

Page 441

744 S.W.2d 441

Lewis HEBERER, Plaintiff-Appellant, v. SHELL OIL COMPANY, a corporation, and E.L. Minton,

Defendants-Respondents.

No. 69293.

Supreme Court of Missouri,

En Banc.

Jan. 20, 1988.

Rehearing Denied Feb. 17, 1988.

Sidney Fortus, Clayton, for plaintiff-appellant.

David Wells, Michael J. Morris, Lawrence C. Friedman, St. Louis, for defendants-respondents.

HIGGINS, Judge.

Lewis Heberer sued defendants alleging they made false collateral misrepresentations to him by falsely representing he would be given the right to operate a new service station to be located at 1240 Brentwood Boulevard if he would extend his current 3-year lease as a Shell dealer at 1421 Brentwood Boulevard. He sought damages for anticipated profit had he been made a dealer at the new station, from the time the new station opened until the time of trial, and also for future damages, same being anticipated profits had Shell given him the station, up to the extent of Shell's lease where the new station was built. The jury returned a verdict for defendants on all issues, and judgment was rendered accordingly. The Court of Appeals, Eastern District, reversed and remanded for a new trial. This Court transferred the case to examine the question of damages. Affirmed.

In 1977, Lewis Heberer entered into a 3-year lease with Shell Oil Company to operate a Shell service station at 1421 Brentwood Boulevard in St. Louis County. The lease extended through October 31, 1980. On June 24, 1980, he and Shell entered into a 3-year successor lease for Heberer to continue to operate this service station. The successor lease began on November 1, 1980, and was to end on October 31, 1983.

In early 1982, Heberer learned that Shell had acquired an interest in land at 1240 Brentwood Boulevard and planned to open a new service station at that location. The new service station was within a short distance of the 1421 Brentwood station. This location was considered by Heberer to be more advantageous because it is adjacent to U.S. Highway 40 entrance and exit ramps.

Shell, through its territory manager, E.L. Minton, had discussions with Heberer concerning early renewal of his lease at 1421 Brentwood around March 1982, shortly prior to completion and opening of the new station. Major conflict arose at trial over why the lease was extended early and who initiated the process. Defendants testified that plaintiff learned of the new station early in 1982 and requested that his lease be extended at the old station ahead of schedule to insure his future with Shell. Plaintiff testified the territorial manager, defendant Minton, requested that plaintiff enter into a new lease ahead of schedule. When plaintiff refused to agree to this arrangement, plaintiff testified that Minton then offered him the new station to operate as a Shell dealer when it opened for business. Plaintiff testified he signed the extended lease for the old station on June 1, 1982, in reliance on Shell's representation. The new lease was to run from June 1982 through May 30, 1985. This arrangement would extend the second lease from November 1, 1983, through May 30, 1985. Shell did not own, but was leasing, the land on which Heberer's station was located, and Shell's lease with that owner was to terminate on May 30, 1985, the same date that the extended lease proposed to Heberer was to end.

Heberer signed the extended lease. Shortly thereafter, on June 22, 1982, Shell opened the new service station, company operated. Two independent dealers offered the new station declined Shell's offer. Shell representatives testified that Heberer was never a consideration and that Shell never offered the new station to him. Shell claims that until suit was filed in this action they were not aware of Heberer's claim that Minton had promised him the new station as a means of inducing him to sign the lease extension at the old station. Plaintiff testified that when he found out approximately one week prior to the opening of the new station that he was not going to be given the job as dealer at the new station, he did not question Minton or any other Shell representatives, and did not discuss the alleged inducement to extend his lease with any Shell representative.

Appellant requested a new trial alleging error in Instruction 11, a purported affirmative defense submission. Instruction 11 directed a verdict for defendants if the jury found that plaintiff had the right, without penalty, unilaterally to terminate his lease to the old service station on 90 days notice and, as a consequence, did not sustain any damage.

The Court of Appeals, Eastern District, granted plaintiff a new trial on the ground Instruction 11 was misleading and misapprehended the nature of Heberer's claim. The court also determined that appellant was entitled to recover any pecuniary losses that are within the foreseeable risk of harm the misrepresentation creates, and that plaintiff was entitled to lost profits at the new station so long as they can be proved with reasonable certainty.

