author: TURNAGE, Judge.

text:
    STATE of Missouri, Respondent, v. UNITED FRATERNAL ORDER OF PEACE OFFICERS ASSOCIATION, INC., Appellant.
    No. KCD 29871.
    Missouri Court of Appeals, Western District.
    Sept. 4, 1979.
    Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 1, 1979.
    Application to Transfer Denied Nov. 14, 1979.
    Robert G. Duncan, Duncan & Russell, Kansas City, for appellant.
    John D. Ashcroft, Atty. Gen., Hugh F. O’Donnell, Asst. Atty. Gen., Kansas City, for respondent.
    Before DIXON, P. J., and TURNAGE and KENNEDY, JJ.
   TURNAGE, Judge.

The State at the relation of the Attorney General filed an information in the nature of a quo warranto by which it sought the forfeiture of the right of United Fraternal Order of Peace Officers Association, Inc., to do business in this State. The court dissolved all of the corporate rights, privileges and franchises of Peace Officers in this State and appointed a receiver to take charge of its affairs.

On this appeal Peace Officers contend there was insufficient evidence to support the court’s judgment. Affirmed.

Peace Officers was first incorporated as a not for profit corporation in the District of Columbia in June, 1972, by Rose Mary Evans; Glen W. Evans, her husband; and Myer Koonin. Among the purposes of the corporation was (a) to make safe and secure the streets of cities throughout the United States; (b) to recruit students for education and training programs; (c) to recruit and assist in placement of volunteers to work with the corporation; and (d) to serve as a communications clearing house to publicize worthwhile activities and to issue a newsletter and other publications.

In February, 1973, the Secretary of State of Missouri issued a certificate of authority under Chapter 355, RSMo 1969, authorizing United Fraternal Order of Peace Officers Association as a foreign corporation to do business as a not for profit corporation in Missouri. The stated purposes of the corporation were identical with the purposes stated in the original incorporation in the District of Columbia.

In September, 1976, the Attorney General filed an information in the nature of a quo warranto seeking to forfeit the right of Peace Officers to do business in Missouri. The information alleged none of the corporation’s activities or funds had been directed or expended to accomplish the purposes set forth in its application to do business in Missouri, but, in fact, its activity and funds had been directed and expended for the use and benefit of the officers and directors of the corporation in excess of reasonable compensation for services rendered. The information also alleged misrepresentation on the part of telephone solicitors working for the corporation in soliciting ads for a yearbook when they stated the proceeds from the publication would be used to pay death benefits for police officers killed in the line of duty.

The evidence revealed that Glen W. Evans and Rose Mary Evans established an office for Peace Officers in Gladstone. The principal activity carried out by the Evans was the employment of a number of telephone solicitors who solicited both in the metropolitan Kansas City area and by WATS line to other areas for ads to be carried in a Peace Officers yearbook. Glen acted as a telephone solicitor and Rose Mary principally handled the office routine. In addition, there were bookkeepers and accountants who kept the books but Rose Mary was the only person authorized to write checks. Until early 1977 the telephone solicitors stated the proceeds from the ads were used to pay death benefits for police officers who were killed in the line of duty.

About 1974, the Evans established Fortune Enterprises as an unincorporated entity. Rose Mary said Fortune was established to handle the publication of the yearbook and to pay the expenses connected therewith. Telephone solicitors were paid 25% of the amount of ads they sold and collectors were paid 20% of the amount they received in picking up ad payments.

The Evans also operated two other organizations: The United Fraternal Order of Fire Fighters and The Future Fire Fighters of America. Yearbooks were published for these organizations in addition to the Peace Officers Yearbook. The telephone solicitors solicited ads for each yearbook. A yearbook was published for Missouri and apparently other yearbooks were published in other parts of the country. The Peace Officers Yearbook for 1975 was published in paperback and consisted of 224 pages. The entire book consisted of box ads which simply gave the name and address of various businesses in Missouri. There were a few articles reprinted from other publications, but the only original literary effort was two messages from Rose Mary Evans. There was nothing in the yearbook which would assist any peace officer in the performance of his duty which was not readily available from other sources. There was no evidence as to how many yearbooks were published.

To demonstrate the success of the operation, Fortune Enterprises received $189,-014.58 in revenue for ads to be placed in the 1975 Peace Officers Yearbook. There is no evidence when the 1975 yearbook was published, but Rose Mary said the yearbooks were always at least a year behind and at trial in 1977 stated the 1976 yearbook was at the printers. The expenses for the 1975 yearbook were not shown but Fortune paid Peace Officers about 5% of the amount it received, or $9,415 in royalties. Rose Mary said the amount of royalty paid Peace Officers was fixed by her accountant and she disclaimed any knowledge of how he arrived at the percentage. The accountant did not testify.

For the first ten months of 1976 Fortune received $196,800 from Peace Officers ads and incurred $159,000 in expenses. The amount of royalty to be paid Peace Officers for the 1976 yearbook had not been determined by the accountant at the time of trial.

Glen Evans died in 1976. It is a fair inference from the evidence that both before and after the death of Glen, the Evans placed all of the revenue received from ads in a bank account controlled by Fortune Enterprises. Money was in turn placed in bank accounts for the Peace Officers and Fire Fighters, but Rose Mary was the only person who wrote checks on those accounts and frequently wrote checks for personal expenses on the Peace Officers account as well as shifted money from one account to another as she might need money in a particular account. Rose Mary stated she had no set salary but simply wrote checks for her personal needs on any of the bank accounts which had money in them and noted on the check it was personal. Her needs at one time included payments on her Lincoln Mark IV.

Rose Mary stated none of the board of directors of Peace Officers was active in the organization. No meeting of the board of directors nor of the membership appears to have been held. It was stipulated at trial that in 1977 there were 101 members of Peace Officers who had paid the yearly dues of $11. Of this, only 9 were from Missouri.

There was evidence that Peace Officers paid $500 in 1973 to Johnson County, Kansas, for a drug program, and in 1975, Fortune paid $625 in death benefits for a police officer and this amount was later repaid from the Peace Officers account. In 1976, $850 was paid from the Peace Officers account for death benefits. Those were the only sums paid in death benefits.

In September, 1973, Glen and Rose Mary purchased property in St. Clair County near Osceola for the stated purpose of establishing a Peace Officers Hall of Fame and recreational area. The title to the property was taken in the names of Glen and Rose Mary and the purchase price of $9,456.71 was paid by Fortune. It was only after the information herein was filed that Rose Mary conveyed title to Peace Officers to part of the property and the remainder to Fire Fighters. Peace Officers paid Fortune $7,987.93 toward the purchase price.

It is more than apparent that the Peace Officers Corporation was operated solely by the Evans for the purpose of selling advertising in a yearbook to make a profit for themselves. The advertising was sold on the representation the proceeds would go for the benefit of police officers, but, in fact, the corporation received only such amount as Rose Mary or her accountant arbitrarily determined. In addition, neither the membership nor the board of directors of Peace Officers functioned and the affairs of the corporation were solely in the hands of Rose Mary. As the only authorized person to write checks, she wrote checks from any bank account for any purpose, including her own personal needs. In fact, the corporate existence of Peace Officers appears to have been nothing more than a ruse skillfully utilized by the Evans to raise money for their own purpose. Any money expended for the corporate purposes was purely incidental and only in a minimal amount. This court concludes from the evidence the true purpose in establishing the corporation was to serve as a vehicle for the Evans to solicit ads from unsuspecting businesses who thought they were assisting police officers and their families when, in fact, the money was used only as Evans directed.

Section 355.340 subjects foreign not for profit corporations who obtain authority to do business in this State to the same duties, restrictions, penalties and liabilities as that imposed upon domestic not for profit corporations. Section 355.025 prohibits any organization created for or engaged in business for profit to be organized under the not for profit corporation law. Section 355.490 permits the circuit court in any county in which the registered officer of any corporation organized under the not for profit corporation law is located to inquire into any alleged unlawful acts or misuse of the franchise of such corporation, upon proceedings by information in the nature of quo warranto.

In State v. Kansas City College of Medicine and Surgery, 315 Mo. 101, 285 S.W. 980 (banc 1926) the court found the evidence justified the conclusion that a medical school organized under the not for profit corporation law was conducted solely for the private gain of one of the officers of the school. The court held that the fact the school had been conducted for pecuniary profit violated the law under which it was incorporated and that justified the forfeiture of its charter and franchise. In State v. St. Louis College of Physicians and Surgeons, 317 Mo. 49, 295 S.W. 537 (Mo. banc 1927) the court held that the school was conducted by its officers and agents primarily for pecuniary profit and this constituted a breach of the school’s contract with the State pursuant to its incorporation under the not for profit act and was sufficient cause to forfeit its charter.

There can be no doubt the Peace Officers Corporation was operated by the Evans for their own pecuniary benefit in violation of the not for profit corporation law and this justified the court in dissolving the corporate rights and franchises of the United Fraternal Order of Peace Officers in Missouri.

