Summary
reversing award of punitive damages because instruction on that issue was not warranted
Summary of this case from Cavins v. S&B Health Care, Inc.Opinion
No. 77-1091
Decided June 14, 1978.
Fraud — Sale of truck — Punitive damages not awarded, when.
APPEAL from the Court of Appeals for Franklin County.
On August 14, 1973, appellant, Graham Ford Company, sold a 1973 Ford truck with an attached 13-cubic yard Ranger Refuse Packer to appellee Harold E. Logsdon, for the price of $14,265. This sale was preceded by negotiations between appellee and appellant's salesman, John Tucci. During the course of these discussions Tucci took appellee to the Schodorf Truck Body Equipment Company (Schodorf), so that appellee could inspect the new Ford truck chassis and the garbage packer unit which appellant had arranged to have Schodorf mount upon it. Afterwards, appellee and Tucci returned to the Graham Ford offices, where appellee indicated that he wished to purchase the total unit. Tucci then determined the purchase price, and appellee signed a tentative purchase order and arranged the necessary financing.
Appellee employed this unit in his trash hauling business from the date of purchase until early in 1974, when he was informed by a repair shop owner that the garbage packer unit had been previously-owned and, in fact, had been serviced at that same shop approximately one year earlier. Although he had no major complaints concerning the performance of either the truck or the packer, appellee at this time permitted the Ford Motor Credit Company to repossess the total unit.
On July 15, 1974, Logsdon filed suit against appellant in the Court of Common Pleas of Franklin County, alleging fraud, deceit, negligent misrepresentation, breach of express warranty and breach of implied warranties. The gravamen of the action was that appellant's salesman had represented to appellee that the garbage packer was new, when, in actuality, the packer was a used unit. Appellee sought both compensatory and punitive damages.
The cause came on for trial by jury on May 20, 1976. Logsdon testified that salesman Tucci had informed him there was a "new unit over at Schodorf's about ready to go." Appellee also testified that, prior to the date of purchase, there was never any indication that the garbage packer was not new, and that had he known it was used, he would not have made the purchase. Appellee introduced in evidence the retail buyer's order, signed by appellee and appellant's salesman, which form indicated that the Ford truck was new, but did not include the model year of the garbage packer unit.
Appellant's salesman testified that, prior to taking appellee to Schodorf, he made it clear that the garbage packer unit was used, but that it would be mounted on a new Ford truck chassis. Tucci testified further that, upon their arrival at Schodorf, Logsdon inspected the packer unit while it was sitting upon steel horses. Tucci states that at this time he told appellee Schodorf would clean, repair and repaint the garbage packer before mounting it upon the truck chassis.
Three of Schodorf's sales representatives also testified on behalf of the appellant. One of the sales representatives stated that Logsdon must have known that the garbage packer was used, since the conversation during appellee's visit to the shop included discussion about the cleaning and repairs that would be necessary before the unit could be mounted. Two of the Schodorf salesmen testified that there was trash in the hopper of the garbage packer when appellee inspected it. Another sales representative testified that he personally informed Logsdon that the garbage packer was used.
At the close of appellant's case the trial court charged the jury concerning compensatory and punitive damages as follows:
"Now, the measure of these compensatory damages, if any, is the difference on August the 14th, 1973, in Columbus, Ohio, of acceptance between the value of the 13-yard Ranger refuse packer accepted by the Plaintiff, Logsdon, and the value it would have had if it had been new and a 1973 model.
"Now, if you find that the compensatory damages are due the Plaintiff, Logsdon, then you will consider further as to the claim of the Plaintiff for exemplary or punitive damages.
"Now, mere fraud never entitles the parties injured to exemplary or punitive damages, but such damages may be recovered only where the preponderance of the evidence shows a gross or malicious fraud, or something showing a very corrupt condition of affairs. Malice consists of bad motive or such wanton and reckless disregard of the rights of others as to do evil intent. If you find by a preponderance of all the evidence, these elements which are a basis of exemplary or punitive damages to be present in this case, then if you think proper you may go beyond mere compensation and award exemplary or punitive damages * * *."
After deliberation, the jury awarded appellee compensatory damages of $1,500, and punitive damages of $15,000. In addition, a series of interrogatories were submitted to the jury in order to determine whether appellee had established the elements of the tort of fraud. These interrogatories were answered in the affirmative.
On appeal, a majority of the Court of Appeals affirmed the judgment of the trial court in an opinion rendered on July 26, 1977.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Mr. G. Gary Tyack and Mr. Michael F. Colley, for appellee.
Messrs. Plymale, Chieffo Vivyan and Mr. Dominic J. Chieffo, for appellant.
The record discloses competent, credible evidence going to the essential elements of the tort of fraud, including testimony that the difference in value of the garbage packer as it was represented, and the actual value of the unit sold, was between $1,000 and $3,000. This court will therefore sustain the jury verdict with regard to compensatory damages. The only question remaining for our determination is whether the trial court erred in instructing the jury relative to punitive damages.
