Opinion
No. ED72983.
FILED: March 23, 1999.
APPEAL FROM THE CIRCUIT COURT OF THE CITY OF ST. LOUIS, HON. ROBERT H. DIERKER.
Charles W. Bobinette and Richard B. Blanke, 906 Olive St., Suite 300, St. Louis, MO 63101, for appellant. Betty Thorne Tierney and David R. Levy, 611 Olive St., Suite 1750, St. Louis, MO 63101, for respondent.
Robert G. Dowd, Jr., C.J., and Paul J. Simon, William H. Crandall, Jr., Kent E. Karohl, Lawrence G. Crahan, Mary Rhodes Russell, and Mary K. Hoff, JJ., concur.
James R. Dowd, J., concurs in parts I-III and V of the majority opinion and dissents from part IV in separate opinion in which James A. Pudlowski, Gary M. Gaertner, Richard B. Teitelman and Lawrence E. Mooney, JJ., concur.
Kathianne Knaup Crane, J., not participating.
John E. Bell appeals from summary judgment entered on April 14, 1997 against him and in favor of respondent, the May Department Stores Company, d/b/a Famous Barr Company (Famous Barr), on Count I of his petition for violation of the Truth in Lending and Fair Credit Billing Acts, 15 U.S.C. § 1601, et seq., and Regulation Z, specifically 12 C.F.R. § 226.13, and on Count II of his petition for tortious interference with credit expectancy. We affirm in part and reverse and remand in part.
I. Standard of Review
On appeal, we test the propriety of summary judgment using the same criteria that the trial court employed to determine the propriety of sustaining the motion initially. To establish a right to judgment as a matter of law on its motion for summary judgment, Famous Barr must show (1) facts that negate any one of Bell's elements facts; (2) that Bell, after an adequate period of discovery, had not produced, and would not be able to produce, evidence sufficient to allow the trier of fact to find the existence of any one of Bell's elements; or (3) that there is no genuine dispute as to the existence of each of the facts necessary to support Famous Barr's properly pleaded affirmative defense. ITT Commercial Fin. Corp. v. Mid-American Marine Supply Corp., 854 S.W.2d 371, 381 (Mo. banc 1993). Only after Famous Barr has made a prima facie showing does Rule 74.04 place a burden on Bell. His response "shall set out each additional material fact that remains in dispute, and shall support each factual statement asserted in the response with specific references to where each such fact appears in the pleadings, discovery or affidavits." Rule 74.04(c)(2). If Bell cannot contradict Famous Barr's prima facie showing, then judgment is properly entered against him because Famous Barr has already established its right to judgment as a matter of law. ITT Commercial Fin. Corp., 854 S.W.2d at 381. Our review on appeal for testing the propriety of summary judgment is essentially de novo. Id. at 376.
Famous Barr bears the burden of establishing a right to judgment as a matter of law on the record as submitted; any evidence in the record that presents a genuine dispute as to the material facts defeats Famous Barr's prima facie showing. Rule 74.04(c); ITT Commercial Fin. Corp., 854 S.W.2d at 382. A genuine dispute exists if Famous Barr requires an inference to establish its right to judgment as a matter of law. In our review of the record, "all facts that are not contradicted are taken as true." Id. If facts are not contradicted and Famous Barr has shown a right to judgment as a matter of law, Bell then bears the burden to create a genuine dispute by supplementing the record with competent materials that establish a plausible, but contradictory, version of at least one of the essential facts.Id. at 381, 382. Bell is entitled to the benefit of all reasonable inferences to be drawn from the record. Id. at 382.
II. Statement of Facts
A review of the record reveals the following facts in the light most favorable to Bell and reasonably supported inferences in Bell's favor: Bell purchased a ceiling fan on August 2, 1992 at the Famous Barr located in the St. Louis Galleria Shopping Mall. Planning to place the fan in his bedroom, Bell tested the available models and selected a quiet fan. Bell charged the purchase price of $132.16 to his Famous Barr account. Bell installed the fan within several weeks of its delivery. Bell alleges that after assembly and installation the fan made an unacceptable level of noise at all speeds and interfered with his sleep. Bell attempted to adjust the brackets, but determined the noise emanated from the fan itself.
Famous Barr billed Bell for the cost of the fan on September 1, 1992, with payment due on September 25. On or about September 23, 1992, Bell reported the problem to Famous Barr's credit office. Bell told the Famous Barr representative that he received a defective fan and did not intend to pay for it. The representative stated the problem would be noted and suggested that Bell contact the manager of the electric appliance department. Bell paid the undisputed amount shown on his September 1, 1992 Famous Barr statement, but withheld payment in the amount of $132.16. Bell attempted, but failed, to contact the manager of the electric appliance department.
Bell sent Famous Barr a letter, dated October 27, 1992. The letter stated the fan was defective because it made too much noise. Bell also wrote that he did not intend to pay for the fan, the cost of removing it or the cost of reinstalling a replacement fan. Additionally, Bell made a general reference to "Regulation Z" in his letter. Bell alleges he followed the directives on the back of his Famous Barr billing statement, which summarized a credit card user's billing rights.
The reverse side of the billing statement provides, in pertinent part:
If you think your bill is wrong . . ., write us on a separate sheet of paper and mail it to the address below as soon as possible. We must hear from you no later than 60 days after we sent you the first bill on which the error or problem appeared . . .
You do not have to pay any amount in question which we are investigating, but you are still obligated to pay the parts of you bill that are not in question. While we investigate your questions, we cannot report you are delinquent or take any action to collect the amount in question . . .
