Opinion ID: 1764819
Heading Depth: 2
Heading Rank: 1

Heading: Count I-Fraudulent Misrepresentation and the Statute of Limitations

Text: The elements of a cause of action for misrepresentation are set out in Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765 (Mo. banc 2007), as (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity, or ignorance of its truth; (5) the speaker's intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of the falsity of the representation; (7) the hearer's reliance on the representation being true; (8) the hearer's right to rely thereon; and (9) the hearer's consequent and proximately caused injury. Heberer v. Shell Oil Co., 744 S.W.2d 441, 443 (Mo. banc 1988); see Trimble v. Pracna, 167 S.W.3d 706, 712-13 (Mo. banc 2005) (reversing denial of JNOV on fraud). See also M.A.I. 23.05. An action for fraud must be discovered within ten years of the facts constituting the fraud. Once the fraud is discovered, an action must be brought within five years. Section 516.120(5). A cause of action for fraud accrues at the time the defrauded party discovered or in the exercise of due diligence should have discovered the fraud. Burr v. Nat'l Life & Accident Ins. Co., 667 S.W.2d 5, 7 (Mo.App.1984). It is generally held that where the facts constituting the fraud appear on the face of a record deed, the record of the deed furnishes constructive notice of the fraud so as to set the statute of limitations in motion. Briece v. Bosso 158 S.W.2d 463, 468 (Mo. App.1942). The real estate contracts and deeds presented to the Larabees represented that Lot 402 and Lot 403 were in Sterett Creek Village. The Eichlers claim that the true rights and privileges accorded to Lot 403 was discoverable in the records maintained by the Benton County recorder of deeds and that the Larabees were subject to constructive notice of the same at the time of purchase. This Court discussed the purpose of our system of recording interests in real estate relative to the statute of limitations and issues of constructive notice in Dreckshage v. Community Fed. Sav. and Loan Ass'n, 555 S.W.2d 314, 319-20 (Mo. banc 1977). Quoting from W.W. Allen, Annotation, Public Records As Notice Of Facts Starting Running Of Statute of Limitations Against Action Based On Fraud, 137 A.L.R. 268, 276 (1942), this Court noted: `The proposition is frequently announced that, under the registration laws, the proper record of an instrument authorized to be recorded is notice to all the world. But this means simply that the record is open to all, and is notice to interested parties. The record of an instrument is notice only to those who are bound to search for it. It is not a publication to the world at large. The recording of a deed or mortgage, therefore, is constructive notice only to those who have subsequently acquired some interest or right in the property under the grantor or mortgagor.' 23 RCL p. 211, s 71. It is apparent, therefore, that where a court decides that a defrauded party is charged with notice of facts appearing from the records, so as to start the running of the statute of limitations against his action, the ruling cannot well be based on the recording laws, because those laws have reference to the outstanding rights and interests of third persons and are intended to give protection to those who in good faith acquire interests in reliance upon the records and who meet the conditions laid down. The recording laws establish a priority as between innocent claimants to the same property or right; they are not intended to give security to the perpetrators of fraud as against their victims. As pungently stated in Andrews v. Smithwick (1870) 34 Tex. 544,   , the recording laws do not make `provision for the registration of fraud.' `   (T)he purpose of recording laws is to notify persons acquiring title or rights subsequent to those of record, and not to give protection to the perpetrators of fraud.   ' See also, Bueneman v. Zykan, 181 S.W.3d 105, 112 (Mo.App.2005). As to any innocent third party, the Larabees would be bound by the facts appearing in the real estate records. The Eichlers, however, are the sellers and not a third party. Because the recording laws do not make for the registration of fraud, they do not operate to provide constructive notice to a good faith purchaser relative to the seller. The statute of limitations did not start running against the Larabees until they obtained actual notice of the fraud. To hold otherwise would also imply that the Larabees would not have a right to rely upon any of the written and oral representations made by the Eichlers if they misrepresented prior real estate recordings. Sellers are not allowed such unbridled license. This is especially so when the written deed given to the Larabees on its face identified Lot 403, Sterert Creek Village and Lot 402, Sterert Creek Village, despite the fact that the trust indenture filed in the records did not describe the village by metes and bounds to include these two lots. A second reason exists to refuse Mr. Eichler's attempt to rely upon the real estate recordings as constructive notice. Mr. Eichler served as a trustee of the Trusteeship. As such, he purported to stand in a fiduciary relationship to the Larabees and continued as such so long as they were billed for trusteeship expenses and enjoyed trusteeship privileges. The failure to use ordinary diligence to discover the fraud may be excused where there exists some relation of trust and confidence, as principal and agent, client and attorney, cestui que trust and trustee, between the party committing the fraud and the party who is affected by it, rendering it the duty of the former to disclose to the latter the true state of the transaction, and when it appears that it was through confidence in the party who committed the fraud that the other was prevented from discovering it. Thompson v. Lyons, 281 Mo. 430, 220 S.W. 942 (1920); see also Vogel v. A.G. Edwards & Sons, Inc. 801 S.W.2d 746, 754 (Mo.App. 1990); Briece v. Bosso 158 S.W.2d 463, 468 (Mo.App.1942). The trial court erred in granting summary judgment on Count I.