Overbey v. Chad Franklin Nat'l Auto Sales North, LLC (In re Estate of Overbey)

• Decision Date: 31 January 2012
• Docket Number: No. SC 91369.,SC 91369.
• Citation: 361 S.W.3d 364
• Parties: ESTATE OF Max E. OVERBEY, Deceased, and Glenna J. Overbey, Appellants/Cross–Respondents, v. CHAD FRANKLIN NATIONAL AUTO SALES NORTH, LLC, Respondent,andChad Franklin, Respondent/Cross–Appellant.
• Court: Missouri Supreme Court

361 S.W.3d 364

ESTATE OF Max E. OVERBEY, Deceased, and Glenna J. Overbey, Appellants/Cross–Respondents,

v.CHAD FRANKLIN NATIONAL AUTO SALES NORTH, LLC, Respondent,andChad Franklin, Respondent/Cross–Appellant.

No. SC 91369.

Supreme Court of Missouri, En Banc.

Jan. 31, 2012.

Douglass F. Noland, Thomas K. Mendel, Noland Law Firm LLC, Liberty, for the Overbeys.

Patric S. Linden, Kevin D. Case, Case & Roberts PC, Kansas City, for Franklin.LAURA DENVIR STITH, Judge.

Max and Glenna Overbey recovered judgments against Chad Franklin National Auto Sales North, LLC (National), and Chad Franklin for fraudulent representations in violation of the Missouri Merchandising Practices Act (MMPA) made in connection with National's sale of a vehicle to the Overbeys.¹ Mr. Franklin appeals the judgment, and the Overbeys appeal the trial court's reduction of the punitive damage award.

This Court rejects Mr. Franklin's claims that a submissible case was not made against him and that the trial court erred in reducing the $1 million punitive damage verdict against him to $500,000 rather than to a lesser amount in light of the fact that the jury awarded only $4,500 against him in actual damages. The award is fully supported by the evidence that he and National, which was wholly owned by him when the Overbeys purchased their SUV, committed fraud in falsely representing to the Overbeys (and making similar representations to others) that they would owe only $49 per month if they joined a membership program for $500, but in fact the contract they signed obligated them to pay more than $37,000 over six years.

This Court also affirms the trial court's reduction of the $1 million punitive damage verdict against Mr. Franklin to $500,000 as required by the statutory cap on punitive damages contained in section 510.265. As the legislature created the MMPA cause of action under which the Overbeys sued, it had a right to set limits on the substantive remedies permitted under that statute, including the limit of punitive damages that could be recovered, without violating the Overbeys' rights to trial by jury or the separation of powers doctrine. For the reasons set forth below, this Court also rejects the claim that the statutory cap violates their rights to due process and equal protection or Missouri's constitutional prohibition on special legislation. The judgment is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND

The evidence, taken in the light most favorable to the jury's verdict, shows that National ran a number of television commercials for a “payment-for-life membership plan” for purchasing a vehicle from it. One of those commercials, seen by the Overbeys and shown at the trial, stated:

No matter how high car prices get in the future, you'll lock in your low monthly payment for the rest of your life. Here's how. Buy any pre-owned vehicle, at the end of one year bring it back and pick out another. You'll drive a different vehicle every single year forever ... your initial monthly payment will never change and you can cancel your membership whenever you want.

Chad Franklin himself did not appear personally in a commercial advertising National's payment-for-life membership plan, but he did appear in one or more advertisements for his other wholly owned dealership, Chad Franklin Suzuki, that offered a similar low “instant reverse payment program.”

After seeing these commercials, the Overbeys went to the National dealership in North Kansas City and said they wanted to buy a vehicle under the payment-for-life membership plan. The Overbeys repeatedly sought and received assurances from the sales personnel at National that they were being given the deal specified in National's commercials. On this basis, the Overbeys agreed to purchase an SUV pursuant to a contract that required them to pay a total of $37,191.28 over 71 months. But, they said, the salesperson at National told them that by paying $500 to join the payment-for-life membership plan, their actual monthly payment would only be $49. And, in fact, once the Overbeys signed the contract, National paid them $3,253 to cover the difference between the $49 per month the salesman said was all they had to pay and the $719.52 the contract said they were required to pay per month, so that they would be paying a net of $49 per month for six months.