If you have a problem with the quality of goods . . . that you purchased with a credit card, and you have tried in good faith to correct the problem with the merchant, you may not have to pay the remaining amount due on the goods . . .
Ms. Milton, who worked with "billing errors" for Famous Barr, sent Bell a reply letter within several days, which acknowledged receipt and stated that a manager from the Famous Barr Galleria store would contact him in the near future. In November 1992, Christopher Thau, Divisional Sales Manager at the Famous Barr Galleria store, contacted Bell and agreed to locate a replacement fan, which was of the same make and model as the defective fan. Thau also agreed to reimburse Bell for the installation cost. Thau and Bell never discussed the details regarding removal of the defective fan, the installation of the replacement fan or the method for paying the cost of installation. Moreover, they never agreed that Bell should pay the purchase price for the defective fan.
Thau sent Bell to the Famous Barr located at the West County Shopping Mall to exchange the fan. The West County store did not have a replacement fan. Bell informed Thau of the situation. Thau stated there might be a delay in locating a replacement fan.
In January 1993, Thau contacted Bell to inform Bell that he was leaving his position and that Ms. Velk would be handling the ceiling fan situation. Bell waited for Velk to contact him. Bell did not recall hearing from Velk.
Beginning with the October 1992 statement, Famous Barr claimed the cost of the fan as an amount due and added finance charges to Bell's statement. On Bell's November 1, 1992 statement, Famous Barr claimed Bell's account was past due. Bell contacted Famous Barr's credit department. A Famous Barr representative assured Bell that Famous Barr had simply made a mistake. In May 1993, the billing statement showed a late fee and accruing finance charges as well as the price of the defective fan and the past due notice.
On May 4, 1993, Famous Barr informed Bell that it was sending his account to three credit reporting agencies. Again, Bell contacted the credit department and explained the dispute. A Famous Barr representative told Bell no further action would be taken to collect the disputed amount and the matter would not affect his credit rating.
This letter stated in pertinent part:
THE PAYMENT PERFORMANCE OF YOUR FAMOUS-BARR ACCOUNT IS BEING REPORTED TO THE FOLLOWING CREDIT BUREAUS[:]
CBI/EQUIFAX TRANS UNION CORPORATION TRW INFORMATION SERVICES
THIS MAY WELL AFFECT YOUR ABILITY TO OBTAIN OR RETAIN CREDIT ELSEWHERE.
IT IS URGENT THAT YOU FORWARD PAYMENT AT ONCE OR CONTACT [FAMOUS BARR] IMMEDIATELY.
Bell continued to receive statements containing late fees, finance charges, restrictions on his account preventing further purchases, threats to send his account to the collection department and threats to report a derogatory rating of "R9" to credit reporting agencies. "R9" is the worst credit rating a person can receive. In the spring of 1993, Bell contacted the billing/collection office multiple times regarding the statements. On each occasion, a representative assured him that Famous Barr would correct the errors and he need not pay for the fan until resolution of the dispute.
On or about August 18, 1993 the parties reached a provisional agreement. Famous Barr had been unsuccessful in locating a replacement fan. Famous Barr agreed to credit Bell's account with all finance and late fee charges and reinstate his credit line. Bell agreed to pay the original sale price if a Famous Barr representative would send a letter which confirmed that Famous Barr had agreed to allow the buyer of Bell's house an additional thirty days from the date of closing to exchange the fan. In August 1993, Famous Barr's automated system reported Bell 120 days delinquent to three credit reporting agencies: Trans Union Corporation, TRW Information Services and CSC Credit Services. On September 1, 1993, Famous Barr assessed late fees and finance charges for nonpayment, closed Bell's account and reported this information to the credit reporting agencies.
The legal file does not disclose the reason for the change from "EBI/Equifax" in the May 4 letter to "CSC Credit Services" thereafter.
On September 13, 1993, Bell drafted a letter to Famous Barr setting out the agreement. Bell received a handwritten note from a Famous Barr representative which stated that Famous Barr would "delete all derogatory information." On October 4, 1993, Bell re-dated the September 13, 1993 letter and mailed it with a check in the sum of $132.16 to cover the cost of the fan.
On October 16, 1993, Bell attempted to make a purchase at Famous Barr with his charge card. However, he was unable to do so because Famous Barr had closed his line of credit due to "poor prior payment history." Bell wrote a letter to Famous Barr on October 19, 1993 in which he quoted the pertinent sections of Regulation Z and demanded the deletion of all adverse or derogatory credit history from his file. On November 19, 1993, Famous Barr faxed letters to the credit reporting agencies, which stated in pertinent part:
Please delete any and all derogatory credit information reported by Famous-Barr from the credit file of the customers listed below. The credit rating should be reflected as R-1.
John E. Bell Mary E. Bell 7440 Somerset Clayton, MO 63105
FAMOUS BARR Account Number: 01 038 796 7 2 Social Security Number: Not available
On the same day, Famous Barr sent Bell a letter informing him of the action taken by Famous Barr. Enclosed were copies of the letters sent to the credit reporting agencies. The letter also stated that Famous Barr reinstated Bell's account with Famous Barr. The parties later discovered that the corrective letters sent by Famous Barr to the credit reporting agencies contained the wrong account number.
Sometime in the late spring or early summer of 1994, Bell applied to the European American Bank ("EAB") for a TWA credit card, hoping to earn frequent flyer miles with his purchases. EAB refused to extend a credit line based upon a report from TRW Information Services. TRW's report did not reflect Famous Barr's November 19 request to delete all derogatory credit information.
