State ex rel. Webster v. Cornelius

• Citation: 729 S.W.2d 60
• Decision Date: 05 May 1987
• Docket Number: No. 51941,51941
• Parties: STATE of Missouri, ex rel. William L. WEBSTER, Attorney General, Plaintiff- Respondent, v. Frank C. CORNELIUS, et al., Defendants-Appellants.
• Court: Court of Appeal of Missouri (US)

Page 60

729 S.W.2d 60

STATE of Missouri, ex rel. William L. WEBSTER, Attorney General, Plaintiff- Respondent, v. Frank C. CORNELIUS, et al., Defendants-Appellants.

No. 51941.

Missouri Court of Appeals,

Eastern District,

Division Three.

May 5, 1987.

Appleton, Newman & Terson, Alan G. Gerson, Clayton, for defendant-appellant.

William L. Webster, Atty. Gen., Jefferson City, Peter Lumaghi, Asst. Atty. Gen., St. Louis, for plaintiff-respondent.

PUDLOWSKI, Presiding Judge.

This is an appeal from an order entered July 2, 1986 by Honorable Edward M. Peek, judge of the Circuit Court of St. Louis. Pursuant to the Missouri Merchandising Practices Act, Chapter 407 RSMo 1978, appellants were permanently enjoined and prohibited from soliciting advertisements or any related type of sale with respect to law enforcement journals or charitable organization without a written contract authorizing this representation. Appellants were further ordered to make full restitution with 10% interest to individuals filing affidavits of financial loss and pay attorney's fees and cost.

In order for the facts of this case to be easily understood, it is important to start with a brief discussion of who the important figures in this case were. O.S.C. Corporation is a Massachusetts corporation that engaged in business in Missouri publishing and soliciting advertisements for publications relating ostensibly to state highway patrol organizations. The president of O.S.C. was David Zucker. Both of these parties were named defendants but they were dismissed from the case by the plaintiff before trial. Appellant Lester Gardner was an officer of O.S.C. in 1983 and 1984 with the title of "vice-president or vice-chairman." Mr. Gardner actively participated in all aspects of O.S.C.'s operations. Defendant Troopers Benefit Association, Inc., (T.B.A.) is a Missouri corporation, established in September of 1984. Defendant Troopers Benefit Association, Inc., of Indiana (T.B.A., Indiana) is not a Missouri corporation. Both of these corporations were established to provide benefits to state highway patrolmen.

Appellant Frank C. Cornelius is the president and owner of T.B.A. and T.B.A., Indiana. Defendant Main Street Publishing of Missouri, Inc., (Main Street) is a Missouri corporation established in July of 1984 that engaged in the publishing and solicitation of advertisements for publications relating ostensibly to state highway patrol organizations. Missouri State Troopers Association (M.S.T.A.) is an organization representing approximately 65% of the Missouri State Highway Patrol. M.S.T.A. was established in August of 1981.

The first significant event relating to this case occurred in June of 1982. At that time M.S.T.A. contracted with O.S.C. to make advertisement solicitations and publish "The Missouri Trooper," the quarterly news magazine of M.S.T.A. M.S.T.A. was to receive 20% of the advertising revenue with the remainder going to O.S.C.

Soon after solicitations began, M.S.T.A. began receiving various complaints concerning the way O.S.C. was handling the solicitations. M.S.T.A. subsequently relayed this information to Zucker and defendant Gardner. On October 28, 1983, M.S.T.A. notified O.S.C. and Zucker that it was terminating its contract with O.S.C. due to the many complaints that it had received concerning O.S.C. practices.

On January 26, 1984, O.S.C. filed suit against M.S.T.A. in federal district court to enforce the terms of the contract. On January 11, 1985, the federal district court ruled in favor of M.S.T.A. and permanently enjoined O.S.C., its officers, agents, servants, employees, attorneys and all those persons in active concert or participation with it, from using the name, "The Missouri Trooper," or any confusingly similar designation as a trademark, or otherwise to publish, sell or advertise such name in any magazine, book or publication of any type.

