State ex rel. Webster v. Areaco Inv. Co.

• Decision Date: 06 September 1988
• Docket Number: No. 53253,53253
• Citation: 756 S.W.2d 633
• Parties: STATE of Missouri, ex rel., William L. WEBSTER, Attorney General of the State of Missouri, Plaintiff-Respondent, v. AREACO INVESTMENT COMPANY, a Missouri Corporation, d/b/a Rocky Ridge Ranch Resort, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 633

756 S.W.2d 633

STATE of Missouri, ex rel., William L. WEBSTER, Attorney General of the State of Missouri, Plaintiff-Respondent, v. AREACO INVESTMENT COMPANY, a Missouri Corporation, d/b/a

Rocky Ridge Ranch Resort, Defendant-Appellant.

No. 53253.

Missouri Court of Appeals,

Eastern District,

Division Three.

Sept. 6, 1988.

Dana A. Hockensmith, Hillsboro, Evan J. Beatty, St. Louis, for defendant-appellant.

Ralph Lane Goodard, St. Louis, for plaintiff-respondent.

SMITH, Judge.

Defendant appeals from the judgment entered in a court-tried case finding that defendant violated the provisions of Chapter 407 RSMo., the Merchandising Practices Act. The court issued injunctive relief, rescission of contracts, and awarded the Attorney General his costs in investigating and prosecuting the matter.

Defendant owns and operates Rocky Ridge Ranch Resort in Ste. Genevieve County. It sells memberships to use the facilities of the resort. It solicits customers by the use of random mailings. As an inducement to visit the resort and be subjected to a sales presentation, the mailings indicate that the recipient will be awarded one of the gifts listed in the mailing. The gift is awarded after a mandatory tour and sales presentation. The defendant hires outside companies to handle the mailings and the selection of gifts. From 1984 through 1986 over a million mailings were made, over 21,000 people visited the resort as a result of the mailings and 1675 memberships were sold. Three categories of memberships were sold, i.e., wilderness, charter, and executive. Exhibits in the record reflect prices ranging from $3500 to $6500.

The State alleged that defendant offered for sale "merchandise" as that term is defined in Sec. 407.010 and in connection with those offers engaged in deception, fraud, false pretense, false promise, misrepresentation and suppression and omission of material fact, all prohibited by Sec. 407.020. The petition then set forth eight specific misrepresentations. After hearing, the trial court entered its findings of fact, conclusions of law, and order. It found seven specific areas of misrepresentation and permanently enjoined defendant from misrepresenting those areas in the future. It also rescinded the contracts of ten customers and ordered refunds of all monies paid pursuant to those contracts. It further awarded the Attorney General $4170 for his attorney's fees, investigatory and incidental expenses. This monetary award was based upon an affidavit submitted after the hearing.

Defendant first contends that the trial court "erroneously declared and applied the law as set out in Sections 407.020, 407.100, and 407.130 ... ." We would be justified in denying this point on the basis that it fails to set forth "wherein and why" the court erred. Rule 84.04(d). From the argument portion of the brief, we gather that defendant premises this allegation of error upon a conclusion that the conduct established was not misleading, that defendant had no intent to deceive, and that there was no reliance by customers established in the record.

Our review is under the established principles of Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) [1-3]. Sec. 407.020.1 RSMo 1986, provides:

"The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce ... is declared to be an unlawful practice ... . Any act, use or employment declared unlawful by this subsection violates this subsection whether committed before, during or after the sale, advertisement or solicitation."

It is the purpose of this section "to supplement the definitions of common law fraud in an attempt to preserve fundamental honesty, fair play and right dealings in public transactions." State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362 (Mo.App.1973) [7-9]. Sec. 407.020 does not define deceptive practices; it simply declares unfair or deceptive practices unlawful. This was done to give broad scope to the meaning of the statute and to prevent evasion because of overly meticulous definitions. This leaves to the court in each particular instance the determination whether fair dealing has been violated. Id.; State ex rel. Webster v. Cornelius, 729 S.W.2d 60 (Mo.App.1987) [2, 3]. It is the defendant's conduct, not his intent, which determines whether a violation has occurred. State ex rel. Ashcroft v. Marketing Unlimited of America, 613 S.W.2d 440 (Mo.App.1981) . It is not necessary in order to establish "unlawful practice" to prove the elements of common law fraud. Id. .

What we have said disposes of defendant's contention that absence of intent precludes a finding of unlawful practice. We also do not find that proof of reliance by customers is a necessary element of such cases. There is dicta in State ex rel. Ashcroft v. Wahl, 600 S.W.2d 175 (Mo.App.1980) 1.c. 176, which appears to indicate the contrary. That dicta is based upon the difference between the Missouri statute and those of Kansas and New Jersey both of which explicitly provide "whether or not any person has in fact been misled, deceived or damaged thereby ... ." We believe that analysis overlooks the language in Sec. 407.020.1 that a violation of that subsection exists whether the act, use or employment is committed "before, during or after the sale, advertisement or solicitation." Further Sec. 407.100 allows the Attorney General to seek an injunction when it appears that a person "has engaged in, is engaging in, or is about to engage in ..." any unlawful practice. (Emphasis supplied). It is difficult to conceive how reliance can be an element of a cause of action which may be commenced before defendant has even begun advertising or solicitation. Having concluded that intent and reliance are not necessary elements of the cause of action, it is unnecessary for us to determine whether they have in fact been established.

We turn to defendant's conduct. There was evidence that the mailers described certain of the gifts in what can be charitably denominated a misleading way. A "blue fox fur coat" was in fact synthetic. A child's plastic vinyl raft was described as a "two man boat". A "Singer sewing machine" turned out to be a seam and hem tacker. A "frost-free refrigerator" turned out to be a small plastic cooler with a cigarette lighter plug-in attachment. That "refrigerator" was described in the mailer as requiring the recipient to pay a fifty dollar delivery charge, clearly indicating it was something considerably larger and more valuable than it turned out to be.

During the escorted tour and sales presentation certain representations were made to customers. They were told that it was necessary to purchase memberships in order to buy a lot. Defendant did not, at the time of these representations, sell lots; they were available, however, from private citizens who had previously purchased them from defendant. Defendant's officers admitted that such representations were untrue but stated they had told their employees not to make such representations. There was evidence that employees were instructed by the officers to make such representations. There was evidence that prospective customers were told that defendant would help them resell memberships if they wished to dispose of the memberships. This was admittedly untrue and defendant was in the business of selling original memberships, not selling those of existing members. Customers were told that their memberships would increase in value. There was no evidence that such would happen and the...