On August 12, 1994, Bell filed suit against Famous Barr. On January 27, 1997, Famous Barr filed its motion for summary judgment on both counts of the petition. The trial court granted Famous Barr's motion for summary judgment on April 14, 1997 for both counts of the petition. On July 21, 1997, the trial court denied Bell's motion for reconsideration. The court entered final judgment against Bell on August 21, 1997.
III. Regulation Z
Bell initially contends the trial court erred in granting summary judgment on Count I because the defective quality of the fan is a "billing error" under Regulation Z, there is a genuine dispute as to whether or not Famous Barr acted in compliance with Regulation Z and there is a genuine dispute that Bell properly rejected the fan and did not act in bad faith. We agree.
In granting Famous Barr's motion for summary judgment on Count I, the trial court relied primarily upon its finding that the "evidence in the record shows that [Bell] used the fan during the time in which he was allegedly rejecting it." The court also found as a matter of law that Bell "resisted [Famous Barr's] attempt at cure and reasonable attempts to resolve the dispute over a substantial period of time."
Famous Barr argues the evidence is undisputed that Bell accepted the ceiling fan or that a rejection was revoked by Bell's inaction. Famous Barr contends none of the definitions of "billing error" set out in 12 C.F.R. § 226.13 are applicable in the instant case. However, section 226.13(a)(3) defines a "billing error" as a "reflection on or with a periodic statement of an extension of credit for property or services not accepted by the consumer or the consumer's designee, or not delivered to the consumer or the consumer's designee as agreed." The Official Staff Interpretations of Regulation Z, prepared by the Federal Reserve Board, clarify the provision and state that "[s]ection 226.13(a)(3) does not apply to a dispute relating to the quality of property or services that the consumer accepts." Famous Barr did not make a billing error, and is not subject to the provisions of the provisions of section 226.13(a)(3), if Bell accepted the ceiling fan. We apply state law to determine if Bell accepted the ceiling fan. See Official Staff Interpretations to 12 C.F.R. § 226.13(a)(3). Judged in a light most favorable to Bell, the record does not establish as a matter of law that Bell accepted the fan, failed to properly reject the fan, revoked his rejection or failed to provide proper notice under Regulation Z.
12 C.F.R. § 226.13, also known as part of Regulation Z, is a section of The Truth in Lending Act, the purpose of which is to require certain actions and disclosures in credit transactions.
A similar definition of "billing error" is found at 15 U.S.C. § 1666(b)(3).
Absent a specific provision in the contract, the buyer has a reasonable time after delivery of goods to determine if the goods conform to the requirements of the contract. Stephens Indus., Inc. v. American Exp. Co., 471 S.W.2d 501, 504 (Mo. App. 1971). If the goods fail in any respect to conform to the contract, the buyer may accept the goods or rescind by rejecting the goods.Id. A buyer choosing to rescind must make the rescission known to the seller within a reasonable time after discovery of a defect or after a defect is discoverable. Id. After rejection, the buyer's continued use of the goods as the buyer's own and in a manner inconsistent with the rights of the seller nullifies the rescission and acts as an acceptance of the goods, requiring payment of the contract price. Section 400.2-606(1)(c), RSMo 1994; Paramount Sales Co., Inc. v. Stark, 690 S.W.2d 500, 504 (Mo. App. 1985). "If the buyer does not use the goods as his own, but rescinds the contract and holds the merchandise as bailee for the seller, the buyer is not liable for the sale price (assuming the rejection was justified)." Paramount Sales Co., 690 S.W.2d at 504-05.
All Missouri statutory references are to RSMo 1994 unless otherwise indicated.
Bell purchased the fan on August 2, 1992. Famous Barr had the fan delivered. Bell did not discover the defect until he had assembled and installed the ceiling fan. After installation, Bell noticed an unacceptable level of noise. He took steps to inspect and test the product. Bell told a Famous Barr representative on or about September 23, 1992 that he received a defective fan and did not intend to pay for it.
The time in which to provide notice of rejection is not quantified by the Uniform Commercial Code ("UCC"). A "reasonable time" under the UCC depends upon the nature, purpose and circumstances of the action to be taken. Section 400.1-204. The question of what is a reasonable time for rejecting defective goods is a question of fact for the jury to decide when fair-minded persons could disagree. Grus v. Patton, 790 S.W.2d 936, 940 (Mo. App. 1990). Fair-minded persons could disagree upon the question of whether a rejection of a ceiling fan less than two months after delivery is reasonable.
Famous Barr argues rejection did not occur, if at all, until Bell provided a written rejection on October 27, 1992, approximately two and one-half months after installation. Section 400.2-602 sets forth the manner and effect of a rightful rejection. This section does not explicitly require that a rejection notice be in writing. Verbal notice may be adequate.See Polar Trading, Inc. v. Amboy Closeouts, Inc., 899 S.W.2d 577, 579 (Mo. App. 1995); Paramount Sales Co., 690 S.W.2d at 502, 505. Had the Missouri legislature intended notice of rejection to be in writing, it could have so provided.
Famous Barr argues that both Regulation Z and the agreement governing a Famous Barr credit card user's billing rights require written notice within sixty days after the creditor transmits the periodic statement first reflecting the alleged error. See 12 C.F.R. § 226.13(b)(1). Famous Barr first billed Bell for the defective fan on a September 1, 1992 periodic statement. Within sixty days thereafter, on October 27, 1992, Bell provided the requisite written notice of the billing error to Famous Barr. Famous Barr contends it could not have committed a billing error on the September statement in that it had no knowledge that the fan may have been defective. This argument is without merit. A trier of fact could find Bell rejected the fan on September 23, 1992, that Famous Bar erred in billing Bell for the fan on his October 1, 1992 billing statement, and that Bell provided written notice of the error within sixty days, complying with the contract and preserving his right under Regulation Z.