At trial, testimony showed that on January 1, 1985, David Zucker had O.S.C.'s operations in Missouri change its name to Main Street Publishing in order for O.S.C to continue its operation in Missouri. Main Street then began soliciting advertisements for a trooper magazine. Prior to this, appellant Gardner had ordered the office to be moved because they had been evicted from their office for failure to pay rent. Testimony at trial indicated that pursuant to instructions from Gardner different business names and addresses were frequently used to avoid paying rent and utility bills.

After the court order, Main Street stopped soliciting directly for M.S.T.A. Instead they turned their attention to the newly formed T.B.A. of Missouri. In their solicitations for T.B.A. of Missouri, Main Street continued to solicit advertisements using the same sales pitch that had been used to solicit advertising for M.S.T.A.

At trial a number of witnesses testified as to the solicitation practices of Main Street. Usually a telephone solicitor would contact an individual or a business and ask them to place an advertisement in a trooper magazine. The contacted person was usually told by the solicitor that they represented the "Troopers Benefit Association for the Missouri Troopers," the "Missouri State Troopers Association," or the "Missouri Troopers Association." At no time were the contacted parties informed that the solicitors were not representing the highway patrol or M.S.T.A., or that those organizations had not sanctioned the use of their name. The contacted parties were additionally informed that the proceeds would be used to benefit widows and families of Missouri State Troopers killed in action or to fund a drunk driving program in Missouri. At no time were any of the collected funds used to further these objectives. Also M.S.T.A. did not receive any funds from any solicitation done by O.S.C. or Main Street after April 13, 1984 even though solicitations continued through January of 1985. Moreover, the "Missouri Trooper" magazine was last published in July-August of 1984. Advertisements solicited after this time were never published.

Another activity appellants and Main Street were engaged in was the promoting and selling of tickets to a sports show for the benefit of the troopers. The sports show was to feature players from the St. Louis Football and Baseball Cardinals. Main Street did not make arrangements for the sports personalities to appear. Nor did it plan to carry out the sports show even though they had sold tickets to the show and made representations that the personalities would be there.

Appellants' first point is that the trial court's judgment was not supported by substantial evidence that appellants either individually or with other defendants engaged in any actions proscribed by Chapter 407 RSMo 1978 or committed willful violations of the act.

The standard for review of a court tried case has been well established in Missouri. The judgment of the trial court will be affirmed 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. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

Section 407.020 provides that an unlawful practice is:

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise is declared to be an unlawful practice.

This statute was construed in State ex rel. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368 (Mo.App.1973), wherein it was held that the purpose of the statute:

is to supplement the definitions of common law fraud in an attempt to preserve fundamental honesty, fair play and right dealings in public transactions. In order to give broad scope to the statutory protection and to prevent ease of evasion because of overly meticulous definitions, many of these laws such as the Missouri statute 'do not attempt to define deceptive practices or fraud, but merely declare unfair or deceptive practices unlawful ...' Commerce Clearing House, Property law Rep., Vol. 1, p 3200, leaving it to the court in each particular instance to declare whether fair dealing has been violated.

This court has further stated that it is not the person's intent that is determinative of the remedial provisions of Chapter 407 but rather that the defendants' conduct constituted unfair practices. State ex rel. Ashcroft v. Marketing Unlimited, 613 S.W.2d 440, 447 (Mo.App.1981). Unfair practices do not have to be proven by the establishment of the elements of common law fraud. The injunctive relief provided for in § 407.100 is remedial, not punitive, and therefore the statutes should be given a liberal construction. Id. at 445.

Upon an examination of the record before us, the facts clearly establish that appellants' conduct as well as the conduct of their agents constituted unlawful practices within the definition of § 407.020.

Evidence illuminated that a number of people were actually mislead by the representations made to them. These witnesses testified that they had been contacted by a solicitor who claimed to be representing M.S.T.A. These witnesses bought advertisements in a trooper magazine ranging in price from twenty-nine dollars ($29) to forty dollars ($40). These witnesses further testified that if they had known the true...