Opinion
WD83836
03-23-2021
VULCAN DRYING SYSTEMS, LLC, Appellant, v. UMB BANK, N.A., Respondent.
Appeal from the Circuit Court of Randolph County, Missouri
The Honorable Jason H. Lamb, Judge Before Division Three: , and Gary D. Witt and Anthony Rex Gabbert, Judges
Vulcan Drying Systems, LLC, appeals from a judgment dismissing its second amended petition alleging claims for fraudulent misrepresentation and negligent misrepresentation against UMB Bank, N.A., in connection with an international wire transfer. Vulcan raises three points on appeal. Vulcan argues that the motion court erred in dismissing Vulcan's petition for failure to state a claim upon which relief can be granted because (1) Vulcan's claims are not preempted by Article 4A of the Uniform Commercial Code (U.C.C.) in that Vulcan's claims do not arise out of the mechanics of the funds transfer process and are not covered by a specific provision of Article 4A; (2) Vulcan pled with particularity all of the ultimate facts of a cause of action for fraudulent misrepresentation; and (3) Vulcan pled all of the ultimate facts of a negligent misrepresentation claim. Because the dismissal cannot be supported on any grounds raised in UMB's motion, we reverse the dismissal and remand the matter for further proceedings.
Background
"At this stage in the proceedings, we take as true all facts alleged in [Vulcan's] operative petition." Hill v. Freedman, 608 S.W.3d 650, 652 n.1 (Mo. App. W.D. 2020). The operative petition here is Vulcan's second amended petition (the petition).
According to Vulcan's petition, on September 5, 2018, Vulcan entered into an agreement to sell a thermal dryer system to SADE Environmental Engineering Technologies & Services Co., Ltd. in Shanghai, China. SADE agreed to pay Vulcan the total purchase price in installments by international wire transfers to Vulcan's account at the Bank of Kirksville. Beginning on September 26, 2018, and continuing through March 5, 2019, UMB, acting as an intermediary bank, successfully processed six funds transfers from SADE to Vulcan's account at the Bank of Kirksville.
On March 4, 2019, SADE initiated a funds transfer of $200,000 to Vulcan's account at the Bank of Kirksville. Like the transfers before it, the March 4 transfer was to be received by UMB and transferred to Vulcan's account. Vulcan alleged that UMB initially accepted the March 4 transfer but subsequently refused to process it and, without explanation, returned the funds to the sender.
According to Vulcan's petition, on both March 4 and 5, Vulcan's owner met with Bank of Kirksville assistant managers and asked whether the Bank had received the March 4 wire transfer. The assistant managers contacted UMB to inquire about the status of the transfer and were informed that it had not been made by the payor and that UMB had never received the transfer, information that the assistant managers immediately relayed to Vulcan's owner. In reliance on UMB's representations about the March 4 transfer, Vulcan accused SADE of breaching its agreement with Vulcan. And, as a result, SADE and its parent company cancelled a written purchase order for a thermal desorption system and withdrew an informal agreement to purchase a second one; the sale price for each system was at least $2.3 million.
Vulcan alleges that UMB's representations about the March 4 funds transfer were false; UMB either knew its representations were false, was recklessly ignorant as to the truth of its representations, or failed to exercise reasonable care in responding to Vulcan's inquiry; UMB intended for Vulcan to rely on the representations in the manner in which Vulcan did; Vulcan's reliance was reasonable; and Vulcan's reliance on UMB's false representations resulted in the loss of future business with SADE. Vulcan requests actual damages for both claims and punitive damages for its fraudulent misrepresentation claim.
UMB moved to dismiss Vulcan's petition for failure to state a claim upon which relief can be granted, asserting that (1) UMB is immune under Article 4A of the U.C.C. from any civil cause of action arising out of the processing of a funds transfer; and (2) Vulcan failed to plead facts sufficient to establish each of the elements of its causes of action for fraudulent and negligent misrepresentation. After hearing arguments on UMB's motion, the court sustained the motion and entered an order and judgment dismissing Vulcan's petition. The court did not specify a legal basis for its ruling. Vulcan filed a motion for reconsideration, which the court denied. This appeal follows.