The October 27, 1992 letter satisfied the requirements of 12 C.F.R. § 226.13(b) in that the letter provided Bell's name and account number. The letter indicated the fan did not conform to the contract because it was defective. Bell attached a copy of the September 1, 1992 billing statement to the letter. This billing statement made clear the date and the amount of the error. Moreover, the letter stated that Bell's concerns fell under Regulation Z. The letter sufficiently identified the "billing error."
Regardless of whether notice of rejection occurred on September 23 or October 27, the trier of fact could find that the notice occurred within a reasonable time. The cases cited by Famous Barr are not persuasive authority that a delayed rejection of approximately three months is so long that reasonable people could not differ on its reasonableness, forcing the question to become one of law. See Burton v. Auffenberg, 357 S.W.2d 218, 222 (Mo. App. 1962); Fitzgerald v. Don Darr Ford, Inc., 729 S.W.2d 256, 257 (Mo. App. 1987); Grus, 790 S.W.2d 936. Moreover, the actions of the parties may affect what constitutes reasonable time. Stephens Indus., Inc., 471 S.W.2d at 504. Where a buyer complains about defects in the goods and the seller persuades him to keep the goods while the seller attempts to remedy the defects, the reasonable time within which to rescind the contract is extended. Id.
Additionally, Famous Barr argues that Bell did not properly reject the fan because he did not return it or tender it back to Famous Barr. This argument fails. The cases cited by Famous Barr do not support the proposition that the buyer must return the defective goods after rejection. Assuming the rejection was justified, a buyer that rescinds the contract and holds the merchandise as bailee for the seller is not liable for the sale price. Section 400.2-602(2); Stephens Indus., Inc., 471 S.W.2d at 504-05. A buyer has no further obligations with regard to goods it has rejected. Polar Trading, Inc., 899 S.W.2d at 580 (citing section 400.2-602(2)). The seller bears the cost of return delivery. Id. Matthews, Burton, and Foam-Tex rely upon the common law, which predates Missouri's adoption of the UCC in 1963. The facts in Polar Trading and Paramount Sales differ from those in the instant case because the buyers used the goods as their own and in a manner inconsistent with rights of the seller when they attempted to sell the delivered goods.
Famous Barr relies upon the following cases in support of this argument: Polar Trading, 899 S.W.2d at 581; Paramount Sales, 690 S.W.2d at 504; Burton, 357 S.W.2d at 222; Matthews v. Truxan Parts, Inc., 327 S.W.2d 28, 37 (Mo. App. 1959);Foam-Tex Indus., Inc. v. Relaxaway Corp., 358 F. Supp. 8, 13 E.D. Mo. 1973).
The summary judgment facts do not show that Bell refused to permit Famous Barr to remove and recover the defective fan after notice of rejection. There is no evidence in the record that Famous Barr demanded or took any action to remove the fan. To the contrary, a trier of fact could have determined that the October 27, 1992 rejection letter and Bell's testimony indicate Bell never intended to keep the defective fan and would have allowed Famous Barr to remove the fan from his ceiling. Bell simply refused to take responsibility for the return of the fan. The evidence further indicates a trier of fact could have determined Famous Barr acquiesced in Bell's continued possession of the fan, agreeing the defective fan would be exchanged when Famous Barr found a duplicate fan. Continued possession by a buyer following a seller's instructions and the seller's failure to effect a return of the goods cannot constitute an acceptance, unless the buyer uses the goods as his own and in a manner inconsistent with the rights of the seller.
Famous Barr relies upon Chancellor Dev. Co. v. Brand, 896 S.W.2d 672 (Mo. App. 1995) for the proposition that Bell's continued use of the fan constituted an acceptance. Unlike the buyers in Chancellor, Polar Trading, or Paramount Sales, Bell did not attempt to sell or solicit the aid of another to sell the fan. Bell's mere possession cannot constitute "an exercise of ownership" because Bell had a duty to "hold" the rejected goods. Section 400.2-602(2)(b).
The trial court found Bell accepted the fan because he used the fan after he rejected it. Specifically, the trial court relied on the testimony of Ms. Klorer, one of Bell's "house guests," who testified the fan was in use when she stayed at the house. Klorer never testified that she observed the fan in use after rejection. She may have testified regarding the use of the fan prior to rejection. The record does not support a prima facie showing that Bell continued to use the fan after he rejected it. Famous Barr's failure to make a prima facie showing of use eliminated Bell's need to respond. See Rule 74.04(e); ITT Commercial Fin. Corp., 854 S.W.2d at 381. Under the provisions of the UCC, use no longer bars rejection or revocation of acceptance as a matter of law. Lawrence v. Modern Mobile Homes, Inc., 562 S.W.2d 729 (Mo. App. 1978).
Viewing the facts in the light most favorable to Bell, it cannot be determined, as a matter of law, that Bell exercised his statutory rights in bad faith. We cannot determine if Bell "resisted" Famous Barr's attempts to cure and resolve the dispute. A trier of fact could reasonably find that Famous Barr agreed to exchange the defective fan when it located the same make and model. In the interim, Bell may not have been under an obligation to pay for the defective fan. Famous Barr could not locate a replacement fan. In August 1993, the parties agreed that Bell would pay for the defective fan. Bell paid after receipt of the letter. The issue of Bell's bad faith presents a jury question in this case, making summary judgment improper. See Brown v. P.N. Hirsch Co. Stores, Inc., 661 S.W.2d 587, 590 (Mo. App. 1983). Bell's Count I, alleging statutory violations, was sufficient to withstand a motion for summary judgment. We reverse and remand the trial court's grant of summary judgment as to Count I.
