Hohenstreet v. Sterling Nat. Land Co.

• Decision Date: 18 February 1986
• Docket Number: No. 49388,49388
• Citation: 706 S.W.2d 80
• Parties: Grover A. HOHENSTREET and Frances V. Hohenstreet, Plaintiffs-Appellants, v. STERLING NATIONAL LAND CO., d/b/a Sterling National Realtors, et al., Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 80

706 S.W.2d 80

Grover A. HOHENSTREET and Frances V. Hohenstreet Plaintiffs-Appellants, v. STERLING NATIONAL LAND CO., d/b/a Sterling National Realtors, et al., Defendants-Respondents.

No. 49388.

Missouri Court of Appeals,

Eastern District,

Division Three.

Feb. 18, 1986.

Lee Young, Union, for plaintiffs-appellants.

Kenneth B. Dopuch, Briegel, Dempsey, Baylard & Patane, Union, for defendants-respondents.

SIMON, Judge.

Plaintiffs, Grover and Frances Hohenstreet, appeal from the dismissal, by the Circuit Court of Franklin County, of their amended petition for fraud (Count I), usurious interest rate (Count II), and Truth in Lending Act violations (Count III) against defendants, Sterling National Land Company (Sterling), Robert Small, and Lloyd J. Wurdack. Plaintiffs also appeal a summary judgment granted upon Sterling's counterclaim, based upon a promissory note secured by a second deed of trust. Sterling cross appeals contending that the summary judgment did not award the correct percent of interest, and the interest was calculated from an incorrect date.

On appeal, plaintiffs contend that the trial court erred: (1) in dismissing Count I of their amended petition for failure to allege sufficient facts to state a claim for relief in fraud; (2) in dismissing Count II for failure to allege the necessary elements of a claim for relief in usury; (3) in dismissing Count III for failure to plead sufficient facts to state a claim for relief for violation of the Truth in Lending Act; and (4) in granting summary judgment on Sterling's counterclaim. We reverse and remand the dismissal of Counts I and III of plaintiffs' amended petition and affirm the dismissal of Count II. In addition, we reverse and remand the summary judgment for further proceedings consistent with this opinion.

In response to plaintiffs' petition, defendants, Sterling and Small, filed motions to dismiss the petition for failure to state a claim for relief. Defendant Wurdack filed an answer denying the petition's allegations except to state that he was named trustee in the second deed of trust and he had no knowledge of any of the facts. About three years later, Sterling filed its counterclaim based on the promissory note secured by the second deed of trust. Later, the trial court sustained the motions to dismiss as to Counts I and III, but denied the motions as to Count II, granting plaintiffs thirty days to file amended pleadings. Defendants then filed an answer to Count II. Later, the plaintiffs filed a three count amended petition. The defendants filed a motion to dismiss the amended petition for failure to state a claim for relief, and the trial court dismissed the three counts of the amended petition. Plaintiffs filed a motion for a new hearing on Counts I and III, but the trial court affirmed its earlier dismissal and granted summary judgment on Sterling's counterclaim for $10,000 plus interest at nine percent from the date of the filing of the counterclaim.

In their amended petition, plaintiffs allege that they purchased land in 1978 from Fern Rohlfing, and were required by promissory note, secured by a first deed of trust, to make twelve yearly payments to Rohlfing beginning in 1979. In January of 1980, plaintiffs sought to borrow money from Sterling in order to make payment to Rohlfing in the amount of $9,040. On January 15, 1980, plaintiffs executed a promissory note, payable to Sterling, in the amount of $15,000 with an interest rate of fifteen percent per annum. The promissory note was secured by a second deed of trust on the land purchased from Rohlfing. Lloyd J. Wurdack was named as trustee. The amended petition also alleges that the promissory note was secured by another document, referred to as the amendment to the second deed of trust, purporting to hold Sterling harmless for any representation other than what was contained in the second deed of trust or the amendment. The promissory note, second deed of trust and amendment were attached and incorporated as part of the three counts of the amended petition.

Plaintiffs further allege that they received only $10,000 from Sterling, and that Sterling's agent, Small, told plaintiffs that they would not have to repay the additional $5,000, that it would be retained in an escrow account, and that the principal amount of plaintiffs' indebtedness on the note would be reduced by $5,000 or such portion which remained after certain fees and expenses were deducted. The thrust of plaintiffs' amended petition is that they were defrauded of $5,000, as well as any interest upon that amount, and that the $5,000 amounted to illegal interest and finance charges contrary to defendants' representations.