Standard of Review
The court dismissed Vulcan's petition without specifying whether the dismissal was with prejudice. Under Rule 67.03 of the Missouri Supreme Court Rules (2019), an involuntary dismissal is deemed to be without prejudice unless the court specifies otherwise in its order of dismissal. "The general rule is that a dismissal without prejudice is not a final judgment and, therefore, is not appealable." Eckel v. Eckel, 540 S.W.3d 476, 482 n.16 (Mo. App. W.D. 2018) (quoting McGaw v. McGaw, 468 S.W.3d 435, 439 n.5 (Mo. App. W.D. 2015)). "'An exception to this general rule' applies, however, 'where the dismissal has the practical effect of terminating the litigation in the form cast by the plaintiff.'" Id. (quoting McGaw, 468 S.W.3d at 439 n.5). "A dismissal 'without prejudice' for failure to state a claim effectively bars a plaintiff from refiling the action in its original form." Id. (quoting McGaw, 468 S.W.3d at 439 n.5). Here, the court did not state its reasons for dismissing Vulcan's petition, but UMB's motion to dismiss asserted the affirmative defense of failure to state a claim for both counts. Thus, the dismissal effectively terminated the litigation, and, therefore, the dismissal is appealable, and we have jurisdiction to review the points appealed.
All points on appeal challenge the propriety of the motion court's dismissal of Vulcan's causes of action for failure to state a claim upon which relief can be granted. "We review 'the grant of a motion to dismiss de novo and will affirm the dismissal on any meritorious ground stated in the motion.'" Hill v. Freedman, 608 S.W.3d 650, 654 (Mo. App. W.D. 2020) (quoting Mosby v. Precythe, 570 S.W.3d 635, 637 (Mo. App. W.D. 2019)).
"A motion to dismiss for failure to state a claim on which relief can be granted is an attack on the plaintiff's pleadings." Id. (quoting R.M.A. by Appleberry v. Blue Springs R-IV Sch. Dist., 568 S.W.3d 420, 424 (Mo. banc 2019)). "Such a motion is only a test of the sufficiency of the plaintiff's petition." Id. (quoting R.M.A., 568 S.W.3d at 424). "When considering whether a petition fails to state a claim upon which relief can be granted, [we] must accept all properly pleaded facts as true, giving the pleadings their broadest intendment, and construe all allegations favorably to the pleader." Id. (quoting R.M.A., 568 S.W.3d at 424). "The Court does not weigh the factual allegations to determine whether they are credible or persuasive." Id. (quoting R.M.A., 568 S.W.3d at 424). "Instead, [we] review[] the petition to determine if the facts alleged meet the elements of a recognized cause of action . . . ." Id. (quoting R.M.A., 568 S.W.3d at 424). "In order to withstand the motion [to dismiss], the petition must invoke 'substantive principles of law entitling plaintiff to relief and . . . ultimate facts informing the defendant of that which plaintiff will attempt to establish at trial.'" Id. (quoting State ex rel. Henley v. Bickel, 285 S.W.3d 327, 329-30 (Mo. banc 2009)). "If the petition sets forth any set of facts that, if proven, would entitle the plaintiffs to relief, then the petition states a claim." Id. (quoting Lynch v. Lynch, 260 S.W.3d 834, 836 (Mo. banc 2008)).
This case also requires us to interpret a statute. "The interpretation of statutory language is a question of law, and our review of it is de novo." Maxwell v. Daviess Cnty., 190 S.W.3d 606, 610 (Mo. App. W.D. 2006).
Analysis
On appeal, Vulcan argues that the motion court erred in dismissing its petition for failure to state a claim upon which relief can be granted because (1) Vulcan's claims are not preempted by Article 4A of the U.C.C. in that Vulcan's claims do not arise out of the mechanics of the funds transfer process and are not covered by a specific provision of Article 4A (Point I); (2) Vulcan pled with particularity all of the ultimate facts of a cause of action for fraudulent misrepresentation (Point II); and (3) Vulcan pled all of the ultimate facts of a negligent misrepresentation claim (Point III). We begin with Vulcan's first point.