The judgment is affirmed.

All concur.


source: Caselaw Access Project

author: KENNEDY, Judge.

license: Public Domain

text:
    Milan GERICH, Plaintiff-Respondent, v. GENERAL MOTORS CORPORATION, Defendant-Appellant.
    No. KCD 30081.
    Missouri Court of Appeals, Western District.
    Sept. 4, 1979.
    Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 1, 1979.
    Application to Transfer Denied Nov. 14, 1979.
    Paul Scott Kelly, Jr., and Dennis Egan, Kansas City, for defendant-appellant.
    David Skeer and John F. Michaels, Kansas City, for plaintiff-respondent.
    Before DIXON, P. J., and TURNAGE and KENNEDY, JJ.
   KENNEDY, Judge.

Plaintiff Milan Gerich had a verdict against defendant General Motors in the sum of $37,348, based upon his claim of fraudulent misrepresentations made by defendant General Motors to plaintiff by which plaintiff was induced to purchase the assets of the Hicks Brothers Chevrolet dealership in Kansas City. The purchase of the assets was actually made by Milan Chevrolet, Inc., a newly formed corporation, in which plaintiff had invested $50,000 and of which he was president and managing officer. His $50,000 investment was represented by non-voting Class “B” common stock. The balance of the capitalization, $550,000, was contributed by General Motors and was divided equally between all the Class “A” voting stock of the corporation and long-term promissory notes. The business was unsuccessful and was liquidated within only a few months, resulting in a loss to Gerich of $50,000, the entire amount of his initial contribution. The General Motors loss upon liquidation was $379,277.86.

Plaintiff blames his losses upon the fact that Hicks Brothers Chevrolet, Inc., on June 1, after its sale to plaintiff on March 14, 1974, entered a suburban Chevrolet dealership in competition with Milan Chevrolet.

Plaintiff claimed that the fraudulent representations which General Motors made to him, and which induced him to enter into the ill-fated venture, were, in the language of plaintiff’s verdict-directing instruction, “A. That Hicks Brothers Chevrolet, Inc., would not get another General Motors franchise . . . or B. That the Hicks Brothers financial statements given to plaintiff presented a true statement of the performance of the company as to fleet sales made in the ordinary course of business . . ."

Hicks Brothers Chevrolet, Inc., had been a party to the action, but it had been dismissed from the suit upon the payment of a $10,000 settlement figure.

The case comes to us on appeal on a single point, i. e., that the court erred in denying defendant’s motion for a directed verdict in that the evidence failed to make a submissible case of fraud. As against such a claim, we do not review the evidence to make our own independent judgment upon the facts. We review it to ascertain only if there was substantial evidence to support the verdict of the jury. We consider only the evidence, and the reasonable inferences therefrom, which tend to support the verdict. That evidence is excluded from consideration which is contrary to the verdict. Ackmann v. Keeney-Toelle Real Estate Co., 401 S.W.2d 483 (Mo. banc 1966); Lesser v. Rubin, 548 S.W.2d 860 (Mo.App.1977); Clark v. McCloskey, 531 S.W.2d 36, 37 (Mo.App.1975).

Furthermore, the verdict and judgment are to be upheld against defendant’s motion for a directed verdict if the evidence supports either of the disjunctive propositions submitted to the jury, even though it might not support the other. DeLay v. Ward, 364 Mo. 431, 262 S.W.2d 628, 630 (banc 1953); Ashton v. Buchholz, 359 Mo. 296, 221 S.W.2d 496, 502 (1949); Hammon v. Gentemann, 423 S.W.2d 5, 7 (Mo.App.1967).

We conclude that plaintiff made a sub-missible case on the first of the above submissions, i. e., that defendant represented that Hicks Brothers would not get another General Motors franchise, and we therefore affirm the judgment. This is not to hold he did not make a prima facie case on the second ground submitted.

The Hicks Brothers Chevrolet dealership at 1601 McGee in Kansas City was owned by a corporation in which the Hicks Brothers, Bill and Ben, were non-voting common shareholders and managers. General Motors, however, or Motors Holding, owned all the voting stock of the corporation, and also was a creditor upon long-term notes of the corporation. Motors Holding was an operating division of General Motors and was the arm of the company which financed dealerships selling General Motors automobiles. The five directors of the corporation were: The two Hicks brothers, and three employees of General Motors, namely, E. W. Broome, Kansas City branch manager for Motors Holding Division; Park Price, III, investment manager for Motors Holding; and R. A. Trent, western regional manager for Motors Holding.

For reasons hereafter explained, General Motors had determined that the Hicks Brothers Dealership was to be sold. The Hicks brothers, Bill and Ben, had resisted the sale and indeed had expressed a desire to buy out the General Motors investment and continue the operation of the dealership. For reasons difficult to understand, General Motors had turned them down.

The history that led to the decision to sell the dealership was as follows: General Motors auditors had discovered during an audit of the corporate books for the period of January 1, 1973-April 30, 1974, that there was a $53,000 shortage. The Hicks brothers, confronted with the audit report at a special directors’ meeting August 29, 1974, at first explained to the directors that this money had been used as payments to influence employees of purchasers of automobile fleets. At one place in the evidence the payments are referred to as “birddog fees”.

At an October 1 directors’ meeting, the brothers were asked to “disassociate themselves from the dealer company”. They asked if they could instead be permitted to retire the General Motors investment, and were advised that this would not be permitted. After this meeting, the brothers Hicks reported that about $30,000 of the $53,000 (which they previously had said had been paid to persons representing fleet customers) had actually been used to pay a personal promissory note owing by them to their predecessor owner of the dealership, and an additional $1,200 had been used to pay, or pay on, a loan from Bill Hicks to Ben Hicks. Presumably the remaining $21,800 had been used, as they had earlier explained, to influence fleet customers’ employees.

Director Trent at a directors’ meeting the next day, October 2, stated, as disclosed by minutes of the meeting, that the recommended selling procedure was to “request the Car Division in writing to assist in finding a buyer for the company’s assets and the company be liquidated through sale and an orderly process, their peers in the automobile business or anyone else would not be aware of anything other than that they had voluntarily requested to sell the assets of the company.” Mr. Trent reminded the brothers Hicks that embezzlement was a felony. Both brothers assured the directors that they had no intention of being disagreeable or unreasonable and would cooperate fully with the directors’ recommendation.

The Hicks brothers appealed the directors’ decision to sell to Mr. William Harvey, III, who was the general manager of the Motors Holding Division of General Motors. They met with him at Detroit on October 4. They offered to buy out the Motors Holding’s investment in Hicks Brothers Chevrolet. This request was unavailing, however, Harvey explaining that Motors Holding’s investment could be retired only through dealership profits. The decision to sell stood unchanged.

After this meeting, the subject of the Hicks brothers’ getting into another dealership was introduced. According to the deposition testimony both of Bill and of Ben Hicks, Harvey said, “They would not blackball us, being Motors Holding, on any other General Motors line, period.” “Q. Do you mean any other than Chevrolet?” “A. Any line.” After a year or a year and a half, Harvey told the Hicks brothers, Motors Holding would “go back in as partners” with them, as a Chevrolet dealer or in any other General Motors line. According to Harvey’s account of the meeting, Harvey told them he would not “attempt to adversely influence whichever car division might be involved”. He agreed that he had told them he would consider financing them in a dealership after a period of performance on their part with a “desirable record”.

A Hicks Brothers directors’ meeting on October 8 made final the decision to sell the dealership, and the decision of the brothers Hicks to “disassociate”. The minutes of the meeting stated that a letter would be forwarded to Mr. W. L. Woodin, Chevrolet zone manager, requesting his assistance in finding a buyer.

The minutes of the October 8 meeting also show the following: “Continuing, Mr. Broome stated that he wished to offer a word of caution. He advised that when negotiating with a prospective buyer, it should be done on a realistic basis, that is, no reasonable offer should be refused or prospective buyer discouraged from negotiating on a reasonable basis. Those present agreed it was imperative a sale of the stock or company assets be consummated at an early date to avoid potential loss to the stockholders.”

At this juncture the plaintiff Milan Ger-ich entered the picture in Detroit. On October 9, 1974, which would be the day after the meeting described in the preceding paragraph, he entered the Detroit office of William Harvey, III, in quest of a dealership, with Chevrolet being his first choice. (Harvey places the date almost a month earlier, on September 12.) The meeting was by a previously arranged appointment. Park Price (a director of Hicks Brothers Chevrolet, but absent from the meetings of August 29, October 1, October 2, and October 8) was also present at this conference and took Gerich to lunch.

