Court Opinion

ID: 9661756
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:48:07.931928+00
Date Added: 2024-06-11T18:14:33.234114
License: Public Domain

WELLIVER, Judge,
dissenting.
I respectfully dissent. Although I agree that there is insufficient evidence in the record to support a jury finding that appellants knew their representations were untrue or were reckless as to the truth or falsity of those representations, I believe the case should be remanded for a determination whether appellants negligently misrepresented the availability of water, causing respondents pecuniary damage. The principal opinion would deny all recovery to plaintiffs-respondents upon the ground that they are bound by the last, possibly erroneous, theory adopted by their counsel.
The question whether the case should be remanded for a new trial when the plaintiff proceeded upon an erroneous theory was thoroughly considered in Zimmerman v. Associates Discount Corp., 444 S.W.2d 396, 398 (Mo. banc 1969), where we stated:
In this posture, what disposition should be made of the case? It is apparent that plaintiff proceeded upon an erroneous theory of liability on the part of defendant. However, under the circumstances, we cannot conclude that this was “done for strategic advantage.” See Smith v. St. Louis Public Service Co., 364 Mo. 104, 111, 259 S.W.2d 692, 696. The rule stated in Smith v. Terminal R. R. Ass’n of St. Louis, Mo.App., 160 S.W.2d 476, 479, applies: “The furtherance of justice requires that a case should not be reversed without remanding unless the appellate court is convinced that the facts are such that a recovery cannot be had; and even though the plaintiff fails to substantiate the theory upon which his case was tried, if he nevertheless shows a state of facts which might entitle him to recover if his case were brought upon a proper theory, the judgment will not be reversed outright, but instead, in the exercise of a sound judicial discretion, the case will be remanded to give him the opportunity to amend his petition, if so advised, so as to state a case upon the theory which his evidence discloses.” Cf. Cudney v. Midcontinent Airlines, 363 Mo. 922, 254 S.W.2d 662, and Pigg v. Bridges, Mo., 352 S.W.2d 28.
The record shows a state of facts which justifies a remand to permit plaintiff to seek recovery under some other theory of liability, if so advised. For example, see 1 Restatement, Law of Torts, Second, § 46; Pretsky v. Southwestern Bell Telephone Company, Mo., 396 S.W.2d 566.
Accord, Smith v. Inter-County Telephone Co., 559 S.W.2d 518, 525 (Mo. banc 1977). Although respondents submitted the case on a theory of fraudulent misrepresentation, I cannot conclude that respondents pursued that theory “for strategic advantage,” in view of the fact that this Court has never expressly recognized a cause of action for negligent misrepresentation nor has it provided a pattern instruction for submitting a case of negligent misrepresentation.
Respondents, aggrieved by the ruling of the court of appeals, sought transfer to this Court, alleging that they had “presented substantial proof” of the “failure of [appellants] to exercise reasonable care or compe*514tence” and that the opinion of the court of appeals implicitly “abolished the action for negligent misrepresentations.” Respondents alleged that the opinion of the court of appeals was contrary to Ligon Specialized Hauler, Inc. v. Inland Container Corp., 581 S.W.2d 906 (Mo.App.1979), and that the law of misrepresentation required reexamination by this Court to remove the confusion that results from viewing negligent misrepresentation in terms of fraudulent misrepresentation. The fact that respondents’ counsel shifted position in his reply brief back to reliance upon fraudulent misrepresentation in a transparent effort to preserve a questionable award of punitive damages should not be permitted to prejudice the right of respondents to a jury determination whether the appellants negligently caused them pecuniary damage.
The principal opinion declines to consider whether the evidence would justify submission on a theory of negligent misrepresentation. Respondents contended in their application to transfer that the evidence supported the judgment, asserting that appellants negligently misrepresented the availability of water at High Country Estates.
In Ligon Specialized Hauler, Inc. v. Inland Container Corp., 581 S.W.2d 906 (Mo.App.1979), the Court of Appeals, Eastern District, recognized the existence of a cause of action for negligent misrepresentation, quoting with approval 3 Restatement (Second) of Torts § 552 (1977). The Restatement (Second) of Torts § 552 states:
552. Information Negligently Supplied for the Guidance of Others
(1)One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them, by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.
3 Restatement (Second) of Torts at 126-27 (1977); 581 S.W.2d at 909.
