State ex rel. Nixon v. Continental Ventures

• Decision Date: 06 August 2002
• Docket Number: No. WD 59716.,WD 59716.
• Citation: 84 S.W.3d 114
• Parties: STATE of Missouri, ex rel. Jeremiah W. (Jay) NIXON, Attorney General, Appellant, v. CONTINENTAL VENTURES INC., d/b/a Universal Consulting Service, et al., Defendant; Bernard Brown, Respondent Pro Se.
• Court: Missouri Court of Appeals

84 S.W.3d 114

STATE of Missouri, ex rel. Jeremiah W. (Jay) NIXON, Attorney General, Appellant, v. CONTINENTAL VENTURES INC., d/b/a Universal Consulting Service, et al., Defendant;

Bernard Brown, Respondent Pro Se.

No. WD 59716.

Missouri Court of Appeals, Western District.

August 6, 2002.

Rehearing Denied October 1, 2002.

Jeremiah (Jay) Nixon, Atty. Gen., Jefferson City, Judith S. Popper, Asst. Atty. Gen., Kansas City, for appellant.

Bernard Brown, Maitland, FL, Respondent Pro Se.

Before HARDWICK, P.J., ULRICH, J., and HANNA, S.J.

ROBERT G. ULRICH, Judge.

The State appeals the portion of the judgment of the trial court for the State that denied requested restitution in a suit brought by the Attorney General against Bernard Brown and others for breach of the Missouri Merchandising Practices Act, Chapter 407 RSMo ("MMPA"). In its single point on appeal, the State argues that the trial court abused its discretion in refusing to compel Bernard Brown to make restitution to two consumers who the court specifically found suffered ascertainable monetary loss in the sum of $22,650 as a result of Bernard Brown's unlawful practices in violation of section 407.100.4, RSMo 2000.¹ The judgment of the trial court is affirmed.

Facts

On March 12, 1999, the State filed suit against Bernard Brown; Continental Ventures, Inc. d/b/a Universal Consulting Services ("UCS"); Alton O. Hauswirth; and Ken Kruta alleging their use of unlawful merchandising practices in the sale of "invention development services" to Missouri consumers. UCS purported to analyze and evaluate consumers' invention ideas and then assist the consumers with the process of patenting and marketing their ideas. Bernard Brown, UCS's Corporate Vice-President of Development and Marketing, was accused of directing the use of misrepresentations of material fact and the withholding of material facts in sales presentations to consumers. All the defendants, except Mr. Brown, signed a "Consent Injunction and Final Judgment."

The case against Mr. Brown proceeded to trial.

The trial court's judgment against Mr. Brown, following trial, enjoined Mr. Brown from further actionable misconduct and awarded the State $15,000 in prosecution costs and $2,000 in penalties. The trial court did not, however, award restitution to two Missouri consumers who the court specifically found experienced financial loss in the amount of $22,650 as a result of Mr. Brown's unlawful practices that contravened Chapter 407 RSMo. The State moved to amend the judgment to include an award of restitution for the two Missouri consumers, but the circuit court denied the motion, and the original judgment became final. The State filed this appeal.

I. Standard of Review

This is a court-tried case. The standard of review in non-jury cases is stated in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). The judgment will be sustained on appeal unless no substantial evidence supports it, it is against the weight of the evidence, or it erroneously declares or applies the law. Id.

Neither the State, Appellant, nor the Respondent, Mr. Brown, contest the judgment against Mr. Brown except that the State appeals the absence of the court's order of restitution for $22,650 to two Missouri consumers who lost that sum as a result of Mr. Brown's unlawful merchandising practices. Thus, the issue presented is whether the trial court abused its discretion in not awarding restitution as provided by section 407.100.4. "Judicial discretion is abused when the trial court's ruling is clearly against the logic of the circumstances then before the court and is so arbitrary and unreasonable as to shock the sense of justice and indicate a lack of careful consideration." Giddens v. Kansas City S. Ry. Co., 29 S.W.3d 813, 819 (Mo. banc 2000), cert. denied, 532 U.S. 990, 121 S.Ct. 1644, 149 L.Ed.2d 502 (2001)(quoting Anglim v. Mo. Pac. R.R. Co., 832 S.W.2d 298, 303 (Mo. banc 1992), cert. denied, 506 U.S. 1041, 113 S.Ct. 831, 121 L.Ed.2d 701 (1992)). Are the weight of the evidence and the requirements of the applicable law so compelling that the failure of the trial court to award restitution constitutes an abuse of discretion?

