Court Opinion

ID: 9772290
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:13:11.222522+00
Date Added: 2024-06-11T07:31:42.846260
License: Public Domain

HOWARD, Judge,
dissenting.
I would decline to embrace the concept of a third party theory of recovery under promissory estoppel in this ease.
I find it easy to sympathize with the plight of the homeowners. However, allowing this type of recovery molds the case into a form unrecognizable to the parties or the trial judge. This concept of relief has not been accepted in Missouri and was not pled, tried or argued at either the trial or appellate level. I would not breathe life into it at this juncture. Additionally, I do not believe plaintiffs can prevail on their original theories of fraud and misrepresentation and breach of contract.
I. Fraud and Misrepresentation
Defendants claim that the trial court erred in granting judgment in favor of the Chesuses, the Cantrells, and the Rohovits on their claims for fraud and misrepresentation. They contend that the representations made to these individuals, according to the evidence presented at trial, could not be classified as statements of existing fact, but rather, as statements of intent as to future conduct. In Missouri, a representation is not fraudulent unless it is a false statement of existing fact, and not a statement of one’s opinion, expectations, or predictions for the future. Slone v. Purina Mills, Inc., 927 S.W.2d 358, 372 (Mo.App. W.D.1996). An unkept promise does not, by itself, constitute fraud. Essig v. Essig, 921 S.W.2d 664, 666 (Mo.App. W.D.1996). However, “a promise accompanied by a present intent not to perform is a misrepresentation of present state of mind, itself an existing fact, sufficient to constitute actionable fraud.” Sofka v. Thai, 662 S.W.2d 502, 507 (Mo. banc 1983). Therefore, if a plaintiff alleges fraud based upon a promise or a statement of intent, then the plaintiff must prove that the speaker made the statement intending not to perform. “A failure to perform alone, however, is not sufficient to establish the intent of the promisor at the time the agreement was made. The mere giving of a promise, though breached the next day, does not give rise to an action for tortious fraud.” Carlund Corp. v. Crown Center Redevelopment Corp., 910 S.W.2d 273, 279-280 (Mo.App. W.D.1995) (citations omitted).
In reviewing the record, it is apparent that the Wattses have done an extremely poor job of developing and maintaining the Cedar Creek subdivision. The road is poorly constructed, the sewer system stinks, and the common areas are full of weeds, to name just a few of the problems. The record is full of testimony about all of the various eyesores and problems to be found in Cedar Creek. However, in reviewing these allegations of fraud, the focus must be on the representations made to each individual plaintiff that could have induced them to purchase their lots. The record shows that the Wattses made representations concerning both future events and existing facts, and I have divided the discussion accordingly.
A. Representations Concerning Future Events
The record reveals that, with the two possible exceptions discussed below, every single representation alleged to have been made by the Wattses was made in the context of a future event.
A significant number of the alleged misrepresentations came from a sales brochure *116entitled “What is Cedar Creek?” Edward Chesus, Janice Cantrell, and Larry Rohovit each testified that they received this brochure during an open house in May, 1984. They refer specifically to language such as the following:
Cedar Creek is a planned, single family development placed on a rocky bluff overlooking the creek from which it draws its name_ More than anything else, Cedar Creek is its land .... its stream and brooks, its rocks, its maples, oaks and evergreens, its rolling hills, its waterfalls.
Cedar Creek is also Dennis and Roxy Watts, and Frank Brown, and Dick Car-lisle, and Roy and Evelyn Benner — people who needed and designed an environmental buffer.
As with the houses Dennis builds, Cedar Creek is a handcrafted place. Its rugged beauty has been preserved with utilities (water and electricity) underground, split rail fencing, a private country lane, nature trails, and streamside picnic areas which are all clearly a part of their natural setting. ...
... All lots in Cedar Creek have access to ten acres of open space (title to these areas will be held by the Cedar Creek Homes Association, the management corporation to be owned by lot owners). This space is being preserved for picnic areas, nature trails, wildlife habitat and similar uses.
Plaintiffs argue that the representations made in this brochure are statements of fact because they are worded in the present tense. I disagree. At the time they received the brochure, it would have been obvious that the Wattses had barely begun to develop Cedar Creek. The open house was held in a newly-constructed home located on lot number three. Except for this house, the subdivision was essentially vacant and undeveloped. No type of permanent road had been constructed. The people who attended the open house had to drive along a gravel road to get to it. The Cantrells had visited Cedar Creek two other times during the weeks preceding the open house. During their first visit, the ground was so muddy they decided to come back another time so they could have a better look around.
Mr. Chesus testified that on the day of the open house they walked back to look at some of the lots. He also testified that it was a little difficult to see because of leaves and undergrowth. Mr. Chesus’s testimony about the brochure was in response to this question: “[Wjould you recite for the Court any representations [the brochure] makes with regard to how Cedar Creek was going to be developed that have not come to fruition?” (emphasis added).
The Rohovits visited Cedar Creek several times before they purchased their lot, including several visits in March and April of 1984. During these visits they would walk around and ask questions. During one such visit in April, 1984, Mr. Watts told the Rohovits that Tract A would feature amenities such as picnic areas and hiking trails. He also mentioned that he was putting together a handout that would describe the layout of the lots and the amenities that would be available.