The elements of negligent misrepresentation differ from those of fraudulent misrepresentation in one major respect: while the latter requires proof that the defendant knew the statement was untrue or was reckless as to whether the statement was true or false,1 the former merely requires proof that the defendant failed to exercise reasonable care or competence to obtain or communicate true information.2
This Court has never passed directly on the question whether Missouri recognizes a right of action for economic loss caused by *515negligent misrepresentation. In Lesser v. William Holliday Cord Associates, Inc., 349 F.2d 490 (8th Cir. 1965), the court assumed that, although no Missouri case had decided the issue, the Missouri courts would accept the Restatement of Torts § 552 as the law of this state, but found that the plaintiff in that ease had failed to show that his damages were caused by the allegedly false representations. Id. at 492-93.
In Anderson v. Boone County Abstract Co., 418 S.W.2d 123 (Mo.1967), the Court considered the implications of recognizing a right of action for negligent misrepresentation resulting in financial loss in a business transaction. In that case, the plaintiff sought damages from an abstract company for negligently certifying as complete an abstract of title to real property which did not refer to a duly recorded restrictive agreement on the use of the land. The abstract in question had been prepared by the defendant for persons who conveyed the property involved to persons who in turn conveyed the property to persons from whom the plaintiffs had purchased the property. The Court quoted the first Restatement of Torts § 552, which is substantially similar to Restatement (Second) of Torts § 552, and discussed the opinion in the Lesser case. Id. at 128-29. The Court assumed that when information is supplied for guidance in business transactions, a cause of action for negligent misrepresentation may be maintained by third parties who act in reliance thereon, but found it unnecessary to decide the question. The Court held that, even if such a right of action were recognized, the plaintiff in Anderson was outside the class of persons to whom a duty of due care extends. Id. at 129-30.
I believe that the time has come for this Court to formally acknowledge that a cause of action exists in this state for the recovery of pecuniary loss caused to persons who justifiably rely on information supplied for their guidance in a business transaction by one who provides the information in the course of his business, profession or other transaction in which he is interested, if the information is false and the supplier of the information failed to exercise reasonable care or competence in obtaining or communicating the information.3 The standard of care which a supplier of information in such a case is required to meet is appropriately elaborated in Comment f to § 552 of the Restatement (Second) of Torts;
If the matter is one that requires investigation, the supplier of the information must exercise reasonable care and competence to ascertain the facts on which his statement is based. He must exercise the competence reasonably expected of one in his business or professional position in drawing inferences from facts not stated in the information. He must exercise reasonable care and competence in communicating the information so that it may be understood by the recipient, since the proper performance of the other two duties would be of no value if the information accurately obtained was so communicated as to be misleading.
3 Restatement (Second) of Torts § 552, Comment f at 131-32 (1977).
MAI 23.05, the verdict directing instruction for fraudulent misrepresentation used *516in the trial court, will not in my opinion properly submit the issue of appellants’ liability for negligent misrepresentation.4 Respondents’ recovery for negligent misrepresentation requires proof that appellants failed to exercise reasonable care to obtain or communicate true information concerning whether water would be available to respondents’ lot in High Country Estates. Whether appellants acted reasonably depends on whether they exercised the care and competence that respondents were entitled to expect in the light of all the circumstances. I believe that “the recipient [of the information represented] is entitled to expect that such investigations as are necessary will be carefully made and that his informant will have normal business or professional competence to form an intelligent judgment upon the data obtained.” 3 Restatement (Second) of Torts § 552, Comment e at 130 (1977).
On the basis of the record before us, I am unable to say that upon retrial with the issues properly restricted respondents would not be able to make a case of negligent misrepresentation against one or both of the appellants.5 Pending approval and adoption of a pattern instruction for the submission of negligent misrepresentation, I would suggest that the issue be submitted using MAI 23.05 with the third paragraph thereof modified to read:
Third, defendant failed to exercise reasonable care or competence in obtaining or communicating the information represented, and,

