Opinion
NO. 2012-CA-000764-MR NO. 2012-CA-000798-MR
02-07-2014
DANNY RALEIGH APPELLANT v. EDGEWOOD MOBILE HOMES, INC.; AND BUCK GROSS APPELLEES AND EDGEWOOD MOBILE HOMES, INC. CROSS-APPELLANT v. DANNY RALEIGH CROSS-APPELLEE
BRIEFS FOR APPELLANT/CROSS-APPELLEE: Adam P. Collins Hindman, Kentucky BRIEF FOR APPELLEE/CROSS-APPELLANT: Frank C. Medaris, Jr. Hazard, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM PERRY CIRCUIT COURT
HONORABLE WILLIAM ENGLE, III, JUDGE
ACTION NO. 07-CI-00264
CROSS-APPEAL FROM PERRY CIRCUIT COURT
HONORABLE WILLIAM ENGLE, III, JUDGE
ACTION NO. 07-CI-00264
OPINION
REVERSING AND REMANDING WITH DIRECTIONS
APPEAL NO. 2012-CA-000764-MR
AND
AFFIRMING CROSS-APPEAL NO. 2012-CA-000798-MR
BEFORE: COMBS, MOORE, AND TAYLOR, JUDGES. TAYLOR, JUDGE: Danny Raleigh brings Appeal No. 2012-CA-000764-MR and Edgewood Mobile Homes, Inc., (Edgewood Homes) brings Cross-Appeal No. 2012-CA-000798-MR from Findings of Fact, Conclusions of Law and Judgment of the Perry Circuit Court entered November 17, 2011, vacating a jury verdict that rescinded a sales contract upon a finding of fraud and awarding Raleigh $25,000 in punitive damages against Edgewood Homes. We reverse and remand with directions Appeal No. 2012-CA-000764-MR and affirm Cross-Appeal No. 2012-CA-000798-MR.
This case centers around a new mobile home purchased by Danny Raleigh from Edgewood Homes on June 13, 2006. The facts were vigorously disputed by the parties at trial. After delivery of the mobile home on August 17, 2006, Raleigh claimed that he discovered myriad structural and aesthetic defects, and despite numerous requests, these defects were never properly remedied by Edgewood Homes. According to Raleigh, these defects were enumerated in writing and sent to Edgewood. Even though a salesperson, Buck Gross, represented that the mobile home would be constructed with 2x6 wall studs and Zone III insulation, Raleigh maintained that he discovered shortly before filing this action against Edgewood Homes on May 11, 2007, that the mobile home was only built with 2x4 wall studs and equipped with Zone II insulation. Also, Raleigh directly testified that he believed based on Gross's representations that the mobile home he purchased would contain both 2x6 wall studs and Zone III insulation, and if the mobile home were not so constructed, he would have declined to enter into the sales contract to purchase the mobile home.
The defects numbered well over sixty and included leaking windows and doors, holes in walls and ceiling, warped and bowed walls, staples and cracks in ceiling, warped and bowed aluminum siding, mold, and a large gap between wall and ceiling throughout the home.
Conversely, Edgewood Homes denied that any substantive defects existed in the mobile home or that any representations were made to Raleigh concerning the 2x6 wall studs or Zone III insulation. Edgewood Homes asserted that Raleigh ordered and purchased a mobile home built with 2x4 wall studs and Zone II insulation.
The matter was tried before a jury in June 2010. The jury was instructed upon the common law claim of fraudulent inducement to enter the sales contract and the remedy of rescission of the sales contract. The jury unanimously returned a verdict in favor of Raleigh. The jury particularly found that Edgewood Homes and its salesperson, Gross, fraudulently induced Raleigh into entering the sales contract by fraudulently representing to him that the mobile home would contain 2x6 wall studs and Zone III insulation. The jury found that the sales contract should be rescinded and awarded $25,000 in punitive damages against Edgewood Homes.