15 U.S.C. §§ 1640 and 1666(e) establish liability for violations of "Part D-Credit Billing" of the Truth in Lending Act and Regulation Z. A cause of action for defamation or invasion of privacy, under Count I or II, would fail. Bell did not produce sufficient summary judgment facts to indicate Famous Barr furnished false information to the credit reporting agencies with malice or willful intent to injure. See 15 U.S.C. § 1681h(e).
IV. Intentional Interference with Contract or Business Expectancy
The trial court did not err in granting Famous Barr's motion for summary judgment on Count II. Bell attempted to state a cause of action for the tort of intentional interference with contract or business expectancy in Count II of his petition. This tort is comprised of the following elements: (1) a contract, a valid business relationship or an expectancy; (2) the defendant's knowledge of the contract, valid business relationship or expectancy; (3) the defendant's intentional interference inducing or causing a breach of the contract, relationship or expectancy; (4) the lack of justification for defendant's actions; and (5) the damages resulting from defendant's conduct. Rice v. Hodapp, 919 S.W.2d 240, 245 (Mo. banc 1996). A plaintiff bears the burden of adducing substantial evidence supporting each and every element of this cause of action. Kerr Const. Paving Co., Inc. v. Khazin, 961 S.W.2d 75, 79 (Mo. App. 1997).
We need not decide whether 15 U.S.C. § 1681h(e) would apply to this claim.
A petition is sufficient if it invokes substantial principles of law which entitle the plaintiff to relief and informs the defendant of what the plaintiff will attempt to establish at trial. Wenthe v. Willis Corroon Corp., 932 S.W.2d 791, 793 (Mo. App. 1996).
Famous Barr's motion for summary judgment stated material facts which showed that Bell would not be able to produce sufficient evidence to allow the trier of fact to find the existence of elements one and two as stated above in his claim of intentional interference in Count II. Bell did not show the facts in the motion for summary judgment were genuinely disputed so as to contradict Famous Barr's prima facie showing.
A. The existence of a valid contract or expectancy
First, we consider whether Bell could establish a genuine dispute as to the existence of a contract or a valid business expectancy at the time of Famous Barr's conduct. Although most cases involving tortious interference with contractual relations involve existing contracts, a formal contract is not required to find a valid business expectancy. American Bank of Princeton v. Stiles, 731 S.W.2d 332, 343 (Mo. App. 1987).
We find this issue is controlled by Haas v. Town Country Mortg. Co., 886 S.W.2d 225 (Mo. App. 1994). In Haas, the plaintiffs alleged intentional interference after they were denied credit by five credit card companies due to the improper reporting of derogatory information by the defendant. 886 S.W.2d at 227. At the time the defendant reported the derogatory information to the credit reporting agencies, the plaintiffs had not submitted an application for credit to any of the five companies from which they were denied credit. Id. at 228. There was no evidence that the defendant reported derogatory credit information after the plaintiffs submitted an application for credit to the companies. The plaintiffs failed to make a submissible case because the plaintiffs' credit expectancy had not been realized at the time of the defendant's improper report.Id. at 229. The plaintiffs' "mere hope of establishing a business relationship with the companies was tenuous and did not evince the existence of a valid business relationship or expectancy." Id. at 228-29.
The dissent's discussion of Haas, infra at 3, focuses not on the existence of an expectancy, but rather, upon the issue of causation. It further claims, infra at 4, that the existence of an expectancy "depends on proof of causation." In doing so, the dissent confuses the elements of intentional interference with a business expectancy and misstates the law in Missouri. We recognize that no standard or test has been established to determine when a business expectancy might arise. Stiles, 731 S.W.2d at 343. Yet, "[l]iability under this tort cannot be predicated upon speculation, conjecture or guesswork and no fact essential to submissibility can be inferred absent a substantial evidentiary basis. A plaintiff must generate substantial evidence supporting each and every element of this cause of action." Francisco v. Kansas City Star Co., 629 S.W.2d 524, 529 (Mo. App. 1981) (emphasis added); see also Khazin, 961 S.W.2d at 79; Slone v. Purina Mills, Inc., 927 S.W.2d 358, 369 (Mo. App. 1996). The dissent argues that the existence of a valid expectancy depends upon the ability of the plaintiff to prove causation. This analysis is incorrect.
Furthermore, we question whether Bell showed summary judgment facts establishing a genuine dispute as to the existence of the element of causation. Famous Barr took measures to correct its report of derogatory information. The record reflects that on November 19, 1993, Famous Barr faxed letters to the credit reporting agencies which requested the deletion of "any and all derogatory information" reported in Bell's file. The legal file also reflects that by December 30, 1993 at least one credit reporting company, Trans Union, had acted upon the November 19 fax transmission. Bell was not denied credit until the late spring or early summer of 1994. In the tort of interference with an expectancy, "damages are limited to those which are 'proximate' to the injury about which [the] complaint is made, i.e., analogous to damages in negligence actions." J.D. Lee Barry Lindahl, Modern Tort Law section 45.07, at 33 (rev. ed. 1990); see also Tri-Continental Leasing Co. v. Neidhardt, 540 S.W.2d 210, 215-19 (Mo. App. 1976). The requirement of proximate cause "absolves those actors whom it would be 'unfair' to punish because of the attenuated relation which their conduct bears to the plaintiff's injury." Simonian v. Gevers Heating Air Conditioning, Inc., 957 S.W.2d 472, 475 (Mo. App. 1997).
