Mark Twain Plaza Bank v. Lowell H. Listrom & Co., Inc.

• Decision Date: 15 July 1986
• Citation: 714 S.W.2d 859
• Court: Missouri Court of Appeals
• Parties: MARK TWAIN PLAZA BANK, Plaintiff/Respondent, v. LOWELL H. LISTROM & COMPANY, INC., Defendant/Appellant. WD 37286.

Page 859

714 S.W.2d 859

MARK TWAIN PLAZA BANK, Plaintiff/Respondent, v. LOWELL H. LISTROM & COMPANY, INC., Defendant/Appellant.

WD 37286.

Missouri Court of Appeals,

Western District.

July 15, 1986.

Motion for Rehearing and/or Transfer to Supreme Court Denied

Aug. 28, 1986.

Wesley B. Jennings, Kansas City, for defendant/appellant.

Jerome D. Riffle, Kansas City, for plaintiff/respondent.

Before NUGENT, P.J., and BERREY and GAITAN, JJ.

BERREY, Judge.

Defendant Lowell H. Listrom & Company, Inc., (hereinafter Listrom) a stock brokerage firm, appeals from a judgment of the circuit court. In this court-tried case defendant was found liable to Mark Twain Plaza Bank under the theories of promissory estoppel, negligent misrepresentation and fraudulent misrepresentation arising from the statements made by the president and an account executive of Listrom concerning the financial status of the margin account of Felix and Josephine Maranzino. The court awarded the bank damages in the amount of $34,800.00. Defendant Listrom asserts five points of error of which three directly attack some aspect of each of three doctrines under which liability was found. The other two apply to defendant's liability in general terms: (1) the Listrom account executive was not acting within the scope and course of employment as a servant of Listrom and Listrom's liability is dependant upon such finding; and (2) any statement made by the account executive was in furtherance of a conspiracy with Felix Maranzino negating Listrom's liability.

I. Background Facts

In June of 1979, Felix Maranzino applied to the Mid Continent National Bank of Kansas City, presently known as the Mark Twain Plaza Bank (hereinafter referred to as bank), for a business loan in the name of Felix Sales, Inc., a wholesaler of automobiles. As guarantors of that loan, Felix and his mother Josephine pledged 4,000 shares of Del Webb Corporation common stock as collateral. One thousand of the 4,000 shares of this stock were held in a margin account at B.C. Christopher and Company, another stock brokerage firm, and the remaining 3,000 shares were held in a margin account by Listrom. The maximum amount of money which could be borrowed from the bank with this collateral was 75% of the market value of the 4,000 shares of Del Webb stock or $47,500.

Prior to the signing of the credit line agreement with Felix Sales and the Maranzinos on July 3, 1979, Robert Martin, a vice-president of the bank, attempted by telephone to confirm that the shares of stock were free and clear of any encumbrances. Mr. Martin talked with Mel Levitt at B.C. Christopher and Company and he indicated the stock was available to be used as collateral with no encumbrances and could be transferred to the bank. Written confirmation of this fact was requested and B.C. Christopher and Company complied with that request.

Mr. Martin also called the Listrom brokerage firm and talked with Mr. Fred Azar, who was employed as a registered representative with Listrom and handled the Maranzinos' account, to confirm Mr. Maranzino's statement that the stock was unencumbered. Mr. Maranzino had referred Mr. Martin to Mr. Azar for that purpose. Mr. Martin testified to the particulars of this phone conversation; no evidence was submitted to refute it. He stated that he explained to Mr. Azar the purpose of his call: to verify that the Del Webb stock was unencumbered and transferable as the bank intended to use the stock as collateral for a loan to the Maranzinos' business. Without objection, Mr. Martin further stated Mr. Azar told him that the Dell Webb's stock was free and clear and would be delivered to the bank after the stock certificates were registered in the name of the Maranzinos. Mr. Martin then requested a "trust letter" from Listrom to evidence the foregoing facts and Mr. Azar responded that such a letter would be delivered to the bank. Mr. Martin testified that a trust letter is "a letter on the letterhead of the brokerage firm whereby they will admit or state to the bank that they are going to take a certain action," and that it is often treated as the equivalent of collateral; it is kept in the bank vault as valued collateral.