II. Restitution Provision Within

Section 407.100.4

Enacted in 1967, Missouri's Merchandising Practices Act, Chapter 407 RSMo, is intended to supplement the provisions of a common law action in fraud. State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368 (Mo.App. W.D.1973); State ex rel. Ashcroft v. Mktg. Unlimited of Am., Inc., 613 S.W.2d 440, 445 (Mo.App. E.D.1981). Chapter 407 is designed to protect Missouri consumers from fraudulent business practices. State ex rel. Nixon v. Telco Directory Publ'g., 863 S.W.2d 596, 601 (Mo. banc 1993). The fundamental purpose of the MMPA is the "protection of consumers." State v. Polley, 2 S.W.3d 887, 892 (Mo.App. W.D.1999). The General Assembly provided several tools within the statute with which the judicial system may address the prohibited conduct and thereby aid and protect consumers from illegal practices and deter future prohibited misconduct. These tools include injunctive relief, payment to the State for the cost of prosecution, penalties, and restitution to injured consumers. From the MMPA's inception, Missouri courts have emphasized that Chapter 407, and particularly the remedy of restitution contained in section 407.100, should be liberally construed to protect consumers. See e.g. State ex rel. Webster v. Myers, 779 S.W.2d 286, 290 (Mo.App. W.D.1989).

For the trial court to award restitution under section 407.100.4, the court must have subject matter jurisdiction. State ex rel. Nixon c. Am. Tobacco Co., 34 S.W.3d 122, 130 (Mo. banc 2000). Either the defendant must have admitted a violation of the Missouri Merchandising Practices Act or the court must have found the defendant to have violated the Act before the court can consider whether restitution under the statute is appropriate. Id.

In this case, the court found that the defendant violated the Merchandising Practices Act. The State proffered the testimony of two Missouri consumers from which the trial court was able to conclude, "two Missouri consumers were harmed by the use of [d]efendant Brown's unlawful merchandising practices ... [in the amount] of $22,650." As a result, the trial court granted injunctive relief and awarded the State $15,000 in prosecution costs and $2,000 in penalties as permitted by the statute. The court, however, did not award the two consumers restitution as permitted by section 407.100.4.

Section 407.100.4 states in part:

The court, in its discretion, may enter an order of restitution, payable to the state, as may be necessary to restore to any person who has suffered any ascertainable loss, including, but not limited to, any moneys or property, real or personal, which may have been acquired by means of any method ... declared to be unlawful by this chapter. It shall be the duty of the attorney general to distribute such funds to those persons injured.

Thus, section 407.100.4 grants the trial court discretion to award restitution for "ascertainable loss" experienced by a consumer as a result "of any method" "declared to be unlawful" by Chapter 407.

III. Discretionary Restitution Under Merchandising Practices Statutes When Consumer Is Harmed

No Missouri cases have decided whether the declination of a trial court to award restitution under section 407.100.4, where the court has specifically determined that a consumer injured by conduct contravening the statute, constitutes an abuse of the trial court's discretion. Missouri's courts have, however, recognized the General Assembly's intent for a broad application of restitution where consumers have suffered loss by the illegal practices contemplated by the Missouri Merchandising Practices Act. In State v. Polley, 2 S.W.3d 887 (Mo. App. W.D.1999), this court declared that the broad language of section 407.100.4 that "any person who has suffered any ascertainable loss' contemplates that other parties, besides the direct purchaser or contracting party, who suffer damages resulting from the violator's prohibited conduct under the Act are included among those eligible to receive restitution" expresses the General Assembly's intent that the Act include as persons qualified to receive restitution those persons who are injured by the miscreant's conduct even though they did not deal directly with the offender. Id. at 892.

Courts in other jurisdictions that have statutes similar to Missouri's Merchandising Practices Act have considered whether the denial of discretionary restitution can constitute an abuse of discretion. In Motzer Dodge Jeep Eagle, Inc. v. Ohio Attorney Gen., 95 Ohio App.3d 183, 642 N.E.2d 20 (1994), the court stated that "restitution is not an automatic or mandatory remedy for violations" of the Ohio Consumers Sales Practice Act R.C. 1345.01 et. seq. Id. at 26. Recognizing that the award of restitution under the statute is discretionary, the court determined the trial court abused its discretion when it failed to award restitution to customers of the motor vehicle dealership that extracted a $95 delivery and handling fee from all customers who purchased new or used cars from the dealership. Id. The Ohio statute utilized by the Attorney General, Ohio Comm. Code § 1345.07(B), provided that "the court may make appropriate orders ... to reimburse consumers found to have been damaged." The court said, "only by ordering restitution" is a strong consumer protection program provided "which safeguards public interest and the well-being of consumers." Id. The court emphasized that "the trial court's decision to award restitutionary relief should be exercised with a view toward the purposes of the act." Id.

In State v. Cottman Transmissions Systems, Inc., 86 Md.App. 714, 587 A.2d 1190 (1991), cert denied, 324 Md. 121, 596 A.2d 627 (1991), the trial court had found that the sale of unnecessary...