This conference was exploratory on both sides, and no mention was made of the Hicks Brothers dealership in Kansas City. Other dealerships, on which Harvey had files, were mentioned. None of them appealed to Gerich. Gerich said he preferred Chevrolet, and a midwest location. Harvey gave Gerich a booklet describing the Motors Holding plan, under which General Motors would invest in dealerships. This plan contemplated that General Motors would invest 75% of the capital of a dealership, half of which would be represented by all the voting “Class A” stock of the corporation, and half by a long-term note. The operator would contribute a minimum of 25% which would be represented by non-voting “Class B” stock. Harvey observed that the $50,000 which Gerich could contribute was “a little light” for the kind of high-volume urban dealership he had in mind. Price, at Harvey’s direction, furnished Gerich an application form which Gerich took with him for completion.

Gerich had been connected with automobile dealerships for 28 years at that time, 22 years as sales manager and general manager. He was at the time the 25% owner of a Ford dealership in the Detroit area, of which he was also general manager. He had had no experience in the financing of dealerships, however, and there is no testimony that he ever participated in the purchase or sale of a dealership.

The application was completed by Gerich and submitted to Harvey. Gerich received a letter from Price, stating that they were investigating his references and his credit. After the lapse of some additional time, Gerich called Harvey and learned that the investigation was complete. An appointment was set up for another conference on November 11, 1974, in Harvey’s office in the General Motors Building in Detroit.

The November 11 conference proved to be a critical one. Harvey stated to Gerich that he had a Chevrolet deal available, “a real plum”. The “real plum” was the Hicks Brothers dealership in Kansas City. He had the dealership’s financial statements for the years 1971 through 1973, and the 1974 statement through September. These were examined and discussed at the conference. The three persons at the conference —Gerich, Harvey and Price — testified that the fleet sales came under scrutiny. For one thing, Gerich observed, the per-unit gross was abnormally high. (Later, when Gerich came to Kansas City and discussed the financial statement with Bill Hicks, the ratio between fleet and individual sales was commented upon. Whereas the ratio should be 75% retail to 25% fleet, according to Gerich, the Hicks Brothers ratio was 50%-50%.) Nothing was said to plaintiff about the audit report which showed the $53,000 discrepancy which had precipitated the offering of the dealership for sale. Ger-ich asked why the Hicks Brothers dealership was being sold. Harvey told him that it was because of “contract violations”, or “disagreement of the parties”. He declined to amplify his answer, stating that the details were confidential. When Gerich asked what the Hicks brothers were going to do, Gerich testified that Harvey replied that “he didn’t care what they were going to do. They would never get another GM franchise anyway.” Gerich testified at the trial that that answer made a difference to him. “I would want to know who my competition is going to be, if I bought them out,” he said. Harvey at the trial denied making the statement.

At the November 11, conference, the subject of capitalization for the dealership was discussed. Harvey suggested $450,000, of which Gerich would contribute $50,000 and General Motors $400,000, divided equally between capital stock and a long-term note.

At the conclusion of the meeting, Gerich took with him the Hicks Brothers’ financial statements. He consulted with associates in the automobile business and shortly notified Harvey that he would like to go to Kansas City to look at the dealership. Harvey said he would call Broome in Kansas City and make the arrangements. Broome, as noted, was Kansas City branch manager for Motors Holding, and was also a director of Hicks Brothers Chevrolet. Gerich himself then called Broome, and on November 20 came to Kansas City. Broome met him at the airport and drove him around the city. Of the Hicks brothers, Broome said “that he would be glad to get rid of those troublemakers . . . contract violations of Motors Holding ... he had a pile of minutes a foot high.” Like Harvey, Broome declined to give details of the violations.

Gerich then talked with Bill Hicks at the dealership. He reviewed the financial statements. The ratio of fleet sales and retail sales was discussed, Gerich observing that the retail sales were low in relation to the fleet sales. Hicks replied that they were working on it. Gerich explained at the trial that most of the fleet purchases (a fleet consists of ten or more cars) are made during the first half of the model year, and that retail sales should account for 75% of the total volume.

The next morning Gerich had his first contact with the Chevrolet division of General Motors when Broome took him to the zone offices in Lenexa, Kansas. There Ger-ich met with Mr. Woodin and Mr. Carbin, zone manager and assistant manager respectively. Carbin gave a sanguine appraisal of Kansas City’s economic situation, especially of the downtown area where the Hicks Brothers’ dealership was located. Woodin thought the $450,000 capitalization was light for the dealership, but that it should be $600,000 or $650,000. Gerich received an application for a franchise.

On the return of Gerich and Broome to Broome’s office, Broome said the price of the “fixed assets and good will” of the Hicks Brothers’ dealership was $130,000.

Gerich returned to Detroit, and in December notified Harvey that he was interested in going ahead. Harvey said he would contact Broome and set up another appointment to negotiate the sale. Gerich testified that, although the price for the fixed assets was $130,000 as he then understood it, that there remained to be negotiated the used car inventory, demonstrators, parts inventory, rental cars and the like.

On January 15,1975, Gerich came to Kansas City. He had in the meantime resigned his job effective December 31, 1974.

As negotiations commenced at the Hicks Brothers’ dealership, the brothers Hicks named a price of $218,000 for the fixed assets and good will. Gerich, upon his return to his hotel room, called Broome to challenge the $218,000 price as against the figure of $130,000 which Broome had mentioned on Gerich’s November visit to Kansas City. Broome replied he would “straighten those guys out”. The next morning, January 16, Gerich and the brothers Hicks were to meet in Broome’s office to negotiate the terms of an “option to purchase”. Gerich arrived first. Broome told Gerich the price would be $150,000. Gerich said that figure would be agreeable. Gerich asked Broome if there would be a “non-compete” clause in the option to purchase. Broome at the trial denied Gerich had asked about a non-competition clause. Gerich testified that Broome “stated to me that I wouldn’t need one because they wouldn’t get a GM deal”. Gerich said, “Fine”. When the Hicks brothers arrived, Broome acted as chairman of the meeting. By afternoon the terms of the option had been agreed upon. It was typed in Broome’s office and there signed by the Hickses.

After this had been completed, still in Broome’s office, Gerich completed an “Application for Investment by Motors Holding Division under Motors Holding Dealer Investment Plan”.

Gerich made one more trip to Kansas City before the closing of the sale which took place March 14, 1975. During a conversation with the Hicks brothers on this occasion, they said they were going to try to get back into the automobile business. They asked Gerich his opinion about a Chrysler-Plymouth franchise. Gerich replied Ford would be better. They mentioned a small town agency, Barter Buick-Pontiac, which one brother would take. “They wanted a much smaller deal with a lot less overhead and a lot less people . They were each going to go their separate ways,” Gerich testified.

On March 14 the sale was closed and Gerich assumed management of the dealership. As earlier explained, the purchase was actually made by Milan Chevrolet, Inc., a newly-formed Delaware corporation. The directors, besides Gerich, were Broome and Trent, both employees of Motors Holding and also directors of Hicks Brothers Chevrolet, Inc.

In February Gerich had ordered from General Motors new identification signs for the dealership. The lease agreement (for the signs) was signed March 24. Gerich was told he could expect delivery of the signs in May. In the meantime, the Hicks Brothers signs remained on the dealership, until they were removed in May in circumstances hereafter described. It was August before the new signs were delivered.

In the early part of May Gerich learned that Hicks Brothers were going back into business as Chevrolet dealers. He called Broome about it. Broome said he would find out about it and get back to Gerich. Next day Broome came by Milan Chevrolet. “Yes, it’s true,” he told Gerich, according to Gerich’s testimony, “but don’t worry, Harvey will block it in Detroit." Shortly thereafter, on about the 15th of May, Gerich learned from Jim Hicks (who was working at the Milan Chevrolet dealership, making assignments of accounts receivable, as an employee of Hicks Brothers) that Hicks Brothers had been approved as Chevrolet dealers in Kansas City on Hickman Mills Drive in a dealership operated by Jerry Debacker Chevrolet. They commenced the operation of the business on June 1.

Gerich, after learning in mid-May about the new Hicks dealership, began at once to paint out the Hicks Brothers signs which were still on the dealership buildings. From then until August, when the new signs were installed, the dealership had no identifying signs.

Several of the key employees of Milan Chevrolet performed in desultory fashion under the new management of Gerich. On March 14, the day Gerich assumed management of the dealership, he found that Ray Shaw, leasing and fleet manager, was going to go with Hicks Brothers as manager of their leasing business (the leasing business was not sold to Gerich but was retained by Hicks Brothers.)

Virgil Shirky had been a retail salesman for Hicks Brothers and continued with Milan after the sale. Gerich discussed Shirky’s becoming a “crew manager” over three to five salesmen. His sales performance had not been up to his previous standard since the change of ownership. Gerich was unable to meet his pay requirements as a crew manager, so he was not made a crew manager. “He practically stopped working,” Gerich testified. One day without any notice he quit. He was employed by Hicks Brothers Chevrolet at their new location.