Contrary to Bell's assertion, we find Franklin v. Mercantile Trust Co., N.A., 650 S.W.2d 644 (Mo. App. 1983), is inapposite to the instant case on the issue of the existence of a valid credit expectancy. In Franklin, the defendant submitted derogatory reports to credit reporting agencies from October 1978 through March 1980. 650 S.W.2d at 646. During that period, the plaintiff attempted to obtain financing from Landmark Bank, Ford Motor Credit, North St. Louis Trust Company and two other lenders unnamed in the opinion. Id. The plaintiff was denied credit from Landmark Bank because of the defendant's refusal to divulge information to Landmark Bank's "credit checkers." Id. The plaintiff did obtain credit financing through Ford Motor Credit, but the annual percentage rate was 2.83 points greater than he would have received at Landmark Bank. The plaintiff was denied credit from North St. Louis Trust Company and an unnamed lender because of derogatory information contained in a report from a credit reporting agency. Id. He was able to obtain credit to finance the purchase of a van, but was forced to pay off the loan in a shorter amount of time than North St. Louis Trust Company would have required. Id.
It is evident that in Franklin, the plaintiff actively applied for loans during the time the defendant reported derogatory information to the credit reporting agencies. As a result of the defendant's report of derogatory information, the plaintiff was denied credit or received a less favorable annual percentage rate and payment schedule. During the period in which the defendant reported derogatory information to credit reporting agencies, the plaintiff in Franklin harbored more than a "mere hope" of a credit expectancy with lenders. The plaintiff entered into a business relationship with the lenders in which his application was submitted, reviewed and approved or denied by the lenders during the period in question. Id. Such is not the record before us.
In this case, Bell had not attempted to establish a business relationship with EAB until at least eight months after Famous Barr transmitted the report of derogatory credit information to the credit reporting agencies. There is no evidence that Famous Barr continued to report derogatory information to the credit reporting agencies after Bell submitted his application for credit to EAB. Bell failed to show summary judgment facts establishing a genuine dispute as to the existence of a valid expectancy at the time Famous Barr issued the derogatory credit report.
B. Knowledge of the contract or expectancy
Next, we take up the issue of Famous Barr's knowledge of Bell's credit expectancy at the time of its conduct. In analyzing this issue, we recognize that "[i]ntentional interference presupposes knowledge of the plaintiff's contract or interest, or at least facts which would lead a reasonable person to believe that such interest exists. Without such knowledge there can be no intent and no liability." W. Page Keeton et al., Prosser and Keeton on the Law of Torts section 129, at 982 (5th ed. 1987). InFranklin, the court found the plaintiff had satisfied the elements of intent and knowledge. The defendant initially submitted derogatory reports to the credit reporting agencies after a dispute as to the payment of a car loan. Franklin, 650 S.W.2d at 646. The plaintiff filed a petition against the dealer and the defendant for rescission and cancellation of the note.Id. The plaintiff was then denied credit due to the "refusal of [the defendant] to divulge further information concerning plaintiff's credit" to the lender's "credit checkers." Id. The plaintiff then amended his petition and added a count alleging the defendant had intentionally interfered with the plaintiff's credit expectancy and business relationships. Id. Even after the plaintiff amended his petition, the defendant continued to report derogatory information about the plaintiff, and the plaintiff was denied credit or received unfavorable terms from three additional lenders. Id. The Franklin court found that under those facts, the elements of knowledge and intent were satisfied. Id. at 648.
The dissent argues that our holding contradictsFranklin. The entire quotation upon which the dissent relies,infra at 5, is as follows:
[W]e believe a jury could find that [the defendant] intentionally published a credit report showing a low rating and maximum delinquency knowing that the report would be relied upon by prospective lenders for evaluation of [the plaintiff's] credit standing when he made future application [sic] for the extension of credit. After the first denial of credit [the] plaintiff informed [the defendant] of this fact by filing an additional Count in his petition, but [the defendant], nonetheless, persisted thereafter in publishing the negative credit information.
Franklin, 650 S.W.2d at 648 (emphasis added). Our reliance uponFranklin is not misplaced.
Furthermore, the letters which the dissent discuss, infra 5-6, only acknowledge that derogatory information reported to a credit reporting agency "may" affect one's ability to obtain credit. This does not establish that Famous Barr knew of Bell's relationship with EAB. A claim for negligent interference with contract is not cognizable under Missouri law. Fleischer v. Hellmuth, Obata Kassabaum, Inc., 870 S.W.2d 832, 834 (Mo. App. 1993).
In this case, Famous Barr had no knowledge of Bell's credit expectancy or business relationship with EAB at the time EAB declined to extend credit to Bell. The record does not indicate that Famous Barr was advised of Bell's relationship with EAB. Bell failed to show summary judgment facts establishing the existence of a genuine dispute as to Famous Barr's knowledge of Bell's credit expectancy with EAB at the time the derogatory credit reports were submitted. See Thomas Phelps Found. v. Custom Ins. Co., Inc., No. 72867, 1998 WL 419448 at *4 (Mo. App. July 28, 1998).
The lack of evidence to allow the trier of fact to find the existence of any element is sufficient to support Famous Barr's prima facie showing that it is entitled to summary judgment. Bell failed to show that the facts asserted by Famous Barr as to the issues of the existence of a valid expectancy and knowledge were genuinely disputed. The trial court did not err in entering summary judgment in favor of Famous Barr on Bell's claim of tortious interference with a business relationship or expectancy in Count II.
