Greene v. Keithley

• Decision Date: 10 November 1936
• Docket Number: No. 10558.,10558.
• Citation: 86 F.2d 238
• Parties: GREENE v. KEITHLEY et al.
• Court: U.S. Court of Appeals — Eighth Circuit

86 F.2d 238 (1936)

GREENE v. KEITHLEY et al.

No. 10558.

Circuit Court of Appeals, Eighth Circuit.

November 10, 1936.

J. M. Fisher, Frederick E. Whitten, Chet A. Keyes, Paul J. Parker, and Fisher, Whitten and Keyes, all of Kansas City, Mo., for appellant.

Before STONE, WOODROUGH, and THOMAS, Circuit Judges.

STONE, Circuit Judge.

This is an action at law against three defendants, for compensatory damages of $1,670 and exemplary damages of $10,000, based upon conspiracy and deceit. The conspiracy alleged was the combination of the defendants "to cheat, wrong and defraud this plaintiff" by making "false, fraudulent and deceitful" statements concerning certain worthless oil properties with the purpose of selling interests therein to plaintiff. The petition alleges such deception of plaintiff and sale to him of such interests for which he paid $1,670, recovery of which with interest is sought. The petition continues as follows: "That because of said conspiracy, combination and agreement, and because said acts and conduct of the defendants herein were willfully, maliciously, fraudulently, deceitfully and intentionally committed by these defendants and each of them, and because said defendants took advantage of the said fraud and deceit practiced upon plaintiff, this plaintiff is entitled to recover of said defendants in addition to said actual damages exemplary damages in the sum of Ten Thousand Dollars ($10,000)."

To this petition a motion to dismiss for lack of jurisdictional amount was filed based upon several grounds which may be summarized as (1) that exemplary damages are not recoverable in this character of action, and (2) that the allegation and prayer for exemplary damages is only colorable and not in good faith. The record contains no evidence as to the second ground which was, apparently, unsupported. The court sustained the motion on the first ground upon the authority of Bank of Arapahoe v. David Bradley & Co., 72 F. 867, a decision of this court. The plaintiff appeals from such order of dismissal.

The question here is whether exemplary damages are recoverable under the allegations of this petition. This question really comprehends two inquiries: (1) Whether, in federal courts, exemplary damages are recoverable in tort actions for conspiracy, deceit, and fraud; and (2), if so recoverable, whether the allegations here are sufficient to warrant such recovery.

It is stated, in the motion to dismiss, that the law of Nebraska does not allow recovery of exemplary damages and that this action is governed thereby. We are not aware of any statute of that state bearing upon this situation. Absent such statute, we need not determine what is the law of Nebraska because the allowance of exemplary damages (absent a governing statute) is a matter of general law which federal courts determine for themselves. Lake Shore & M. S. Ry. Co. v. Prentice, 147 U.S. 101, 106, 13 S.Ct. 261, 37 L.Ed. 97. The long-established rule in federal courts is that, in many kinds of torts, exemplary damages may be recoverable. The Amiable Nancy, 3 Wheat. 546, 558, 559, 4 L.Ed. 456; Day v. Woodworth, 13 How. 363, 371, 14 L.Ed. 181; Philadelphia, etc., Railroad Co. v. Quigley, 21 How. 202, 213, 214, 16 L.Ed. 73; Milwaukee & St. Paul Railway Co. v. Arms, 91 U.S. 489, 493, 495, 23 L.Ed. 374; Missouri Pacific Ry. Co. v. Humes, 115 U.S. 512, 521, 6 S.Ct. 110, 29 L.Ed. 463; Barry v. Edmunds, 116 U.S. 550, 562, 563, 564, 6 S. St. 501, 29 L.Ed. 729; Denver & Rio Grande Railway Co. v. Harris, 122 U.S. 597, 609, 610, 7 S.Ct. 1286, 30 L.Ed. 1146; Lake Shore & M. S. Ry. Co. v. Prentice, 147 U.S. 101, 107, 13 S.Ct. 261, 37 L.Ed. 97; Scott v. Donald, 165 U.S. 58, 86, 17 S.Ct. 265, 41 L.Ed. 632. Also, it is clear that if the action is of the character where exemplary damages are so allowable, the amount claimed therefor is included in determining the jurisdictional amount even though the compensatory damages sought are clearly below such jurisdictional amount. Scott v. Donald, 165 U.S. 58, 86, 17 S.Ct. 265, 41 L.Ed. 632; Barry v. Edmunds, 116 U.S. 550, 6 S.Ct. 501, 29 L.Ed. 729, and see Vance v. W. A. Vandercook Co., 170 U.S. 468, 18 S.Ct. 645, 42 L.Ed. 1111. Also, it is clear that the mere claim for such damages, if in an action where exemplary damages are not recoverable, cannot affect the jurisdictional amount. North American T. & T. Co. v. Morrison, 178 U.S. 262, 267, 20 S.Ct. 869, 44 L.Ed. 1061; Vance v. W. A. Vandercook Co., 170 U.S. 468, 18 S.Ct. 645, 42 L.Ed. 1111. With the above general statements concerning the rules of law in the federal courts as to exemplary damages, we pass to the particular question of whether the case before us is of that character of tort wherein exemplary damages are recoverable.