Similarly, the performance of Travis Wheeler, a fleet salesman who handled the Farmland Industries Fleet account, the dealership’s largest, was below par. About June 1 he quit to sell dump truck beds. A week later he was employed by Hicks Brothers Chevrolet and at the time of trial was their sales manager.

Hicks Brothers Chevrolet newspaper advertisements began to appear in June. The earliest such ad to be introduced in evidence was dated July 10, 1975. “We’ve moved!” it said, “Now we’re moving our big, big inventory of over 350 new cars — buy at tremendous savings now!!” The new address was given as 115th and 71 Highway.

A September 21 advertisement of Hicks Brothers featured Mr. Virgil Shirky as “salesman of the month” for August, who cordially invited “old and new customers to call him for all their automotive needs.”

Two of the largest of the Hicks Brothers fleet customers had been Farmland Industries and Budget Rent-A-Car. Gerich had attempted to have Travis Wheeler set up appointments with them to cultivate the business after Gerich took over. Wheeler never got this done, and Gerich afterwards failed to make contact with the purchasers. After Wheeler had quit Milan Chevrolet, and after he had commenced working for Hicks Brothers at the new location, Gerich called Bill Hicks to complain. When they had completed their conversation on that subject, Hicks said to Gerich: “Milan, you might as well forget about Farmland and Budget ... I have got written contracts with both those companies, so there is no way you can get them.”

We may now draw our narrative quickly to its close, for the defendant on this appeal makes no issue of the rapid decline of Milan Chevrolet, Inc. We shall state the evidence on this point more fully as we discuss the subject of damages later in our opinion. On July 15, 1975, plaintiff Gerich submitted his resignation as president of Milan Chevrolet effective July 1, 1975, although he continued to manage the business until November 15, 1975. A directors’ meeting of September 29, 1975, determined to liquidate the business. It was noted that losses through August 30 had accumulated to $83,098.75 and that the cash position was precarious. The liquidation of the business was substantially completed by November 15, resulting in a loss exceeding $400,000. Under the contract between Motors Holding and plaintiff Gerich, the Class B stock (by which Gerich’s $50,000 investment was represented) was first absorbed, then the Class A stock which belonged to Motors Holding. Thus the plaintiff lost his initial $50,000 investment, while General Motors lost $379,277.86 of its initial investment of $550,000. Although defendant does not claim that the evidence does not support the fact that defendant suffered losses, it does claim that the losses cannot be laid to Hicks Brothers’ competition and hence cannot be blamed upon General Motors’ misrepresentation that Hicks Brothers would not get a GM franchise.

Plaintiff also presented evidence of his personal loss of earnings, and his travel and moving expenses connected with the venture.

We will now take up the points at which defendant says plaintiff’s case is deficient.

Representation of existing fact.

Defendant contends that the representations claimed by plaintiff to have been made by Harvey and Broome were not true representations of preexisting or present fact, and thus were not actionable. Defendant says they were instead mere opinions or predictions of a future contingency over which Harvey, the speaker, had no control.

It is true that if the evidence will allow only defendant’s construction of the alleged fraudulent misrepresentations, then such cases as Yerington v. Riss, 374 S.W.2d 52, 58 (Mo.1964), cited by defendant, would hold that plaintiff’s case must fail.

But plaintiff answers that the evidence justifies the characterization of defendant’s representations as representations of a state of mind, or of a present purpose. If the evidence will reasonably allow that construction, our cases hold that the representations are statements of existing fact and actionable. Dillard v. Earnhart, 457 S.W.2d 666, 670-1 (Mo.1970); Brennaman v. Andes & Roberts Brothers Const. Co., 506 S.W.2d 462, 465 (Mo.App.1973); Metropolitan Paving Co. v. Brown-Crummer Inv. Co., 309 Mo. 638, 274 S.W. 815, 823 (banc 1925).

The initial statement of Harvey made to plaintiff at the November 11 meeting, that Hicks Brothers was being “terminated” and would never get another GM franchise is itself couched in emphatic terms. The statement bespoke a hardened corporate disfavor on the part of General Motors toward Hicks Brothers. Observe:

“Q. I (plaintiff Gerich) asked what they were going to do.
A. What did he (Harvey) say?
Q. He didn’t care what they were going to do. They would never get another GM franchise anyway.”

(Emphasis supplied).

The statement gathered support from later statements made by Harvey and by Broome. Harvey spoke of “contract violations” of Hicks Brothers, but on the grounds of confidentiality declined to amplify. Broome later, when plaintiff visited Kansas City in November, spoke of the Hicks Brothers as “troublemakers” of whom he would be glad to be rid, and indicated that their misdeeds were documented by “a pile of minutes a foot high”. Later still, on January 16, 1975, as preparations were being made for drafting the option to purchase which, if exercised by plaintiff, would become the sale-purchase contract, Broome told plaintiff no “non-compete” clause was needed because Hicks Brothers “wouldn’t get a GM deal”. These statements by Broome added plausibility and authority to Harvey’s earlier statement that Hicks Brothers “would never get another GM franchise”.

In effect, the Harvey statement buttressed by Broome, implied a history of unsatisfactory dealings with Hicks Brothers and implied an existing relationship with them which foreclosed the possibility of their securing another franchise to sell General Motors automobiles. Gerich could reasonably believe, and so the jury could have found, that Harvey’s representation was of a settled corporate purpose, existing at the time of the representation, not to grant a General Motors franchise to Hicks Brothers.

The actual fact was that there existed no such corporate purpose, and no flinty corporate intention not to grant a General Motors franchise to Hicks Brothers. For aught the record shows, Hicks Brothers would suffer no disadvantage or handicap upon application for a franchise. On this point there is no dispute. Thirty-eight days before the November 11 statement to plaintiff Gerich, Harvey had had a conversation in Detroit with Bill and Ben Hicks, which contemplated their securing a General Motors franchise, not excluding Chevrolet. Harvey had assured them that he would not “adversely influence” any application for a franchise. He had even suggested after a decent length of time that Motors Holding would finance them in a dealership, or two dealerships, in any General Motors line.

Two and one-half months after the March 14 closing of the sale of the Hicks Brothers dealership to plaintiff Gerich, Hicks Brothers commenced operating under a new franchise the former Jerry Debacker Chevrolet dealership. Our record does not show when the franchise was approved by General Motors, but plaintiff Gerich learned of it in early May. The promptness of the reentry of Hicks Brothers into the Chevrolet market is itself corroborative of the absence of any corporate disfavor on defendant’s part.

Plaintiff’s reliance upon representation.

Defendant says plaintiff should not have relied upon Harvey’s statement — that he should have gone to the Chevrolet division, the “best authority”, if it was important to him, to learn if Hicks Brothers might get a Chevrolet franchise. Defendant points out that Harvey was the general manager of Motors Holding, a division of General Motors which financed dealers, while the granting or withholding of a franchise was up to the car division concerned, in this instance the Chevrolet division. A similar argument was made, and rejected after close examination, in Tietjens v. General Motors Corporation, 418 S.W.2d 75, 81 (Mo.1967).

Defendant also emphasizes plaintiff’s long and varied experience in the automobile business which we have earlier described. Gerich should have known, it argues, that General Motors was no monolithic organization and that the various operating divisions, including Motors Holding and Chevrolet sales, operated independently and at a distance from each other. The jury could reasonably find otherwise. They could have found that there was nothing in plaintiff Gerich’s experience or background which would have acquainted him with the internal structure of General Motors and with the interrelationships of its various operating divisions. For that matter, the evidence shows there was a considerable degree of cooperation among the operating divisions.

In connection with the question of plaintiff’s reliance upon Harvey’s representation, and his right to rely thereon, defendant in his brief emphasizes that Harvey could not control the granting or withholding of Chevrolet franchises. Whether he could or could not was not really the issue presented to the jury by the plaintiff’s verdict-direction instruction. That instruction required the jury to find that “Harvey and Broome, or either of them that made such representation, did not know whether such representation was true or false”. This placed plaintiff’s case upon the ground of a negligent misrepresentation, rather than upon the ground of a knowing false representation. Huttegger v. Davis, E.D. No. 38,808 and No. 38,820 (filed May 29, 1979, 6-8; Wilson v. Murch, 354 S.W.2d 332, 338-9 (Mo.App.1962). Harvey’s control of the granting of Chevrolet franchises would be relevant on the question of his knowledge, but not controlling. More to the point was his familiarity with the internal workings, politics and procedures of General Motors with respect to the granting or withholding of Chevrolet franchises.

As a matter of fact, however, Harvey’s influence extended beyond the boundaries of Motors Holding. He himself testified that he could “influence” the granting or withholding of a franchise. The Hicks brothers recognized and Harvey acknowledged this ability on his part when in their meeting of October 4, 1974, they had asked Harvey if he would “blackball” them — or to use Harvey’s language, “adversely influence” the granting of a General Motors franchise to them. And Broome, when it developed that Hicks Brothers had at some level been approved to take over the De-backer dealership, had told plaintiff Gerich not to worry, that Harvey would “stop it in Detroit”. We are not talking here about formal authority to grant franchises. Formal authority to grant Chevrolet franchises was vested in the Chevrolet car division. We are talking about the way the matter actually worked in practice.

