Ex parte Lewis

• Decision Date: 02 April 1982
• Citation: 416 So.2d 410
• Parties: Ex parte Debbie LEWIS. (In re TREADWELL FORD, INC. v. Debbie LEWIS). 80-638.
• Court: Alabama Supreme Court

Page 410

416 So.2d 410

Ex parte Debbie LEWIS.

(In re TREADWELL FORD, INC. v. Debbie LEWIS).

80-638.

Supreme Court of Alabama.

April 2, 1982.

Rehearing Denied May 21, 1982.

Gary D. Porter, Mobile, for petitioner.

Vincent F. Kilborn, III of Kilborn & Gibney, Mobile, for respondent.

PER CURIAM.

This is a review of the Court of Civil Appeals' reversal of a judgment, --- So.2d ----, for Plaintiff Debbie Lewis and against Defendant Treadwell Ford based upon a claim of misrepresentation in selling Plaintiff a 1969 model Ford van as a 1972 model. We granted certiorari in this case in order to clarify this State's law as it applies to actions for fraud and deceit (§ 6-5-100 et seq., Code 1975).

Treadwell sold a vehicle to Wepco Leasing and received as a "trade-in" a 1969 model Ford van which Wepco represented to be a 1972 model. Lewis and her brother, interested in purchasing a van, drove the vehicle in question which Defendant had received from Wepco and later questioned Defendant's salesman about the van's history. They were shown the repairs that had been made on the van and were given the name of Wepco as the former owner of the van. Defendant's salesman told them the van was a 1972 model, as did a representative of Wepco who was contacted by Plaintiff's brother.

From the evidence it appears that the 1969 and 1972 models of Ford vans are identical in appearance. They are distinguishable, however, when their serial numbers are compared with the serial numbers in a book maintained in the parts departments of automobile dealers. Treadwell relied on Wepco's representation that the van was a 1972 model vehicle and, in both purchasing the van from Wepco and selling the van to Plaintiff, Treadwell did not compare the serial number of the van with the book in its parts department.

After a jury trial, judgment was entered for the buyer for $10,000.00 on her claim for reckless misrepresentation. The seller appealed, maintaining that the trial court had committed reversible error in submitting the issue of punitive damages to the jury. The Court of Civil Appeals reversed, stating in part:

"In order for the jury to award punitive damages in this case, there must have been evidence from which it could have concluded that the fraud was malicious, oppressive or gross and the statements were made recklessly without regard to their truth and without caring or knowing if they were true or not. Big Three Motors, Inc. v. Smith [--- So.2d ----], Civ. 1847 (Ala.Civ.App., March 25, 1981).

The record is devoid of any evidence which shows Treadwell acted so heedlessly or so recklessly as to authorize the award of punitive damages.... It is conceded that Treadwell failed to examine the book in its parts department which would have revealed the correct model year. However, we are not persuaded that such an omission amounts to gross, oppressive or malicious conduct so as to warrant the imposition of punitive damages. Proctor Agency, Inc. v. Anderson, Ala., 358 So.2d 164 (1978); Continental Volkswagen, Inc. v. Soutullo, 54 Ala.App. 410, 309 So.2d 119 (1975)."

Lewis, the buyer, petitioned this Court for a writ of certiorari on the ground that the decision of the Court of Civil Appeals was in conflict with Big Three Motors, Inc. v. Smith, [MS. January 9, 1981] --- So.2d ---- (Ala.1981) (Smith I ).

The issue before this Court, then, is a narrow one: Given the element of intent to deceive (which the factfinder was authorized under the evidence to find, considering the "reckless disregard of the consequences" element), was the jury warranted in awarding punitive damages?

This is the precise issue presented, addressed and answered in the affirmative in Big Three Motors, Inc. v. Smith, (MS. February 5, 1982] --- So.2d ---- (Ala.1982) (Smith II ) (second review by this Court). We reverse and remand on the authority of Smith II, supra.

REVERSED AND REMANDED.

MADDOX, FAULKNER, SHORES, EMBRY, BEATTY and ADAMS, JJ., concur.

JONES, J., concurs specially.

ALMON, J., concurs in the result.

TORBERT, C. J., dissents.

JONES, Justice (concurring specially):

Undoubtedly, and understandably, this Court's decisions in several recent fraud cases of the "intent to deceive" species have misled the Court of Civil Appeals with respect to the elements of the offense necessary for the imposition of punitive damages. ¹ The question of punitive damages, just as in Big Three Motors, was resolved by the Court of Civil Appeals on the basis of a lack of evidence to support a course of reprehensible conduct, beyond and in addition to, the requisite element of intent to deceive.

