The Law

Sad, But Not Fraud by Ron Davis Were residents of a Missouri community illegally duped by a developer’s proposal to buy their property to build a shopping center? Not at all, Missouri’s courts have responded after the buyout proposal collapsed for lack of funding. In fact, the courts added in the resulting lawsuit, the developer is neither guilty of the fraud nor the negligence that the residents charge. That charge was based on the developer’s big plans. That developer—Novus Equities Company—had targeted the community of Sunset Manor in the St. Louis suburbs for construction of a shopping center anchored by a Bass Pro Shops store. Sunset Manor is located in the city of Sunset Hills, whose officials readily agreed to the development. Novus Equities eventually found it needed to change its plans, but failed to pass that information along to local officials and owners of the property targeted for redevelopment. Relying on the developer’s plans to purchase their property, many owners reacted by stripping and salvaging materials from their homes. At a later meeting, however, Novus Equities’ top officer revealed that his bank had “pulled the financing” for the purchase of all the homeowners’ properties. And Novus Equities never redeveloped Sunset Manor as a shopping center. The homeowners responded that they were damaged by the developer’s representations. They added that they were also denied accurate information that would allow them to decide a course of action to take regarding their property. Novus Equities stated, however, that the homeowners failed to provide any facts that, if proven, would establish that they relied on any alleged misrepresentations. In fact, the developer added, none of the homeowners’ charges, even if factual, could show that Novus Equities owed them a duty to supply them with information. A Missouri court agreed with Novus Equities that the homeowners had failed to state a claim “for which relief can be granted.” The homeowners appealed. A Missouri appellate court upheld the lower-court decision, explaining, “We find that the homeowners failed to set forth any set of facts which, if proven, would demonstrate that, in the context of a negligence cause of action, the developer owed them a duty. Therefore, the facts alleged [by the homeowners] do not meet the elements of a cause of action for negligence.” The court also found that the facts the homeowners allege “do not meet the elements…for either fraudulent misrepresentation or negligent misrepresentation.” (Stein v. Novus Equities Company, 2009 WL 214342 [Mo.App.E.D.]) Decision: February 2009 Published: February 2009