Plaintiff saw a demonstration of Harvey’s influence. Harvey was able to induce Chevrolet to accept plaintiff Gerich as a dealer with one-third the personal investment Chevrolet usually required from the dealer. The policy was to require a personal investment from the dealer of at least 25% which in this case would have been $150,000. Gerich was approved with a personal investment of 8.3%.

But Harvey’s life-or-death power over the granting or withholding of a Chevrolet franchise is not the issue; plaintiff could reasonably suppose that he was in a position at least to evaluate Hicks Brothers’ prospects for getting a General Motors franchise. Gerich could suppose that Harvey knew what he was talking about when he said that Hicks Brothers would never get another GM franchise.

This combination of knowledge on Harvey’s part and his ability to influence, could reasonably have been viewed by the jury as justifying plaintiff’s reliance upon his representation.

Materiality to plaintiff.

Appellant says the representation was not a material one in inducing the plaintiff to enter into the ill-fated venture. The jury could have found that it was a material factor. That he placed a value upon freedom from competition from the Hicks brothers would be hard to gainsay, if his testimony is to be believed. At the time for negotiating the option, he inquired whether a “non-compete” clause should be included. Broome said it would not be required, for Hicks Brothers would not get another GM franchise. This statement confirmed what Harvey had said in their Detroit conference on November 11. At that conference he had made specific inquiry what the Hicks brothers were going to do. “I wanted to know who my competition would be,” Ger-ich said. The $150,000 price was several times referred to in the evidence as being for “fixed assets and good will”. A seller’s good will is of little value to the buyer if the seller goes immediately into business in the same market with the same product.

Defendant says Gerich should have been alerted when Bill Hicks mentioned a Buick-Pontiac agency they were considering. But that is not necessarily so, for Gerich could have believed that they would be disappointed when they made application to GM for the franchise — but, however that might be, Hicks Brothers in a Buick-Pontiac agency would be a different thing than Hicks Brothers in a Chevrolet agency, the line with which they had been connected and with which their good will was connected through seven or eight years of operating a Chevrolet agency.

Damages to plaintiff.

Defendant next calls upon the rule of Toenjes v. L. J. NcNeary Construction Company, 406 S.W.2d 101, 106 (Mo.App.1966), which holds that “proof of substantial injury and damage is essential to recover in an action for fraud and deceit”, and that “in contradistinction with trespass and other direct injuries for which the complainant is awarded nominal damages if he should fail to plead and prove actual damage, deceit belongs to that class of tort of which pecuniary loss constitutes a part of the cause of action”.

Under this topic defendant raises no question about the measure of damages, either in the admission or rejection of evidence, or in the jury instructions on the subject. It does not challenge the amount of the verdict for excessiveness. We do not need to deal with those questions. Our question as presented by defendant’s motion for a directed verdict, and by its brief, is whether plaintiff’s evidence showed substantial, as opposed to nominal, damages so as to make out a prima facie case.

We conclude that the jury could reasonably have found from the evidence that plaintiff suffered substantial damage stemming from Hicks Brothers’ reentering the Chevrolet dealership (which both parties, and we, treat as resulting from defendant’s misrepresentation that Hicks Brothers would not get another General Motors franchise). Plaintiff’s evidence therefore supplies that element of his case.

The evidence shows that Hicks Brothers took Farmland Industries, the agency’s largest fleet customer, and Budget Rent-A-Car, another large fleet buyer.

Two key employees, and three other experienced and valued employees, quit plaintiff and immediately or soon joined Hicks Brothers at the new location.

Plaintiff Gerich testified that in the month of June when advertisements of the new Hicks Brothers’ dealership began to appear, “the volume at Milan Chevrolet and the business, new, used, dropped off tremendously . . . We didn’t have anybody coming in the showroom or the used car lot.”

That defendant suffered substantial pecuniary loss is plain. There is no well-marked evidentiary trail leading from the loss back to the prompt reentry of Hicks Brothers into the Chevrolet market, but that does not defeat plaintiff. In the nature of the case, it would be impossibly cumbersome to collect and adduce such proof. But there is enough here from which the jury, made up of men and women of varying degrees of worldly experience and wisdom, could trace to the Hicks Brothers competition a substantial portion of plaintiff’s loss.

It is true, as defendant argues, that other factors may have contributed to plaintiff’s loss. Defendant points out that after the first month after Hicks Brothers reentered business, plaintiff’s business showed the smallest loss of any of the three months he had operated it — $11,897 as against $13,980 and $13,160.79. The July loss was only $750.48. But by the end of August the accumulated loss had grown to $83,098.75. Defendant attributes the losses to poor management on plaintiff’s part and to adverse economic conditions in the automobile business. Pertinent to this argument is the following language from Herod v. St. Louis, San Francisco Ry. Co., 299 S.W. 74, 78 (Mo.App.1927):

“In an action for tort, where the evidence clearly shows substantial damages for which the defendant is responsible, plaintiff is not confined to a recovery of mere nominal damages by a failure to show with exactness the portion of the damages for which the defendant is responsible. Where it is impossible to distinguish between the damage arising from the actionable injury and the damage which has another origin, the jury are left to make from the evidence the best estimate in their power and to award compensatory damages for the actionable injury. And in case of concurring torts by several, the difficulty of ascertaining with exactness the proportion of damage caused by each tort-feasor is not a ground for denying the right to recover a substantial sum, where the best evidence of which the case is susceptible, reasonably tending to show the relative proportion, is adduced.”

It must be agreed that the amount of the loss which directly resulted from Hicks Brothers competition does not admit of precise ascertainment. But in such cases, the plaintiff is not to be denied recovery for defendant’s wrong because of the difficulty or the impossibility of quantifying the damages.

“It is always incumbent upon the party who asserts he has been damaged to adduce proof of the elements of his damage, but the rule against the recovery of uncertain damages relates to uncertainty as to the cause rather than uncertainty as to the measure or extent.” Thayer-Moore Brokerage Co. v. Campbell, 164 Mo.App. 8, 147 S.W. 545, 550 (1912).

See Annot., “Damages for breach by seller or former employee of covenant, express or implied, not to engage in like business or enter employment of competitor of cove-nantee,” 127 A.L.R. 1152; Annot., “Distinction between uncertainty as to whether substantial damages resulted and uncertainty as to amount,” 78 A.L.R. 858; 22 Am.Jur.2d Damages, § 24, 25 (1965).

Conclusion.

The parties in their briefs have examined the evidence microscopically. It is not feasible for us in this opinion to deal with it as minutely, nor is it necessary, since our limited task is to determine whether the evidence made a prima facie case for plaintiff. We have set out enough of the evidence to resolve that issue in the affirmative.

The judgment is affirmed.

All concur.


author: MANFORD, Judge.

text:
    Edward L. WOLF, Appellant, v. OLD REPUBLIC LIFE INSURANCE COMPANY, Respondent.
    No. 30127.
    Missouri Court of Appeals, Western District.
    Sept. 4, 1979.
    Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 1, 1979.

      Robert J. Graeff, Michael W. Manners, Independence, for appellant.
    Max W. Foust, Lloyd L. Messick, Kansas City, for respondent.
    Before SOMERVILLE, P. J., and PRITCHARD and MANFORD, JJ.
   MANFORD, Judge.

Appeal from jury verdict denying recovery to surviving spouse under accidental death policy.

Luvena Wolf, the deceased spouse of appellant, had a history of cancer. This unfortunate malady had led to the removal of a breast and kidney. Medical evidence contained in the record established she suffered from cancer of the right femur. Indeed, it was this last condition which, at trial, was the center of the dispute.

Luvena Wolf sustained a fracture of the right femur and left humerus for which she was hospitalized. During her recovery, she died as a result of a pulmonary embolus. A secondary cause of death was listed as metastatic carcinoma of the kidney. The evidence was that a leg injury and cancer are both predisposing elements to an embolism. There was medical testimony which, in summary, concluded the fracture of the right femur was the direct result of a pathological fracture. The physician treating the deceased stated the deceased was doing nothing other than walking in a normal fashion when she felt the pain, later determined to be the fracture.

Exhibits introduced at trial included a case history secured by the treating physician, which in part stated, “Today while walking, she developed spontaneous, severe pain in her mid femur and fell to the ground, landing on her left shoulder.”

During the course of the trial, the main issue drawn was whether, as was pointed out in respondent’s brief, the fracture of the femur was caused by the cancerous weakening of the bone or by a fall.

The jury found in favor of respondent insurance carrier, and the surviving spouse, appellant herein, filed this appeal, alleging the trial court erred in the giving of instruction no. 5. This is the only point raised on appeal.

