7 Most Common Claims in Missouri Real Estate Litigation

Are you looking to buy or sell a home? Are you a real estate agent assisting someone with purchasing or selling a home?

Are you prepared to go to court after the closing?

Given the complexity of Missouri real estate laws and the inordinate amount of issues that can arise, buyers, sellers, and real estate agents face a real threat of becoming a party to litigation after participating in Missouri real estate transactions.  Even those parties who comply with all laws and regulations face exposure to litigation merely by virtue of their involvement in the transaction.

This guilt-by-association-esque approach may not seem right, but it is an unfortunate reality when something goes awry in a real estate transaction.  While there is no guarantee that you will not be named as a defendant in a lawsuit, there are certain things that can be done to greatly reduce the probability of winding up in litigation.

Based on my experience litigating these cases, the 7 most commonly alleged claims involving Missouri real estate transactions are set forth in this article.  The prudent real estate agent, homebuyer and/or home seller will educate themselves regarding these claims to know the potential pitfalls, so they are in a better position to avoid exposure to liability and the unpleasantries that accompany a lawsuit.

The table of contents on this page enumerates the 7 claims that are most common when litigating real estate transactions.  Each claim is discussed more fully under its respective heading.

1. Fraud

The elements of a fraud claim in Missouri are: “(1) a representation;  (2) its falsity;  (3) its materiality;  (4) the speaker’s knowledge of its falsity;  (5) the speaker’s intent that it should be acted on by the person and in the manner reasonably contemplated;  (6) the hearer’s ignorance of the falsity of the representation;  (7) the hearer’s reliance on the representation being true;  (8) his right to rely thereon;  and, (9) the hearer’s consequent and proximately caused injury.”  Droz v. Trump, 965 S.W.2d 436 (Mo. App.W.D., 1998); see also Green Acres Enterprises, Inc. v. Nitsche, 636 S.W.2d 149, 153 (Mo.App.1982); Hanrahan v. Nashua Corp., 752 S.W.2d 878, 883 (Mo. Ct. App. 1988).

Fraud is a term used in everyday speak.  We know the meaning, but most people don’t know the 9 elements in Missouri that make up a fraud claim.  While these are merely technical elements in Missouri law, in laymen’s terms, fraud is synonymous with lying.  Thus, even if you don’t choose to memorize the above elements, just remember that if you don’t lie, you probably won’t find yourself on the other end of a fraud claim (no guarantees, but it should greatly reduce the probability).

Statute of Limitations

  • 5 year or 15 year Statute of Limitations (depending on tolling)—S.Mo. § 516.120(5)

R.S.Mo. § 516.120(5) states: “[a]n action for relief on the ground of fraud, the cause of action in such case to be deemed not to have accrued until the discovery by the aggrieved party, at any time within ten years, of the facts constituting the fraud.”

“[T]he cause of action does not accrue from discovery of the fraud. If ten years elapse without discovery of the fraudulent acts, the statute of limitations begins to run and after five years the cause of action is barred, even if the fraud has not yet been discovered. Id. at 798. This means that the latest a fraud claim may be brought is 15 years after the fraud occurred.” State ex rel. Stifel, Nicolaus & Co., Inc. v. Clymer, 522 S.W.2d 793, 798 (Mo. banc 1975).

Thus, an action for fraud accrues not when the damage occurs or can be ascertained, but when “facts constituting the fraud are discovered.” Schwartz v. Lawson, 797 S.W.2d 828, 832 (Mo.App.1990). The statute of limitations begins to run at the time a cause of action in fraud accrues, which is when plaintiff “discovered or in the exercise of due diligence, should have discovered the fraud.” Gilmore v. Chicago Title Insurance Co., 926 S.W.2d 695, 698 (Mo.App.1996)(citing Burr v. National Life & Accident Insurance Co., 667 S.W.2d 5, 7 (Mo.App.1984)). “The plaintiff maintains the duty to make inquiry to discover the facts surrounding fraud. Where the means of discovery exist, the plaintiff will be deemed to have known of the fraud so as to begin the running of the statute.” Burr v. National Life & Acc. Ins. Co., 667 S.W.2d 5 (Mo. App.W.D., 1984).

