Kesselring v. St. Louis Group, Inc.

• Court: Missouri Court of Appeals
• Writing for the Court: James R. Dowd
• Citation: Kesselring v. St. Louis Group, Inc., 74 S.W.3d 809 (Mo. App. 2002)
• Decision Date: 02 April 2002
• Docket Number: No. ED 79933.,ED 79933.
• Parties: Robert KESSELRING, Donna Kesselring, and A.L.A., Inc., Appellants, v. ST. LOUIS GROUP, INC. and Sunil Thakkar, Respondents.

74 S.W.3d 809

Robert KESSELRING, Donna Kesselring, and A.L.A., Inc., Appellants, v. ST. LOUIS GROUP, INC. and Sunil Thakkar, Respondents.

No. ED 79933.

Missouri Court of Appeals, Eastern District, Division Five.

April 2, 2002.

Motion for Rehearing and/or Transfer to Supreme Court Denied May 14, 2002.

James W. Schottel, Jr., Schottel & Associates, P.C., St. Louis, MO, for appellants.

Mayer S. Klein, John P. Lavey, Newman, Freyman, Klein & Gamache, P.C., Clayton, MO, for respondents.

JAMES R. DOWD, Chief Judge.

Robert and Donna Kesselring, as A.L.A., Inc. (Buyers) purchased the assets of Roland Moving and Storage, Inc. from William and Terry Roland (Sellers). Claiming they were not given all material financial records of the company, Buyers filed suit against Sellers and their brokers, St. Louis Group, Inc. and Sunil Thakkar (Brokers). Buyers sought rescission of the sales contract and restitution or, in the alternative, damages for fraudulent misrepresentation, negligent misrepresentation and breach of contract. The trial court entered summary judgment in favor of St. Louis Group, Inc. and Sunil Thakkar and against Buyers and designated the judgment final for purposes of appeal. We reverse and remand.

On appeal from a grant of summary judgment we view the evidence and the inferences therefrom in the light most favorable to the party against whom judgment was entered. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.banc 1993). On January 20, 2000, Roland Moving and Storage, Inc. entered into an "exclusive right to sell" Listing Agreement with St. Louis Group, Inc. to assist it in the sale of its business. In relevant part, that agreement provided:

Seller agrees to provide Broker with copies of all financial statements, leases, equipment lists, inventory lists, notes and other documents pertaining to the sale of Business. Seller warrants that Business is in compliance with all federal, state, and local regulations and licensing requirements for the operation of Business. Seller warrants all information supplied to Broker to be true and correct and that no information which could adversely effect (sic.) the sale of Business has been omitted, and to indemnify Broker against any legal action which may result against Broker due to Seller's misrepresentations or omissions. Seller agrees to notify Broker immediately of all material changes which may adversely or favorably effect (sic.) the salability or selling price of Business. If Broker secures a Buyer, ready, willing and able and a sale is lost because of misrepresentations or omissions of Seller, Seller agrees to pay Broker the full brokerage commission. Any information given by Seller may be provided buyers.

Brokers listed Sellers' assets for sale and Sunil Thakkar served as St. Louis Group's agent handling the account. The Kesselrings approached Brokers and expressed interest in purchasing Sellers' assets. Brokers kept a file on Sellers' assets and made relevant documents available to Buyers for their inspection. On April 21, 2000, Buyers and Sellers executed an "Asset Purchase Agreement." Paragraph 1 of that agreement provided for the purchase of Sellers' assets, which were defined as "the furniture, fixtures, inventory, and other tangible personal property, plus the following intangible assets and rights: Business name, customer lists, contract rights, covenant not to compete, goodwill, right to use the telephone number and any other business numbers and other intangible ownership rights of the Business...." Paragraph 2 of the agreement specifically excluded Sellers' liabilities and obligations from the purchase and Sellers agreed "to indemnify and hold Purchaser harmless from and against any and all costs, losses, liabilities, damages, claims or expenses ... arising out of or resulting from any such liability or obligation." The purchase price for the assets was set at $675,000.00.

In paragraph 7, "Representations and Warranties of Seller," Sellers promised that at the time of closing, Sellers' assets would "be free and clear of all liens, claims, charges, taxes, security interests, pledges, options or other encumbrances of any nature whatsoever."