Instruction no. 5 reads as follows, “The phrase ‘accidental bodily injury’ as used in these instructions means injury as a result of external, violent and accidental means. (MAI 15.03) (Modified)”

The contention by appellant is that the foregoing instruction misdefines the law as to the definition of “accidental means” as that term is used within insurance policies. Appellant implores the court to extend the rule under Kearbey v. Reliable Life Insurance Company of Webster Groves, Missouri, 526 S.W.2d 866 (Mo.App.1975). This case dealt with the question of the presumption against suicide and distinguished between an intentional act and when an apparent intentional act, under the evidence, might be construed as an accidental act. This court is not persuaded to extend the rule under Kearbey v. Reliable Life Insurance Company of Webster Groves, Missouri, supra.

By contrast, respondent offers to this court, in support of the validity of the instruction, the argument that the term “accidental means” is to be held synonymous with the term “causes”. Respondent cites as authority for his argument, Commercial Insurance Company of Newark, N. J. v. Orr, 379 F.2d 865 (8th Cir. 1967).

This court takes no exception to the argument of the respondent on that issue, but the posture of the respondent does not address the problem before this court as regards the precise wording of instruction no. 5.

Under our law, for recovery upon accident policies, there is a basic requirement that plaintiff has the burden of proving an accident. The determination of this issue is one for the fact finder, whether court or jury. The sufficiency of the evidence on this point was not questioned on this appeal and this court could not pass upon that question.

It was error for the court to have given instruction no. 5 as it related to the particular policy provision in this particular case. The pertinent portion of the insurance policy herein reads, “If the Insured shall lose his life, independently of all other causes, as a direct result of an accidental bodily injury occurring while this policy is in force and death shall occur within one hundred and eighty days of the date of such accident, the Company will pay the sum specified in the above Schedule for such loss.”

This policy did not contain provisional language which included the terms “as a result of external, violent and accidental means”. Many policies contain such limiting language, “external, violent and accidental means” and had that been the case with the policy herein, instruction no. 5 would have been a proper definition of the term “accident” as applicable within the terms of the policy.

The court in Commercial Insurance Company of Newark, N. J. v. Orr, supra, a ease dealing with policy language identical to the case herein, in addition to the explanation provided herein by the respondent as regards the terms “causes” and “means” as being synonymous, also pointed out that an insurance carrier is not entitled further to have embodied within that insurance agreement an additional requirement not contained specifically within the policy. The court in Commercial Insurance Company of Newark, N. J. v. Orr, supra, at 872, after pointing out that the policy therein contained language identical to the policy of the case herein stated,

“Appellant, relying upon this ‘external means’ authority, now apparently claims that although the insurance contract it sold to insured did not embody ‘external violent and accidental means’ language, recovery should only be allowed if there was such an external and violent occurrence. The imposition of an external means requirement on the insuring clause of the Orr policy which insured simply on the basis of ‘accidental bodily injury’ would amount to the judicial construction of the insurance policy in favor of the insurer.”

The court in the above case pointed out that to permit such a practice violated the rule in Mutual Life Ins. Co. of New York v. Hurni Packing Co., 263 U.S. 167, 44 S.Ct. 90, 68 L.Ed. 235 (1923).

In the case herein, the giving of instruction no. 5 placed a prohibited judicial construction upon the policy before the court. The result was to broaden the exclusionary clause, while narrowing the coverage under the policy. The term “accident” should have been defined in terms so as neither to broaden the exclusionary clause nor to narrow the coverage under the terms of the policy.

The plaintiff herein still has the burden to prove that an accident occurred which would qualify him as the surviving spouse of the decedent to recover under the terms of the policy. The harm done, as has been pointed out, was the imposition of prohibited construction upon this particular policy. For the reasons set forth above, this case is reversed and remanded for retrial upon the issues.

All concur.


author: WASSERSTROM, Chief Judge.

text:
    Carl A. RIBANDO and Leora Ribando, Plaintiffs-Respondents, v. Thomas J. SULLIVAN and Theresa W. Sullivan, Defendants-Appellants.
    No. KCD 30170.
    Missouri Court of Appeals, Western District.
    Sept. 4, 1979.
    Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 1, 1979.

      Milton W. Adams, John C. Theisen, Gordon, Adams & Gordon, Kansas City, for defendants-appellants.
    Thomas R. Bellmann, Bellmann, Speck & Handley, Kansas City, for plaintiffs-respondents.
    Before SHANGLER, P. J., WASSER-STROM, C. J., and CLARK, J.
   WASSERSTROM, Chief Judge.

Plaintiffs purchased a lot on which defendants contracted to erect a house. Plaintiffs thereafter brought suit for damages arising from defects in the construction. A jury trial resulted in a verdict of $10,000 for plaintiffs. Defendants appeal.

The evidence shows that plaintiffs approached defendants, who were partners doing business as Sullivan Construction Company, for the purpose of having a house built on one of defendants’ lots. Defendants showed the plans for a “Catalina” house, but that was not attractive to plaintiffs. Defendants then went to a designer and obtained plans for a “No. 4613” style house and showed those plans to plaintiffs, and defendants quoted a price to plaintiffs of $44,600 for the Catalina house and $43,-975 for the No. 4613.

Plaintiffs were basically attracted to plan No. 4613, but did want a number of changes, the most important of which called for a one foot extension in the house on the bedroom side and four feet on the family room side. Other changes included such special items as two fireplaces, a cathedral ceiling in the dining room, a roughed in stool and lavatory in the basement and an inter-communications system. Agreement was reached with respect to these changes and a contract was signed on November 11, 1971, for a total price of $43,529.50. Under the terms of that contract, plaintiffs were to obtain commitment for a loan, and thereupon defendants were to deed the lot to plaintiffs and defendants were to proceed with the construction of the house with the features agreed upon.

The house was completed and plaintiffs took possession in June, 1972. They began noticing a number of defects which they called to defendants’ attention, some of which were repaired by defendant. Many of plaintiffs’ complaints, however, remained unsatisfied, and they arranged for the house to be inspected by Mr. Leon Maslan, an architect and also an engineer. Mr. Maslan made two inspections of the premises, one in March and the other in April, 1973, and thereafter he checked the house one more time to refresh his memory on February 11, 1978.

As a result of his inspection, Maslan identified a number of structural defects, principal among which were the following: the two big plates under the first floor were not bolted to the steel beams on which they rested, but were attached only with bent nails; the steel beams rested on wooden posts to which they were not fastened and the wooden posts just referred to were not fastened to the concrete foundation; the main support for the floor joist under the first floor had been drilled into and thereby weakened and had not been properly nailed to the floor resting upon it; the concrete basement floor had been poured without expansion joints; the stair stringers had not been properly nailed; the exterior doors had not been sealed at the top and bottom; a light switch in a half-bath had been placed on the wrong side of the door; kitchen paper was loose; there was no putty around the kitchen sink and the sink was not bolted down; the wood paneling in the family room was loose and not properly nailed; the plywood floor was not nailed down in the bedroom hall; the door in the master bedroom did not fit properly and therefore dragged; there was no bracing in a bathroom cabinet; bedroom floors were loose; wall nails were popping out; flashing under the outside brick veneer was improperly placed so that it took water into the basement; a decorative brick wall in the front of the house was falling apart; some of the outside wood paneling was coming down; there were no splash blocks under the down spouts; one of the windows was in front of instead of behind a panel; and there was no sheeting or belting paper under the exterior siding. Maslan’s conclusion was that the house had been built in a defective manner, the workmanship was not quality construction and the house was not of reasonable quality. There was additional testimony that the air conditioner installed had only a three and one-half ton capacity instead of the four ton capacity specified in the agreement.

With respect to the amount of damages, Mr. Ribando testified “I think it’s twenty or twenty-five thousand dollars that it would take to fix all them things — to have all the leaks and the foundations fixed, and stuff. * * * If I have to dig out that yard and get in that foundation, and if I have to have this basement resealed — and I don’t know what I’d have to do to, you know, get the different things fixed around there. * * I’d just like to have a sufficient amount of money for my trouble and agony and worry in fooling with this house to get these things fixed and repaired in the home, and live in it like I want to. And twenty, twenty-five thousand, I think would be sufficient enough to try to get everything straightened out. * * * ” He admitted on cross-examination that he was not a contractor and had no idea about construction labor rates nor about the costs of construction materials.

The only other evidence offered by plaintiffs with respect to their damages was the testimony of Mr. Albert L. Margolin, a real estate expert. Margolin testified that the fair market value for the house at the time of trial was $50,000, that its fair market value without the defects would be $66,000, so that the diminution in fair market value was $16,000. He testified that these calculations were made by him as of 1977, updated to the date of trial in 1978, and that he did not compare his calculations at all to the value of the property in either 1972 or 1973.