Back to top

2. Violations of the Missouri Merchandising Practices Act

The Missouri Merchandising Practices Act is an act designed to protect consumers by leveling the playing field and incentivizing attorneys to take such cases where consumers are harmed.  In order to incentivize attorneys to take these cases, the Missouri legislature included the potential for recovery of attorney’s fees and punitive damages if violations of the Act are found.

Generally, consumers are not equipped to foot an expensive litigation bill, but with the potential for attorney’s fees, some attorneys are more inclined to take the case on a contingency basis (that mean’s that the client only pays attorney’s fees if the client succeeds).  This attorney’s fees possibility heightens the recovery potential and gives the consumer more leverage.

“Section 407.020 of the Missouri Revised Statutes, commonly known as the “Missouri Merchandising Practices Act,” provides that, ‘[t]he act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce … is declared to be an unlawful practice.’ The scope of the MPA is broad. Section 407.025 provides a civil cause of action to consumers who purchase goods or services and suffer damages due to any of the aforesaid unlawful practices.In re McClelland, 06-41720, 2008 WL 5157685 (Bankr. W.D. Mo. June 20, 2008).

One case simplifies the foregoing paragraph in a succinct manner, “[i]n a private lawsuit for violation of the Missouri Merchandising Practices Act (MMPA), plaintiffs must demonstrate that they:

  • (1) purchased merchandise…from defendants;
  • (2) for personal, family, or household purposes; and
  • (3) suffered an ascertainable loss of money or property;
  • (4) as a result of an act declared unlawful under the Merchandising Practices Act.”

Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 773 (Mo. banc 2007); Edmonds v. Hough, 344 S.W.3d 219 (Mo. App.2011)(spacing and emphasis added).

The following is a more descriptive breakdown of each element necessary to satisfy the Missouri Merchandising Practices Act (“MMPA”).

(1) purchased merchandise…from defendants

R.S.Mo. § 407.010 (4) defines merchandise as the following: “any objects, wares, goods, commodities, intangibles, real estate or services.”

Based on the definition alone, the first element of the MMPA is satisfied because real estate is considered merchandise. Accordingly, the first element is satisfied by virtue of the type of transaction. Due to the long reach of the MMPA, there is potential that the legislature may amend the MMPA to narrow it.  Particularly with the Republican administration in 2017, there is a chance that the MMPA could be greatly limited.

However, at this point, it is difficult to say whether that limitation would involve the definitions section or would limit the reach of the MMPA as to whom it applies (i.e., only merchants).

It should be noted, though, that because the aim of the MMPA is to protect consumers, and because the MMPA allows buyers of residential real estate (typically consumers) to bring an MMPA claim against sellers of residential real estate (oftentimes consumers), the leverage contained in R.S.Mo. § 407.025, which potentially allows for the recovery of attorney’s fees and punitives, not only works for consumers, but also works against them.

The contrary argument to this policy stance is that most real estate contracts that are drafted by sophisticated parties (which are most contracts used by real estate agents and brokerage firms these days) contain a clause which awards attorney’s fees to the prevailing party.  However, the distinction lies in the vast reach of the violative acts (which are discussed below under element 4 of the MMPA) versus the requirements that the party prevail on the breach of contract claim.  To capitalize on the attorney’s fees provision in the real estate contract, the prevailing party would, presumably, have to prevail on the breach of contract claim.  Because the prevailing party would have to prove breach, this would require a greater burden than merely proving that the party violated an act under the MMPA.

The opposing side would then argue that the safeguard under the MMPA is that the judge ultimately decides whether attorney’s fees are awarded at the conclusion of the case.  Thus, if the court believes in equity that attorney’s fees are warranted, then reasonable fees will be awarded.

