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In Big Three Motors, Inc. v. Smith, 412 So.2d 1219 (Ala.Civ.App. 1980), reversed and remanded [Ex parte Smith, supra], this court attempted to follow the rule set forth in Proctor, supra, and Winn-Dixie Montgomery, Inc. v. Henderson, Ala., 371 So.2d 899 (1979), and held that punitive damages may not be recovered unless the defendant had actual knowledge of the falsity of the representation.
Summary of this case from Treadwell Ford, Inc. v. LewisOpinion
Civ. 1847.
March 25, 1981. Rehearing Denied May 13, 1981.
Appeal from the Circuit Court, Mobile County, William D. Bolling, J.
Patricia K. Olney and Richard W. Vollmer, Jr., of Pillans, Reams, Tappan, Wood, Roberts Vollmer, Mobile, for appellant.
James H. Lackey, Mobile, for appellee.
This case is on remand from the supreme court, 412 So.2d 1218. The facts appear in our original opinion, 412 So.2d 1214. On original submission the sole issue raised was whether there was a scintilla of evidence to take the case to the jury on the issue of punitive damages. We held that there was insufficient evidence as to punitive damages and reversed.
In that opinion we were constrained to follow the supreme court's opinion in Winn-Dixie Montgomery, Inc. v. Henderson, Ala., 371 So.2d 899 (1979) which set out a two-pronged test for punitive damages. That test is as follows: (1) that the fraud be malicious, oppressive or gross, and (2) that the statements were made with knowledge of their falsity and with an intent to deceive.
On certiorari, the supreme court, 412 So.2d 1218, stated the issue to be "whether this Court [Alabama Supreme Court], in Winn-Dixie Montgomery, Inc. v. Henderson, Ala., 371 So.2d 899 (1979), modified the law of fraud by allowing a recovery of punitive damages only upon proof of statements made with actual knowledge of their falsity." The supreme court went on to answer this question by stating, "With deference to our brothers, our opinion in Henderson was not intended to change the law of fraud by eliminating the possibility of a recovery based upon a heedless or reckless misrepresentation."
It is apparent to this court that neither Big Three nor Mason had actual knowledge of any lien on the vehicle sold to plaintiff. However, actual knowledge is not the only requirement for granting punitive damages. Ex parte Smith, 412 So.2d 1218 (Ala. 1981).
We therefore return to International Resorts, Inc. v. Lambert, Ala., 350 So.2d 391 (1977), where the supreme court stated:
As a general rule, an intent to deceive is an indispensable element to the successful maintenance of a tort action for fraud and deceit. 37 Am.Jur.2d, Fraud and Deceit, § 188. However, it is equally well-established that an action for damages will lie when one makes representations relied upon by another without knowing or caring whether they are true or false.
The court also held that the evidence supported a finding that misrepresentations had been made, whether they were with an intent to deceive or were made heedlessly and without any regard to the consequences, and the court upheld the award of punitive damages.
The Lambert case implies that the two-pronged test for punitive damages enunciated in Henderson is not the only rule. Our interpretation of Lambert is confirmed, so we believe, by the decision in Ex parte Smith, supra. Statements made other than with actual knowledge of their falsity will support an award of punitive damages. Such statements, if made so heedlessly and so recklessly and without knowing or caring whether they are true or false may support an award of punitive damages in a fraud action. Lambert, supra. Furthermore, representations made recklessly and heedlessly without regard to their consequences will supply the requisite intent to support a fraud action. Winn-Dixie Montgomery, Inc. v. Henderson, 395 So.2d 475, 79-456 (Ala. 1981).
It appears to us after reviewing the cases dealing with fraud and punitive damages that the rule to follow in this case is that punitive damages may be awarded where there is evidence from which a jury could conclude that the fraud was malicious, oppressive or gross, and the statements were made recklessly without regard to their truth and without knowing or caring if they were true. Lambert, supra.
Therefore, the issue presented to this court on remand is whether there was a scintilla of evidence to take the case to the jury on the question of punitive damages. We find that there was no such evidence and reverse the judgment of the trial court.
The evidence shows that the vehicle was parked on or near Big Three's lot, that Big Three's stationery was used to draw up the bill of sale, that the bill of sale provided that Big Three was the lawful owner of the vehicle, that Big Three's office employee processed the sale in Big Three's office, that payment was made to Big Three, and that, in fact, Big Three received one-half of the profits from the sale.
Nowhere in this evidence do we find that Big Three acted so heedlessly or recklessly that it could be said Big Three did so without knowing or caring whether the representations made were truthful nor that the representations made by Big Three were gross, oppressive or aggravated.
In the absence of a scintilla of evidence to support a punitive damages award, the trial court erred in refusing the motion for a directed verdict as to punitive damages. See Proctor Agency, Inc. v. Anderson, Ala., 358 So.2d 164 (1978).
REVERSED AND REMANDED.
WRIGHT, P.J., concurs.
HOLMES, J., dissents.
I respectfully again dissent.
The question, as pointed out by the plaintiff, is whether Big Three Motors represented to plaintiff that it was the owner of the automobile in question and that it had a right to sell the vehicle. Put another way, the issue is not whether Big Three knew there was a prior encumbrance on the vehicle, but whether Big Three knew it was not the owner of the vehicle when it represented that it was the owner.
I would find that Big Three knew it was not the owner and thus intentionally deceived the plaintiff in warranting title.
This is so because to me the evidence is clear that Big Three's agent allowed plaintiff to believe Big Three was the owner when in fact the agent was the owner. Indeed, Big Three's defense at trial had at its very core the claim that Mason, the agent, was the owner. Nevertheless, it warranted to plaintiff that it had clear title to the vehicle.
Viewed another way, Mason's admitted failure to disclose his ownership amounted to the suppression of a material fact which he, as agent, or Big Three, as principal, had a duty to disclose. Under § 6-5-102, Code of Ala. 1975, such suppression constitutes fraud.
In the case of Neil Huffman Volkswagen Corp. v. Ridolphi, Ala., 378 So.2d 700 (1979), the Supreme Court of Alabama upheld a jury award of punitive damages totaling over $27,000 when liability was predicated upon this statute. There, the salesman failed to disclose the fact that the used automobile plaintiff was contemplating purchasing had been wrecked despite the plaintiff's express inquiries as to the condition of the car. Certainly, the information suppressed here, namely the true ownership of the vehicle, as known by the agent and principal, was just as vital as the information suppressed in Neil Huffman. Put another way, Big Three, the principal, clearly knew it was not the owner.
In closing, I could do no better than to set out the eloquent language of Mr. Justice Faulkner in Neil Huffman, supra:
The doctrine of caveat emptor, if not already grounded, is a weak bird. The law now is consumer oriented, and federal and state laws (Truth-in-Lending, UCC, for example) have been passed for the protection of the consumer. It now appears that the seller is the one to beware. This certainly appears to be true in the matter of the sale of used cars. It is a rare case when the seller and buyer of a used car stand on equal footing. In most cases the buyer is at the mercy of the seller, and when he pays a substantial portion of his monthly paycheck in car payments, he does not want to drive a car running sideways down the highway, or have the thing come out nude when he drives it through a carwash. These statements are made to emphasize the statutory law, particularly § 6-5-102. . . .
378 So.2d at 702. I would only add to the penultimate quoted sentence, "or be owned by someone other than the dealer."
I would affirm the verdict of the jury and the resulting judgment.