Grand Ventures, Inc. v. Whaley

• Decision Date: 02 March 1993
• Court: United States State Supreme Court of Delaware
• Parties: GRAND VENTURES, INC., Plaintiff Below, Appellant, v. Terry M. WHALEY and Holcomb & Salter, a business entity of the State of Delaware, Defendants Below, Appellees. HOLCOMB & SALTER INSURANCE AGENCY, Defendant Below, Appellee/Cross Appellant, v. GRAND VENTURES, INC., Plaintiff Below, Appellant/Cross Appellee. . Submitted:

Page 63

632 A.2d 63

GRAND VENTURES, INC., Plaintiff Below, Appellant, v. Terry M. WHALEY and Holcomb & Salter, a business entity of

the State of Delaware, Defendants Below, Appellees.

HOLCOMB & SALTER INSURANCE AGENCY, Defendant Below, Appellee/Cross Appellant, v. GRAND VENTURES, INC., Plaintiff Below, Appellant/Cross Appellee.

Supreme Court of Delaware.

Submitted: March 2, 1993.

Decided: Oct. 19, 1993.

On appeal from the Superior Court. AFFIRMED.

Philip Trainer, Jr. (argued), Jeffrey S. Welch and Amy A. Quinlan of Ashby & Geddes, Wilmington, for appellant/cross appellee Grand Ventures, Inc.

Stephen P. Casarino (argued), Casarino, Christman & Shalk, Wilmington, for appellee/cross appellant Holcomb & Salter Ins. Agency.

N. Maxson Terry, Jr. of Terry, Terry, Wright & Speakman, Dover, for appellee/cross appellant Terry Whaley.

Before VEASEY, C.J., HORSEY, MOORE, WALSH and HOLLAND, JJ. (constituting the Court en banc)

MOORE, Justice.

In this appeal from the Superior Court we address the scope of the Delaware Deceptive Trade Practices Act ("DTPA" or the "Act"), 6 Del.C. § 2531 et seq. Plaintiff, Grand Ventures, Inc. ("Grand Ventures"), appeals the denial of its post-trial motion for treble damages and attorney fees under the Act, while defendant-appellee Holcomb & Salter Insurance Agency ("Holcomb & Salter") cross-appeals the denial of its motion for a new trial. This action stems from an insurance policy that Grand Ventures purchased from defendant Terry M. Whaley ("Whaley") through Holcomb & Salter. After an extensive fire, Grand Ventures discovered that the policy was not valid, and that Whaley did not have authority to bind the insurance carrier. The jury returned a verdict in favor of Grand Ventures against both Holcomb & Salter and Whaley. The jury also found that the defendants had violated the Deceptive Trade Practices Act.

We conclude that Grand Ventures does not have standing to sue under the DTPA. Therefore we affirm the denial of treble damages and attorney's fees. The Act is intended to address unfair or deceptive trade practices that interfere with the promotion and conduct of another's business. Unlike the Consumer Fraud Act, the DTPA is not intended to redress wrongs between a business and its customers.

Regarding the cross-appeal, we affirm the rulings of the Superior Court on all claims.

I.

In the spring of 1986, Grand Ventures agreed to purchase the leasehold interest, liquor license, machinery and equipment of a failed restaurant in Rehoboth Beach, Delaware. The new restaurant was to be known as the "Irish Eyes." The president of Grand Ventures, James Kiernan ("Kiernan"), was to obtain insurance for the restaurant, as stipulated in the purchase agreement.

The Insurance Place ("TIP") was incorporated in 1982. Its original shareholders were defendant Whaley, Ronald Stephens ("Stephens") and David Salter ("Salter"). The purpose of the business was to sell any insurance in southern Delaware for which it could become an agent. Stephens was experienced in real estate and Salter in insurance. Whaley was the president of TIP, primarily responsible for sales. Salter was also a principal in Holcomb & Salter.

From its incorporation in 1982 until the late winter of 1983, TIP did not represent any insurance companies. Instead, Holcomb & Salter placed the various insurance policies which TIP generated. TIP would receive monthly commission checks from Holcomb & Salter.

Although Kiernan normally bought insurance through his own Allstate agent, Allstate did not offer the specific coverage that Kiernan sought. Kiernan contacted Whaley at TIP. Kiernan had previously obtained insurance at TIP, and he now inquired into the purchase of the insurance for the restaurant.

Kiernan advised Whaley that Grand Ventures had budgeted $2,500 for insurance to provide typical business coverage for fire, liability and business interruption. On April 16, 1986, Whaley presented Kiernan with a binder written on International Underwriters ("International"). The binder stated that the policy coverage was for $70,000. The premium was $3,780. When Kiernan objected that the premium was substantially more than had been budgeted, Whaley responded that the premium reflected the amount of coverage needed, and that Kiernan could lower his premium by proportionally reducing the coverage. At trial, Whaley testified that the premiums written in the binder were quoted to him by Holcomb & Salter.

