Lucas v. Enkvetchakul, 16960
| Decision Date | 02 July 1991 |
| Docket Number | No. 16960,16960 |
| Citation | 812 S.W.2d 256 |
| Parties | Bill LUCAS, Plaintiff-Respondent, v. Boonmee ENKVETCHAKUL and Eiko Enkvetchakul, Defendants-Appellants. |
| Court | Missouri Court of Appeals |
Loren R. Honecker, Sherwood, Honecker & Bender, Springfield, for defendants-appellants.
Thomas Y. Auner, Woolsey, Fisher, Whiteaker & McDonald, Springfield, for plaintiff-respondent.
In this promissory note lawsuit the trial court entered a judgment for $30,441.63 for the plaintiff Bill Lucas, holder of the note, against the defendants Boonmee and Eiko Enkvetchakul, makers of the note. The trial court ruled against the defendants on their counterclaim for damages in which they alleged they were induced to invest in an apartment complex (and hence to sign the note) by the plaintiff's fraudulent misrepresentations about the deductibility on their personal income tax return of certain closing costs, construction costs, and the real estate sales commission. The trial court concluded that such representations were misrepresentations of law and, therefore, not actionable; hence, they were not available as an affirmative defense to the claim on the note.
The two questions presented which are dispositive of this appeal are:
(1) Did the trial court err in failing to find that a confidential relationship existed between the parties or in failing to find that the plaintiff had superior knowledge about income tax law (those being recognized exceptions to the rule that misrepresentations of the law are not actionable)?
(2) Did the defendants waive an alleged affirmative defense that the promissory note was based on an illegal consideration?
Because we answer the first question "no" and the second question "yes," we affirm the judgment.
The plaintiff, a licensed real estate broker since 1971 and a licensed insurance broker since 1965, graduated from Southwest Missouri State College in 1964 with a decree in economics and attended law school for one year. He was also licensed by the Commodity Futures Commission of the United States. He was not, however, licensed to sell securities in Missouri.
The defendant Boonmee Enkvetchakul, a physician employed by the Missouri Rehabilitation Center at Mt. Vernon, Missouri, was born in Thailand. He first came to the United States in 1964 and has been a United States citizen since 1980. His wife Eiko was born and reared in Japan. Included in the business experiences of the defendant Boonmee was (a) setting up a medical practice in Warren, Pennsylvania, (b) the purchase of two houses in Pennsylvania (in which transactions he hired an attorney), (c) the purchase of a personal residence and a rental property in Springfield, Missouri (where an attorney was hired), and (d) an investment of $7,000 in a restaurant project in 1985 which resulted in a $4,000 tax loss.
As to the initial business contact between the litigants, the plaintiff testified that the defendant Boonmee had been to his office some months before the transaction in question and "said he wanted to be in some real estate deals, he wanted to become a real estate investor." Boonmee denied this but, in any event, the plaintiff sent the defendants a letter dated December 6, 1985, suggesting the availability of a 50 percent interest in a partnership involving the construction of a 24-unit subsidized housing development. The price was stated to be $310,000 with $65,000 capital required, and sundry projections of income, expenses, and depreciation were included (based on land cost of $35,000 and building cost of $275,000). The letter advised, "It should be a very good investment for you plus an excellent tax shelter."
The defendant Boonmee responded to the December 6 letter by visiting the plaintiff's office to discuss the project. After additional discussions of the project between the plaintiff and both defendants on December 9 and 11, a real estate sales contract was signed by the defendants on December 26, 1985. That contract identified "Crown Heights Apartments Limited, a Missouri Partnership," as seller and identified the plaintiff and the defendants as the buyers of a 50 percent interest "in the entire project as limited partner." 1 The price for the 50 percent interest was $310,000 but the contract obligated the buyers (the plaintiff and the defendants) to pay only $65,000 as follows: $25,000 escrowed when the contract was signed, $25,000 payable on completion of the apartment building, and $15,000 (representing the plaintiff's real estate commission) payable when the contract was signed. Thus, the buyers were to pay $40,000 at closing with the defendants' share of the obligation being $36,000. The defendants met their initial $36,000 obligation by issuing a check for $16,000 and by borrowing $20,000 from the plaintiff (that loan being evidenced by a $20,000 promissory note). 2
Regarding the alleged fraudulent misrepresentations by the plaintiff, the record reveals the following. The defendant Boonmee testified that before he and his wife signed the contract and note, the plaintiff represented that they would be entitled to take as tax deductions one-half of the closing expenses, construction expenses, real estate commission, loan fees, and depreciation. He further testified that he had relied "completely" on the plaintiff's oral representations and the language in the December 6, 1985, letter and the original sales contract. He also testified that he had asked the plaintiff to explain the venture to an attorney and an accountant, but that the plaintiff had replied this was unnecessary because the partnership already had an attorney and an accountant. Both of the defendants testified that the plaintiff had offered to prepare their 1985 tax returns, but they declined because they wanted to continue using H & R Block for this purpose. Finally, the defendant Eiko testified that in March 1986 she had telephoned the plaintiff from an H & R Block office after learning that the commission was not deductible and the plaintiff had replied that perhaps the law had been changed.