We concur in the appellate court's determination that the jury verdict in favor of appellee is based upon the cause of action sounding in fraud. Accordingly, we need not discuss appellant's contention that appellee was barred from pursuing a cause of action in contract, for breach of warranty, because of his alleged failure to notify appellant of the breach. Suffice it to say that inobservance of the notice requirement, set forth in R.C. 1302.65(C)(1), would not bar appellee from recovery under his tort theory. See R.C. 1301.03 and 1301.06(A).
"Consistently with the general rule as to the allowance of exemplary or punitive damages, the jury may, in a fraud action where there is gross or malicious fraud or something showing a very corrupt condition of affairs, go beyond the rule of mere compensation and award exemplary or punitive damages, even though the defendant may have been punished criminally for the same wrong. However, a bare case of fraud or constructive fraud does not warrant the assessment of exemplary damages." 25 Ohio Jurisprudence 2d 34, Fraud and Deceit, Section 205.
"The general rule is said to be that exemplary damages may properly be awarded where the plaintiff has suffered actual damages as a result of fraud intentionally committed with the purpose of injuring him. * * *
"Generally speaking, a recovery of exemplary or punitive damages in an action based on a fraudulent sale will be allowed only where the fraud is an aggravated one as where it is malicious, deliberate, gross, or wanton." 37 American Jurisprudence 2d 465-466, Fraud and Deceit, Section 347. See, also, Annotation, 165 A.L.R. 614; Manning v. Len Immke Buick (1971), 28 Ohio App.2d 203; Waters v. Novak (1953), 94 Ohio App. 347.
After studied review of the evidence presented in the trial court, we are of the opinion that Tucci knowingly concealed from appellee a fact material to the transaction, viz., that the garbage packer was approximately one year old, by referring to the new truck and the attached garbage packer as a "new unit," and by failing to indicate the model year of the garbage packer on the retail buyer's order form. However, we conclude that such actions on the part of appellant's salesman did not evince a malicious, wanton or gross fraud, and that therefore the trial court erred in giving the instruction on punitive damages.
Certainly it is difficult to so distinguish varying degrees of culpability, since to be actionable every fraud must consist of, inter alia, (1) an actual or implied false representation of, or concealment of, a material fact, (2) with knowledge of the falsity, or such utter disregard for the truth or recklessness that knowledge may be inferred, and (3) the intention to induce the plaintiff to rely upon the misrepresentation. See 24 Ohio Jurisprudence 2d 635, Fraud and Deceit, Section 20; Prosser, Law of Torts (4 Ed.) 685-686, Section 105.
In each case of alleged fraud the plaintiff, in order to be awarded punitive damages, must establish not only the elements of the tort itself but, in addition, must either show that the fraud is aggravated by the existence of malice or ill will, or must demonstrate that the wrongdoing is particularly gross or egregious. The case of Saberton v. Greenwald (1946), 146 Ohio St. 414, serves as an example of the type of fraud for which punitive damages are awarded.
The plaintiff in Saberton was sold a watch by a jeweler who represented that it was new. During the two months following the purchase plaintiff found it necessary to return the watch for repairs and adjustments on five different occasions. On the sixth such occasion plaintiff tendered the watch and demanded her money back. Defendant insisted that the watch only needed to be adjusted. The testimony of two watchmakers at trial established that the watch case was new, but that the working parts were at least 25 years old and beyond repair. On appeal, this court held that the trial court had erred in refusing to instruct the jury on punitive damages.
We believe it apparent that the conduct of appellant's salesman in the cause at bar, while constituting fraud, does not approximate the egregious fraud perpetrated by the defendant jeweler in Saberton.
More than 100 years ago this court, in Pittsburg, Fort Wayne and Chicago R.R. Co. v. Slusser (1869), 19 Ohio St. 157, 161-162, reversed a jury award of punitive damages, and in so doing expressed the following opinion, which we find to be as cogent today as the day it was written:
"We are of opinion, that while this charge [on punitive damages] may be well enough as an abstract proposition — and might be well enough if given in a proper case — yet when given in a case like this, it was uncalled for, and tended to mislead the jury. We think it clear that this was no case for the application of the proposition stated by the court to the jury; and the statement of it tended to lead the minds of the jury to suppose that the court regarded it as such a case. It is always proper for courts engaged in the trial of cases to avoid giving to the jury mere abstract propositions of law, however correct they may be, and it is often their imperative duty to refuse to give them if requested. A majority of us admit that corporations may render themselves liable, by the malicious misconduct of their agents or servants while acting within the scope of their employment, to exemplary and punitive damages; but it is a doctrine capable of being greatly abused, and courts ought to be careful to see to it that it is not misapplied."
It is our decision that the $15,000 award of punitive damages must be reversed.
Judgment affirmed in part and reversed in part.
O'NEILL, C.J., HERBERT, CELEBREZZE, W. BROWN, P. BROWN, SWEENEY and LOCHER, JJ., concur.