State v. Polley, A-1

• Decision Date: 05 October 1999
• Docket Number: A-1
• Citation: 2 S.W.3d 887
• Parties: (Mo.App. W.D. 1999) State of Missouri, Respondent, v. Charles Polley d/b/aConstruction and Exteriors, Appellant. WD56400
• Court: Missouri Court of Appeals

2 S.W.3d 887 (Mo.App. W.D. 1999)

State of Missouri, Respondent, v. Charles Polley d/b/a A-1 Construction and Exteriors, Appellant.

WD56400

Missouri Court of Appeals Western District

10/05/99

Appeal From: Circuit Court of Jackson County, Hon. David W. Shinn

Counsel for Appellant: David Edward Martin

Counsel for Respondent: James Dale Youngs

Opinion Summary: Charles Polley, d/b/a A-1 Construction and Exteriors, appeals the findings of fact, conclusions of law, and judgment of the trial court finding he had engaged in "unfair practices" as prohibited by the Missouri Merchandising Practices Act.

Division III holds: (1) All of Polley's conduct occurred after the date "unfair practice" was added to section 407.020.1. Thus, his conduct was subject to judicial scrutiny as "unfair practice" under the statute, notwithstanding the fact that the 15 CSR 60-8.020 definition of "unfair practice" was not effective at that time.

(2) Consumers suffered ascertainable losses from Polley's practices prohibited by the Merchandising Practices Act. Thus, the trial court's order of restitution, pursuant to section 407.100.4, on behalf of the consumers was supported by the evidence.

(3) A consumer contracting indirectly with Polley through his builder suffered ascertainable loss by having to repair or replace siding defectively installed by Polley. The consumer falls within the class of persons the statute was designed to benefit.

(4) Polley failed to plead failure to mitigate damages as an affirmative defense in his answer pursuant to Rule 55.08, thereby waiving this defense.

(5) The two actions against Polley do not involve identical "things sued for," so res judicata does not preclude this case. As the issues litigated in both cases are not identical, the present suit is not barred by the doctrine of collateral estoppel.

(6) The civil penalties, the Attorney General's costs of investigating and prosecution, and the $25,000 bond or letter of credit requirement imposed upon Polley are authorized by statute and are within the statutorily prescribed range. Accordingly, they are not as a matter of law excessive under the Excessive Fines Clause.

Smith and Howard, JJ., concur.

Robert G. Ulrich, Presiding Judge

Charles Polley, d/b/a A-1 Construction and Exteriors, appeals the finding of fact, conclusions of law, and judgment of the trial court finding he had engaged in "unfair practices" as prohibited by the Missouri Merchandising Practices Act, Chapter 407, RSMo 1994. Mr. Polley raises several points on appeal. He claims that the trial court erred by (1) misapplying the law holding that Mr. Polley had engaged in "unfair practices" under section 407.020¹ because some of the contracts with consumers were formed prior to the effective date of 15 CSR 60-8.020, which defines "unfair practice," (2) ordering restitution on behalf of consumers Elmore, Bass, Braverman, and Pierron because the State failed to present evidence of ascertainable loss, (3) ordering restitution to a consumer who did not contract or pay Mr. Polley directly, (4) ordering restitution to consumers who failed to mitigate damages, (5) failing to dismiss the State's petition under the doctrines of res judicata and collateral estoppel, and (6) imposing penalties which are excessive and thus prohibited by the Eighth Amendment.

The judgment of the trial court is affirmed.

Facts

Charles Polley is a sole proprietor who does business under the name "A-1 Construction and Exteriors." His business is engaged in the advertising and sale of home repair and improvement services including the installation of maintenance-free siding and replacement windows. In Mr. Polley's contract negotiations with various consumers to perform work for them, he represented that he provided a three-year guarantee on the workmanship of the work performed by him and a lifetime guarantee on the materials used in the project. After Mr. Polley completed the work, consumers noted various problems with Mr. Polley's work, including siding improperly installed so that it sagged or fell off the building, incomplete installation, substandard installation of windows and doors so that they would not function properly, and further damages to the consumers' homes due to Mr. Polley's attempts at installation. Furthermore, Mr. Polley evaded attempts by disgruntled consumers to contact him, and when he spoke to dissatisfied consumers, he made promises to honor his guarantees that he never fulfilled.