The jury's verdict was returned and filed of record on June 11, 2010. Subsequently, by order entered June 22, 2010, the circuit court set a hearing to determine "damages," and both parties filed briefs on the issue of damages. Approximately one year after entry of the jury's verdict, the circuit court effectively set aside the jury's verdict by order entered June 2, 2011. In that order, the court stated that it had:
[R]eviewed the parties' briefs and authorities relating to damages and has considered the oral arguments of counsel and has further reviewed the jury instructions, and interrogatory answers or verdicts rendered by the jury. The Court hereby finds that instruction no. 3 was erroneously given. The instruction is incomplete, inconsistent, and is contrary to law. As a result thereof, this Court can not [sic] make a determination as to whether or not damages are recoverable and if so, in what amount.Thereupon, the parties filed numerous motions, including a motion for judgment notwithstanding the verdict (Kentucky Rules of Civil Procedure (CR) 50.02) and a motion to vacate (CR 59.05). The circuit court eventually denied all motions by a July 29, 2011, order.
IT IS THEREFORE ORDERED AND ADJUDGED as follows:
(1) The jury's determination as contained in the jury's answers to instruction or interrogatory no. 3 is set aside.
(2) A hearing is set for Monday, June 20, 2011[,] at 3:00 p.m., to determine the additional steps, if any, necessary to bring this case to a resolution.
Then, on November 17, 2011, the circuit court rendered its Findings of Fact, Conclusions of Law, and Judgment. Therein, the circuit court made numerous findings of fact, including:
5. Upon delivery of the home, [Raleigh] inspected the same along with his girlfriend Kendra Caudill and her father. [Raleigh] was told by Kendra's father at that time the home had 2x4 studs and Zone II insulation.Based upon these findings of fact, the circuit court concluded that Raleigh failed to "act promptly" to rescind the sales contract upon learning of the fraudulent misrepresentations as to the 2x6 studs and Zone III insulation. As a result, the circuit court reasoned that Raleigh was not entitled to rescind the sales contract. The circuit court also held that "[a]s a matter of law . . . [Raleigh] is unable to restore the status quo because the mobile home has decreased in value significantly." The circuit court believed that the "issue of recession [sic] of the contract was sent to the jury in error as the same is an equitable remedy that can only be rendered by the court." This appeal and cross-appeal follow.
6. Being fully aware of the foregoing [Raleigh] called the company financing the transaction for him and advised them he was accepting the home and that the loan proceeds should be disbursed.
7. Mr. Raleigh did not reject the mobile home within a reasonable time after delivery of the goods.
. . . .
11. The purchase price for the home was $46,500.00 plus tax.
12. The current fair market value of the home as established by the appraisal of Mark Holbrook is $25,000.00.
13. There was sufficient evidence presented to the jury to support the verdict returned regarding fraud in the transaction and the award of punitive damages as a result of the same. Edgewood is solely liable for this amount pursuant to the jury's finding under Instruction No. 7.
Appeal No. 2012-CA-000764-MR
Raleigh contends that the circuit court erroneously set aside the jury's verdict by ordered entered June 2, 2011, and improperly rendered the November 17, 2011, Findings of Fact, Conclusions of Law, and Judgment (November 17, 2011, Judgment). For the following reasons, we agree.
The jury returned its verdict on June 11, 2010. The circuit court then proceeded to order a hearing on damages, and the parties filed briefs thereupon. Almost one year later, on June 2, 2011, the court set aside the jury's verdict upon rescission of the sales contract. In its June 2, 2011, order, the circuit court concluded that Jury Instruction No. 3 was "erroneously given" and proceeded to "set aside" the jury's verdict as to the remedy of rescission. From the record, it appears that the circuit court sua sponte set aside the jury's verdict granting rescission of the sales contract. While a court may sua sponte render a directed verdict during trial, we do not believe the circuit court may set aside a jury's verdict sua sponte before final judgment is entered per the Kentucky Rules of Civil Procedure.