Defendants’ Points Relied Upon may be summarized as follows: (1) that plaintiffs’ submission to the jury on theory of breach of contract constituted a departure from the petition which pleaded breach of warranty, and that plaintiffs did not prove a breach of contract; (2) that the damage instruction was not supported by any proper evidence; (3) that certain photographic exhibits were improperly admitted because not properly identified; (4) that said exhibits were improperly admitted because they were taken five years after the alleged breach of contract; (5) that the verdict is excessive; (6) that the verdict is so excessive as to show bias and prejudice; and (7) that the trial court should have sustained defendants’ motion for directed verdict.

I.

A discussion of the issues raised by the above points will be greatly clarified by starting with an examination of the nature of defendants’ responsibility and their consequent legal liability. In Smith v. Old Warson Development Company, 479 S.W.2d 795 (Mo. banc 1972), Missouri adopted for the first time the doctrine that a builder-vendor of a new house becomes liable under an implied warranty of habitability. The applicability of that leading decision was thereafter distinguished in Barrett v. Jenkins, 510 S.W.2d 805 (Mo.App.1974) and O’Dell v. Custom Builders Corporation, 560 S.W.2d 862 (Mo. banc 1978), both of which declare that the new Old Warson doctrine applies only to the sale of a completed new house, and has no application to a contract with respect to a house to be built. As pointed out in O’Dell, the latter situation does not require the invocation of any new doctrine, because the common law as it existed prior to Old Warson clearly recognized that one who contracts to build a house impliedly warrants and it becomes a condition of the contract that the contractor will perform the construction work in a reasonably workmanlike manner. This long standing legal obligation upon one who contracts to build a house is well recognized by Missouri cases. Kennedy v. Bowling, 319 Mo. 401, 4 S.W.2d 438 (banc 1928); Freeman Contracting Company v. Lefferdink, 419 S.W.2d 266 (Mo.App.1967); Pitzer v. Hercher, 318 S.W.2d 397 (Mo.App.1958). That this constituted the well established law pertaining to construction contracts even before the onset of the new doctrine of implied warranty of habitability which was adopted in this state by Old Warson, was recognized by the numerous law review articles cited in Old Warson. Roberts, The Case of the Unwary Home Buyer: The Housing Merchant Did It, 52 Cornell L.Q. 835, 838 (1967); Bearman, Caveat Emptor in Sales of Realty — Recent Assaults Upon the Rule, 14 Vand.L.Rev. 541, 571 (1961); Byrd, Property — Implied Warranty of Fitness in the Sale of a New House, 71 W.Va. L.Rev. 87, 88 (1968); Haskell, The Case For an Implied Warranty of Quality in Sales of Real Property, 53 Geo.L.Rev. 633, 637 (1965).

The present case is one in which the defendants entered into a contract to build a house. This case is therefore controlled by the old, well established doctrine of an implied warranty or condition of good workmanship which existed prior to Old Warson and still exists independent of the new doctrine of implied warranty of habitability.

II.

Attention can now be directed to defendants’ first Point on Appeal concerning the alleged departure in plaintiffs’ legal theory. Defendants argue that plaintiffs attempted to plead a cause of action under the theory of implied warranty of habitability (as declared in Old Warson), and tried their case on that basis. Defendants further state in their brief that at the close of the evidence a conference was held with respect to instructions and that the trial court refused to instruct on implied warranty of habitability in reliance upon Barrett. Defendants proceed to say that plaintiffs thereupon submitted an instruction on the theory of breach of contract, which instruction was accepted and given by the trial court.

Nothing with respect to that instruction conference, alleged by defendants to have taken place, appears in the transcript. Regardless of whether such a conference and ruling by the trial court did occur, that cannot be material to a resolution of the issues on appeal. The question presented by defendants’ first assignment of error is whether plaintiffs’ pleading was sufficient to present a breach of contract theory and whether the evidence adduced supported that theory. We conclude that plaintiffs’ pleading and proof in that respect was sufficient.

Plaintiffs’ first amended petition (shown in the transcript as the First Amended “Complaint”) does contain some language reminiscent of the Old Warson opinion. Nevertheless, the allegations of the petition are consistent with and support the theory of breach of warranty of an implied warranty or condition of good workmanship. Even if the allegations of the petition could be said to be insufficient, those allegations must be deemed to have been amended under Rule 55.33 to conform to the evidence, particularly to the testimony given by Maslan.

Maslan’s testimony has already been summarized and it will be seen that Maslan undertook to describe in considerable detail the violations of good workmanship committed by defendants. Not only did Mas-lan’s testimony in this regard come in without objection, but defendants joined issue by introducing counterevidence to the effect that their construction methods had conformed to customary standards of good workmanship. This record compels the conclusion that the parties have tried the issue of good workmanship by consent, regardless of whether it was completely and accurately pleaded. Furthermore, Maslan’s testimony was amply sufficient to warrant submission of that issue to the jury.

III.

For their second Point, defendants contend that plaintiffs have not proved damages, in that all of plaintiffs’ evidence on this issue related to the value of the house in 1977, rather than its value in the year of completion, 1972. Defendants’ contention in this respect is correct and requires reversal.

The basic rule of damages in this situation is that plaintiffs are entitled to whichever is lower, as between the cost of repair and the diminution of value (diminution meaning the difference in value of the house if it had been constructed properly compared with its actual value as constructed.) MAI No. 4.02 and the Notes on Use thereunder; Sands v. R. G. McKelvey Building Co., 571 S.W.2d 726, 732 (Mo.App.1978). In measuring the value of the house as completed, the value must be ascertained immediately after the breach of the contract. DeArmon v. City of St. Louis, 525 S.W.2d 795, 800[7] (Mo.App.1975); Hotchner v. Liebowits, 341 S.W.2d 319, 322 (Mo.App.1961). So, the controlling date for evidence as to the value of plaintiffs’ house as constructed had to be June, 1972.

The only evidence addressed by plaintiffs with respect to damages was the testimony of plaintiff Carl Ribando and the expert witness Margolin. Ribando’s testimony was extremely vague and lacking in sufficient foundation to give it probative value. In any event, his testimony as to damage cannot be given effect because he testified as to a cost of repair in the range of $20,000 to $25,000, which was in excess of the diminution in value figure given by Margolin. Margolin’s testimony also fails to satisfy plaintiffs’ burden of proof, because his appraisal was made as of 1977, five years after the house was completed. He firmly disclaimed taking any account of value in either 1972 or 1973. Accordingly, none of plaintiffs’ evidence satisfies the legal standard of proof as to the value of the house on date of breach.

However, the failure of proof in this regard unquestionably occurred simply by reason of a misunderstanding of the applicable legal rule and plaintiffs should be given an opportunity by a new trial to introduce proper evidence directed toward value of the house as it was and as it should have been at the time of breach, June 1972, or the cost of repairs as of that date. Inasmuch as this case will be retried as to damages, defendants’ Points V and VI need no attention.

IV.

One of defendants’ assignments of error is that their motion for a directed verdict should have been sustained. It has already been held under Point III of this opinion that plaintiffs failed to submit proper proof of damages. However, that is not to say that there was no evidence in the case showing that they did suffer at least some damage. For example, the evidence is uncontested that defendants installed a three and one-half ton air conditioner instead of the four ton air conditioner promised. Furthermore, even one of defendants’ witnesses admitted that some repairs were required to correct defendants’ faulty construction and still remain to be done. Hence, plaintiffs’ failure to prove its full amount of damage cannot stand as sufficient reason for saying that a verdict should have been directed against them.

V.

Because of the faulty evidence regarding damages, this case must be remanded for new trial, but the question occurs whether the new trial should be limited to the question of damages only. The issue of whether or not defendants were guilty of defective workmanship has already been fully developed and settled by the jury, and there would be no reason to retry that issue unless it could be because the admission of certain photographs was error and such error prejudicially tainted the jury’s finding of defective workmanship.

The problem about photographs arose in the following manner. The first witness to testify on plaintiffs’ behalf was Maslan. He testified at length as to his examination of the house in 1973 and used in that connection a number of black and white photographs which he had taken at that time. Then, during the course of his examination, plaintiffs’ counsel asked Maslan about certain color photographs. When asked by defendants’ counsel about these latter photographs, Maslan stated that they had not been taken by him and that he could not say when or by whom the photographs had been taken. Defendants then objected to these photographs, but the objections were overruled. Later, during the testimony of plaintiff Leora Ribando, it developed that the color photographs had been taken in 1978, three or four weeks before trial.

Defendants now argue that the color photographs should not have been introduced because they did not depict the condition of the house as it existed immediately after the breach. That, however, was not the nature of the objection made by defendants at trial. Their objections then went only to the matter of identification, and the objections were voiced only when the pictures were offered through Maslan. When some of these same pictures were reoffered and others of the same group were offered through Leora Ribando, not only was there no objection made by defendants, but their counsel stated affirmatively time after time, “No objection.” Under these circumstances, defendants have waived their objection made during the testimony by Maslan and carried forward on appeal as Point III, and they cannot now raise the additional different objection presented in their brief on appeal as their Point IV.