Electronic funds transfers are governed by Article 4A of the U.C.C., which Missouri adopted and codified in 1992 as § 400.4A-101, et seq. An electronic funds transfer is a specialized method of payment comprised of a "series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order" and includes "any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order." § 400.4A-104(a). Thus, an electronic funds transfer is a linked series of debits and credits between the originator, the originator's bank, any intermediary, receiving banks that may be necessary to complete the process, the beneficiary's bank, and the beneficiary. In this case, SADE was the originator and the sender of the first payment order. SADE's foreign bank, the originator's bank, was the recipient of the first payment order and the sender of the second payment order. UMB, the intermediary bank, was the recipient of the second payment order and the sender of the third payment order. The Bank of Kirksville, the beneficiary's bank, would have been the recipient of the third payment order, and Vulcan would have been the beneficiary.
All statutory references are to the Revised Statutes of Missouri (2018).
A "payment order" is an oral, written, or electronic instruction from a sender to a receiving bank to pay or to cause another bank to pay an amount of money to a beneficiary. § 400.4A-103(a)(1).
"Originator" means "the sender of the first payment order in a funds transfer." § 400.4A-104(c). "Sender" means "the person giving the instruction to the receiving bank." § 400.4A-103(a)(5). "Originator's bank" means "(i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank." § 400.4A-104(d). "Intermediary bank" means "a receiving bank other than the originator's bank or the beneficiary's bank." § 400.4A-104(b). "Receiving bank" means "the bank to which the sender's instruction is addressed." § 400.4A-103(a)(4). "Beneficiary's bank" means "the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account." § 400.4A-103(a)(3). "Beneficiary" means "the person to be paid by the beneficiary's bank." § 400.4A-103(a)(2).
Article 4A is "intended to be the exclusive means of determining the rights, duties and liabilities of the affected parties in any situation covered by particular provisions of the Article." § 400.4A-102 Comment. "[R]esort to principles of law or equity outside of Article 4A is not appropriate to create rights, duties and liabilities inconsistent with those stated in th[e] Article." Id. As the Official Comment to § 400.4A-102 indicates, "this is not a blanket preemption of all common law claims once a transaction implicates Article 4A. Only issues covered by the provisions of Article 4A or claims that would create inconsistent rights, duties, or liabilities are preempted." 3 White, Summers, & Hillman, Uniform Commercial Code § 22:9 (6th ed. 2014). "[T]he U.C.C. does not necessarily preempt claims based on additional actions that occur outside the funds transfer process or exceed the allocation of liability under Article 4A provided the application of other law is not inconsistent with Article 4A." Koss Corp. v. Am. Express Co., 309 P.3d 898, 906 (Ariz. Ct. App. 2013). Thus, "[f]or Article 4A purposes, the critical inquiry is whether its provisions protect against the type of underlying injury or misconduct alleged in a claim." Ma v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 597 F.3d 84, 89-90 (2d Cir. 2010).
See § 400.1-103 ("Unless displaced by the particular provisions of this chapter [which includes Article 4A], the principles of law and equity, including . . . the law relative to . . . misrepresentation . . . supplement its provisions.").
The crux of Vulcan's claims is that UMB, an intermediary bank, made allegedly inaccurate representations to the Bank of Kirksville and ultimately to Vulcan, the beneficiary, about the status of the March 4 funds transfer and Vulcan relied on those misrepresentations, resulting in the loss of future business. According to Vulcan's petition, UMB received the funds transfer, accepted it, and then returned it to the sender without explanation. But, when asked about the status of that transfer, UMB reported that the payor had not made the transfer and that UMB had never received it.
Although not dispositive here, the petition does not allege facts indicating that UMB "accepted" the payment order within the meaning of Article 4A. "[A] receiving bank other than the beneficiary's bank accepts a payment order when it executes the order." § 400.4A-209(a). "A payment order is 'executed' by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank." § 400.4A-301(a). Vulcan does not allege that UMB executed the payment order it received by issuing its own payment order to the Bank of Kirksville, the beneficiary's bank. Rather, Vulcan alleges that UMB returned the payment order to the sender.