The trial court determined that this court had decided against such recovery in Bank of Arapahoe v. David Bradley & Co., 72 F. 867. Appellant seeks to avoid such a conclusion by two lines of argument. First, that the petition in the Bradley Case lacked the allegations necessary to warrant recovery of exemplary damages, and, therefore, the decision should not be construed as broadly determining that exemplary damages could never be recovered in torts for deceit or fraud. Second, that if the Bradley decision is to be given the broader scope, yet it is superseded by the later case in this court of Young v. Main, 72 F.(2d) 640.

We think the Bradley Case should be understood as ruling broadly that exemplary damages are not allowable for "loss of personal property by fraudulent representations." 72 F. 867, at page 870. While there is some basis for appellant's contention that the allegations necessary to recovery of exemplary damages were lacking in the Bradley Case, yet this is a very doubtful matter and the language of the opinion shows clearly that the court accepted them as sufficient and ruled the matter as though they were. In the instant case, the trial judge was right in construing the Bradley Case as holding that exemplary damages were not recoverable in actions in tort for fraudulent representations. However, it should be noted that no conspiracy was present in that case.

The second matter urged is the effect upon the Bradley Case of Young v. Main (C.C.A.) 72 F.(2d) 640. The Young Case involved the inclusion of claimed exemplary damages where actual damages were below the jurisdictional amount. The two questions treated therein (72 F.(2d) 640, at page 642) were (1) whether the action was in tort for conspiracy and deceit or was in contract for return of purchase price, and (2), if the latter, whether exemplary damages were recoverable. The court determined the action to be in contract for recovery of purchase price after rescission for fraud. In discussing whether exemplary damages were recoverable in that kind of action, the court (72 F.(2d) 640, at page 643) said:

"The plaintiff claims that the action is in tort for deceit and for damages `in the nature of a writ of conspiracy'; that he may sue an agent in tort as well as a principal; that the contract is void ab initio because in violation of an Iowa statute making it a crime to obtain money or property by false representations; and that he has a right to sue in tort notwithstanding the rescission.

"It is true that exemplary damages may be added to actual damages to make up the federal jurisdictional amount where exemplary damages are permitted to be recovered, Scott v. Donald, 165 U.S. 58, 89, 17 S.Ct. 265, 41 L.Ed. 632; and exemplary damages may be allowed in actions on the case of conspiracy or deceit, Alexander v. Staley, 110 Iowa, 607, 81 N.W. 803; Day v. Woodworth, 13 How. 363, 14 L. Ed. 181; 17 C.J. 977.

"The petition does set up all the elements necessary to support an action in deceit, and, were it not for the allegation that the plaintiff duly rescinded the contract of purchase, the claim of the plaintiff that the action was one in tort would be well founded." (Italics inserted.)

Obviously, the statement that "exemplary damages may be allowed in actions on the case of conspiracy or deceit" is directly contrary to the statement in the Bradley Case that exemplary damages are not recoverable for "the loss of personal property by fraudulent representations."

Although the Bradley Case was neither discussed nor cited in the Young Case, and although the above italicized statement was made concerning a secondary matter, yet it cannot be brushed aside as merely dictum. If not essential to determination of the case, it was highly pertinent to the issues being discussed. If this statement in the Young Case does not supersede the holding in the Bradley Case, at least it throws such doubt upon the Bradley Case and also as to what is the rule of law in this Circuit, that the question must be broadly examined. Therefore, we now consider what should be the rule in this Circuit as to allowance of exemplary damages in tort actions for conspiracy or deceit.

We think the proper rule is that exemplary damages may be recoverable in tort actions based upon conspiracy or deceit. In the leading case of Day v. Woodworth, 13 How. 363, 371, 14 L.Ed. 181, the Supreme Court laid down the rule as follows: "It is a well-established principle of the common law, that in actions of trespass and all actions on the case for torts, a jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant, having in view the enormity of his offense rather than the measure of compensation to the plaintiff." (Italics inserted.) This rule has not been qualified or limited, but has been followed consistently by the Supreme Court. Scott v. Donald, 165 U.S. 58, 88, 17 S.Ct. 265, 41 L.Ed. 632; Lake Shore & M. S. Ry. Co. v. Prentice, 147 U.S. 101, 107, 13 S.Ct. 261, 37 L.Ed. 97; Denver & Rio Grande Railway Co. v. Harris, 122 U.S. 597, 609, 7 S.Ct. 1286, 30 L.Ed. 1146; Barry v. Edmunds, 116 U.S. 550, 562, 6 S.Ct. 501, 29 L. Ed. 729. Actions in tort based on conspiracy or deceit are...