Instruction No. 3 read:
If you found for [Raleigh] under instruction number 2 above, you will award him remedies that will fairly and reasonably compensate him for the damages he suffered as a result of [Edgewood Home's] fraudulent representations.
We the jury, determine that [Raleigh's] contract with [Edgewood Homes] be rescinded and that [Raleigh] be returned to the position he was in prior to being fraudulently induced into his contract with [Edgewood Homes].
The Rules of Civil Procedure outline the precise steps the circuit court and parties must follow to set aside a jury's verdict. After return of the jury's verdict, the circuit court should render judgment in accordance with the jury's verdict. Upon entry of such judgment, the circuit court then has ten days to sua sponte modify or set aside the judgment, and the parties may file numerous post-judgment motions seeking to do the same. CR 59.01, 59.02, 59.04 and 59.05. See Prichard v. Bank Josephine, 723 S.W.2d 883 (Ky. App. 1987). By setting aside the jury's verdict sua sponte before judgment was rendered, the circuit court violated the Rules of Civil Procedure and acted improperly. Therefore, we reverse and remand this action directing the circuit court to render judgment in accordance with the jury's verdict. Upon entry of such judgment, the circuit court may sua sponte set aside the judgment within ten days or the parties may move to set aside the judgment in a manner consistent with the Rules of Civil Procedure.
We view Raleigh's remaining contentions of error as moot.
Cross-Appeal No. 2012-CA-000798-MR
Edgewood Homes asserts that the circuit court erred by denying its motion for a directed verdict upon the claim of fraudulent inducement. Edgewood Homes contends that Raleigh failed to prove the tort of fraudulent inducement because the evidence did not demonstrate a misrepresentation as to a present or past material fact or a misrepresentation resulting in damage.
A directed verdict is proper only when reasonable jurors could only conclude that the moving party was entitled to judgment. CR 50.01; Morrison v. Trailmobile Trailer, Inc., 526 S.W.2d 822 (Ky. 1975). When considering a directed verdict, the evidence and reasonable inferences therefrom must be viewed in a light most favorable to the nonmoving party. Id. Stated differently, on a motion for directed verdict, it must be determined whether plaintiff has met his burden of proof by more than a scintilla of evidence. James v. England, 349 S.W.2d 359 (Ky. 1961).
To meet his burden of proof, Raleigh was required to prove by clear and convincing evidence the following six elements:
(1) [T]hat the declarant made a material misrepresentation to the plaintiff, (2) that this misrepresentation was false, (3) that the declarant knew it was false or made it recklessly, (4) that the declarant induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the misrepresentation, and (6) that the misrepresentation caused injury to the plaintiff.Radioshack Corp. v. ComSmart, Inc. , 222 S.W.3d 256, 262 (Ky. App. 2007) (quoting United Parcel Service Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999)); see also 13 David J. Leibson, Kentucky Practice - Tort Law § 19:1 (2013).
Edgewood Homes alleges that Raleigh did not submit evidence that it made a material misrepresentation as to an existing or past fact. Rather, Edgewood Homes maintains that any misrepresentation constituted a mere future promise. In particular, Edgewood Homes argues:
The uncontroverted evidence presented to the jury was the mobile home delivered to Danny Raleigh had not been built at the time he was on the Edgewood lot viewing homes. Therefore[,] any claims he makes regarding what the home would or would not contain are based on statements of a future promise or event and not an existing or past fact. . . .Edgewood Home's Brief at 19.
The promise on which [Raleigh] relies, that the home he would receive would be exactly like the one on the lot that had already been sold, involves a promise of future performance.
According to Raleigh's testimony at trial, he entered into the sales contract based upon the false representations that the mobile home he purchased that day had 2x6 studs and Zone III insulation. It was conceded at trial that Edgewood Homes did not procure and never intended to procure a mobile home for Raleigh with 2x6 studs and Zone III insulation. Instead, Edgewood Homes offered evidence that no such representations were made to Raleigh at the time of purchase and that Raleigh was confused as to which mobile home he in fact purchased. In any event, the evidence plainly indicates that the alleged false representations concerned a present disputed fact - the type of mobile home Raleigh was led to believe he purchased on the day he entered into the sales contract. Consequently, we believe the misrepresentations concerned a present fact that was properly presented to the jury.