Paragraph 21 memorialized the understanding of the parties concerning the relationship between Sellers, Brokers and Buyers. In relevant part, it states:

Purchaser hereby acknowledges that the Broker is an agent of the Seller and not the Purchaser. Purchaser also acknowledges that Purchaser is relying solely on Purchaser's own inspection of the Seller's Business Assets and the representations of the Seller, and not the Broker, with regards to the prior operating history of the Business, the value of the Assets being purchased and all other material facts relied upon in entering this Agreement.... Purchaser acknowledges that Broker has not verified, and will not verify, the representations of Seller and should such representations be untrue, Purchaser agrees to look solely to Seller for relief and to hold Broker harmless in connection with all losses and damages caused Purchaser thereby.

The agreement for the purchase of Sellers' assets closed on June 15, 2000 at Brokers' office. As part of that agreement Sellers signed a "Bulk Sales Affidavit of Title to Personal Property," which, in relevant part, provided:

3. That the said property, and each and every part thereof, is free and clear of any and all liens, mortgages, debts, or other encumbrances, of any nature or description; and that Roland Moving and Storage, Inc. is not indebted to any one, and has no creditors; that there are no judgments existing, or entered, against it; that there are no replevins attachments, or executions issued against it, now in force; that no petition in bankruptcy has been filed by or against it; that it has not filed any petition, or answer, for a composition or extension, under the provisions of the Federal Bankruptcy Act; that no receiver of any of its property has been appointed; that there are no municipal, state or federal tax liens or judgements affecting the assets; and that it has the full right, power and authority to sell and transfer the said property.

4. That they, on behalf of Roland Moving and Storage, Inc., Seller, makes this affidavit, knowing full well that A.L.A., Inc. (Purchaser), are parting with a sum in excess of Six Hundred Forty Thousand Dollars ($640,000.00) and waiving the Bulk Sale law requirements, relying upon the truth of the statements contained herein, and that this affidavit is made for the purpose of inducing the said Purchasers to part with the sum of money, to purchase the property described in said Bill of Sale, and to accept of the said Bill of Sale and of this affidavit.

After Buyers took over the business assets from Sellers, they encountered several problems with suppliers, some of whom refused to do business with Buyers because of unpaid accounts. Buyers notified Brokers of their problems. On July 25, 2000, Sellers wrote to Buyers and included a document indicating that Seller had $93,861.32 in outstanding expenses from 1999. Buyers claim this was the first time they were made aware of these expenses.

On December 5, 2000, Buyers filed their first amended petition in the Circuit Court of St. Louis County. Brokers filed separate answers and a joint motion for judgment on the pleadings. Buyers filed a second amended petition on May 10, 2001. Brokers' motion for judgment on the pleadings was applied to the second amended petition and was granted that same day. Buyers filed a motion for reconsideration, which was overruled by the trial court on June 1, 2001. On June 21, 2001, the trial court vacated its order granting Brokers' motion for judgment on the pleadings, converted Brokers' motion for judgment on the pleadings to a motion for summary judgment and granted Buyers leave to file a response to Brokers' motion for summary judgment. Buyers filed a response to Brokers' motion and Brokers filed a reply. The trial court sustained Brokers' motion for summary judgment and Buyers now appeal the trial court's Order entering Summary Judgment in favor of Brokers and against Buyers.

We review a grant of summary judgment de novo, applying the same standard as the trial court. ITT Commercial Fin. Corp., 854 S.W.2d at 376. A motion for summary judgment is properly granted only if there is no genuine issue as to any material fact. Id. An issue is material if its resolution could affect the outcome of the action. Id. at 378. A dispute is genuine if the record contains competent materials evidencing two plausible but contradictory accounts of the essential facts. Id. at 382. In deciding whether a fact issue has been created, we must view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. Id. at 376. Where a "defending party," as in this case, will not bear the burden of persuasion at trial, that party may establish a right to judgment by showing facts that negate any one of the claimant's elements. Id. at 381.

Because there was no contract between Buyers and Brokers we need only decide if Buyers' evidence, if believed, would entitle them to a judgment on either their claim for fraudulent or negligent misrepresentation.

The elements of a fraudulent misrepresentation claim are: (1) a false, material representation, (2) the speaker's knowledge of its falsity or his ignorance of its truth, (3) the speaker's intent that it should be acted upon by the hearer in the manner reasonably contemplated, (4) the hearer's reasonable reliance on its truth, and (5) the hearer's consequent and proximately caused injury. Id. at 386. The elements of a negligent misrepresentation claim are similar. The plaintiff must prove: (1) the speaker supplied information in the course of his business; (2) because of a failure by the speaker to exercise reasonable care, the information was false; (3) the information was intentionally...