Edmark Motors, Inc. v. Twin Cities Toyota, Inc., 16064

• Decision Date: 30 October 1986
• Docket Number: No. 16064,16064
• Parties: EDMARK MOTORS, INC., an Idaho corporation, Plaintiff-Respondent, v. TWIN CITIES TOYOTA, INC., and Harold Myers, aka Cliff Myers, Defendants- Appellants.
• Court: Idaho Court of Appeals

Page 1274

727 P.2d 1274

111 Idaho 846

EDMARK MOTORS, INC., an Idaho corporation, Plaintiff-Respondent, v. TWIN CITIES TOYOTA, INC., and Harold Myers, aka Cliff Myers, Defendants- Appellants.

No. 16064.

Court of Appeals of Idaho.

Oct. 30, 1986.

Petition for Review Denied Jan. 6, 1987.

William F. Gigray, Jr. (argued) and Donald E. Downen (Gigray, Miller, Downen, Weston & Pasley), Caldwell, for defendants-appellants.

James C. Morfitt (Rettig, Rosenberry, Lovan & Morfitt), Caldwell, for plaintiff-respondent.

BURNETT, Judge.

This appeal presents issues of materiality, proximate cause and punitive damages in an action for fraud. Edmark Motors sued Twin Cities Toyota and its sales manager, Harold Myers, alleging that they had defrauded Edmark in a used car transaction. A jury agreed. Judgment was entered upon a verdict awarding compensatory and punitive damages. Today we affirm the judgment.

At the heart of this case is a 1980 Chevrolet El Camino. Twin Cities purchased the El Camino from a dealership which had acquired it from an auto auction. For several months Twin Cities carried the El Camino in its used car inventory. Eventually Twin Cities decided to offer the El Camino, plus a cash payment, in exchange for a Toyota at Edmark Motors. However, believing that Edmark would not take the El Camino in trade from another dealer, Twin Cities disguised its role in the transaction. Montana license plates were affixed to the El Camino in lieu of dealer plates. Twin Cities' sales manager, an individual new to the community, contacted Edmark and represented himself to be the vehicle's owner. He displayed a title endorsed in blank by a previous individual owner. He stated that he wanted to trade the El Camino for the Toyota in order to get better gas mileage. He commented that the vehicle would need no work prior to resale except "[m]aybe just wash it off." In order to avoid a sales tax on the Toyota, he completed an exemption certificate, listing an out-of-state address and falsely declaring that the car would be removed from Idaho. The cash difference between the El Camino and the Toyota was paid with a cashier's check, disclosing no source of the funds. ¹

Some time after the transaction was completed, Edmark encountered mechanical problems with the El Camino. Although conflicting testimony later was presented at trial, the record contains substantial evidence to support a finding that the mechanical problems existed when Twin Cities traded the vehicle to Edmark. However, Edmark did not specifically contend that Twin Cities knew of, and concealed, these problems. Rather, Edmark asserted more broadly that Twin Cities misrepresented the history of the El Camino and that if the misrepresentation had not occurred, Edmark would not have accepted the vehicle in trade. The jury awarded Edmark $1,500 in compensatory damages and $10,000 in punitive damages. Post-trial motions for judgment n.o.v. and for a new trial were denied. This appeal followed.

I

In order to establish fraud, a plaintiff must prove, inter alia, that a misrepresentation was material and that reliance upon the misrepresentation proximately caused the plaintiff's injury. E.g., Faw v. Greenwood, 101 Idaho 387, 613 P.2d 1338 (1980). Although closely related, these requirements are conceptually distinct. Materiality refers to the importance of the misrepresentation in determining the plaintiff's course of action; proximate cause refers to the causal link between the plaintiff's act of reliance and his subsequent injury. In this case, Twin Cities and its sales manager appear to dispute both requirements. They contend that ownership of the El Camino was not material to Edmark's decision to accept it in trade, and that Edmark's loss was caused by the vehicle's physical condition, not by reliance upon its misrepresented ownership.