A contractual provision providing for the award of attorney’s fees, does not allow for such flexibility.  In any event, the foregoing discussion merely elucidates the advantages and disadvantages of modifying the extent that the MMPA applies to real estate transactions, the application to transactions in which a consumer is the seller, and how attorney’s fees may affect/undermine the legislature’s intent.

(2) for personal, family, or household purposes

This element is very factually based.  If the purpose of the transaction is personal and will be used as the buyer’s principal residence, then it satisfies this element.  If the purchase of the property is to be used as rental property, there is a legitimate question as to whether this element is satisfied.

There is a high probability that the court will find that this element is not satisfied for rental property because it is for commercial purposes and is not used for personal, family or household purposes.

(3) suffered an ascertainable loss of money or property

As it pertains to the MMPA, the Missouri Court of Appeals stated that “[t]he defrauded party should be awarded the difference between the actual value of the property and the value if it had been as represented, measuring the damages at the time of the transaction.” Schoenlein v. Routt Homes, Inc., 260 S.W.3d 852 (Mo. App., 2008).

(4) as a result of an act declared unlawful under the Merchandising Practices Act

The following are the unlawful acts seen most frequently in the real estate context:

a) Misrepresentation

A misrepresentation is defined as “an assertion that is not in accord with the facts”

When proving a misrepresentation pursuant to the MMPA, a plaintiff does not need to prove

  • Reliance,
  • Knowledge that the assertion is misleading/false, or
  • Any culpable mental state. 15 CSR 60-9.070

b) Half-Truth

A half-truth in its simplest form is defined as a situation where a party “[o]mit[s] to state a material fact necessary in order to make statements made…not misleading.” 15 CSR 60-9.090

c) Omission of a Material Fact

An omission of a material fact is defined as “any failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her.” 15 CSR 60-9.110 (3)

When proving an omission of a material fact pursuant to the MMPA, a Plaintiff does not need to prove:

  • Reliance, or
  • Intent. 15 CSR 60-9.110 (4)

d) Unfair Practice

An unfair practice is any practice that:

1A. Offends any public policy as it has been established by

  • Constitution
  • Statutes
  • MO Common law
  • Federal Trade Commission & interpretive decisions

or

1B. Is unethical, oppressive, or unscrupulous           

and

2. Presents risk or causes substantial injury to consumers

15 CSR 60-8.020

Statute of Limitations

  • 5 Year Statute of Limitations—S.Mo. § 516.120(2)

“The statute of limitations [for violations of the MMPA] begins to accrue when the Plaintiff has

[1] knowledge of the wrong and at least nominal damage, or

[2] knowledge that puts plaintiff on notice to inquire further.”

 Ball v. Friese Constr. Co., 348 S.W.3d 172 (Mo. App., 2011)(emphasis and spacing added).

Back to top

3. Breach of Contract

“The essential elements of a breach of contract action include: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant to the contract; (3) breach of the contract by the defendant; and (4) damages suffered by the plaintiff.” Martha’s Hands, LLC v. Rothman, 328 S.W.3d 474, 479 (Mo. Ct. App. 2010)(citing Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. banc 2010)).

A breach of contract in a real estate scenario can be the seller or buyer suing the opposing party (buyer or seller) on the basis that their actions constituted a breach of contract.  In a similar vein, the buyer or seller may sue their real estate agent or the brokerage firm, usually, whichever entity/person was named on the buyer or seller’s agency agreement.

While the agent has statutory duties s/he must carry out, the agency contract often incorporates a number of said duties as well as its own independent duties (typically).  Violation of the statutory duties incorporated into the contract could be the basis for the breach of contract claim.  In the event the MMPA claim is not sufficient or groundless against the real estate agent, the breach of contract claim might be the only avenue of recovery.

