State ex rel. Ashcroft v. Marketing Unlimited of America, Inc.

• Decision Date: 27 January 1981
• Docket Number: No. 41209,41209
• Citation: 613 S.W.2d 440
• Parties: STATE of Missouri ex rel. John ASHCROFT, Attorney General, Plaintiff-Appellant, v. MARKETING UNLIMITED OF AMERICA, INC., d/b/a Handicapped Assistance League of America, Inc. et al., Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 440

613 S.W.2d 440

STATE of Missouri ex rel. John ASHCROFT, Attorney General Plaintiff-Appellant, v. MARKETING UNLIMITED OF AMERICA, INC., d/b/a Handicapped Assistance League of America, Inc. et al Defendants-Respondents.

No. 41209.

Missouri Court of Appeals, Eastern District, Division Four.

Jan. 27, 1981.

Motion for Rehearing and/or Transfer to Supreme Court

Denied March 13, 1981.

Application to Transfer Denied April 6, 1981.

Martin E. Grambow, Asst. Atty. Gen., St. Louis, for plaintiff-appellant.

Lester W. Duggan, Jr., St. Charles, for defendants-respondents.

SIMON, Judge.

An action for an injunction, restitution and appointment of a receiver was brought in November 1977 by the Attorney General of the State of Missouri under the authority of the Merchandising Practices Act, Chapter 407 RSMo Supp. 1975, ¹ against Marketing Unlimited of America, Inc. (Marketing Unlimited), Richard A. Schirmer (Schirmer), Seldon P. Kanaday (Kanaday), and Paul C. Santhoff (Santhoff). Personal jurisdiction was not obtained as to Marketing Unlimited and Kanaday. They are not parties to this action. In its petition, the Attorney General alleged the violation of § 407.020. The trial court rendered its judgment in favor of the defendants Schirmer and Santhoff on the ground that the evidence was insufficient to show that the defendants violated the statutory provisions of Chapter 407. The Attorney General appeals. We reverse.

The Attorney General of the State of Missouri contends the trial court erred (1) in that its conclusion of law that the facts do not support a violation of Chapter 407 sufficient to render defendants individually liable is against the manifest weight of the evidence; and, (2) in declaring that a breach of contract is not an unlawful act constituting a violation of Chapter 407. We shall set forth the facts in detail.

Marketing Unlimited was incorporated as a Missouri corporation on March 21, 1977. The stated corporate purposes were to manufacture, sell and distribute "cactus eggs" and related programs and merchandise; to engage in any businesses or pursuits permitted by law and its board of directors; and to perform all that is necessary and incidental to those purposes. The offices of Marketing Unlimited were located at 734 West Port Plaza, St. Louis, Missouri. Schirmer was the president and Santhoff was the vice-president and a salesman for the company.

The Handicapped Assistance League of America, Inc. was a partnership between Schirmer and Kanaday. According to Schirmer, the purpose of the partnership was to sell vending machine routes for mints that had been made by handicapped persons. The Handicapped Assistance League was never registered with the Secretary of State as a domestic or foreign corporation, nor under the Fictitious Name Act. Its office was the same as Marketing Unlimited's.

The defendants were charged with a violation of Chapter 407, in particular § 407.020 in the operation of two sales schemes. The first concerned the sale of "cactus egg" distributorships. The second concerned the sale of mint candy distributorships.

On March 9, 1977, Mr. Hamilton of College Park, Georgia met with a Mr. Hughes who identified himself as an agent of Marketing Unlimited. Mr. Hughes represented Marketing Unlimited as a distributorship operation which would furnish retail locations in the Atlanta area for a cactus egg product which are sold in racks. Mr. Hughes told Mr. Hamilton that for an initial investment of $4,500 he would receive 4000 cactus eggs, 20 racks and 20 locations. A handicapped woman would establish the retail locations for Mr. Hamilton, and assist him in placing the racks and the product in the locations. Mr. Hamilton's job would be to service the racks and collect the money. Mr. Hughes also told him that if he had not recouped his investment within six months, the remaining inventory would be repurchased by Marketing Unlimited at its initial cost.

On March 11, 1977, Mr. Hamilton signed a contract for the purchase of a distributorship worth $9,000, which was to include 8000 cactus eggs, 40 racks and 40 locations. After paying the $9,000 demanded in advance, Mr. Hamilton received a copy of the contract and the guarantee of repurchase. When he did not receive his cactus eggs and racks within 10 days as he was promised, Mr. Hamilton wrote Schirmer asking him to honor the contract. Hamilton eventually received 1000 eggs in June, 7000 eggs in August or September and the racks in October. Retail locations were not established, nor was his original inventory repurchased.