Upon retrial, the challenged color photographs should not be used.

VI.

One final matter, although not raised by defendants, should be mentioned so as to avoid error upon retrial. The question of damages was submitted to the jury in this case under MAI No. 4.01. The use of that form was inappropriate and erroneous. Upon retrial the issue of damages should be submitted under MAI No. 4.02. Sands v. R. G. McKelvey Building Co., supra.

The judgment is reversed and the cause remanded for a new trial on the issue of damages only. Costs will be assessed against the plaintiffs.

All concur.

      . The pertinent allegations of the petition in this respect are as follows:
      “5. That defendants were contractors for the construction of said home and installed or directed and controlled the construction and installation of the framing and support structures, basement and foundation, interior wall, cabinet and plumbing fixtures, carpeting, central vacuum system, central air conditioning, door locks, electrical wiring and other general construction work.
      “6. That shortly after plaintiffs took possession of said home, the basement leaked, floor joists were left unfastened, the floors began to settle, the carpet was loose and unfastened, the interior wallpaper came loose, doors and cabinets were unfinished, windows were un-caulked, the oven failed to properly operate, and the air conditioner and vacuum systems were insufficient to perform their respective tasks.
      “7. That all the items described in paragraph 6 above are defects in construction, and such defects were latent defects, of which plaintiffs were not capable of discovering by careful inspection.
      “8. That the defects made the home one not of reasonable quality or of reasonable fitness for use as a home.
      “9. That defendants have breached their implied warranty of merchantable quality and fitness, by representing and offering for sale, and selling said home with the above mentioned defects.”

      . A fair example of defendants’ objections at trial is as follows: “MR. ADAMS [defendants’ counsel]: Mr. Maslan, did you take these photos? THE WITNESS: No. MR. ADAMS: Do you know when they were taken? THE WITNESS: No. MR. ADAMS: Your Honor, we’ll object to the introduction of these exhibits, 40 and 43, for the reason this witness cannot identify the time or place of the taking of these pictures.”


author: ANDREW J. HIGGINS, Special Judge.

text:
    KANSAS CITY, Missouri, a municipal corporation, Plaintiff-Appellant, v. C-J CONSTRUCTORS, INC., Defendant-Respondent.
    No. 30172.
    Missouri Court of Appeals, Western District.
    Sept. 4, 1979.
    Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 1, 1979.
    Application to Transfer Denied Nov. 14, 1979.
    Aaron A. Wilson, George L. DeBitetto, Kansas City, for plaintiff-appellant.
    John H. Foard, Jr., Foard & Foard, Kansas City, for defendant-respondent.
    Before HIGGINS, Special Judge, Presiding, SWOFFORD, C. J., and ROBERT R. WELBORN, Special Judge.
   ANDREW J. HIGGINS, Special Judge.

Appeal from the judgment on verdict directed for defendant at close of the evidence in plaintiff’s suit for occupation license tax deficiencies. The question is whether C-J Constructors, Inc., is liable for additional occupational taxes based upon inclusion in its “gross annual business” of amounts received from William C. Haas, a realtor, and other companies owned or controlled by him, which amounts C-J paid to subcontractors on behalf of the Haas entities for construction services, C-J and the Haas entities being under the same ownership and control. Reversed.

C-J Constructors, Inc., is a licensed contractor, with its place of business at 4215 Baltimore, Kansas City, Missouri. It was classified by the City as a building, contracting or construction company pursuant to its application for a grant of an Occupational License for the years 1968 through 1973.

Plaintiff’s suit was for deficiencies and penalties as follows:

Year Principal Amount Penalty

1968 $650.00 $195.00

1969 525.00 131.25

1970 525.00 131.25

1971 625.00 156.25

1972 525.00 131.25

1973 440.00 110.00

Defendant’s occupation license tax deficiencies were revealed through an audit of books and records made available by defendant to the City’s auditor.

Section 21.86, Code of General Ordinances, 1966, relates to “Building, Contracting or Construction Company,” and requires the license fee “be based upon the gross annual business done and performed by any such contractor within the corporate limits of the City during the period of twelve (12) months last past before the payment of the license.”

Section 21.36 of the Code defines “gross annual business” as “twelve (12) times the average monthly value of all,services performed, goods, wares, merchandise, chattels and all other personal property of every kind and description, bought, sold, loaned or exchanged in the business in question * * * >>

C-J was organized by Mr. Haas, a real estate broker, manager, counselor, and appraiser, “for the purpose of constructing residential apartments.” Its function was “to act as a general contractor and to provide supervisory and common labor help. * * * Everything else was subcontracted.” Its services were performed for other Haas entities which, in turn, reimbursed C-J for the cost of all such services rendered to each such entity.

Lawrence G. Latimer, on behalf of the City, performed the audit of the foregoing payments to arrive at C-J’s “gross annual business” for the years in question, and computed the additional license fees due for each such year. The amounts are not disputed. Mr. Latimer, when asked “what goods, wares, merchandise, chattels and other personal property bought, sold, loaned or exchanged to the business of the defendant” he found in his audit, stated, “C-J Constructors bought all of the goods and services necessary to construct these projects and they exchanged them with Mr. Haas at the final conclusion or completion of those projects.” The services found performed by C-J were “everything necessary to the completion of an apartment project.”

Respondent contends the judgment should be affirmed on the theory of the trial court that “Plaintiff had failed to provide any evidence of the value of defendant’s services rendered and, consequently, has failed to prove an essential item of plaintiff’s case, the gross annual business of defendant.”

Appellant contends it had evidence to show the value of services rendered by defendant because the job cost reimbursements received by defendant from other Haas entities shown by defendant’s books and records represented the value of services which constituted “gross annual business” within the purview of Section 21.36, supra.

The question thus posed and previously stated was answered in Kansas City v. Standard Home Improvement Co., Inc., 512 S.W.2d 915 (Mo.App.1974). Standard Improvement Company and Universal Home Remodeling Company were separate entities owned, controlled, and managed by the same officers, directors and shareholders. Standard was licensed as a building, contracting or construction company under Section 21.86, and engaged in repair and remodeling of residential and commercial buildings as did Universal. Universal, however, functioned only in procurement of sales for home and other improvements through telephone solicitation. Universal had no construction and repair crews. These were supplied by Standard which maintained the payroll for workmen and paid material bills. Upon receipt by Universal of such accounts, Universal would accumulate them and periodically pay them to Standard. The City audited Standard and found it had excluded from its computations of “gross annual business” the amounts received from Universal which Standard paid to its subcontractors for labor and materials in completing Universal’s solicited contracts. Standard contended, as does C-J, that the job cost reimbursements it received from Universal were not to be included in “gross annual business.” The Court answered, apropos C-J’s contention: “Standard’s (C-J’s) records, when audited by Mr. Latimer of the City did show that job costs reimbursements were among Standard (C-J’s) other receipts for the years in question. * * * they partake * * * of the nature of sales of labor and material at cost to Universal (Haas). They were done pursuant to the carrying out of the business operations, that of repair and remodeling (construction) of residential and small commercial buildings (apartments), of the * * * separate corporations * *. The receipts for the advances made by Standard (C-J) must be treated as a part of its basic business operation, that is, a part of its annual gross business under the terms of the ordinance. As such, the receipts were properly includable in the computation of the license tax due, albeit that the work and materials were furnished at cost * * ”. 512 S.W.2d 915, 917.

Similarly in Simmons Hardware Co. v. City of St. Louis, 192 S.W. 394 (Mo.1916), plaintiff had allied corporations in other states to which it sold wares from its St. Louis office as it did to Simmons Saddlery Company in St. Louis. Simmons Saddlery, a Missouri Corporation, had common ownership of stock with plaintiff. Plaintiff sought to recover a portion of its license tax based upon sales to its affiliated companies. As to the foreign corporations, the Court said, “They were all distinct and separate entities, either of which might independently prosper, and survive the others. * * * It sufficiently appears, however, that all the elements of payment and delivery which characterize a sale were present in the transactions. Having voluntarily adopted that method of transacting business, it does not now lie in the mouth of the respondent to say that it means something else than the character they have given it.” 192 S.W. 394, 397. The same reasoning was applied to the Simmons Saddlery Company transactions, and the judgment in favor of Simmons Hardward Co. was reversed. See also In re Bush Terminal Co., 93 F.2d 661 (2nd Cir. 1938).

Respondent’s assertion that its only activity was to serve as a supervising and disbursing agent is not persuasive as a distinction of the analogous cases cited and quoted.

Accordingly, the judgment is reversed; and with the amounts of license taxes undisputed the cause is remanded with directions to enter judgment for the City of Kansas City, for occupational license taxes due in the undisputed amounts together with the appropriate penalties for the years 1969^ 1970, 1971, 1972, and 1973.

All concur.

      . Plaintiff dismissed Count I for this deficiency on the bar of the Statute of Limitations.