Article 4A does not protect against the misconduct alleged here and, therefore, Vulcan's claims are not preempted. There are several reasons for this. First, although Vulcan's claims relate to a rejected payment order, the alleged misconduct was not the failure of the transfer process itself, but rather statements made by an intermediary bank to a beneficiary about the status of a payment order, and those statements are outside the scope of Article 4A.
Vulcan relies on several cases in which courts found that Article 4A did not preempt common law claims because the claims did not arise out of the mechanics of an electronic funds transfer. See, e.g., Sheerbonnet, Ltd. v. Am. Express Bank, Ltd., 951 F. Supp. 403, 405, 414 (S.D.N.Y. 1996) (letter of credit holder's claims for conversion, tortious interference with contract, and unjust enrichment against an intermediary bank were not preempted where the bank credited transferred funds to an insolvent company's account—despite the bank's knowledge that the account was frozen—and then asserted its own right to the funds as an offset to the debt owed to it by the insolvent debtor); Schlegel v. Bank of Am., N.A., 628 S.E.2d 362, 368 (Va. 2006) (common law claims relating to allegedly unauthorized payment orders were preempted, but common law claims arising from the freezing of funds without refunding them were not preempted); Koss Corp. v. Am. Express Co., 309 P.3d 898, 901, 910 (Az. Ct. App. 2013) (claims for conversion, aiding and abetting fraud, and aiding and abetting a breach of fiduciary duty were not preempted by Article 4A where the claims arose from the retention of funds allegedly known to be embezzled). Despite the factual dissimilarities between these cases and the present one, these cases reflect a judicial consensus that preemption does not apply when defendants act outside the scope of the Article 4A funds transfer process and thereby trigger additional duties and liabilities they would not otherwise have had.
The rules of . . . [A]rticle [4A] are transactional, aimed essentially at resolving conflicts created by erroneous instruction or execution of payment orders, whether by the originator, by an intermediary or receiving bank, or by the beneficiary's bank. . . . As organized by the [A]rticle, funds transfer errors fall into three main categories. Errors may occur during the issuance and acceptance of the payment
order—as when a payment order is made for the wrong amount, or identifies the wrong beneficiary, or . . . is untimely cancelled. Errors may also occur during the execution of the payment order by the receiving bank—as when the originator's instructions are not followed, or the order is executed late, or is issued in an improper amount, or is not executed at all. Errors may also stem from payment issues—as in the obligation of the originator to pay the receiving bank, of the beneficiary's bank to pay the beneficiary, and notification of payment and discharge of duties requirements.Sheerbonnet, Ltd. v. Am. Express Bank, Ltd., 951 F. Supp. 403, 412 (S.D.N.Y. 1996). None of these areas are implicated by Vulcan's claims, which "do not involve allocating liability among [Vulcan] and the various banks involved in funds transfers based on the funds transfer process and whether the funds transfers were authorized as defined by the U.C.C." Koss, 309 P.3d at 905. Rather, Vulcan's claims are aimed at allegedly false representations made by UMB, an intermediary bank, to Vulcan, the beneficiary, after UMB returned the March 4 payment order to the sender.
Additionally, given Vulcan's allegations regarding UMB's knowledge that its representations were false, a finding that Article 4A applied to the alleged misconduct here would preclude Vulcan "from obtaining a remedy for fraud, which is not the objective of the U.C.C." Koss Corp., 309 P.3d at 905; see also Regions Bank v. Provident Bank, Inc., 345 F.3d 1267, 1276 (11th Cir. 2003) ("It could hardly have been the intent of the drafters to enable a party to succeed in engaging in fraudulent activity, so long as it complied with the provisions of Article 4A.").
Second, the circumstances giving rise to Vulcan's misrepresentation claims are not specifically covered by Article 4A. Section 400.4A-210 governs rejection of payment orders. The section imposes certain obligations on receiving banks and provides a remedy to the sender in the event the receiving bank does not fulfill its duties. But § 400.4A-210 does not impose a notification obligation on an intermediary bank vis-á-vis the beneficiary of the funds transfer. And our review of Article 4A did not reveal any other provisions that would impose such an obligation under these circumstances. Thus, neither the circumstances giving rise to Vulcan's claims nor remedies for their resolution are specifically covered by Article 4A.