Appellant contends: that he is entitled to recover on the fraud claim because there was a collateral fraudulent misrepresentation by defendants; that he is entitled to profits at the new station under the "benefit of the bargain rule"; that he had the right to stand on the contract and sue for actual and punitive damages, which he did; that the 90-day cancellation provision in the lease was not a valid defense in a fraud action; and that his cause of action was properly brought in tort and not in contract. The dispositive question is whether plaintiff made a submissible case in fraud.

The elements of fraud are: 1) a representation; 2) its falsity; 3) its materiality; 4) the speaker's knowledge of its falsity, or his ignorance of its truth; 5) the speaker's intent that it should be acted on by the person and in the manner reasonably contemplated; 6) the hearer's ignorance of the falsity of the representation; 7) the hearer's reliance on the representation being true; 8) his right to rely thereon; and, 9) the hearer's consequent and proximately caused injury. Sofka v. Thal, 662 S.W.2d 502, 506 (Mo. banc 1983). A failure to establish any one of the essential elements of fraud is fatal to recovery. Dolan v. Rabenberg, 360 Mo. 858, 231 S.W.2d 150 (1950). Empire Gas Corp. v. Small's LP Gas Co., 637 S.W.2d 239, 242-243 (Mo.App.1982).

The courts of this state are committed to the benefit of the bargain rule as a method of arriving at damages in a case of fraud and deceit. It allows a defrauded party to be awarded the difference between the actual value of the property and what its value would have been if it had been as represented. Smith v. Tracy, 372 S.W.2d 925, 938 (Mo.1963), as quoted in Auffenberg v. Hafley, 457 S.W.2d 929, 937 (Mo.App.1970). The damages are measured at the time of the transaction. Id. at 937.

There are a number of cases in this state in which damages amounting to the difference between the value of the property as represented and its actual value were allowed: Kendrick v. Ryus, 225 Mo. 150, 123 S.W. 937 (1909) (fraudulent lease of mining rights); Smithpeter v. Mid-State Motor Co., 74 S.W.2d 47 (Mo.App.1934) (fraudulent sale of automobile); Jeck v. O'Meara, 343 Mo. 559, 122 S.W.2d 897 (1939) (fraudulent sale of securities in company retailing automobiles); Salmon v. Brookshire, 301 S.W.2d 48 (Mo.App.1957) (purchase of a cow); Smith, 372 S.W.2d 925 (sale of garbage business); Auffenberg, 457 S.W.2d 929 (sale of automobile); they are distinguishable from Heberer's claim. In those cases, the plaintiffs gave something of value, usually money, for the rights to some property. It is natural that they should receive the benefit of the bargain if they choose not to rescind the agreement and ask for return of their initial investment. At most, appellant Heberer agreed to an extension of his lease, which he could unilaterally terminate without penalty upon 90 days notice, for the right to manage the new station. Benefit of the bargain damages as defined above do not flow naturally from this alleged misrepresentation. Appellant received nothing of value in return for his agreement to extend the lease. The benefit of the bargain rule does not apply where the purchaser rescinds and returns the property received or where he received nothing of value. Brookshire, 301 S.W.2d at 54. In such case, he may properly recover the amount he paid with interest from the date of payment, plus incidental losses and expenses suffered as a result of the seller's misrepresentations. Id. at 54. Appellant has claimed no losses from extending his lease at his old station. His claim is only for loss of profits at the new station, a claim not contemplated or allowed under the above standard.

In order for a false representation to be actionable, there must exist a causal connection between the misrepresentation and the harm allegedly sustained. Collins v. Adams Dairy Co., 661 S.W.2d 603, 605 (Mo.App.1983). "It must appear in an appreciable sense that the damage flowed from the fraud as the proximate and not the remote cause, and the damage must be such as is the natural and probable consequence of the fraud." 37 Am.Jur.2d Fraud and Deceit, section 293, as quoted in Collins, 661 S.W.2d at 605. Appellant claimed he was injured by respondents' misrepresentations which caused him to agree to the extension of the dealer and lease agreements at his old station. Appellant claims no damages from that operation, and none were proved at trial. Even if the misrepresentations occurred as appellant contends, he still suffered no harm. Appellant's extension of the lease at the old station did not cause him to lose anticipated profits at the new station. Appellant has not established a causal connection between the alleged misrepresentation and the harm sustained. In other words, appellant has not proven that the lost profits expected at the new station were the natural and...