In 1987, in response to the consumer complaints against Mr. Polley, the State of Missouri, acting through the Attorney General, sought and obtained a permanent injunction against Mr. Polley, then doing business as "Brite Side Construction." The injunction prohibited Mr. Polley from failing to honor his workmanship and materials guarantees. In a subsequent proceeding brought by the Attorney General, Mr. Polley was fined $10,000 in civil penalties for violating the 1987 injunction.

In further response to Mr. Polley's conduct, the Attorney General brought the present civil action against Mr. Polley alleging that he had engaged in unlawful merchandising practices as prohibited by the Missouri Merchandising Practices Act, Chapter 407("the Act"). At trial, the State presented the testimony of five consumers who had work performed on their homes by Mr. Polley during the period of August 1993 through April 1995.

The trial court concluded that Mr. Polley had engaged in the following conduct prohibited by section 407.020: misrepresentation of his intention to provide an unlimited three-year guarantee on his workmanship and the extent of the guarantee, failure and refusal to honor the three-year guarantee on workmanship, failure and refusal to respond in good faith to consumers' requests to honor his contract, failure to honor promises to consumers to repair his work, misrepresentation that he would perform the work in a competent and workmanlike manner, misrepresentation to consumers that no down payment was required, misrepresentation to consumers on how they could contact him by providing an inaccurate address, and misrepresentation in his Yellow Page advertising that he was licensed and insured. The court concluded that Mr. Polley had violated the Act fifteen times and ordered him to pay a civil penalty of $500 per violation, or $7,500. In addition, the court permanently enjoined him from certain conduct and required that he post a $25,000 bond or letter of credit as security against future claims. The court also ordered restitution totaling $15,535 to be distributed to consumers Elmore, Bass, Braverman, and Pierron. It also ordered him to reimburse the Attorney General's $15,530 costs of investigation and prosecution, pay a $5,000 civil penalty for violating the consent preliminary injunction, and to make a $1,554.50 contribution to the Merchandising Practices Revolving Fund. This appeal followed.

Standard of Review

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).

I. Unfair Practices Prior to 15 CSR 60-8.020

As Mr. Polley's first point on appeal, he contends that the trial court erred in declaring and applying the law when it found that he had engaged in unfair practices because Mr. Polley formed the contracts with consumers Bass, Pierron, and Braverman prior to the effective date of 15 CSR 60-8.020, which defines "unfair practice."

Missouri enacted its original Merchandising Practices Act in 1967, Ch. 407. In 1985 the Missouri General Assembly amended section 407.020, by adding the term "unfair practice" to the list of prohibited conduct under the Act and granting the attorney general authority to promulgate rules setting out the exact scope of Missouri's law and the meaning of the words employed in the Merchandising Practices Act. State ex rel. Nixon v. Telco Directory Pub., 863 S.W.2d 596, 601 (Mo. banc 1993). Nine years after "unfair practice" was added to section 407.020, the attorney general promulgated interpretative rules defining "unfair practice" as set forth in 15 CSR 60-8.020. These rules had an effective date of September 30, 1994.

Prior to the promulgation of 15 CSR 60-8.020, no statutory or regulatory definition of "unfair practice" existed under the Act. Cases decided after the inclusion of "unfair practice" in the statute but prior to the promulgation of 15 CSR 60-8.020 left to the courts determination whether each particular charged instance violated fair dealing. State ex rel. Webster v. Areaco Inv. Co., 756 S.W.2d 633, 635 (Mo. App.E.D. 1988). In Areaco, the court noted that section 407.020 did not define the term "deceptive practices," and stated that "this was done to give broad scope to the meaning of the statute and to prevent evasion because of overly meticulous definitions." Id. Review of the sparse case law applying section 407.020 discloses no conflict in the law between what constitutes "unfair practice" prior and subsequent to the promulgation of 15 CSR 60-8.020. The CSR further articulates what constitutes "unfair practice" and does not state a different standard from section 407.020.

All of Mr. Polley's described conduct occurred after 1985, the date "unfair practices" was added to section 407.020.1, RSMo 1985; therefore, all his conduct is subject to judicial scrutiny as "unfair practice" under the statute. The fact that the CSR interpretative definition of "unfair practice" did not become effective until after Mr. Polley had contracted with consumers Braverman, Bass, and Pierron does not make section 407.020 inapplicable to Mr.Polley's pre-CSR actions. Point one is denied.

II. Ascertainable Loss Required by Section 407.100.4

Mr. Polley contends as his second point on appeal that the trial court erred in awarding restitution to...