UMB's reliance on Moody National Bank v. Texas City Development Ltd., Co., 46 S.W.3d 373 (Tx. Ct. App. 2001) is revealing. In Moody, the court found that common law claims arising from a misrepresentation about non-receipt of a specific electronic funds transfer were preempted by Article 4A. Id. at 376, 379. But Moody was the beneficiary's bank and, as such, was subject to an express notification requirement not applicable in the present case. Id. at 379.
Much of UMB's preemption argument rests on § 400.4A-212 (Liability and duty of receiving bank regarding unaccepted payment order). That section states,
If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this Article, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this Article or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in section 400.4A-209, and liability is limited to that provided in this Article. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this Article or by express agreement.UMB reads § 400.4A-212 broadly to mean that UMB, as a receiving bank, had no obligation to take any action with respect to the March 4 payment order and, in fact, owes no duty whatsoever to Vulcan beyond those duties imposed by express agreement or Article 4A. But the language of § 400.4A-212 does not support such a broad interpretation. The liability described in § 400.4A-212 is framed in terms of action taken or not taken with respect to a payment order. But Vulcan's claims are not based on UMB's rejection of the March 4 payment order. Rather, Vulcan's claims are based on statements UMB made to Vulcan's bank when asked about the status of the payment order. Where, as here, an intermediary receiving bank takes "additional actions that occur outside the funds transfer process or exceed the allocation of liability under Article 4A," the bank assumes a duty to perform those actions in accordance with all applicable laws, including common law, provided that application of such laws is not inconsistent with Article 4A. Koss, 309 P.3d at 906.
Third, allowing Vulcan's misrepresentation claims to proceed would not create rights, duties, or liabilities inconsistent with Article 4A. Because Article 4A is silent with respect to claims based on representations made by intermediary banks to beneficiaries, holding intermediary banks liable for negligent or fraudulent misrepresentations under state law is not inconsistent with Article 4A. Regions Bank v. Provident Bank, Inc., 345 F.3d 1267, 1275 (11th Cir. 2003) (finding Article 4A did not preempt a state law requiring a receiving or beneficiary bank to disgorge funds the bank knew or should have known were obtained illegally because Article 4A does not address the issue). "Insofar as Article 4A is implicated [by Vulcan's claims] at all, the purpose and policies of Article 4A are not advanced by preempting, nor diminished by permitting [Vulcan's] common-law claims." Koss, 309 P.3d at 910.
For these reasons, we conclude that Article 4A does not protect against the misconduct alleged by Vulcan because the circumstances giving rise to Vulcan's claims are not specifically covered by Article 4A. Further, allowing Vulcan to proceed with its claims would not create rights, duties, or liabilities inconsistent with Article 4A. Thus, Vulcan's claims for fraudulent and negligent misrepresentation are not preempted by Article 4A.
Point I is granted.
We now turn to Vulcan's remaining two points, which we discuss together. In Point II, Vulcan claims the motion court erred in dismissing its fraudulent misrepresentation claim because Vulcan adequately pled all of the required elements of that claim.
The elements of fraudulent misrepresentation are: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it should be acted on by the person 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) the hearer's right to rely thereon; and (9) the hearer's consequent and proximately caused injury.Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 131-32 (Mo. banc 2010). "A plaintiff's failure to establish any one of the essential elements of fraud is fatal to recovery." Id. at 132.
For Point III, Vulcan claims that the motion court erred in dismissing its negligent misrepresentation claim because Vulcan adequately pled all of the required elements of that claim.
The elements of negligent misrepresentation are: (1) the speaker supplied information in the course of his business; (2) because of the speaker's failure to exercise reasonable care, the information was false; (3) the information was intentionally provided by the speaker for the guidance of limited persons in a particular business transaction; (4) the hearer justifiably relied on the information; and (5) due to the hearer's reliance on the information, the hearer suffered a pecuniary loss.Id. at 134. "A party must prove every element of a claim for negligent misrepresentation for the claim to succeed." Id.
