State Ex Rel. Webster v. Areaco Investment Co.
756 S.W.2d 633, 1988 Mo. App. LEXIS 1256 (1988)
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Rule of Law:
A defendant's conduct violates Missouri's Merchandising Practices Act if it involves deception or misrepresentation in connection with a sale, regardless of the defendant's intent or proof of a specific customer's reliance on the unlawful practice.
Facts:
- Rocky Ridge Ranch Resort, owned by the defendant, sold memberships to use its facilities in Ste. Genevieve County.
- The resort solicited potential customers through mass mailings that promised one of several listed gifts to recipients who visited the resort for a mandatory tour and sales presentation.
- The gifts advertised were significantly misrepresented; for example, a 'blue fox fur coat' was synthetic, a 'two man boat' was a child's plastic raft, and a 'frost-free refrigerator' was a small plastic cooler.
- During sales presentations, resort employees made false oral representations to prospective customers.
- These false representations included claims that purchasing a membership was necessary to buy a lot, that the resort would help members resell their memberships, and that the memberships would increase in value.
- Employees also misrepresented existing or planned amenities, such as promising additional condominiums, a miniature golf course, and stables that had no horses.
- The resort's written closing documents contained disclaimers that contradicted the oral promises, but customers testified they were pressured to sign quickly without reading carefully.
- On at least one occasion, a prospective customer was falsely told they had to purchase a membership to receive their promised gift.
Procedural Posture:
- The State of Missouri, through its Attorney General, filed a petition against the defendant in a state trial court.
- The petition alleged that the defendant's sales and marketing activities violated the Missouri Merchandising Practices Act.
- Following a bench trial, the trial court found in favor of the State, determining that the defendant had engaged in unlawful practices.
- The trial court issued a permanent injunction, ordered the rescission of contracts for ten customers, and awarded costs to the Attorney General.
- The defendant (appellant) appealed the trial court's judgment to the Missouri Court of Appeals, the state's intermediate appellate court.
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Issue:
Does a violation of the Missouri Merchandising Practices Act require the state to prove the defendant's intent to deceive and a customer's reliance on the misrepresentation?
Opinions:
Majority - Smith, J.
No. A violation of the Missouri Merchandising Practices Act is determined by the defendant's conduct, not their intent, and does not require proof of customer reliance. The Act's purpose is to supplement common law fraud and preserve 'fundamental honesty, fair play and right dealings in public transactions.' The court reasoned that the statute's focus is on the act itself, making the defendant's intent irrelevant. Furthermore, because the Attorney General can seek an injunction before a deceptive practice even begins, requiring customer reliance would be illogical. The statute prohibits misrepresentation 'in connection with the sale,' meaning an unlawful act occurs even if later written documents attempt to correct prior oral misrepresentations made to induce the sale.
Analysis:
This decision significantly broadens the scope and power of Missouri's Merchandising Practices Act as a tool for consumer protection. By eliminating the common law fraud elements of intent and reliance, the court makes it substantially easier for the Attorney General to prosecute deceptive business practices. The ruling establishes that the entire sales process, including initial advertisements and oral statements, is subject to the Act's standard of fair dealing. This precedent puts the onus on businesses to ensure the accuracy of all representations, as they cannot later 'cure' an oral misrepresentation with a written disclaimer in the final contract.
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