Midwest Energy Inc. v. Orion Food Systems Inc.

• Decision Date: 25 January 2000
• Citation: 14 S.W.3d 154
• Parties: (Mo.App. E.D. 2000) . Midwest Energy, Inc., Plaintiff/Appellant, v. Orion Food Systems, Inc. and Ted Ries, Defendants/Respondents Case Number: ED75323 Missouri Court of Appeals Eastern District Handdown Date: 0
• Court: Missouri Court of Appeals

14 S.W.3d 154 (Mo.App. E.D. 2000)This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.Midwest Energy, Inc., Plaintiff/Appellant,
v.
Orion Food Systems, Inc. and Ted Ries, Defendants/RespondentsCase Number: ED75323Missouri Court of Appeals Eastern DistrictHanddown Date: 01/25/2000

Appeal From: Circuit Court of St. Louis City, Hon. Robert H. Dierker

Counsel for Appellant: John L. Oliver

Counsel for Respondent: Terry A. Bond and Leonard D. Vines

Opinion Summary: Midwest Energy appeals the summary judgment for Orion Food Systems and Ted Ries concerning Orion's failure to grant Midwest Energy a convenience food franchise. Midwest Energy sued Orion for breach of contract and promissory estoppel, and Ries for fraud and deceit.

AFFIRMED IN PART; REVERSED AND REMANDED IN PART.

Division Five holds: (1) The trial court did not err in granting summary judgment on the breach of contract claim. The contract is unenforceable under the Statute of Frauds, and therefore also unenforceable through promissory estoppel. (2) The trial court erred in granting summary judgment on the promissory estoppel claim, considering genuine issues of fact relating to the promises, foreseeable reliance, reliance in fact, and injustice absent enforcement. (3) The trial court erred in granting summary judgment on the fraud and deceit claim against Ries, as an alternative pleading.

Opinion Author: Charles B. Blackmar, Sr.J.

Opinion Vote: AFFIRMED IN PART; REVERSED AND REMANDED IN PART. Russell, C.J., concurs, Crahan, J., concurs in part and dissents in part in separate opinion.

Opinion:

Opinion modified by Court's own motion on March 7, 2000. This substitution does not constitute a new opinion.

The trial court granted summary judgment on all three counts of the plaintiff's petition and entered final judgment for both defendants. On this appeal we accept as true the facts appropriately established by the plaintiff in the manner prescribed by Rule 74.04 and afford the plaintiff all reasonable inferences from the facts adduced, disregarding defendants' contrary proffers except to the extent they are uncontradicted and unequivocal. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 382 (Mo. banc 1993). We state the facts from the plaintiff's point of view, without any intimation that court or jury has to find any of these facts.

The plaintiff Midwest, a Missouri corporation, operates a chain of service station convenience stores in Southeast Missouri. The defendant Orion, a South Dakota corporation, has developed recipes and equipment for several fast food systems for which it issues franchises to local outlets. Defendant Ted Ries at material times was the district sales manager for Orion in the area in which Midwest has facilities.

In early 1996 Midwest undertook the construction of a substantial building in Fruitland, Missouri, designed for the operation of a service station and convenience store and estimated to cost $800,000. Its president and sole stockholder, Laura Younghouse, inquired into the possibility of a franchise for some of Orion's product lines. On March 27, 1996, Ries visited Younghouse and delivered to her an offering circular required by the Federal Trade Commission accompanied by a specimen franchise agreement in which the blank spaces were not filled in. The circular contained a caution about taking any further action until Midwest had been notified in writing that its application had been approved. Younghouse receipted for these documents and read them.

Ries advised Younghouse he had to check with other Orion franchisees in the area to determine whether they had any contractual protection from nearby competition. He checked particularly with Rhodes Oil, which had Orion franchises at several nearby locations. On April 13, 1996 Ries again visited with Younghouse, advising her that Rhodes and other franchisees interposed no obstacle and that "we can go forward with the franchise." Younghouse had already filled out and delivered a franchise application on behalf of Midwest for the new location. Midwest's building contractor was present at this conference and discussed the proposed construction with Ries and Younghouse.

During the next several months Orion provided drawings and specifications setting forth its requirements for the area in which its franchised products would be prepared and dispensed. Ries was in touch with both the general contractor and the electrician. He pointed out the need to enlarge the convenience store area to 800 square feet to meet Orion's special requirements. This was a larger area than Younghouse had originally planned. The final store layout and design was provided by Orion to Midwest on July 2, 1996.

Ries reported his contacts with Midwest to his immediate supervisor, Keith Watts, who told him to "go ahead" at the Midwest location. Orion prepared orders for the equipment necessary to prepare and serve the franchised products.

Under date of September 4, 1996 Midwest received from Orion an unsigned franchise agreement specifying an opening date of November 8, 1996. On September 13, Ries called to advise Younghouse he would call on September 18, 1996 to "pick up the franchise agreement."¹ He did not appear on that date and did not respond to Younghouse's persistent attempts to get in touch with him. There is evidence that his superiors instructed him to "make himself scarce" while they reevaluated the franchise situation.

On September 30, 1996 Younghouse executed the franchise agreement on behalf of Midwest and mailed it to Orion. In the meantime a representative of Rhodes, Midwest's potential competitor, had called Orion to report that he had seen a notice of Midwest's opening date of November 8 for the new facility and was not pleased at the thought of competition. Orion's executives decided not to issue the franchise to Midwest, and one Schendel, an analyst, was instructed to write a letter to Midwest conveying this decision. For some reason the letter was not mailed until October 11, 1996. On October 1, however, Watts called Younghouse to advise her Orion was "withdrawing the franchise offer."²

The foregoing is an abbreviated summary of the bare facts that might be found. The record provided on summary judgment is voluminous, and other facts will be stated in the discussion of each of the several counts.

Midwest's petition declares in three counts as follows: (I) Breach of contract by Orion in failing to grant a franchise to Midwest; (II) Promissory estoppel against Orion in accordance with the provisions of Section 90 of the Restatement (2d) of Contracts; and (III) Fraud and deceit against Ries for willfully misstating the extent of his authority. We affirm the judgment on Count I, but find error in the entry of summary judgment on Counts II and III, and so remand this portion of the case for further proceedings.

Count I -- Breach of Contract

Count I declares on the five-year franchise agreement submitted to Midwest on September 4, 1996 as a contract between Midwest and Orion. The contract, however, is not signed by Orion. It cannot be performed within one year of its stated effective date of November 8, 1996. This contract is clearly unenforceable under section 432.010 RSMo 1994, known as the "Statute of Frauds,"³ and nothing short of Orion's signature can make it into an enforceable contract. See Mayer v. King Cola Mid-America, Inc., 660 S.W.2d 746, 749 (Mo. App. 1983) and cases cited therein.

Our cases clearly hold that a contract otherwise unenforceable because of the Statute of Frauds cannot be made into a fully enforceable contract through any doctrine of promissory estoppel. Mayer, 660 S.W.2d at 749; Geisinger v. A & B Farms, Inc., 820 S.W.2d 96, 98-100 (Mo. App. 1991) (recognizing that there might be some room for remedies based on promissory estoppel as discussed in the portion of this opinion dealing with Count II). Full enforcement of the contract would defeat the purpose of the Statute of Frauds.

Because the Statute of Frauds suffices to dispose of Count I, there is no need to consider the extensive discussion about which officers and agents of Orion had authority to sign franchise agreements. Wherever the authority lay, the agreement was never signed by Orion.

The parties clearly contemplated a written contract, and so neither was bound by the proposed franchise agreement until an authorized representative of each had affixed a signature.

There was no error in granting summary judgment on...