Kiernan and Whaley met, toured the restaurant, and further discussed the cost of the insurance. Upon examination, Whaley estimated the inventory value at approximately $50,000. Further, Whaley suggested that Grand Ventures insure only 80% of the inventory, thereby reducing coverage to $40,000, for a new premium of $1,800. Kiernan delivered a check for the full premium to Whaley in exchange for an insurance binder, again written on International. After issuing the binder, Whaley claims that he forwarded it to Holcomb & Salter.

In late May or early June of 1986, Kiernan had not received the actual insurance policy from either TIP or International, and asked Whaley about the delay. Whaley assured Kiernan that the restaurant was insured, that commercial policies take a long time to issue, and that there was no cause for concern.

On August 11, 1986, a fire extensively damaged the Irish Eyes restaurant. When Kiernan contacted Whaley about coverage, Whaley stated that the policy had not been received, and that he would give Kiernan a standard policy to review. Later in the week Whaley advised Kiernan that International was so busy that he would adjust the fire himself. By the end of the week, Whaley had not appeared, so Kiernan again contacted TIP. At this time, the secretary at TIP told him that Grand Ventures was not insured and that no policy had ever been placed with International. Kiernan only later learned that TIP lacked authority to bind International.

TIP had financial problems from the beginning and lost money every year of its existence. In 1985 and 1986, premium payments earmarked for TIP's fiduciary account regularly financed TIP's operating account.

Even after TIP began to represent some insurance companies, it continued to place commercial insurance policies through Holcomb & Salter for companies which it did not represent. Although TIP could not bind International, Holcomb & Salter had authority to do so. It was routine for TIP to place insurance with Holcomb & Salter, and also to issue binders for insurance companies that TIP had no authority to bind by placing the insurance through Holcomb & Salter. This practice was encouraged and implemented by Holcomb & Salter.

The court charged the jury as to agency, negligence, the Consumer Fraud Act and the DTPA. Holcomb & Salter took exception to nine of the court's charges, one of them being on the DTPA.

The jury awarded Grand Ventures $70,000 in compensatory damages and $4,000 in punitive damages, apportioning fault at 85% for Holcomb & Salter and 15% for Whaley. In responding to special interrogatories the jury found that the defendants had violated the DTPA, but not the Consumer Fraud Act.

Holcomb & Salter moved for a new trial. Its primary argument was that the Superior Court erred as a matter of law in instructing the jury on the DTPA. Conversely, Grand Ventures moved for pre-judgment interest, costs, treble damages and attorney fees pursuant to the DTPA. The trial court denied the motion for new trial. 622 A.2d 655. Additionally, the court determined that Grand Ventures did not have standing under the DTPA, and denied Grand Ventures' motion for treble damages and attorney fees.

II.

A.

We first address the question of Grand Ventures' standing under the Act. When resolving an issue of statutory construction, our scope of review is whether the Superior Court erred as a matter of law in formulating or applying legal precepts. Delaware Alcoholic Beverage Wholesalers, Inc. v. Ayers, Del.Supr., 504 A.2d 1077, 1081 (1986). Questions of law are reviewed de novo. E.I. duPont de Nemours and Co., Inc. v. Shell Oil Co., Del.Supr., 498 A.2d 1108, 1113 (1985). "In the construction of a statute, this court will establish as its standard the search for legislative intent. Where the intent of the legislature is clearly reflected by unambiguous language in the statute, the language itself controls." Spielberg v. State, Del.Supr., 558 A.2d 291, 293 (1989).

B.

In 1965, the Delaware General Assembly, desiring to protect the interests of consumers and businesses, passed as companion bills the Consumer Fraud Act and the Deceptive Trade Practices Act. The Consumer Fraud Act, 6 Del.C. §§ 2511-2526, "protects consumers and legitimate business enterprises from unfair or deceptive merchandising practices." 6 Del.C. § 2512. The wrongs that it is intended to remedy, which easily distinguish it from the wrongs addressed by the DTPA, are enumerated in § 2513(a):

§ 2513. Unlawful practice.

(a) The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is an unlawful practice.

6 Del.C. § 2513(a).

Retail consumers have an implied private cause of action to recover losses from incidental or specific fraud or deception on the part of merchants. Young v. Joyce, Del.Supr., 351 A.2d 857, 859 (1975).

Conversely, the DTPA prohibits unreasonable interference with the promotion and conduct of another person's business. See PREFATORY COMMENT, UNIFORM DECEPTIVE TRADE PRACTICES ACT OF 1964 7A U.L.A. 300, 301 (1985). The DTPA is based on the Uniform Deceptive Trade Practices Act of 1964, which the General Assembly adopted in its entirety. The purpose of the Uniform Act i...