Mr. Maranzino also contacted Mr. Azar on July 2 and asked him to write a letter to the bank assuring them of the delivery of unencumbered stock but Mr. Azar refused. Mr. Maranzino then contacted Lowell Listrom, president of the firm, requesting the same and, according to Mr. Listrom's testimony, told him he needed the stock to be delivered to the bank so he could borrow more money than allowed by the brokerage firm under Regulation T. ¹

Mr. Listrom discussed this request for a trust letter with Mr. Azar. The evidence at trial concerning this conversation is spotty. Mr. Listrom, in his deposition which was read into the record, stated Mr. Azar explained that Mr. Maranzino wanted to pay for the stock and have it delivered to the bank so that he would be able to borrow money using the stock as collateral. Mr. Azar's testimony (also read into the record from his deposition) did not reveal he gave such assurance. He stated he advised Mr. Listrom not to send the trust letter because there was a debit balance in the Maranzinos' account.

After this exchange Mr. Listrom sent the following letter to Mr. Martin on the Listrom stationery:

July 2, 1979

Mr. Bob Martin

Mid Continent National Bank

4901 Main

Kansas City, Missouri 64112

Dear Mr. Martin:

Please be advised that we will deliver as quickly as possible, 3,000 shares of Del Webb Corporation to the Mid Continent National Bank, for the account of Felix W. Maranzino & Josephine C. Maranzino.

Thank you very much.

Sincerely,

Lowell H. Listrom

LHL/rlr

The bank received a similar trust letter from B.C. Christopher and Company stating it would deliver the 1,000 shares of Del Webb stock "free," to the bank as soon as the transfer of the registered names took place. The bank did not disburse the loan proceeds to the Maranzinos until after these letters were in its possession.

The bank called Robert Stevenson, a registered representative with Dain Bosworth, Inc., as an expert witness to testify on the importance attached to these trust letters. He testified that in the normal course of business when there is a debit in the margin account a stock brokerage firm "would advise the bank that there is a debit in the account and [the certificates] cannot be sent until the debit is paid off." He believed the Listrom letter indicates there was no problem with delivery.

On July 30, 1979, Listrom received the stock certificates from the Morgan Guaranty Trust Company in New York representing the 3,000 shares registered in the names of Felix and Josephine Maranzino. The certificates were never forwarded to the bank; Listrom delivered them to the First National Bank of Kansas City as collateral for general firm borrowings. Subsequently, Listrom sold the Del Webb stock to Mabon Nugent Company for $41,487.15.

During this period of time there was no communication between Listrom and the bank, and Listrom did not inform the bank of the sale of the stock until January 1980 when Mr. Martin began investigating and inquiring into the absence of stock certificates in the bank's vault. The bank sent Listrom a letter demanding the delivery of the stock but Listrom did not comply.

On July 3, 1980, Felix Sales and the Maranzinos defaulted on the loan. ² At the time of default, the fair market value of the 3,000 shares of Del Webb stock was $34,800.00. The bank sold the other 1,000 shares received from B.C. Christopher for $11,013.44 to reduce the balance on the loan amount to $37,566.12, an amount which did not include interest or attorney fees.

The question for an appellate court in a court-tried case is whether the findings are supported by substantial evidence, and unless the judgment is against the weight of the evidence, or unless the court erroneously declares or applies the law, the judgment will be affirmed. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We are concerned only with the correctness of the result, not the route by which it was reached. Nedblake v. Nedblake, 682 S.W.2d 852, 855 (Mo.App.1984).

The first point asserted by Listrom suggests that regardless of what theory is applied no liability may attach because the statements made by Azar concerning the Maranzinos' margin account were not made within the scope and course of his employment. The bank argues this alleged error is a "red herring" because the letter written by Mr. Listrom, standing alone, provides a sufficient basis for liability under each of legal theories relied upon by the circuit court. The answer to this question appears to be dependent upon which of the particular doctrines is applied. This court will also explore defendant's other allegations of error concerning each of these theories as asserted in defendant's points III, IV and V.

II. Promissory Estoppel

Under the doctrine of promissory estoppel Missouri courts have relied upon Section 90 of the Restatement of Law on Contracts for guidance. Mayer v. King Cola Mid-America, Inc., 660 S.W.2d 746, 749 (Mo.App.1983); Katz v. Danny Dare, Inc., 610 S.W.2d 121, 124 (Mo.App.1980). It states:

A promise which the promissor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.

From this, it has been stated by this court that three elements must be proved: (1) a promise; (2) detrimental reliance on the promise, and; (3) injustice can be avoided only by enforcement of the promise. Katz v. Danny Dare, Inc., supra, 610 S.W.2d at 124. This estoppel principle is not predicated on misstatement of fact but rather rests upon a promise on which a party relies. Corbin, Contracts § 140 pp. 607-608. Thus, under these facts the Listrom letter may...