Statute of Limitations

  • 5 Year Statute of Limitations—S.Mo. § 516.120(1)

“The statute of limitations begins to run “after the causes of action shall have accrued.” § 516.100. But a “cause of action shall not be deemed to accrue when the wrong is done or the technical breach of contract or duty occurs, but when the damage resulting therefrom is sustained and is capable of ascertainment.” Id. A cause of action is capable of ascertainment “‘when a reasonable person would have been put on notice that an injury and substantial damages may have occurred and would have undertaken to ascertain the extent of the damages.'” State ex relOld Dominion Freight LineIncvDally, 369 S.W.3d 773, 778 (Mo. App. S.D. 2012) (quoting Powel vChaminade CollPreparatoryInc., 197 S.W.3d 576, 584 (Mo. banc 2006)). “‘At that point, the damages would be sustained and capable of ascertainment as an objective matter.'” Id. (quoting Powel, 197 S.W.3d at 584-85).” N. Farms, Inc. v. Jenkins (Mo. App., 2015).

Back to top

4. Breach of Fiduciary Duty

The agent’s statutory duties include the duty of care and loyalty, which are the essence of a fiduciary duty.

To establish a claim for breach of a fiduciary duty, a plaintiff must prove: (1) the existence of a fiduciary duty between the plaintiff and the defending party; (2) “‘that the defending party breached the duty'”; and (3) “‘that the breach caused the [plaintiff] to suffer harm.'” Henry v. Farmers Ins. Co., 444 S.W.3d 471 (Mo. App., 2014)(citing W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 15 (Mo. banc 2012)).

“Whether a fiduciary duty exists is a question of law, while the breach of that duty is for the trier of fact to decide.” W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 33 IER Cases 1397 (Mo., 2012).

It should be noted that the seller does not have a fiduciary duty to the buyer, and the buyer does not have a fiduciary duty to the seller.  Thus, these would not be valid claims against the other party.  These claims should be reserved to be alleged solely against the real estate agents and/or brokerage firms, depending on whether the situation lends to such claim.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(4); N. Farms, Inc. v. Jenkins (Mo. App., 2015).

Back to top

5. Negligent Misrepresentation

The elements of negligent misrepresentation are: “(1) speaker supplied information in the course of his business or because of some other pecuniary interest; (2) due to speaker’s failure to exercise reasonable care or competence in obtaining or communicating this information, the information was false; (3) speaker intentionally provided the information for the guidance of a limited group of persons in a particular business transaction; (4) listener justifiably relied on the information; and (5) that as a result of listener’s reliance on the statement, he/she suffered a pecuniary loss.” White v. Bowman, 304 SW 3d 141 (Mo. App., 2009).

A negligent misrepresentation claim is the hedge for a fraudulent misrepresentation claim.  In real estate litigation, usually a negligent misrepresentation claim is brought against the seller (if it deals with misrepresentation) and the seller’s agent and/or the listing agent, again, depending on what the facts the case indicate.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(4); Branstad v. Kinstler, 166 S.W.3d 134 (Mo, 2005).

Back to top

6. Negligence/Negligence Per Se

In a negligence action, the plaintiff must allege and prove facts which show: “1) the existence of a duty on the part of the defendant to protect plaintiffs from injury; 2) failure of defendant to perform that duty; and 3) injury to plaintiffs resulting from such failure.” Hill v. Gen. Motors Corp., 637 S.W.2d 382, 384 (Mo.App. E.D.1982) (citing Scheibel v. Hillis, 531 S.W.2d 285, 288 (Mo. banc 1976)). “The particular standard of care that society recognizes as applicable under a given set of facts is a question of law for the courts. Whether a defendant’s conduct falls short of the standard of care is a question of fact for the jury.” Harris v. Niehaus, 857 S.W.2d 222, 225 (Mo. banc 1993). Thompson v. Brown & Williamson Tobacco Corp., 207 S.W.3d 76 (Mo. App., 2006).

Negligence Per Se is a variation of negligence in which the duty is set by statute rather than by common law.  “Negligence per se arises when the legislature pronounces in a statute what the conduct of a reasonable person must be and the court adopts the statutory standard of care to define the standard of conduct of a reasonable person.” Dibrill v. Normandy Assoc. Inc., 383 S.W.3d 77, 84 (Mo.App. E.D.2012).