"Missouri is a fact pleading state." R.M.A., 568 S.W.3d at 425. "But the facts that must be pleaded are the ultimate facts, not evidentiary facts." Id. "The plaintiff has to plead ultimate facts, not conclusions, which, if true, support each and every proof element of his claim." Doyle v. Crane, 200 S.W.3d 581, 590 (Mo. App. W.D. 2006). And, when a party alleges fraud, Missouri Supreme Court Rule 55.15 (2019) requires the party to state with particularity the circumstances that gave rise to the alleged fraud.
We look to Missouri Approved Instructions (MAI) for guidance when determining whether a petition states a cause of action under Missouri law. R.M.A., 568 S.W.3d at 425. MAI 23.05 (fraudulent misrepresentation) states:
Your verdict must be for plaintiff if you believe:
First, defendant (describe act such as "represented to plaintiff that the motor vehicle was never in an accident"), and
Second, such representation was made by defendant with the intent that plaintiff rely on such representation in (purchasing the motor vehicle), and
Third, the representation was false, and
Fourth, [defendant knew that it was false] [defendant knew that it was false at the time the representation was made] [defendant made the representation without knowing whether it was true or false], andMAI 31.26 (negligent misrepresentation) states:
Fifth, the representation was material to the (purchase of the motor vehicle), and
Sixth, plaintiff relied on the representation in (making the purchase), and such reliance was reasonable under the circumstances, and
Seventh, as a direct result of such representation, plaintiff sustained damage.
Your verdict must be for plaintiff if you believe:
First, defendant in the course of defendant's [business] [profession] [employment] (describe act such as "represented to plaintiff that the motor vehicle was never in an accident"), and
Second, such representation was made by defendant with the intent that plaintiff rely on such representation in (purchasing the motor vehicle), and
Third, such representation was material to the (purchase of the motor vehicle), and
Fourth, such representation was false, and
Fifth, defendant failed to use ordinary care in making such representation, and
Sixth, plaintiff relied on such representation in (making the purchase) and such reliance was reasonable under the circumstances, and
Seventh, as a direct result of such representation, plaintiff sustained damage.
In its motion to dismiss, UMB challenged three elements of Vulcan's fraudulent and negligent misrepresentation claims—falsity, reliance, and causation. With respect to the element of falsity, Vulcan pled,
The $200,000 was actually received by [UMB] on March 4, 2019, at which time [UMB] knew SADE . . . had initiated the funds transfer to [UMB's] account for the ultimate benefit of [Vulcan].
Initially, [UMB] accepted the $200,000 funds transfer, but subsequently refused to process the funds transfer to [Vulcan's] account at Bank of Kirksville, and without explanation returned the funds to the sender.
UMB told [the] Bank of Kirksville that the transfer had not been made by payor, information that the [Bank of Kirksville] immediately relayed to [Vulcan's owner].Because Vulcan alleged that UMB received the March 4 transfer but UMB represented that SADE had not made the transfer and that UMB never received it, Vulcan pled facts sufficient to satisfy the falsity element of its misrepresentation claims.
[UMB] told the Bank of Kirksville and [Vulcan] that [UMB] had never received the $200,000 funds transfer which SADE . . . initiated on March 4, 2019.
UMB's representations were false: SADE sent the wire on March 4, and [UMB] initially accepted the $200,000 transfer. [Vulcan] only later discovered that UMB without explanation rejected the incoming wire, effectively blocking the funds transfer to [Vulcan's] account at Bank of Kirksville.
Regarding the reliance element, Vulcan pled,
[UMB] intended that its representations should be acted upon by [Vulcan] in the manner reasonably contemplated - by [Vulcan] contacting SADE . . . and communicating to SADE . . . that it had failed to make the $200,000 payment required by their contract and that SADE had thereby breached their contract.Here, Vulcan alleged that it relied on UMB's misrepresentations when Vulcan contacted SADE about the March 4 transfer, and Vulcan further alleged that its reliance was reasonable under the circumstances. Vulcan pled facts sufficient to satisfy the reliance element of its misrepresentation claims.
[Vulcan] justifiably relied on the truthfulness of [UMB's] representations in contacting SADE . . . and communicating to SADE . . . that it had failed to make the $200,000 payment and had thereby breached their contract, causing damage to [Vulcan's] business relationship.