A

The district judge informed the jury that to be material, "a representation must be of such character that if it had not been made, the contract or transaction would not have been entered into." This instruction can be criticized for suggesting that the representation not only must be important but also must be the cause in fact of the plaintiff's course of action. Moreover, the instruction fails to acknowledge that materiality may be either objective or subjective to the plaintiff. A more comprehensive definition of materiality appears in the RESTATEMENT (SECOND) OF TORTS § 538(2) (1977), which recites that a representation is "material" if:

(a) a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question; or

(b) the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it.

Nevertheless, the defects in the instruction did not weigh against Twin Cities and its sales manager. Rather, the defects simply tended to make Edmark's burden of proof more rigorous. The instruction was given without objection. Accordingly, the question before us is narrowed to whether the record supports the jury's implicit determination--to paraphrase the court's instruction--that Edmark would not have entered into the El Camino transaction if the history of the vehicle had been truly represented.

This question is governed by the substantial evidence standard. ² We believe the standard is satisfied. Edmark's president and sales manager both testified that their dealership would not have accepted in trade a vehicle that had come from an auto auction. The sales manager explained that "most of the cars ... you buy ... at the auto auction are discards from the dealers. There's usually something wrong. They got a lot of wear or something like that." Although this testimony was in some respects questioned, the jury was entitled to accept it. The jury reasonably could infer that if Twin Cities' ownership of the El Camino had been disclosed, Edmark would have been put on inquiry concerning the vehicle's origin and would have discovered that the vehicle came from an auction. In such event, the transaction would not have occurred. Accordingly, we uphold the jury's implicit finding of materiality.

B

With respect to proximate cause, the jury was given Idaho Jury Instruction (IDJI) No. 230. This pattern instruction defines proximate cause as:

a cause which, in natural or probable sequence, produced the damage complained of and without which the damage would not have occurred. It need not be the only cause. It is sufficient if it concurs with some other cause acting at the same time, which in combination with it, causes damage.

In Challis Irrigation Co. v. State, 107 Idaho 338, 689 P.2d 230 (Ct.App.1984), we criticized the pattern instruction as being incomplete.

Proximate cause, in the sense of cause in fact, has been defined as a cause "which in natural and continuous sequence, unbroken by any efficient intervening cause, produces the result complained of and without which the result would not have occurred." Smith v. Sharp, 82 Idaho 420, 426, 354 P.2d 172, 175 (1960).... This component of proximate cause embraces two closely related elements. First, an event is the cause in fact of a succeeding event only if the succeeding event would not have occurred "but for" the prior event. Thus, an act or omission is not the cause in fact of ensuing damage if the damage likely would have occurred anyway. The second element is a requirement that the first event be a "substantial factor" in producing the succeeding event. Munson v. State Department of Highways, 96 Idaho 529, 531 P.2d 1174 (1975). Thus, a defendant's conduct is the cause in fact of an event only if it was a material element and a substantial factor in bringing it about. W. PROSSER, supra, at 240; RESTATEMENT (SECOND) OF TORTS § 431 (1965).

Id. at 343, 689 P.2d at 235 (citations omitted). The pattern instruction essentially contains the "but for" requirement, but it is silent as to a "substantial factor."

Here, the trial judge gave the pattern instruction without objection. However, he may have supplied the "substantial factor" requirement indirectly by giving an additional instruction: "If you find that [Twin Cities' sales manager] misrepresented no other material fact than ownership of the El Camino, then you must find in favor of the Defendants." This instruction apparently embodied the judge's view that reliance upon a misrepresentation of ownership alone would not have proximately caused Edmark's loss.

Reading the two instructions together, the jury was abjured not to return a verdict for Edmark unless the defendants' misrepresentation went beyond mere ownership and extended to the condition of the El Camino. We believe the record contains substantial evidence to support such a finding. As we have explained, Twin Cities' misrepresentation of the vehicle's history...