Boise Dodge, Inc. v. Clark

• Decision Date: 25 April 1969
• Docket Number: No. 10196,10196
• Citation: 453 P.2d 551,92 Idaho 902
• Parties: BOISE DODGE, INC., an Idaho corporation, Plaintiff, Cross-Defendant and Appellant, v. Robert E. CLARK, Defendant, Cross-Complainant and Respondent.
• Court: Idaho Supreme Court

Page 551

453 P.2d 551

92 Idaho 902

BOISE DODGE, INC., an Idaho corporation, Plaintiff, Cross-Defendant and Appellant, v. Robert E. CLARK, Defendant, Cross-Complainant and Respondent.

No. 10196.

Supreme Court of Idaho.

April 25, 1969.

Clemons, Skiles & Creen, Boise, for appellant.

Smith, Miller & Weston, Caldwell, for respondent.

McQUADE, Justice.

Nearly all of the facts in this case are uncontroverted. In January, 1967, the management of Boise Dodge, Inc., decided to make a special effort to sell approximately thirteen 1966 cars then held in stock as 'demonstrators.' The only conflict in testimony came as Earl Morris, then the service manager for Boise Dodge, testified that Jack E. Day, then the general manager of Boise Dodge, ordered him to have all the odometer readings on these cars set back to zero as well as to have the cars generally cleaned up for sale. Morris said he persuaded Day to leave some miles showing on the odometers. Day denied ordering the odometer setbacks but admitted he knew they had been set back when the cars were sold. In any event, the fact that the odometer on the car purchased by respondent Clark was set back roughly 7,000 miles (from 6,968 to 165) was stipulated by Boise Dodge and shown by an internal repair order of Boise Dodge and by the testimony of an employee of Superior Auto Products who did the work on these 'demonstrators' for Boise Dodge. Mr. Day is now a car salesman at Anderson Buick, and Morris, apparently fired by Day, has now been rehired by Boise Dodge as its service manager.

With these 'demonstrators' on the lot, respondent Clark appeared at Boise Dodge on February 2, 1967, looking for a used Chrysler. However, as Boise Dodge had no Chryslers, Clark and his wife dicided to purchase on of the 1966 'demonstrators,' a Dodge Monaco, described by the two salesmen (now apparently unavailable) as a 'new' car. Mrs. Clark asked how the car could be 'new' with 165 miles on it, and this was explained as the result of normal driving around the premises.

After seeing the car before lunch, the Clarks returned after lunch and purchased the car. The 'Automobile Agreement' signed by Mr. Clark clearly indicates on its face at its top in normal size print that the car was a 'demonstrator' in that the word 'Demo' is written in ink under the heading 'Used' which appears next to an empty blank headed by 'New.' Mr. Clark admits he got a copy of this agreement, but says he focused his attention only on the figures appearing on it. Clark that day (February 2nd) gave his check for $500 and the next day (February 3rd) gave his check for $1,562 when the car was delivered to his farm. These checks plus his 1963 Pontiac traded to Boise Dodge at a value of $1,100 constituted the sales price of the car. Because Clark then discovered facts which led him to belive the car was used, he stopped payment on his two checks on the next Monday, (February 5th). The checks have not been paid, and while Clark holds the Dodge Monaco, Boise Dodge still has Clark's Pontiac.

Boise Dodge brought suit on the checks, and Clark counterclaimed for equitable rescission or for damages for breach of contract and deceit as well as for wrongful attachment of his bank account and punitive damages. The district court granted appellant's motion for involuntary dismissal of the counterclaim for wrongful attachment. Also, because of the following facts, the court ruled as a matter of law that Clark had waived, or elected against, his right to rescind the contract and instead had acted to affirm it. Clark admitted on cross-examination that on February 3rd he went back to Boise Dodge to get assurance in writing that the car had never been titled to anyone else before him. On that same day, it was also explained to Clark that the window sticker on the car had been removed because that was done on all 'demonstrators.' On February 9th, Clark returned to Boise Didge and had title to the new car put in his name. Clark admitted that at no time during these visits did he tell Boise Didge he did not want the car, that he wanted his old car back, that he was dissatisfied with the deal or that he had stopped payment on the checks. Apparently Clark was not sure he wanted his old car back at all.