[Vulcan] had a right to rely on the truthfulness of [UMB's] representations and was at all times acting reasonably in reliance on their truthfulness.
[Vulcan] had a right to rely on the truthfulness and accuracy of [UMB's] information and was at all times acting reasonably in reliance o[n] its truthfulness. In reliance on the misrepresentations, [Vulcan] communicated to SADE that it had failed to send the wire and was in breach of [their] contract, causing damage to the business relationship.
In its motion, UMB asserted that Vulcan failed to adequately plead reliance because Vulcan did not allege that UMB made any representations directly to Vulcan. "To be liable to indirect recipients of a fraudulent statement, the speaker must have had the intent, or '[some] reason to expect,' that the statement would be repeated to others and would influence their conduct." Cromeans v. Morgan Keegan & Co., Inc., No. 2:12-CV-04269-NKL, 2014 WL 1375038, *8 (W.D. Mo. April 8, 2014) (quoting Restatement (Second) of Torts § 533). "[L]iability for negligent misrepresentation extends only to 'a limited group of persons for whose benefit and guidance [the speaker] intends to supply the information or knows that the recipient intends to supply it.'" Id. (quoting Restatement (Second) of Torts § 552). Vulcan alleged that UMB "intended that its representations should be acted upon by [Vulcan] in the manner reasonably contemplated" and that Vulcan "justifiably relied on the truthfulness of [UMB's] representations." Vulcan adequately pled that UMB had "some reason to expect" that its statement would be repeated to Vulcan and would influence its conduct. Likewise, Vulcan adequately pled that it belongs to a limited group for whose benefit the speaker intended to supply the information. --------
Finally, regarding causation, Vulcan pled,
As a proximate result of the [allegedly fraudulent misrepresentation], SADE and its parent company Veolia China later in 2019 canceled a written purchase order for one 5 TPH Indirect Fire Thermal Desorption System and withdrew an informal agreement to purchase a second 5 TPH Indirect Fire Thermal Desorption System.Here, Vulcan alleged that its damages were proximately caused by UMB's misrepresentations. At this stage of the proceedings, that is sufficient to satisfy the causation element of Vulcan's claims. See Truong v. Truong, 564 S.W.3d 761, 769-70 (Mo. App. E.D. 2018) ("To adequately plead the damage element of fraud, the petition need only assert a 'proximate causal connection between the misrepresentations alleged and the claimed injury, i.e. the damages.'") (quoting Schauer v. Gundaker Movits Real Estate Co., 813 S.W.2d 112, 115 (Mo. App. E.D. 1991)).
As a result of [UMB's] actions, [Vulcan] was damaged in excess of $25,000.00, including loss of profits, goodwill, and future sales related to SADE . . . .
As a proximate result of the [alleged negligent misrepresentation], SADE and its parent company Veolia China later in 2019 canceled a written purchase order for one 5 TPH Indirect Fire Thermal Desorption System and withdrew an informal agreement to purchase a second 5 TPH Indirect Fire Thermal Desorption System.
As a proximate result of the foregoing, [Vulcan] was damaged in excess of $25,000.00, including loss of profit, goodwill, and future sales related to SADE . . . .
"[A]ccept[ing as we must] all properly pleaded facts as true, giving the pleadings their broadest intendment, and constru[ing] all allegations favorably to [Vulcan]," Hill, 608 S.W.3d at 654 (quoting R.M.A., 568 S.W.3d at 424), we conclude that Vulcan's petition states claims for fraudulent and negligent misrepresentation. Because we are reviewing a motion to dismiss for failure to state a claim, we "leave for another day consideration of the proof of [those] claim[s]." R.M.A., 568 S.W.3d at 425 n.4.
Points II and III are granted.
Conclusion
Because none of the grounds stated in UMB's motion supported dismissal of Vulcan's petition, the motion court erred in granting the motion. The court's judgment is reversed, and this case is remanded for further proceedings consistent with this opinion.
/s/_________
Karen King Mitchell, Presiding Judge Gary D. Witt and Anthony Rex Gabbert, Judges, concur.