Sterling's counterclaim stated that plaintiffs executed the promissory note payable to Sterling and that plaintiffs received $10,000 from Sterling. Despite demand, plaintiffs failed and refused to repay the $10,000, so Sterling prayed judgment for $10,000 and prejudgment interest in the amount of ten percent per year.

Reviewing plaintiffs' first three points, we shall construe the amended petition favorably and give the plaintiffs the benefit of every reasonable and fair intendment in the facts alleged. Euge v. Golden, 551 S.W.2d 928, 931 (Mo.App.1977). The plaintiffs have a right to proceed if the facts pleaded, and their reasonable inferences, looked at most favorably from the plaintiffs' standpoint, show any ground upon which relief can be granted. Id. Although the plaintiffs are required to plead the ultimate facts, it is not necessary that they plead the facts or circumstances by which the ultimate facts will be established to avoid a motion to dismiss. Scheibel v. Hillis, 531 S.W.2d 285, 290 (Mo. banc 1976).

In plaintiffs' first point on appeal, they contend that the trial court erred in dismissing Count I of the amended petition because fraud was pleaded with particularity as required by Rule 55.15. The specific elements of a fraud claim are: a representation, its falsity, its materiality, a speaker's knowledge of the falsity, his intent that his statement should be acted upon by the other party and in the manner contemplated, that party's ignorance of the falsity, his reliance on its truth, his right to rely thereon, and his consequent injury. Yerington v. Riss, 374 S.W.2d 52 (Mo.1964). In paragraphs number four and five of Count I of the amended petition, plaintiffs alleged that they executed a note payable to Sterling in the amount of $15,000, but they received only $10,000. Paragraph number eight included the representations allegedly made by Small, and it is set out in full as follows:

That Defendant Robert Small, in his capacity as agent of Defendant Sterling National Realtors, and acting in behalf of and pursuant to the authority of Defendant Sterling National Realtors, represented to plaintiffs that the Five Thousand ($5,000) Dollar balance would be retained by Defendant Sterling National Realtors in an escrow account and that the principal amount of Plaintiffs' indebtedness on said note would be reduced by Five Thousand ($5,000) Dollars or such portion thereof as remained after certain fees and expenses were deducted therefrom.

Plaintiffs alleged in paragraph number nine that they "received no information regarding the establishment of an escrow account or appointment of an escrow agent or reduction or credit of the principal amount of Plaintiffs' indebtedness." It was pleaded in paragraph number ten that "Robert Small knew that no escrow account would be opened and knew that Plaintiffs would receive no credit on said Note for all or any part of said sum of Five Thousand ($5,000) Dollars and that the sole purpose of making said representation was to deceive and defraud Plaintiffs." Plaintiffs further alleged in paragraph number thirteen "That Plaintiffs believed and relied upon, and were justified in believing and relying upon the aforesaid material representations of Defendant Robert Small acting on behalf of Defendant Sterling National Realtors and were thereby induced to execute said Note and Second Deed of Trust." Finally, paragraph fourteen stated plaintiffs' damages: "That by reason of the aforesaid misrepresentations made by Defendant Robert Small acting on behalf of Defendant Sterling National Realtors, Plaintiffs have been defrauded and damaged in the sum of Five Thousand Seven Hundred Fifty ($5,750) Dollars." In short, it was pleaded that Small intended to induce plaintiffs to sign a note by making false representations which Small knew were false when he made them; and that believing these representations were true, plaintiffs were justified in believing and relying upon defendants' representations which caused plaintiffs' consequent injury in the amount of $5,750. Therefore, all of the elements of fraud were pleaded sufficiently.

Defendants' principal argument is that plaintiffs' amended petition did not state a misrepresentation of an existing fact because it alleged that defendants promised to do something in the future with the $5,000 balance rather than that defendants were presently doing something with the money contrary to their representations. Defendants' contention is without merit. In Sofka v. Thal, 662 S.W.2d 502, 507 (Mo. banc 1983), our Supreme Court stated that, "... a promise accompanied by a present intent not to perform is a misrepresentation of present state of mind, itself an existing fact, sufficient to constitute actionable fraud." Since plaintiffs' amended petition alleged that Small knew that his representations were false, that no escrow account would be opened, and that plaintiffs would receive no credit on their promissory note for all or part of the sum of $5,000, the amended petition stated a misrepresentation of an existing fact.

Defendants also argue that paragraph eight of the amended petition alleged a representation which could not be proven false since the $5,000 would be placed in escrow or used for other purposes. A...