For the foregoing reasons, I would reverse the judgment and remand the case for further proceedings consistent with this opinion.

. To prove “recklessness” in this context, “[i]t is sufficient that [the defendant] made the representations with the consciousness that he was without knowledge as to their truth or falsity, when, in fact, they were false.” Ackmann v. Keeney-Toelle Real Estate Co., 401 S.W.2d 483, 489 (Mo. banc 1966); Luikart v. Miller, 48 S.W.2d 867, 868 (Mo. banc 1932); Western Cattle Brokerage Co. v. Gates, 190 Mo. 391, 89 S.W. 382, 385-86 (1905); Wilson v. Murch, 354 S.W.2d 332, 339 (Mo.App.1962).

. Compare Restatement (Second) of Torts § 526, Comment b at 60 with Restatement (Second) of Torts § 552, Comment e at 130. For a discussion comparing intentional and negligent misrepresentation, see James and Gray, Misrepresentation — Part I, 37 Md.L.Rev, 286, 296-315 (1977). See also, Ollerman v. O’Rourke, 94 Wis.2d 17, 288 N.W.2d 95, 1980, at 108 n. 27.

. A cause of action for negligent misrepresentation having the elements stated in Section 552 of the Restatement of Torts has been recognized in several other jurisdictions. Van Buren v. Pima Community College District Board, 113 Ariz. 85, 546 P.2d 821, 823 (banc 1976); Bonhiver v. Graff, 311 Minn. 111, 248 N.W.2d 291, 298-99 (Minn.1976); Neff v. Bud Lewis Co., 89 N.M. 145, 548 P.2d 107, 110 (1976); Rempel v. Nationwide Life Insurance Co., 471 Pa. 404, 370 A.2d 366, 367-68 (1977); Jasper Aviation, Inc. v. McCollum Aviation, Inc., 497 S.W.2d 240, 244-45 (Tenn.1972). Some jurisdictions have expressly approved the formula found in Restatement (Second) of Torts § 552. Kovaleski v. Tallahassee Title Co., 363 So.2d 1156, 1158-59 (Fla.App.1978); Ryan v. Kanne, 170 N.W.2d 395, 402-03 (Iowa 1969); Stotlar v. Hester, 92 N.M. 26, 582 P.2d 403, 406 (1978); Banker's Trust Co. v. Steenburn, 95 Misc.2d 967, 409 N.Y.S.2d 51, 66 (1978); Aetna Life and Casualty Co. v. Lyon, 576 S.W.2d 114, 117 (Tex.Civ.App.1979); Susser Petroleum Co. v. Latina Oil Corp., 574 S.W.2d 830, 831-32 (Tex.Civ.App.1978); Rogers v. City of Toppenish, 23 Wash.App. 554, 561, 596 P.2d 1096, 1099 (1979); Wilber v. Western Properties, 22 Wash. App. 458, 463, 589 P.2d 1273, 1276-77 (1979).

. Pending review of MAI 23.05 by the Committee on Instructions, I acknowledge that this opinion would render MAI 23.05 inappropriate for use without modification in certain cases of fraud. MAI 23.05 blurs the distinction herein drawn between fraudulent misrepresentation and negligent misrepresentation. Paragraph third of MAI 23.05 permits recovery for fraudulent misrepresentation if the jury believes that “defendant did not know whether the representation was true or false.” More properly, the instruction should express the requirement that the defendant made a false representation “with the consciousness that he was without knowledge as to their truth or falsity.” Ackmann v. Keeney-Toelle Real Estate Co., 401 S.W.2d 483, 489 (Mo. banc 1966); Luikart v. Miller, 48 S.W.2d 867, 868 (Mo. banc 1932); Wilson v. Murch, 354 S.W.2d 332, 339 (Mo. App.1962). The Committee’s Comments to MAI 23.05 quote the correct rule from Wilson, 354 S.W.2d at 339.

. The following illustration is provided in the Restatement:
A, having lots for sale, negligently supplies misinformation concerning the lots to a real estate board, for the purpose of having the information incorporated in the board’s multiple listing of available lots, which is distributed by the board to approximately 1,000 prospective purchasers of land each month. The listing is sent by the board to B, and in reliance upon the misinformation B purchases one of A’s lots and in consequence suffers pecuniary loss. A is subject to liability to B.
3 Restatement (Second) of Torts § 552, Comment h, Illustration 4 at 134.