AEFC, INC., ) ) Plaintiff-Respondent, ) ) v. ) No. SD36137 ) Filed: December 16, 2020 TAMMY D. VIETTI, Individually, and ) VIETTI ENTERPRISES, LLC, ) ) Defendants-Appellants. )
APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY Honorable Michael J. Co rdonnier, Circuit Judge AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH DIRECTIONS A jury found in favor of plaintiff AEFC, Inc. (AEFC) on its common law fraud theory of recovery against defendants Viet ti Enterprises, LLC and its member and president, Tammy Vietti (hereinafter referred to collectively as Vietti and individually as Vietti Enterprises or Tammy Vietti). Th e jury awarded AEFC $106,626.61 in actual damages. Thereafter, AEFC filed a motion requesting an award of $350,708 as “contractual attorney’s fees,” which the trial court granted. The court entered an amended2 judgment that increased AEFC’s actual dama ges by the amount of the attorney fees awarded. On appeal, Vietti presents three points challenging the award of attorney fees. Point 1, which is dispositive, contends the trial court misapplied the law in granting AEFC’s motion for contractual at torney fees because: (1) th e jury found in favor of AEFC only on its common law fraud theory of recove ry; and (2) pursuant to the American Rule, AEFC was not entitled to recover attorney fees on that tort theory. We agree. Therefore, we reverse the trial court’s awar d of attorney fees. In all other respects, the judgment is affirmed. The cause is remanded with directio ns to the trial court to enter an amended judgment consistent with this opinion. The following facts are relevant to Vietti ’s first point on app eal. AEFC is the national franchisor for the “A dam & Eve” retail brand, which it bills as the “market leader in lingerie and adult themed novelty products in the United States.” AEFC’s purpose is to enter into franchise agreements with indi viduals and companies across the country, whereby AEFC is paid money in exchange for the use of its franchise, including the exclusive use of its pr oducts and marketing. In July 2007, AEFC entered into a franchise agreement (Franchise Agreement) with Vietti Enterprises, whereby that LLC w ould operate a retail “Adam & Eve” store on Republic Road in Springfield, Missouri. The Franchise Agreement was originally set to run from July 19, 2007 to July 18, 2017. It imposed various covenants and conditions upon each party, including that Vietti Enterprises was required to pay 5% of its gross sales per month to AEFC as a royalty fee. As rele vant to this appeal, the Franchise Agreement contained the following language pertinent to th e issue of attorney f ees in section 25.10:3 Cost of Enforcement. Franchisee [Vietti Enterprises] shall pay all expenses, including attorn eys’ fees and costs, incurred by the Company [AEFC], its affiliates, and its successors and assigns (a) to remedy any defaults of, or enforce any rights unde r, this [Franchise] Agreement; (2) to effect termination of this Agreemen t; and (3) to collect any amounts due under this Agreement. Attached to the Franchise Agreement wa s a personal guarantee document signed by Tammy Vietti (hereinafter referred to as Personal Guarantee). The third paragraph of this Personal Guarantee contained the following lan guage pertinent to the issue of attorney fees: The undersigned [Tammy Vietti] hereby agree[s] to defend, indemnify, and hold the Company [AEFC] harmless against any and all losses, damages, liabilities, costs, and expenses (i ncluding, but not limited to, reasonable attorneys’ fees, reason able costs of investig ation, court costs, and arbitration fees and expenses) resulti ng from, consisting of, or arising out of or in connection with any failure by Franchisee [Vietti Enterprises] to perform any obligation of Franchisee under the [Franchise] Agreement, any amendment thereto, or any other agreement executed by Franchisee referred to therein. Vietti operated its Adam & Eve retail store under the terms of the Franchise Agreement through May 2013, at which time the working relationship between AEFC and Vietti had completely deteriorated. On Ma y 30, 2013, Vietti ceased operations of the store under the Adam & Eve name. That same day, the parties executed a written document (Settlement Agreement) resolving their dispute. Pursuant to the terms of the Settlement Agreement: (1) Vietti paid AEFC a tota l of $22,271; (2) any amounts alleged due and owing by Vietti to AEFC were deemed satis fied; (3) Vietti agreed to a non-compete provision for a period of two years; and (4) the Franchise Agreement was “terminated and cancelled effective as of the date of the ex ecution of this Agreement by all Parties [May 30, 2013] and is no longer of any force or e ffect.” Paragraph 18 of the Settlement4 Agreement stated: “All Parties to this Agreem ent will bear their own costs and attorneys’ fees related to this Agreement.” On June 1, 2013, “In the Garden of Eden, LLC,” owned by Tammy Vietti’s husband, began operating a new store at the Rep ublic Road location in Springfield. The new store operated under the name “In the Garden of Eden.” According to AEFC, the “In the Garden of Eden” store was “substantially similar to an Adam & Eve store, and sells products that are substantially similar to products offered by an Adam & Eve store.” In March 2014, AEFC filed suit against Vietti. 1 In a third amended petition, AEFC asserted six theories of recovery against Vietti. Count 1 asserted a common law fraud theory and was based upon alle gations that Vietti had fraudu lently induced AEFC “to end the franchise relationship and sign the Settlement Agreement” with false representations. The remedies sought in Count 1 included rescis sion of the Settlement Agreement, as well as actual and punitive damages. In the al ternative, AEFC also asserted the following theories of recovery: civil conspiracy to defraud (Count 2); breach of contract based upon the Franchise Agreement (Count 3); breach of the Personal Guarante e attached to the Franchise Agreement (Count 4); and breach of the confidentiality and non-compete provisions of the Franchise Agreement (Count 5). Finally, AEFC asserted in Count 6 a breach of contract theory based upon the Settlement Agreement and sought liquidated damages of $10,000, as provided therein.

1 AEFC later filed a motion to add additional parties, including Tammy Vietti’s husband, Gregory Vietti, and In the Garden of Eden, LLC. Gregory Vietti settled with AEFC, and In the Garden of Eden, LLC was voluntarily dismissed as a party by AEFC, leaving only Tammy Vietti and Vi etti Enterprises in the case.5 Prior to trial, AEFC filed a motion in limine. The motion stated that, “if the jury returns a verdict in AEFC’s favor on either of the breach of contract claims, the respective contracts call for an award of attorney’s fees . AEFC requests that the award of fees be postponed until post-verdict and handled by the Court directly.” In March 2019, a jury trial was held. Befo re the trial began, the trial court referred to an unrecorded pretrial conference at wh ich the court ruled on “a variety of motions in limine ... filed by each party.” At trial, AEFC abandoned its request for rescission of the Settlement Agreement that had been pled in Coun t 1, as well as the theo ries of recovery in Counts 2-5. That included the breach of contract theories involving the Franchise Agreement and its attached Personal Guaran tee. During AEFC’s case-in-chief, it only presented evidence on: (1) it s Count 1 common law fraud th eory, which sought actual and punitive damages; and (2) its Count 6 breach of contract theory based on the Settlement Agreement. At the close of AEFC’s evidence, the tr ial court noted that AEFC “closed its case without presenting any evidence of attorn ey’s fees.” The court then questioned the parties’ attorneys: THE COURT: .... Attorney’s fees was discussed at our pretrial conference as being a potential element of damage in this case. I intended that we would put that on the record sometime earlier, and we didn’t do that. Do you all have the agreement that – depending on the outcome of the case – if attorney fees are appropriate, that you will submit evidence of that post verdict with the expectation the Court will consider that award separately from the jury? [AEFC’s attorney]: That was what pl aintiff proceeded its case, based on our pretrial proceedings, and intends to do should they become applicable under a contractual theory. [Vietti’s attorney]: Yes, Your Honor, I believe we contemplated that that was a matter within the special purview of the Court, that we decided postverdict.6 THE COURT: As long as you both agr ee on it, that’s fine. Otherwise, I would have to deal with the possibility to reopen the case. That is resolved. (Italics added.) AEFC’s common law fraud theory of recovery was submitted via Instructions 6- 11 and Verdict Form A. This verdict form to ld the jury to stop if it found for AEFC and awarded damages to it. The breach of c ontract theory of r ecovery based upon the Settlement Agreement was submitted via Instructions 12-14 and Verdict Form B. The jury found in favor of AEFC on its common law fraud