V. Punitive Damages
Similarly, the trial court did not err in granting summary judgment in favor of Famous Barr on Bell's claims for punitive damages. Bell requested reasonable punitive damages in both Count I and Count II. Punitive damages are imposed for the purpose of punishment and deterrence. Vaughan v. Taft Broadcasting Co., 708 S.W.2d 656, 660 (Mo. banc 1986).
As stated above, the trial court did not err in granting summary judgment on Count II, the state law tort claim for interference with a business expectancy. Therefore, Bell could not have been awarded punitive damages based on Count II. Moreover, "punitive damages require a showing of a culpable mental state on the part of the defendant, either by a wanton, willful or outrageous act or reckless disregard (from which evil motive is inferred) for an act's consequences." Burnett v. Griffith, 769 S.W.2d 780, 787 (Mo. banc 1989). Missouri requires the evidence to meet the clear and convincing standard of proof.Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104, 111 (Mo. banc 1996). Bell failed to show he could produce clear and convincing evidence that Famous Barr acted with malice.
Count I alleges statutory violations. The applicable civil liability sections corresponding to such statutory violations are 15 U.S.C. §§ 1640 and 1666(e). Neither section appears to allow recovery for punitive damages. Cf. 15 U.S.C. § 1681o (allowing punitive damages for failure to comply with requirements of the Fair Credit Reporting Act); 15 U.S.C. § 1691(b) (allowing punitive damages for failure to comply with any requirement imposed under the Equal Credit Opportunity Act). We presume the disparate statutory inclusion and exclusion of punitive damages was done intentionally and purposefully. Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995). Therefore, Bell's request for punitive damages under Count I was improper. To the extent that several federal cases have discussed punitive damage claims in the context of technical violations subjecting defendants to damages under section 1640, such cases articulate a test for punitive damages similar to that of the State of Missouri. Punitive damages will not lie unless a defendant acts in a wanton, malicious or oppressive manner or in reckless disregard of the requirements of the law. See Smith v. Capital Roofing Co. of Jackson, Inc., 622 F. Supp. 191, 196 (S.D.Miss. 1985). Bell failed to make a showing that he could prove Famous Barr acted in such a manner.
See Smith v. Capital Roofing Co. of Jackson, Inc., 622 F. Supp. 191, 195-96 (S.D.Miss. 1985); Engle v. Shapert Const. Co., 443 F. Supp. 1383, 1389 (M.D.Penn. 1978).
We affirm the trial court's grant of summary judgment on Count II and on the issue of punitive damages on Counts I and II. We reverse the summary judgment on Count I and remand for further proceedings.
I respectfully dissent from Part IV of the principal opinion in which the majority concludes that Bell failed to establish a genuine issue of material fact as to the first two elements of a claim for tortious interference with a business relationship or expectancy. I otherwise concur in the majority opinion.
I.
The first element of a claim for tortious interference with a contract, business relationship, or expectancy is proof of a contract, business relationship, or expectancy. Nazeri v. Missouri Valley College, 860 S.W.2d 303, 316 (Mo. banc 1993). Clearly, Bell did not have a contract or business relationship with European American Bank ("EAB") until after Famous Barr reported the derogatory information. Therefore, the question is solely whether Bell had a valid expectancy at the time of Famous Barr's improper reporting.
Although no Missouri case has defined the term "expectancy" in the context of a claim for tortious interference with a business relationship or expectancy, Black's Law Dictionary defines an "expectancy" as "[t]hat which is expected or hoped for." Black's Law Dictionary 576 (6th ed. 1990). An individual's mere hope of some remote benefit, however, is but one component of a valid expectancy. In addition, a "plaintiff must prove that the expectancy would have come to fruition but for the actor's improper conduct." Baugher v. Gates Rubber Co., 863 S.W.2d 905, 910 (Mo.App. E.D. 1993) (emphasis in original). Therefore, a commercial interest which would have been realized but for the defendant's improper conduct constitutes an expectancy.
Relying on Haas v. Town Country Mortgage Co., 886 S.W.2d 225 (Mo.App. E.D. 1994), the majority concludes that Bell did not have a valid expectancy because he had not established a business relationship with EAB prior to Famous Barr's reporting of derogatory information. In Haas, this Court determined that the plaintiffs failed to make a submissible case on their claim for tortious interference with a business expectancy and reversed a judgment in their favor. Citing no legal authority, the court disposed of the claim in a single paragraph, which reads as follows:
Here, the only evidence to support plaintiffs' tortious interference claim was the testimony of plaintiff, Stephen Haas. He testified that sometime after Town and Country reported the delinquent payments to the credit reporting services, plaintiffs were denied credit and were charged a high interest rate on a car loan. There is no evidence in the record that at the time Town and Country issued the credit reports that plaintiffs had established a business relationship either with any of the credit card companies which denied them coverage or with the lender of the car loan. Plaintiffs' mere hope of establishing a business relationship with the companies was tenuous and did not evince the existence of a valid business relationship or expectancy. Plaintiffs failed to prove one of the elements of tortious interference with a business expectancy, and thus failed to make a submissible case on that claim. Town and Country's second point is granted.
Id. at 228-29.
I do not interpret Haas as holding that a mere hope of establishing a business relationship can never give rise to a valid expectancy because, by definition, an expectancy is that which is hoped for. Instead, I believe the holding in Haas is grounded on the plaintiffs' complete failure to produce evidence that the defendant's reporting caused the other companies to deny plaintiffs credit. Because the plaintiffs in Haas presented no evidence that they were denied credit but for Town and Country's reporting, they failed to establish a valid expectancy. See Baugher, 863 S.W.2d at 910. Moreover, this reading of Haas is consistent with our decision in Franklin v. Mercantile Trust Co., 650 S.W.2d 644, 648 (Mo.App. E.D. 1983), in which we indicated that a plaintiff's reasonable expectancy of obtaining credit is sufficient to support a claim for tortious interference. 650 S.W.2d 644, 648 (Mo.App. E.D. 1983) ("[W]e conclude that plaintiff might have made a submissible case of tortious interference with a contract; the contract being the reasonable expectancy of the financing of the loans with the lending agencies would be sufficient to support such a cause of action.").