Under the circumstances, it would be unreasonable to think that any of the plaintiffs read the brochure with the impression that the amenities discussed in it were anything other than improvements that the Wattses intended to construct in the future. “The meaning of representations, their truth or falsity, are to be made ‘in the light of the meaning which the plaintiffs would reasonably attach to them in existing circumstances and the words employed must be considered against the background and in the context in which they were used.’ ” Haberstick v. Gordon A. Gundaker Real Estate Co., 921 S.W.2d 104, 109 (Mo.App. E.D.1996) (quoting Toenjes v. L.J. McNeary Construction Company, 406 S.W.2d 101, 105 (Mo.App.1966)). It can be concluded, therefore, that the brochure, “What is Cedar Creek,” did not contain representations of existing fact. Rather, the brochure contained statements of expectations for the future.
In addition to the testimony about the “What is Cedar Creek” brochure, the individual plaintiffs testified about oral representations made to them by the Wattses. Again, with the two possible exceptions, all of the testimony concerns statements made by the *117Wattses about things they planned to do in the future. For example, Mr. Chesus testified that Dennis Watts told him that “Tract B would be another common area with access, and it would consist primarily of nature trails and things of that nature,” and that “there would be a waterfall.” (emphasis added).
Similarly, Mrs. Cantrell testified, “We were told that there would be some kind of sewer, not a sewer system, but berms and things put in to make for storm drainage; that it was going to look like a country lane coming through _” (emphasis added). She also talked about how Dennis Watts told them that he “was considering building a covered bridge.”
Mr. Rohovit also testified about improvements that the Wattses said they were planning to complete in the future. “[Mr. Watts] said that [Tract A] would be a common area and there would be picnic areas and hiking trails, jogging trails, those kinds of things.” “We were walking down this hill and he says, ‘and the road’s going to come right through here, and right here is where the millpond is going to be, and there’s going to be a covered bridge, and there’s going to be a waterfall off to the right,’ and boy, I got excited.”
The record contains abundant evidence of representations made by the Wattses to Plaintiffs about their development plans. There is no question that these statements were made. The issue now is whether there is evidence that the Wattses made the representations intending not to perform. I find no such evidence, other than testimony that the Wattses failed to perform. Such evidence is not enough to prove the necessary intent. Carlund Corp., 910 S.W.2d at 279-280. Therefore, with respect to the aforementioned representations, I would hold that the evidence does not support the trial court’s judgment.
B. Representations of Existing Fact
The only representations that were not promises or statements of intent concerned discussions about whether some of the properties had passed percolation tests. Initially, the Wattses planned to have homeowners use septic tanks instead of sewers. The City of Lee’s Summit would not issue permits to install septic tanks unless the property passed a ground percolation test. Mr. Che-sus and Mrs. Cantrell both testified that before they purchased their lots, the Wattses represented to them that their properties had passed ground percolation tests.
Clearly, these would have been statements of existing fact. However, even with regard to these statements, the record provides no evidence of fraud. To successfully prove fraudulent misrepresentation, a plaintiff must establish, among other elements, that the speaker made a false representation, and that the representation was made either with knowledge of its falsity or ignorance of its truth. Link v. Kroenke, 909 S.W.2d 740, 746 (Mo.App. W.D.1995). In this case, although the record contains evidence that the properties in question did not pass the percolation test, there is no evidence that the Wattses either knew this or were ignorant of this fact. In fact, Mr. Chesus’s testimony suggests that the Wattses made the representations in good faith. He read excerpts from minutes taken at various meetings of the Lee’s Summit Planning Commission. First, he read the following from the July 25,1988 meeting:
In response to another question from Mr. Gloor, Mr. Watts stated that on-site septic systems will be used. He stated that Mr. Formeyer [sic] had conducted percolation tests and more tests will be taken. He stated the results of the percolation tests were good.
Mr. Chesus then read from the minutes of an August 22,1983 meeting:
Mr. Fahrmeier stated percolation tests have been conducted and it was found that soil absorption systems will be adequate.
Based upon these minutes, it appears that at some point percolation tests had been conducted, and the soil had been deemed adequate for septic tanks. Thus, the Watts-es had some basis for making the statements. Chesus also read from correspondence, dated October, 1988, between the City of Lee’s Summit and the Superintendent of Inspections. This correspondence suggests that the previously conducted percolation tests were inaccurate, and that the properties *118would not support septic tank systems after all. However, there is no evidence tying the Wattses to this information, and it is therefore impossible to tell whether they knew this at the time they spoke to the Chesuses or the Cantrells. “All doubt should be entertained in favor of good faith in determining whether a statement constitutes a misrepresentation.” Stewart v. Kirkland, 929 S.W.2d 321, 322-323 (Mo.App. S.D.1996) (quoting Grosser v. Kandelr-Iken Builders, Inc., 647 S.W.2d 911, 914 (Mo.App.1983)). Therefore, I believe the evidence does not prove that the statements concerning the percolation tests were fraudulently made.