The plaintiff testified he would "[n]ever, ever" advise anyone to dispense with legal counsel or accounting advice and that, as a matter of fact, he did advise the defendant Boonmee to see a lawyer and an accountant about the deal. The plaintiff did admit telling the defendants that he "thought" they could deduct loan fees, depreciation, and his commission but not construction costs. He also acknowledged having written several figures dealing with deductions for loan fees, interest, and depreciation on a document given to the defendants before the contract and note were signed by them.
In May 1986, the defendants consulted an attorney, Kenneth Ashlock, about the Crown Heights project. They furnished the attorney with several of the Crown Heights documents, and in several meetings with Ashlock before August 1986 they discussed their inability to deduct the real estate commission on their 1985 income tax return. At some point prior to August 1986, the defendants stopped making payments on the $20,000 note for a period of two to four months.
Actual construction of the Crown Heights apartments began in July 1986. In keeping with the December 1985 contract and after consulting with attorney Ashlock, the defendants proceeded to close the contract by signing an Assignment of Interest in Limited Partnership on August 9, 1986. At the closing, the defendants paid the arrearage on their note, the money initially escrowed was released, and the plaintiff and the defendants received photocopies of their interests in the Crown Heights project. Finally, in January 1987, while still represented by attorney Ashlock, the defendants paid the balance due under the contract ($22,500) and received the originals of the certificates of interest in the project.
No payments on the note were made after July 1987, and this suit followed. Trial by jury was waived and the trial court issued written findings of fact and conclusions of law. Among the court's conclusions of law was one stating that the plaintiff's misrepresentations about deductibility on the defendants' income tax return of certain expenses of the limited partnership were not actionable representations because they were misrepresentations of law. This appeal followed.
Review is under Rule 73.01(c). As that rule is interpreted in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976), we are to affirm the judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, it erroneously declares the law, or erroneously applies the law. Plunkett v. Parkin, 788 S.W.2d 356, 357 (Mo.App.1990).
In Point I of their brief, the defendants assert that the "gravamen" of their counterclaim was the plaintiff's alleged misrepresentations about the deductibility of the real estate commission and other expenses. In Point II, they claim those same representations support their affirmative defense to the plaintiff's effort to collect on the note. It is those representations which the trial court held were not actionable because they were misrepresentations of law.
The defendants concede the existence of the general rule that an action for fraud (and also an affirmative defense of fraudulent misrepresentation) cannot be based on misrepresentations of law. McMullin v. Community Savings Service Corp., 762 S.W.2d 462, 464 (Mo.App.1988). That rule is based on the principle that everyone is presumed to know the law and is bound to take notice of the law and, therefore, in legal contemplation, cannot be deceived by representations concerning the law or permitted to say he has been misled. Fredrick v. Bensen Aircraft Corp., 436 S.W.2d 765, 770 (Mo.App.1968).
However, the defendants claim the trial court erred in its findings because of two recognized exceptions to the...
To continue reading
Request your trial
-
Business Men's Assur. Co. of America v. Graham, WD
...to the defense or avoidance." Rule 55.08. Because the purpose of Rule 55.08 is to provide notice to the plaintiff, Lucas v. Enkvetchakul, 812 S.W.2d 256, 263 (Mo.App.1991), the facts supporting a defense must be pled in the same manner as they would be with claims. Ashland Oil, Inc. v. Warm......
-
Albu Farms, LLC v. Pride
... ... results in waiver of that defense." Id. (citing ... Lucas v. Enkvetchakul , 812 S.W.2d 256, 263 (Mo. App ... S.D. 1991)) ... ...
-
Reis v. Peabody Coal Co.
...See McDonald, 239 S.W.2d at 99 (doctor's statement that it was "legally compulsory" to have an autopsy performed ); Lucas v. Enkvetchakul, 812 S.W.2d 256, 260 (Mo.App.1991)(broker's statement regarding deductibility of real estate commission and other expenses); Link v. Cox, 529 S.W.2d 189,......
-
Tindall v. Holder
...affirmative defense results in waiver of that defense." Detling v. Edelbrock, 671 S.W.2d 265, 271 (Mo. banc 1984); Lucas v. Enkvetchakul, 812 S.W.2d 256, 263 (Mo.App.1991). Clearly, Plaintiff recognized the need to plead additional facts which would have allowed her to avoid legal liability......