Memco v. Chronister

• Decision Date: 27 September 2000
• Citation: 27 S.W.3d 871
• Parties: (Mo.App. S.D. 2000) Memco, Inc., Plaintiff/Respondent, v. Mary Chronister, Defendant/Appellant. 23230 0
• Court: Missouri Court of Appeals

27 S.W.3d 871 (Mo.App. S.D. 2000)

Memco, Inc., Plaintiff/Respondent, v. Mary Chronister, Defendant/Appellant.

23230

Missouri Court of Appeals Southern District

09/27/2000

Appeal From: Circuit Court of Taney County, Hon. James L. Eiffert

Counsel for Appellant: Donald W. Ingrum

Counsel for Respondent: Richard L. Schnake

Opinion Summary: None

Parrish, P.J., and Montgomery, J., concur.

Kenneth W. Shrum, Judge

Memco, Inc. ("Plaintiff") employed Mary Chronister ("Defendant") as its "office manager" for several years. While so employed, Defendant surreptitiously took money from Plaintiff to which she was not entitled. Plaintiff brought this civil suit to recover the money taken. A non-jury trial resulted in a judgment for Plaintiff in the amount of $167,574.04.¹

Defendant appeals, charging trial court error as follows:

(1) the trial court's judgment was grounded in "conversion," a remedy not available on this record;

(2) the trial court abused its discretion in allowing Plaintiff leave to amend its pleading on the day of trial; and

(3) the trial court improperly included attorney fees and accountant fees as part of the damages awarded.

We do not agree with Defendant's premise that "conversion" was the remedy selected in entering this judgment. The judgment sounded in fraud, which is a viable remedy under the facts proven. As to the amended pleading, we find no abuse of discretion in allowing the amendment. The trial court erred, however, when it included attorney fees and accounting fees as part of Plaintiff's recovery. We affirm in part; we reverse in part and remand.STATEMENT OF FACTS

Plaintiff is a Missouri corporation owned by Robert and Julie Middleton ("Middletons"). Defendant was employed by Plaintiff from 1984-1995 as an "office manager." Her job responsibilities included doing all of the "accounting, payables, [and] receivables." Defendant also did the payroll throughout her tenure as office manager, except for three instances when she was on vacation. Once the payroll checks were prepared, they were either signed by Middletons or stamped with a signature stamp by Defendant.

Defendant resigned in June of 1995. Her resignation came at the same time the Middletons decided to implement a new computer system to handle Plaintiff's payroll.

In September 1996, the Middletons received a letter from the Internal Revenue Service ("IRS") inquiring about certain of Plaintiff's payroll records and withholdings. This prompted the Middletons to delve into Plaintiff's records, first by a consulting accountant and later by a Springfield accounting firm hired by Plaintiff's lawyer. Among other irregularities, the accountants found several years in which Defendant falsely prepared Plaintiff's quarterly 941 IRS forms. Specifically, Defendant reported to the IRS, via these forms, that money had been deducted from her payroll checks as income tax withholdings; yet, this did not happen. In handling the payroll duties for Plaintiff, Defendant issued herself paychecks without deducting the federal and state income tax withholdings as reported to the IRS. Defendant then used funds from Plaintiff's general corporate account to provide the IRS the money falsely reported as coming from her paychecks. By this scheme, Defendant systematically took money from Plaintiff to which she was not entitled.

The Middletons also discovered checks drawn on Plaintiff's corporate account which were not for materials and supplies purchased by Plaintiff. One of these checks was to Harry Cooper Supply Company in the amount of $5,039.93, and the other to White River Woodworks for $7,702.95. Both checks were written December 4, 1992. Also, the Middletons found a $4,677.77 check drawn on Plaintiff's corporate account dated December 1, 1992, in which Defendant was named as payee. Evidence established that $677.77 of the $4,677.77 check represented her "normal" salary, but the additional $4,000 was money to which Defendant was not entitled. The three December 1992 checks were written during the time Defendant was building a home in the Branson area. Neither the Middletons nor any other of Plaintiff's employees learned of Defendant's nefarious conduct until after she resigned. Apparently, Defendant's misconduct was not discovered earlier because she was the sole person responsible for reconciling bank statements with the corporate books and records.

After learning of Defendant's schemes, Plaintiff filed a two count petition on April 20, 1998. Paragraphs one through eight of Plaintiff's petition contained general allegations claiming, among other things, Defendant acquired money from Plaintiff by "false pretenses" and "actual fraud." Count I of the petition, entitled "Conversion," incorporated all general allegations, then alleged (a) Plaintiff owned the missing funds, (b) Plaintiff was entitled to possession thereof, and (c) Plaintiff demanded Defendant return the money, but she refused to do so. Also within this count, Plaintiff specifically realleged the funds were obtained by "false pretenses . . . and . . . actual fraud" which commenced "as early as January of 1992," and Plaintiff incurred various expenses in uncovering the "wrongfully appropriated" money.