As to damage suffered by Raleigh, it is evident that Raleigh obtained a mobile home inferior in quality and value as it was built with smaller studs and less insulation. Simply put, the evidence at trial was more than sufficient to create a submissible jury issue. Hence, we conclude that the circuit court properly denied Edgewood Home's motion for a directed verdict upon the claim of fraudulent inducement.
Edgewood Homes also maintains that the evidence was insufficient to support the jury's award of punitive damages. Edgewood Homes particularly argues:
It must be pointed out that Edgewood Homes attacks the sufficiency of evidence supporting the punitive damage award and not the amount of the punitive damage.
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[T]here is no evidence that [Edgewood Homes] acted with reckless disregard for the lives, safety or property of others. Mr. Raleigh and his family did not suffer any physical injury. No testimony was presented to establish that their lives were ever threatened or endangered by virtue of the mobile home having Zone 2 instead of Zone 3 insulation, no microwave, different faucets or 2x4 wall studs. Nor is there any support for a finding of reckless disregard for the property of others. Mr. Raleigh did not prove that he has suffered a monetary loss of any type as a result of the transaction with Edgewood [Homes]. There is nothing in the entire record of this case, the testimony presented at trial or the evidence introduced during the trial that in any way supports the jury's finding on this issue.Edgewood Home's Brief at 21.
In this Commonwealth, an award of punitive damages is authorized upon proof by clear and convincing evidence that defendant "acted toward the plaintiff with oppression, fraud, or malice." KRS 411.184(2). And, our Supreme Court has recognized that punitive damages are permissible "where a party has been induced by fraud to enter a contract." Wiley v. Adkins, 48 S.W.3d 20, 23 (Ky. 2001); see also 21 Julie Namkin, Kentucky Practice - Elements of an Action § 9.5 (2012). To justify punitive damages, there must be evidence that a defendant's failure to exercise reasonable care "was accompanied by 'wanton or reckless disregard for the lives, safety, or property of others.'" City of Middlesboro v. Brown, 63 S.W.3d 179, 181 (Ky. 2001) (citation omitted).
Herein, the jury found Edgewood Homes had committed the tort of fraudulent inducement in connection with the sale of the mobile home to Raleigh. Additionally, evidence was presented that Edgewood Homes acted with reckless disregard for the property (mobile home) of Raleigh. In short, we believe that reasonable jurors could differ upon the issue of punitive damages and that the circuit court properly submitted the instruction on punitive damages to the jury.
For the foregoing reasons, Appeal No. 2012-CA-000764-MR is reversed and remanded with directions and Cross-Appeal No. 2012-CA-000798-MR is affirmed.
MOORE, JUDGE, CONCURS.
COMBS, JUDGE, DISSENTS BY SEPARATE OPINION.
COMBS, JUDGE, DISSENTING: I file this dissent with regard to the reversal of the trial court in Appeal No. 2012-CA-000764-MR.
The trial court conscientiously and candidly attempted to correct the impact of a jury instruction that was given erroneously. In effect, the court entered judgment notwithstanding the verdict. It would be a waste of time for all concerned to force the court to enter a judgment that it knew to be erroneously entered and then to correct it, sua sponte, or to await motions urging it to do so.
The majority opinion forces such an exercise in futility and waste of time and resources. The trial court correctly avoided such a ludicrous outcome. Therefore, I would affirm. BRIEFS FOR APPELLANT/CROSS-
APPELLEE:
Adam P. Collins
Hindman, Kentucky
BRIEF FOR APPELLEE/CROSS-
APPELLANT:
Frank C. Medaris, Jr.
Hazard, Kentucky