Section 6-5-101, Code 1975, provides a cause of action for the tort of misrepresentation of a material fact, for which compensatory damages may be awarded, even in the absence of the statute's alternative remedy for willful deceit:

"Misrepresentations of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitute legal fraud."

The elements which, when proved, sustain an action in deceit and the concomitant recovery of punitive damages, are set out at § 6-5-103, which states in part:

"Willful misrepresentation of a material fact made to induce another to act, and upon which he does act to his injury, will give a right of action.... In all cases of deceit, knowledge of a falsehood constitutes an essential element. A fraudulent or reckless representation of facts as true, which the party may not know to be false, if intended to deceive, is equivalent to a knowledge of the falsehood."

The distinction between the two preceding Code sections is crucial as to both the evidence required to prove the offense and the ultimate damages sought by the injured party. The distinction was recognized by this Court in Hall Motor Company v. Furman, 285 Ala. 499, 234 So.2d 37 (1970), which holds in part:

"Under our cases there is a difference between actionable fraud by misrepresentation of a material fact and an action for actual deceit. Rudisill v. Buckner, 244 Ala. 653, 15 So.2d 333. It would appear, however, that if the misrepresentation of a material fact was made willfully to deceive, or recklessly without knowledge, such conduct would be deceitful in fact. This is the first provision in [§ 6-5-101]. The last alternative found in [§ 6-5-101] relates to a fraud made by mistake and innocently. Such representation is a legal fraud, though it be only constructive. Hornaday v. First National Bank of Birmingham, 259 Ala. 26, 65 So.2d 678.

"Under [§ 6-5-101], the good faith of a party in making what proves to be a material misrepresentation, is immaterial if the other party acted on such misrepresentation to his injury. Standard Oil Co. v. Johnson, 276 Ala. 578, 165 So.2d 361. Only compensatory damages could be recovered in such a situation.

"...

"In the often cited case of Caffey v. Alabama Machinery & Supply Co., 19 Ala.App. 189, 96 So. 454, it is pointed out that [§ 6-5-101] is but a reflection of the general law on the subject of fraudulent misrepresentation, and that fraud being alleged, and established by the evidence, punitive damages may be recovered only if the fraud was malicious, oppressive, or gross, made with knowledge of its falseness (or so recklessly made as to amount to the same thing), and made with the purpose of injuring the plaintiff. To the same effect see Boriss v. Edwards, 262 Ala. 172, 77 So.2d 909; Treadwell Ford, Inc. v. Leek, 272 Ala. 544, 133 So.2d 24; J. Truett Payne Co. v. Jackson, 281 Ala. 426, 203 So.2d 443.

"Under [§ 6-5-101] the misrepresentations must be of a material fact, made to be relied on as an inducement, and in fact relied on. Intent to deceive is not essential since only constructive fraud may be present in such a situation. Under [§ 6-5-103], knowledge of the fraud, with intent to deceive, is required, and under [§ 6-5-103], the scope of liability is extended to cases of concealment of the fraud, and thus 'material fact' has a wider meaning under [§ 6-5-103] than under [§ 6-5-101]. Cartwright v. Braly, 218 Ala. 49, 117 So. 477." ²

A claim of fraud, then, of the "innocent" or "legal" species carries no requirement of proof that the defendant had knowledge of the falsity of the matter represented, only that the defendant misrepresented a material fact which was acted upon to the injury of the other party. While liability for innocent fraud is not dependent upon knowledge of the falsehood (and, therefore, not dependent upon an intent to deceive), compensatory damages only may be awarded.

Deceit, on the other hand, as contemplated by § 6-5-103, is an intentional tort which, when proved to the satisfaction of the finder of fact, will support an award of punitive damages. International Resorts, Inc. v. Lambert, 350 So.2d 391 (Ala.1977). Absent an initial finding of the essential element of "knowledge of a falsehood," however, there can be no determination of an intent to deceive; and, therefore, the factfinder would be precluded, as a matter of law, from awarding punitive damages. See Mobile Dodge, Inc. v. Waters, 404 So.2d 26 (Ala.1981).

It is the finding of intent to deceive, which must be based upon the initial finding of knowledge of the falsity of the material representation, that triggers the discretionary power of the factfinder to award punitive damages. It is a misinterpretation of the cases to require that the incidents of grossness, oppressiveness, and maliciousness be found as additional elements to be superimposed upon the statutory requisite of intent to deceive, in order to warrant punitive damages. ³

This is the reason for the clarifying language in Shiloh Construction Co., Inc. v. Mercury Construction Corp., 392 So.2d 809 (Ala.1980):

"Once an intent to deceive has been established it is difficult to see but that a fraud was committed grossly. Randell v. Banzhoff, 375 So.2d 445 (Ala.1979); Hall...