On the day of trial, Defendant filed a motion in limine to exclude any references to "cash acquired prior to January 1992" and any amounts spent for accountant fees. The trial court overruled the motion and allowed Plaintiff leave to amend the pleadings by interlineation to present evidence of Defendant's chicanery prior to 1992. Defendant was also allowed to amend her answer to include an affirmative defense based on the statute of limitations. At the same time, Plaintiff dismissed its Count II requesting punitive damages. The court then continued the case until the next day. Both parties waived a jury. After trial, the court entered judgment for Plaintiff for $167,574.04, but gave Defendant credit for $23,793 paid by her as restitution in a related criminal proceeding. This appeal followed.STANDARD OF REVIEW

In a court-tried case the standard of review is that which is set out in Murphy v. Carron, 536 S.W.2d 30, 32[1] (Mo.banc 1976), and is as follows: "The decree or judgment of the trial court will be sustained by the appellate court unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law."DISCUSSION AND DECISION

Point III: Was the Judgment Based On An Unavailable Remedy?

We reproduce Defendant's third point relied on as follows:

"THE TRIAL COURT ERRED IN AWARDING JUDGMENT IN FAVOR OF MEMCO, INC. FOR ANY AMOUNT IN THIS CASE BECAUSE A CLAIM FOR CONVERSION LIES ONLY FOR A SPECIFIC CHATTEL WHICH HAS BEEN WRONGFULLY CONVERTED, IN THAT IN THIS CASE THERE WAS NO SPECIFIC CHATTEL THAT WAS TAKEN."

In arguing this point, Defendant assumes the trial court entered judgment based on "conversion" principles. Such assumption ignores other relevant parts of the record, including allegations in Plaintiff's petition which are broad enough to state an action for either money had and received or an action for fraud. Also, Defendant's argument disregards evidence in the record which supports recovery on theories other than conversion.²

While it is axiomatic one cannot recover for a cause of action not pleaded, Browning-Ferris v. Landmark Systems, 822 S.W.2d 569, 571[1] (Mo.App. 1992), it is also true a party can plead alternative causes of action in a petition and may do so in one count. Rule 55.10;³ Browning-Ferris at 571[2]. "'The character of a cause of action must . . . be determined from the facts stated in the petition and not by the prayer or the name given the action.'" McKinnon v. McKinnon, 896 S.W.2d 90, 91 (Mo.App. 1995) (quoting McMenamy v. Main, 686 S.W.2d 874, 876 (Mo.App. 1985)). It is the facts stated in the petition, along with the relief sought, which under our system of code pleading are to be looked at to determine the cause of action, rather than the form of the petition. Alarcon v. Dickerson, 719 S.W.2d 458, 461[2] (Mo.App. 1986).

Although Plaintiff's Count I was entitled "Conversion," the facts stated therein referred to and supported multiple causes of action. Plaintiff realleged its general allegations within this count. Among these were claims Defendant obtained money owned by Plaintiff by means of "false pretenses" and "actual fraud." Plaintiff specifically stated the manner Defendant used to accomplish her subterfuge, which supported claims for money had and received and fraud. Also within Count I, Plaintiff claimed Defendant "intentionally . . . appropriated and converted" funds, obtained the funds "by false pretenses . . . and engaged in actual fraud," and Plaintiff "demanded a return of the funds wrongfully taken."

"Fraud is defined as an instance or act of trickery or deceit especially when involving misrepresentation; an act of deluding." Smile v. Lawson, 435 S.W.2d 325, 328 (Mo.banc 1968). "'Fraud' is a malfeasance. That is, 'fraud' is a positive act resulting from a willful intent to deceive." Harris v. Penninger, 613 S.W.2d 211, 214[2] (Mo.App. 1981). The claims asserted in the petition are broad enough to state a cause of action for fraud. The purpose of a pleading is to limit and define the issues to be tried in a case and put the adversary on notice thereof. See Luethens v. Washington University, 894 S.W.2d 169 (Mo.banc 1995). "A petition is sufficient if it invokes principles of substantive law which entitle the plaintiff to relief and informs the defendant of what the plaintiff will attempt to establish at trial." Empiregas, Inc. of Rolla v. Whitson, 902 S.W.2d 347, 348[4] (Mo.App. 1995). Plaintiff repeatedly used the term "fraud" throughout the petition. Furthermore, Plaintiff described the acts which constituted the fraud.

Likewise, Defendant cannot complain she was not informed of what Plaintiff intended to...