The court thus instructed the jury that it might find a breach of contract (damages for which would equal the car's value as represented less its actual value) or deceit (damages for which would equal the price paid for the car less its actual value). The court gave the usual instructions on misrepresentation. The court further instructed the jury that it could award punitive damages if it found appellant's actions to have been willful, wanton, gross or outrageous in order to punish and deter such conduct. The court instructed that the punitive damages must bear a reasonable relation to any actual damages found. The jury found for appellant Boise Dodge in the amount of $2,062 (the amount owing on the contract) and for respondent Clark on his counterclaim for breach of contract damages in the amount of $350 (the value of the car as represented, $2,400, less its actual value, $2,050, ¹ which values and the difference between them were testified to by an expert witness using the N. A. D. A. Bluebook for a guide). The jury also awarded punitive damages to Clark in the amount of $12,500. The court gave judgment accordingly as well as for respondent's 'costs and disbursements.'

Appellant Boise Dodge, Inc., makes several assignments of error which in essence present but a single ultimate issue: whether or not the award of punitive damages was proper. Involved in this question are several subsidiary issues with which we shall deal in order.

First, Boise Dodge argues that the issue of punitive damages should not have been submitted to the jury at all inasmuch as a corporation cannot be held liable for punitive damages based upon the acts of its agents unless the corporation participated in the wrongdoing or previously or subsequently ratified it. We recognize that Idaho is one of those states which applies the rule that a principal is liable for punitive damages based upon the acts of his agents only in which the principal participated or which he authorized or ratified. ² Of course, a wooden application of this rule, which we reject, would effectively insulate all corporations from punitive damage liability, for a corporation can act only through its agents. ³ On the other hand, it is wise policy from the standpoint of proper corporate responsibility to recognize that, when corporate officials and managing and policy-making agents engage in fraudulent activity in furtherance of corporate profits which inure to the benefit of shareholders, the acts of such agents must be attributed to the corporation:

'(T)here may be good reason to use whatever devices are available to deter owners and managing officers from tolerating misconduct by employees. If exemplary damages will encourage employers to exercise closer control over their servants, there is sufficient ground for awarding them.' ⁴

It is on this basis that corporate liability for punitive damages has received appropriate judicial sanction, particularly in actions against car dealerships for fraud. ⁵

We have no difficulty in applying this principle to the case at bar. The then general manager of Boise Dodge, Inc., admitted that, when the car in this case was sold to respondent Clark, he knew the odometer had been set back nearly 7,000 miles. When the management of Boise Dodge, Inc., allowed this sale to occur with full knowledge of the deception which was inherent in the situation, the corporation effectively ratified the wrongdoing. Indeed, this would even constitute corporate participation in the wrong. Further along the lines of participation, the service manager of Boise Dodge, Inc., testified that it was the corporate general manager who ordered that the odometers be set back. We cannot but conclude, in view of the respective employment history of these officers, that the jury believed this testimony rather than the general manager's denial. Thus, under the Idaho rule and all the authorities cited, the court below properly allowed the jury to award punitive damages against Boise Dodge, Inc., qua corporation.

Boise Dodge, Inc., next argues that the court below erred in giving to the jury Instruction No. 17, which was as folfollows:

'If you find that the cross-defendant, Boise Dodge, Inc., was guilty of wilful or wanton conduct, which proximately caused damage to the cross-complainant, Robert Clark, and that such action was gross and outrageous, and if you believe that justice and the public good require it, you may, in addition to any damages to which you find the cross-complainant, Robert Clark, entitled, award him an amount which will serve to punish the cross-defendant, Boise Dodge, Inc., and to deter others from the commission of like offenses.

'You may not award punitive damages to the cross-complainant, however, unless you first find that he is entitled to recover actual or compensatory damages.' (Tr. 103).

We find no merit in this contention, for the instruction correctly stated the law of this State respecting the basis of an award of punitive damages ⁶ on these facts.

Boise Dodge, Inc., next argues that the court below erred in refusing to set aside the jury's verdict awarding $12,500 punitive damages as excessive and because it was based upon passion and prejudice. Appellant fails, however, to support this contention with any specific reference to concrete matters which would indicate that the verdict was based upon passion and prejudice rather than upon reason. Nearly the entire record in this case stands uncontradicted, and if the facts proved at trial with respect to appellant's business conduct toward the public tended to arouse legitimate concern in the jury, we fail to see how this constitutes prejudice. In this respect, appellant's contention is vague and...