theory of recovery. On Verdict Form A, the jury awarded actual damages in the amount of $106,626.61 and zero punitive damages. The jury stopped as instruct ed and returned no verdict on the alternative theory for breach of the Settlemen t Agreement in Verdict Form B. After the court accepted the jury’s verdict, but before final judgment was entered, AEFC filed a “Motion for Contractual Atto rney’s Fees” in th e amount of $350,708. The premise for the motion was that AEFC was entitled to contractual attorney fees pursuant to provisions in the Franchise Agreement and the Personal Guarantee. Vietti opposed the motion, arguing that the American Rule made each party responsible fo r their own attorney fees. After a hearing on the matter, the trial court entered an order granting the motion for the following reason: [AEFC] made a claim for additional damages for attorn ey fees under the Franchise Agreement. The parties agr eed pre-trial to a procedure whereby the issue of [AEFC’s] entitlement to attorney’s fees, and the amount of those fees would not be submitted to the jury. Rather, the parties agreed that, in the event [AEFC] was the prevailing party, the issue of attorney’s fees would be submitted to the Court for determination and, if appropriate, inclusion in the Judgment.7 Thereafter, the court entered an amended j udgment awarding AEFC total compensatory damages of $460,065.93, plus post-judgment interest. 2 This appeal followed. Vietti’s first point challenges the trial c ourt’s award of attorney fees to AEFC. “Whether a trial court has authority to award attorney’s fees is a question of law, which we review de novo .” Desu v. Lewis , 427 S.W.3d 843, 844 (Mo. App. 2014); see also Lucas Stucco & EIFS Design, LLC v. Landau , 324 S.W.3d 444, 445 (Mo. banc 2010). Vietti contends the trial court lacked the aut hority to award AEFC attorney fees because it only prevailed on its common law fraud th eory of recovery. We agree. At this point, it is important to note th at the trial court inaccurately summarized the parties’ agreement. The statem ent that the parties agreed to submit the issue of attorney fees after trial if AEFC was the “prevailing party” is overbroad. AEFC’s clearly stated position in its motion in limine and at trial wa s that the judge could decide the issue of attorney fees post-trial if AEFC was entitled to them on a contract ual theory. Vietti’s attorneys agreed with th at procedure. The record does no t support the statement that Vietti had agreed AEFC was entitled to attorney fees if it prevailed on any pleaded theory. The only submitted theory upon which the jury found for AEFC was common law fraud. Missouri generally does no t permit recovery of attorney fees in damage actions.
See Morris Branson Theatre, LLC v. Cindy Lee, LLC , 472 S.W.3d 635 , 642 (Mo. App. 2015). “Missouri follows the ‘American Rule’ regarding attorney’s fees, which provides that, absent statutory authoriz ation or contractual agreement, each party bears the expense

2 That figure was comprised of the ju ry’s actual damage award of $106,626.61, attorney fees of $350,708, and costs of $2,731.32.8 of his or her own attorney’s fees.” Tupper v. City of St. Louis , 468 S.W.3d 360, 374 (Mo. banc 2015). 3 Here, AEFC was awarded actual damages only on its common law fraud theory. Based on the American Rule, a trial court lacks the authority to award attorney fees to a party who prevails on a common law th eory of recovery, such as negligence or fraud. See, e.g. , Green v. Plaza in Clayton Condo. Ass’n , 410 S.W.3d 272, 281-82 (Mo. App. 2013) (affirming the denial of attorney fees to plaintiffs, who recovered money damages on their common law negligence theory); Borgschulte v. Bonnot , 285 S.W.3d 345, 352 (Mo. App. 2009) (reversing an award of a ttorney fees to plaintiffs, who were awarded money damages on their fraudulent misrep resentation theory of recovery, rather than their breach of contract theory); Memco, Inc. v. Chronister , 27 S.W.3d 871, 877-78 (Mo. App. 2000) (reversing an awar d of attorney fees to plai ntiffs, who recovered on their common law fraud theory); Hoffman v. Quality Chrysler Plymouth Sales, Inc. , 706 S.W.2d 576, 582 (Mo. App. 1986) (remanding the case with instructions to vacate an attorney fee award to plaintiffs, who rec overed on their common law fraud theory, if defendants’ motion to set asid e the judgment was denied); Gollwitzer v. Theodoro , 675 S.W.2d 109, 111 (Mo. App. 1984) (plaintiffs who elected to submit a common law fraud theory to support a request fo r punitive damages could not be awarded attorney fees).