Mr. John Marr of Charlottesville, Virginia came in contact with Marketing Unlimited at an "Own Your Own Business" show. He too, met with a Mr. Hughes who identified himself as an agent for Marketing Unlimited. Substantially similar representations were made to Mr. Marr as were made to Mr. Hamilton. On or about March 31, 1977, Mr. Marr signed a contract for the purchase of a cactus egg distributorship worth $2,250, with payment in advance. For his investment Mr. Marr was to receive 2000 cactus eggs, 10 display racks and 10 retail locations. When Mr. Marr failed to receive anything within 15 days as promised, he contacted Mr. Hughes who gave him Schirmer's home phone number. Mr. Marr called the number several times and spoke to a man who identified himself as Dick Schirmer. In their initial conversation Mr. Marr was told that the cactus eggs would be delayed because of production problems. Subsequent telephone conversations produced nothing but more words of delay. Late in April Mr. Marr did receive his cactus eggs. However, he never received his racks, retail locations and his initial inventory was never repurchased.

The evidence indicates that sometime in June, 1977, Marketing Unlimited ceased selling distributorships for cactus eggs and began selling distributorships for the sale of mint candies through vending machines established in retail locations.

In early June of 1977, Bobby Watson's response to a newspaper ad prompted Santhoff to visit Mr. Watson's home. Santhoff identified himself as a representative of Marketing Unlimited. He told Mr. Watson that in exchange for an investment of $3,750, he would receive 25 vending machines and locations in an area of Mr. Watson's choice and approximately 536 pounds of mint candies supplied by the Handicapped Assistance League and company support. Mr. Watson was to service the machines and collect the money.

On June 2, 1977, Mr. Watson signed a contract and gave Santhoff a personal check in the amount of $300 as a down payment. The contract stated that his relationship with Marketing Unlimited would be in the nature of a partnership. He was also given a certificate of guarantee to the effect that if he did not make a return on his investment within six months, he could get a full refund. Santhoff returned to Mr. Watson's house the next day with the contract and told him that he had been accepted as a partner. Santhoff then asked for the balance of the money. Mr. Watson stated that he would pay only half of the balance in advance, and the other half when the route was set up. Mr. Watson personally went out to the West Port Plaza office and gave Schirmer a cashier's check made payable to Marketing Unlimited in the amount of $1,575. Schirmer then told Mr. Watson that he had to have the rest of the money in advance to establish the vending machine routes. On June 14, 1977, Mr. Watson mailed another cashier's check to Schirmer for the balance. The check was made payable to Marketing Unlimited and was subsequently deposited in the company's account with the First Missouri Bank and Trust Company of Creve Coeur together with the other check. When Mr. Watson did not receive what he was promised, he called Schirmer who told him that he was having trouble getting the machines and locations but that he had the candy. Mr. Watson failed to receive any machines, candy or locations, and received no refund of his investment.

In early June of 1977, James Deliberto of St. Louis met with Santhoff after answering a newspaper ad. Substantially similar representations were made to Deliberto as were made to Mr. Watson. Mr. Deliberto signed a contract and gave Santhoff, in advance, a total of $3,750 in cashier's checks made payable to Marketing Unlimited. The contract stated that Mr. Deliberto's relationship with Marketing Unlimited would be in the nature of a partnership. It also stated that for his investment Mr. Deliberto was to receive 25 vending machines at 25 locations and approximately 500 pounds of candy. Although he was to receive the candy and machines within 30 days, it was "a couple of months" before the machines and about 200 pounds of candy were delivered to him.

In late August, when Deliberto still had not received his locations, he called Santhoff demanding a return of his money. Santhoff refused to acknowledge that he knew him. Mr. Deliberto never received the 25 retail locations, the rest of his candy or a refund.

Janis A. Reis of Holdrege, Nebraska met with Santhoff on July 6, 1977. She too learned of Marketing Unlimited through a newspaper ad. Santhoff identified himself as the vice-president of Marketing Unlimited and presented her with a business card stating the same. Substantially the same representations were made to her as were made to Deliberto and Watson. Mrs. Reis signed a contract with Marketing Unlimited which stated that for an investment of $3,750 she would receive locations, machines and approximately 586 pounds of candy. It also stated that the agreement would be in the nature of a partnership with the company. She also received a refund guarantee. Santhoff signed and accepted the contract on behalf of Marketing Unlimited as vice-president. Mrs. Reis paid the $3,750 in cashier's checks.

When she received nothing, Mrs. Reis called the West Port Plaza office several times speaking to several individuals, but to no avail. She did not receive any...