To prevail on a negligence per se claim, “the following four elements [must be] met: (1) There was, in fact, a violation of the statute; (2) The injured plaintiff was a member of the class of persons intended to be protected by the statute; (3) The injury complained of was of the kind the statute was designed to prevent; and (4) The violation of the statute was the proximate cause of the injury.” King v. Morgan, 873 S.W.2d 272, 275 (Mo.App. W.D. 1994).

“If a submissible case is made under a negligence per se cause of action, a plaintiff could recover if a jury concluded that a statute was violated and the violation was the proximate cause of the injury.” Sill v. Burlington N. R.R., 87 S.W.3d 386, 392 (Mo. Ct. App. 2002)(citing Vintila v. Drassen, 52 S.W.3d 28, 37 (Mo.App. S.D.2001). Thus, “if the [jury] instruction were based upon the theory of negligence per se, the jury would begin their inquiry with the question of proximate cause.” Id.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(2) & (4); Kueneke v. Jeggle, 658 S.W.2d 516 (Mo. App. E.D., 1983); Nuspl v. Missouri Medical Ins. Co., 842 S.W.2d 920 (Mo. App. E.D., 1992).

Back to top

7. Unjust Enrichment

Unjust enrichment is brought in a majority of lawsuits and usually acts as the catch-all claim.  Unjust enrichment is an equitable claim created in the law, which seeks to arrive at an outcome the represents principles of fairness.

Most diligent attorneys bring this claim in addition to the other relevant claims to ensure that the claimant can maintain his/her cause of action even if the court decides that no contract existed between the parties (or that there is no claim at law).

The elements of an unjust enrichment claim are: “the plaintiff must prove that (1) he conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust circumstances.” Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010); see also Hertz Corp. v. RAKS Hospitality, Inc., 196 S.W.3d 536, 543 (Mo.App. E.D.2006); Graves v. Berkowitz, 15 S.W.3d 59, 61 (Mo.App. W.D.2000). Even if a benefit is “conferred” and “appreciated,” if no injustice results from the defendant’s retention of the benefit, then no cause of action for unjust enrichment will lie. Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010)(citing White v. Pruiett, 39 S.W.3d 857, 863 (Mo.App. W.D.2001)).

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(1).

“Section 516.120(1) provides a five-year statute of limitations for ‘[a]ll actions upon contracts, obligations or liabilities, express or implied….’ An action for unjust enrichment is based on an implied or quasi-contractual obligation. Landmark Sys., Inc. v. Delmar Redev. Corp., 900 S.W.2d 258, 262 (Mo.App. E.D.1995). Such actions are subject to the five-year statute of limitations in Section 516.120(1). See Koppe v. Campbell, 318 S.W.3d 233, 240 (Mo.App. W.D.2010).” Royal Forest Condo. Owners’s Ass’n v. Kilgore, 416 S.W.3d 370 (Mo. App., 2013).

Back to top

Conclusion

Real estate transactions can give rise to various causes of action.  While there are no magic steps one can take to avoid a lawsuit, informing one’s self about the most common claims in Missouri real estate litigation may allow the reader to take preventative steps to reduce the possibility of litigation.

The following are the 7 most common claims that are brought in Missouri cases involving real estate matters:

  1. Fraud
  2. Violations of the Missouri Merchandising Practices Act
  3. Breach of Contract
  4. Breach of Fiduciary Duty
  5. Negligent Misrepresentation
  6. Negligence/Negligence Per Se
  7. Unjust Enrichment

While many of these claims are discussed above, one takeaway is that the truth almost always prevails. Thus, if there is some question as to the legality of certain actions, remember most people are best served by taking the higher road and erring on the side of disclosure or taking preventative measures and addressing all problems up front, rather than dealing with bigger issues after the fact.

If you have issues involving a real estate transaction or if you just have questions about a potential situation that could arise, please do not hesitate to contact our attorneys.  We’d be more than happy to assist you in any way that we can.

Please let us know real estate claims that you’ve dealt with and any feedback regarding the same in the comments section.

Back to top

Leave a Reply

Your email address will not be published. Required fields are marked *