3 Two other exceptions have been recognized. The first is that “attorney’s fees may, on rare occasions, be recovered when a c ourt of equity finds it necessary to balance benefits where very unusual circumstances have been shown.” Cupit v. Dry Basement, Inc. , 592 S.W.3d 417, 422 (Mo. App. 2020). The sec ond is that attorney fees may be awarded when “the natural and proximate result of a wrong or breach of duty is to involve the wronged party in coll ateral litigation.” Trustees of Clayton Terrace Subdivision v. 6 Clayton Terrace, LLC , 585 S.W.3d 269, 285 (Mo. banc 2019) (citation omitted). Neither exception applies to this case.9 Thus, under well settled Missouri law, the trial court here lacked the authority to award attorney fees to AEFC. AEFC argues that it was entitled to contra ctual attorney fees because there were provisions for attorney fees in the Franchise Agreement and its attached Personal Guarantee. We find no merit in th at argument for the following reasons. First, by the express terms of the Settle ment Agreement, the Franchise Agreement and its attached Personal Guarantee were terminated on May 30, 2013 and no longer had any force or effect. An award of attorney f ees cannot be made in reliance on a contract that no longer exists. Greenstreet v. Fairchild , 313 S.W.3d 163, 172 n.4 (Mo. App. 2010);
Harris v. Desisto , 932 S.W.2d 435, 448 (Mo. App. 1996). The only way AEFC could have relied upon the provisions for attorney fees in the Franchise Agreement and Personal Guarantee was to have the trial court rescind the Settlement Agreement. See Anglin Family Investments v. Hobbs , 375 S.W.3d 244, 252 (Mo. App. 2012) (“[r]escission of a contract extinguishes it and restores the parties to the pos itions they occupied before the contract was executed”). In Count 1 of the third amended petition, rescission of the Settlement Agreement was one of the remedies sought by AEFC. By the time of trial, however, AEFC had abandoned that requested remedy. Instead, AEFC chose to submit common law fraud as its favored theory of reco very in Verdict Form A. The only breach of contract theory of recovery, submitted to the jury in Verdict Form B, was based on the Settlement Agreement. This alternative submission would have permitted AEFC to potentially recover $10,000 in liquidated damages if the jury returned a verdict for Vietti on the common law fraud theory. The jury also was told not to reach this theory if it found for AEFC in Verdict Form A. By electi ng to submit the case th at way, AEFC was bound10 by the restrictions placed on each chosen theory. Gollwitzer , 675 S.W.2d at 111. Because the jury only returned a verdict for AEFC on its common law fraud theory of recovery, the trial court did not have the authority to award attorney fees to AEFC. See id

. Second, assuming arguendo that the provisions for attorney fees in the Franchise Agreement and Personal Guarantee were still enforceable, AEFC could not recover such fees unless it submitted and prevailed upon breach of contract theories of recovery involving those contracts. That did not happe n. Instead, AEFC abandoned its breach of contract theories involving the Franchise Ag reement and the Personal Guarantee at trial, and neither of those theories of recovery was submitted to the jury. An illustrative example of how this principle is applied can be found in Borgschulte v. Bonnot , 285 S.W.3d 345 (Mo. App. 2009). There, plaintiffs were purchasers of real estate near the Table Rock Lake area. Id . at 347. After the purchasers received the sellers’ disclosure statement a nd all parties signed the sales contract, the purchasers discovered that the property had issu es with sewage seeping through the yard.
Id . at 347-48. There was evidence that the se llers knew about the septic-system issues prior to the sale, but they failed to disclose the problem to the purchasers. Id . at 348-49. Thereafter, the purchasers filed a three- count petition alleging: (1) fraudulent misrepresentation; (2) breach of contract ; and (3) negligent misrepresentation. Id . at 347 n.1. Following trial, the court entered judgment and awarded damages in favor of the purchasers based on their theory of rec overy for fraudulent misrepresentation. Id . The trial court also awarded purchasers attorney fees, as provided by the sales contract. Id . at 347. On sellers’ appeal, this Court affirm ed the damage award on the fraudulent misrepresentation theory. The award for atto rney fees, however, was reversed because:11 Although the sales contract provided for attorney fees for a prevailing party upon default on the contract, that was not the basis on which plaintiffs prevailed. Plaintiffs prev ailed on their tort action for fraudulent misrepresentation, not on their contract action.
Id . at 352. We apply that principle here. B ecause AEFC only prevailed on its tort theory of common law fraud, it was not enti tled to recover attorney fees. Vietti’s first point is granted. The trial court’s award of $350,708 to AEFC for attorney fees is reversed. In all other respects, the judgmen t is affirmed. The cause is remanded with directions to the trial court to enter an amended judgment consistent with this opinion.

JEFFREY W. BATES, C.J. – OPINION AUTHOR DANIEL E. SCOTT, P.J. – CONCUR MARY W. SHEFFIELD, J. – CONCUR