When the Overbeys returned to National six months later to trade in the SUV for another vehicle, they were told that the salesperson who sold them the SUV no longer worked there and that no current employees were aware of any provision in the Overbeys' contract that allowed them to trade in the vehicle after six months. To the contrary, the dealership claimed, the Overbeys had bought the vehicle for $37,191.28 and were obligated to pay $719.52 a month for the 65 months remaining on the contract. Michael Overbey, Max and Glenna's grandson, who accompanied them to the dealership, testified that when the Overbeys demanded to speak to Mr. Franklin, the National salesperson purported to get Mr. Franklin on the telephone, after which the salesman said Mr. Franklin claimed he had no knowledge of any deal offered to the Overbeys. National continued to insist the Overbeys were obligated to pay the full contract amount.

The Overbeys filed suit claiming that National and Mr. Franklin made fraudulent misrepresentations regarding the sale of the vehicle in violation of the MMPA, introducing testimony about the commercials, their experience with the dealership, the experience of four other persons who said they similarly were misled, and evidence of some 35 complaints filed with the attorney general that caused him to seek an injunction against the continued operation of the program.

The jury found that both National and Mr. Franklin violated the MMPA. It awarded the Overbeys $76,000 in actual damages and $250,000 in punitive damages against National. The jury also awarded $4,500 in actual damages and $1 million in punitive damages against Mr. Franklin. The trial court overruled Mr. Franklin's motion for judgment notwithstanding the verdict, rejecting his claim that the Overbeys had failed to adequately connect him with National's fraudulent representations, and denied remittitur of the punitive damages as excessive. Mr. Franklin appeals these rulings.²

The trial court did, however, grant Mr. Franklin's motion to reduce the punitive damage award against him pursuant to the damages cap contained in section 510.265, which states in relevant part: “No award of punitive damages against any defendant shall exceed the greater of (1) Five hundred thousand dollars; or (2) Five times the net amount of the judgment awarded to the plaintiff against the defendant” (emphasis added).

In reducing the punitive damage award to $500,000 as required by section 510.265, the trial court rejected the Overbeys' claims that a cap on punitive damages violates their rights to trial by jury, due process and equal protection, violates the separation of powers doctrine, and constitutes the kind of special law prohibited by the Missouri Constitution. The Overbeys appeal these rulings.

Because the parties challenge the constitutional validity of a statute, this Court has exclusive jurisdiction over their appeals. Mo. Const. art. V, § 3.

II. MR. FRANKLIN'S APPEAL

Mr. Franklin argues that the Overbeys failed to make a submissible case against him and that the reduced amount of punitive damages awarded was excessive.

A. Plaintiffs Made a Submissible Case Against Mr. Franklin

A motion for judgment notwithstanding the verdict will be denied if the plaintiff made a submissible case. Klotz v. St. Anthony's Med. Ctr., 311 S.W.3d 752, 769 (Mo. banc 2010). A case is submissible if “each and every fact essential to liability is predicated on legal and substantial evidence.” Id. “The Court takes the evidence in the light most favorable to the verdict, giving the prevailing party all reasonable inferences from the verdict and disregarding the unfavorable evidence.” Hodges v. City of St. Louis, 217 S.W.3d 278, 280 (Mo. banc 2007). “This Court will reverse the jury's verdict for insufficient evidence only where there is a complete absence of probative facts to support the jury's conclusion.” Klotz, 311 S.W.3d at 769.

The Overbeys did not seek to hold Mr. Franklin liable for violating the MMPA under respondeat superior or by piercing the corporate veil but rather for his personal involvement in the fraud. To hold him liable under the MMPA, they needed to prove his employment “of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce ....” § 407.020. A corporate officer may be held liable if it is “shown by evidence of probative force that he had actual or constructive knowledge of the actionable wrong and participated therein.” Wolfersberger v. Miller, 327 Mo. 1150, 39 S.W.2d 758, 764–65 (1931).

Direct evidence of fraud rarely exists, “[b]ut fraud, like any other fact, may be established by circumstantial evidence.” Bank of New Cambria v. Briggs, 361 Mo. 723, 236 S.W.2d 289, 291 (1951). This may include indirect evidence of knowledge of or involvement in the conduct, as well as evidence of “similar transactions in the course of a continuous, systematic course of dealing.” Blakeley v. Bradley, 281 S.W.2d 835, 839 (Mo.1955); see also Chesus v. Watts, 967 S.W.2d 97, 113 (Mo.App.1998).

Mr. Franklin did not admit involvement in the fraud, but the Overbeys presented substantial circumstantial evidence supporting his involvement in the fraudulent conduct. First, they showed that National placed television commercials advertising the payment-for-life program, quoted earlier. They showed that he was the sole owner of National and of Chad Franklin Suzuki. They showed that Chad Franklin Suzuki made commercials offering a...