Wiper v. Downtown Development Corp. of Tucson, 18560-PR

• Citation: 152 Ariz. 309,732 P.2d 200
• Decision Date: 07 January 1987
• Docket Number: No. 18560-PR,18560-PR
• Parties: Raima A. WIPER, Plaintiff-Appellee, v. The DOWNTOWN DEVELOPMENT CORPORATION OF TUCSON, Arizona, a non-profit corporation, and Priscilla Robinson, Defendants-Appellants.
• Court: Supreme Court of Arizona

Page 200

732 P.2d 200

152 Ariz. 309

Raima A. WIPER, Plaintiff-Appellee, v. The DOWNTOWN DEVELOPMENT CORPORATION OF TUCSON, Arizona, a non-profit corporation, and Priscilla Robinson, Defendants-Appellants.

No. 18560-PR.

Supreme Court of Arizona, In Banc.

Jan. 7, 1987.

Law Offices of William J. Risner by Kenneth K. Graham, Tucson, for plaintiff-appellee.

Bury, Moeller & Humphrey by Kevin Miniat, Tucson, for defendants-appellants.

HAYS, Justice (retired).

Raima A. Wiper (plaintiff) brought an action for assault against defendant The Downtown Development Corporation of Tucson (DDC) and its director, Priscilla Robinson. Following a jury trial, plaintiff was awarded compensatory damages against both defendants and punitive damages against DDC only. The court of appeals affirmed. Wiper v. The Downtown Dev. Corp. of Tucson, No. 2 CA-CIV 5370 (Oct. 10, 1985).

In its petition for review, DDC claims that no legal basis exists for the award of punitive damages. DDC maintains that as its liability is solely vicarious and no punitive damages were awarded against Robinson, none can properly be awarded against it. We granted review to clarify the relationship between punitive damages and the doctrine of respondeat superior. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3), A.R.S. § 12-120.24, and Rule 23, Ariz.R.Civ.App.P., 17A A.R.S.

Wiper was assaulted by Priscilla Robinson following a DDC public meeting. Wiper, a member of the audience, had questioned provisions for low-cost housing in a downtown development project. After the meeting adjourned, Robinson "seized [Wiper] by the face and shoved her." Wiper was not physically injured, but she was mentally upset and continued to be so until the time of trial. Wiper subsequently sued both Robinson and DDC, alleging that the latter was liable for the acts of its employee based on the doctrine of respondeat superior. Wiper's complaint did not allege a claim against DDC for either negligent hiring or negligent supervision.

Without objection from defendants, the jury was given several forms of verdict, one of which allowed it to find in favor of defendant Robinson and against codefendant DDC on the issue of punitive damages. The jury's actual verdict awarded compensatory damages of $7,000 against both defendants, jointly and severally. The verdict awarded punitive damages of $2,500 against DDC only. The trial court accepted the verdicts without objection from counsel. ¹ The appeals court affirmed the award of punitive damages against DDC. It held that such damages may be awarded against an employer whose only liability is vicarious, even though none are assessed against the employee whose acts created that liability. The basis for the court's holding was that a punitive damage award encourages employers to exercise closer control over their servants. It did not matter that DDC was not charged in a separate count for negligent supervision. DDC contends that such a rule is both unsound and unfair. We agree.

It is generally recognized that an employer may be held liable to third persons for the tortious acts of its employee. There is a conflict of authority, however, as to exactly when an employer can be held vicariously liable for punitive damages based on an employee's conduct. See generally PROSSER & KEETON, HANDBOOK ON TORTS § 2 (5th ed. 1984). Many courts follow the RESTATEMENT OF THE LAW OF AGENCY (SECOND) § 217(C), and RESTATEMENT OF TORTS § 909, which recognize liability for punitive damages where the employee's act was either authorized, ratified or approved by the employer, where the employee was unfit and recklessly employed, or where the employee was acting in a managerial capacity and in the scope of employment. See, e.g., Agarwal v. Johnson, 25 Cal.3d 932, 603 P.2d 58, 160 Cal.Rptr. 141 (1979); Condict v. Condict, 664 P.2d 131 (Wyo.1983).

Arizona has specifically rejected the Restatement view in favor of a rule allowing punitive damages against an employer for acts of its employees "so long as committed in the furtherance of the employer's business and acting within the scope of employment." Western Coach Co. v. Vaughn, 9 Ariz.App. 336, 338-39, 452 P.2d 117, 119-20 (1969), citing Southern Pacific Co. v. Boyce, 26 Ariz. 162, 174-76, 223 P. 116, 120 (1924); accord Owen v. Superior Court, 133 Ariz. 75, 649 P.2d 278 (1982); Echols v. Beauty Built Homes, 132 Ariz. 498, 647 P.2d 629 (1982). In addition, Arizona has recognized specific instances where punitive damages cannot be imputed to an employer for an employee's acts. One such instance is where the individual employee has been discharged from personal liability. In such cases, a judgment in favor of the employee will relieve the employer of any liability. See Rosenzweig & Son Jewelers, Inc. v. Jones, 50 Ariz. 302, 72 P.2d 417 (1937). In Rosenzweig, a libel action, the jury returned a verdict in favor of the plaintiff and against the company, but not against the individual defendants. The company appealed the verdict, claiming the only legal theory which would support a verdict discharging the individual defendants was that they acted without malice. This being so, the company argued it could not be found guilty of malice and therefore judgment against it could not stand.

This court agreed with the company. We recognized that an "overwhelming majority" of cases have held that where an employer's liability is premised on principles of respondeat superior, the employer cannot be held liable if the jury finds in favor of the employee who actually committed the tort. Id. at 309, 72 P.2d at 419. Stated otherwise, where one defendant would be liable for committing the act and the other solely by operation of law, a finding that the first is not liable requires that the second be free from liability. Id. at 310, 72 P.2d at 420 (quoting Doremus v. Root, 23 Wash. 710, 63 P. 572 (1901)). We concluded:

We think that all justice and reason upholds this view of the law. When the only reason why a judgment may be returned in favor of a plaintiff is that A has committed a tort, and the liability of B, if any, is an imputed one only, it would be a denial of all justice to say that the one who actually did the wrong may go free, while the one who can only be liable because of the former's wrongdoing is mulcted in damages.

50 Ariz. at 311, 72 P. at 420.

This court reached the same conclusion in Kennecott Copper Corp. v. McDowell, 100 Ariz. 276, 281-82, 413 P.2d 749, 753 (1966) (if a principal's liability is solely derivative, a directed verdict in favor of an agent who performs a tortious act necessarily releases the principal); and in DeGraff v. Smith, 62 Ariz. 261, 268-70, 157 P.2d 342, 345 (1945) (where negligence action was dismissed with prejudice against truck driver, plaintiff could not recover from truck owner since his liability was solely...