Although easy access to credit has been a boon to consumers in some ways, it has come at a price. Part of that price is the increased reliance by the consumer credit industry on the information provided by consumer reporting agencies and standard formulas for evaluating that information, rather than detailed individual evaluations of each applicant's creditworthiness.
This, in turn, has placed great importance on the actual information provided by credit reporting agencies. If any of that information is negative, a consumer's chances of getting credit can be badly damaged or even eliminated, with no realistic chance of an individualized assessment which could reverse the result. This is why the threat of a negative report to a consumer reporting agency is such a potent collection threat.
It is also why a consumer's reasonable expectancy of access to credit needs the highest level of protection. If retailers and other creditors are allowed to report misinformation to consumer reporting agencies without consequences, consumers will be coerced into accepting unfair resolutions of disputes in order to protect their credit ratings and access to future credit. The Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., does not allow consumers to sue furnishers of information for providing inaccurate information to consumer reporting agencies. Missouri statutes do not provide a remedy. The tort of tortious interference is perhaps the only meaningful weapon consumers can use to obtain redress when creditors engage in wrongful conduct by submitting incorrect information to consumer reporting agencies.
Consistent with Franklin, I would hold that Bell — like all consumers — has an interest in obtaining credit based on actual credit history. Whether or not such an interest rises to the level of an expectancy, however, depends on proof of causation. Unlike the plaintiffs in Haas, the record contains substantial evidence of causation which, when viewed in a light most favorable to Bell, demonstrates that EAB denied Bell's TWA credit card application based on the derogatory information reported by Famous Barr. I would therefore find that Bell established a valid expectancy.
In a letter dated July 21, 1994, EAB notified Bell of the following:
Unfortunately at this time, we are unable to grant your request for the following reason(s).
DEROGATORY CREDIT BUREAU REFERENCES
Our credit decision was based in whole or in part on information obtained from the following consumer reporting agency(ies). . . .
TRW CONSUMER ASSISTANCE 660 N CENTRAL EXPY, EXIT 28 P.O. BOX 949 ALLEN, TX 75002 800-682-7654
TRW's credit report indicated that Bell's Famous Barr account "was past due 120 days in 08/01/93" and may require further review by a prospective creditor when checking Bell's credit history.
II.
The second element of a tortious interference claim is the defendant's knowledge of the contract, business relationship, or expectancy. Nazeri, 860 S.W.2d at 316.
The majority concludes that "Bell failed to show summary judgment facts establishing the existence of a genuine dispute as to Famous Barr's knowledge of Bell's credit expectancy with EAB at the time the derogatory credit reports were submitted." According to the majority, liability cannot attach unless the retailer was aware of the particular credit application with which its reporting interfered. Thus, so long as the retailer is not aware of the particular credit application at the time of reporting, it is shielded from liability even if it intentionally sabotages a consumer's credit rating by unjustifiably reporting derogatory information to credit agencies. This holding directly contradicts Franklin v. Mercantile Trust Co. In Franklin, even though the defendant did not have knowledge of the plaintiff's particular credit applications, this Court found that "a jury could conclude that [the defendant] intentionally published a credit report showing a low rating and maximum delinquency knowing that the report would be relied upon by prospective lenders for evaluation of his credit standing when he made future application for the extension of credit." Id. at 648 (emphasis added). Therefore, I place no significance on the fact that Famous Barr may not have been aware of Bell's credit card application. In this day where the extension of credit is commonplace, a major retailer must be presumed to know that consumers will make future applications for credit.
Here, the legal file contains two letters which reveal that Famous Barr did have knowledge of Bell's expectancy of obtaining credit. On May 4, 1993, Famous Barr sent Bell a letter indicating that his account was being reported delinquent to three credit reporting agencies due to nonpayment. Famous Barr also informed Bell that the reporting "may well affect your ability to obtain or retain credit elsewhere." In a second letter, dated July 7, 1993, Famous Barr wrote to Bell in part as follows:
Your account is currently 120 days delinquent. Your failure to make the required monthly payments has resulted in your account being considered for assignment to a collection agency.
If your account is assigned, we will exercise our legal right to demand the balance in full, attorney fees, and court costs. Your credit bureau report will show a derogatory rating of "R9" for the next seven years. This may result in denial when trying to obtain car loans, charge cards, apartment rental, home mortgage, and even employment.
(emphasis added). These letters show Famous Barr realized that Bell may apply for credit in the future. This evidence provides a sufficient basis to conclude that at the time it issued the derogatory credit reports, Famous Barr had knowledge of Bell's expectancy of obtaining credit.
I am deeply troubled by the ramifications of the majority's holding that a retailer must have knowledge of the plaintiff's particular credit application at the time the derogatory information is reported. A retailer can only know of a specific credit application if the application is pending at the time of reporting, and in almost all conceivable cases, a retailer's knowledge of a credit application will be acquired from the consumer. However, a consumer would have no reason to notify a retailer of a pending credit application before the retailer reports derogatory information. Once the derogatory information has been reported, it is too late for the consumer to notify the retailer. Thus, it is virtually certain that a retailer will never be held liable for at least the initial improper reporting of derogatory information.
I would reverse the judgment as to count II and remand for trial.