In sum, I would reverse the trial court’s judgment in favor of the Chesuses, the Can-trells, and the Rohovits on their claims for fraud and misrepresentation. In regard to the representations concerning future events, the evidence does not support a finding that at the time the Wattses made such representations they intended not to perform. As to statements of existing fact, there is insufficient evidence to prove that the Wattses made these statements with knowledge of their falsity or ignorance of their truth.
II. Breach of Contract — Cedar Creek Homes Association
The trial court awarded CCHA compensatory damages of $235,000 for breach of contract under Count III of the petition. This amount represented the estimated cost of correcting storm drainage deficiencies, reconstructing the sewer system, and developing the common areas with foot paths, a foot bridge, and other miscellaneous improvements.
The Wattses contend that the trial court erred in granting judgment to CCHA for three reasons: (1) CCHA presented no evidence on its own behalf to support its claim; (2) the petition fails to allege a contract; and (3) no evidence was presented to prove the terms or even the existence of any contract with CCHA. I agree with Appellants as to the second and third arguments.
Count III of Plaintiffs’ petition does not sufficiently allege a contract. The relevant paragraphs of Count III read as follows:
24. Watts represented, agreed and promised Plaintiffs to develop a first-class residential area with sewers, streets, walks, utilities, common areas and amenities provided and paid for by Watts.
25. It was expressed or implied that the development would conform to and be done in accordance with generally accepted engineering practices as well as applicable regulations, laws and ordinances for sewers, utilities, subdivisions and regulated land use as represented to Plaintiffs and outlined in written sales and promotional materials Watts supplied to Plaintiffs in connection with sale and purchase of lots and residences in Cedar Creek.
26. Defendants have failed to fulfill their promises, obligations and representations so that the Plaintiffs are damaged by diminished value of their land and improvements and the costs they have been or will be required to pay in connection -with corrections, changes, construction and repairs necessitated by the breach of Watts’ contractual duties and obligations to Plaintiffs.
To state a cause of action for breach of contract, a plaintiff must plead (1) an agreement between parties capable of contracting; (2) mutual obligations arising under the agreement in respect to a definite subject matter; (3) valid consideration; (4) part performance by one of the parties and the prevention of further performance by the other; (5) and damages measured by the contract resulting from its breach. Yoest v. Farm Credit Bank of St. Louis, 832 S.W.2d 325, 329 (Mo.App. W.D.1992) (citing Berra v. Papin Builders, Inc., 706 S.W.2d 70, 73-74 (Mo.App.1986)). Regarding CCHA, the petition falls short in several respects. It does not allege any specific agreement, mutual obligations, or valid consideration. The petition does refer to “sales and promotional materials,” presumably meaning the “What is Cedar Creek” brochure. However, upon examining the brochure I find no evidence of a contract between the Wattses and CCHA.
*119CCHA responds by arguing that the trial court did not err because the “Declaration of Covenants, Conditions, and Restrictions,” which was admitted into evidence by stipulation of the parties, constitutes a valid contract, thereby entitling CCHA to the relief awarded to it. CCHA refers specifically to the following language found in the preamble:
This Declaration shall be construed so as to ensure that Cedar Creek will always be maintained as an attractive, prestigious development for single-family residential homes with ample, landscaped open areas; attractive structures of the highest quality; in order to protect against depreciation in value of the Properties; to provide a quiet place of fields and forests where homes are designed with nature in mind.
CCHA claims that this language and the Declaration read as a whole “necessarily imply and mandate that the development’s construction would conform to generally accepted engineering practices and conform to applicable regulations, laws, and ordinances, including those regarding sewers and utilities.” I would reject this argument for two reasons. First, the petition makes no reference whatsoever to the Declaration. CCHA’s argument, therefore, does not change the fact that it failed to adequately plead the existence of a contract. Second, I find no evidence in the Declaration or anywhere else in the record to suggest that the Declaration contractually obligates the Wattses to perform in the manner advanced by CCHA. The Declaration establishes the rights and duties of CCHA, lists membership requirements, and sets out certain restrictions on the use of the individual parcels and common areas so as to maintain a common scheme throughout the subdivision. There are, however, no provisions defining the manner in which the Wattses, as the developers, are to construct roads, the drainage and sewer systems, or the common area improvements. I have no doubt that the Wattses have violated numerous construction codes and ordinances, but Plaintiffs have not properly alleged, nor does the evidence prove, that a contract exists between CCHA and the Wattses.
III. Breach of Contract — The Raups
The Wattses also contest the trial court’s grant of judgment in favor of the Raups for breach of contract. They argue that there was no competent and substantial evidence to support the judgment because the Raups had no privity of contract with them. The Raups present no response.
William Raup testified at trial that they purchased their lot, number eleven, sometime around late 1986 or early 1987 for $60,-000. The Raups did not purchase their lot from the Wattses. Rather, they purchased it from a third party named Smith. The record shows little evidence of any contact between the Raups and the Wattses. Most of Raup’s testimony was in regard to a dispute he had with Dennis Watts about connecting to his sewer system. I find no evidence of a contract, and therefore would reverse the trial court’s judgment for that reason.