Hardy v. Toler

• Decision Date: 07 October 1975
• Docket Number: No. 12,12
• Citation: 288 N.C. 303,218 S.E.2d 342
• Court: North Carolina Supreme Court
• Parties: Eddie HARDY, Jr. v. Charles L. TOLER and Pamlico Motor Company, a corporation.

Page 342

218 S.E.2d 342

288 N.C. 303

Eddie HARDY, Jr. v. Charles L. TOLER and Pamlico Motor Company, a corporation.

No. 12.

Supreme Court of North Carolina.

Oct. 7, 1975.

Atty. Gen. Rufus L. Edmisten and Asst. Atty. Gen. Donald A. Davis, Raleigh, amicus curiae, for the State.

Ward & Ward by Jerry F. Waddell and Kennedy W. Ward, New Bern, for plaintiff appellant.

Wilkinson & Vosburgh by John A. Wilkinson, Washington, for defendant appellees.

MOORE, Justice.

Plaintiff first assigns as the holding of the Court of Appeals affirming the action of the trial court in allowing defendants' motion for a directed verdict under Rule 50(a) as to the issue of punitive damages.

This action is based upon fraudulent representations made by Toler on behalf of himself and his principal, Pamlico Motor Company, which were relied upon by the plaintiff in purchasing the automobile in question. Defendants represented to the plaintiff that the automobile was a one-owner vehicle which had been driven approximately 23,000 miles, that it had never been wrecked, and that the Chrysler warranty could and would be transferred to plaintiff. Plaintiff offered testimony tending to show that all of these representations were false. The parties stipulated that the car had had two prior owners, had been involved in a wreck, and that the Chrysler warranty would not transfer to plaintiff. Although the plaintiff's evidence and the stipulations of the parties provide ample basis for a recovery based on actionable fraud, this was not sufficient to subject the defendants to punitive damages.

In North Carolina, whether a person may recover punitive damages in an action for fraud depends upon the character of the acts alleged to constitute fraud in each case. Furthermore, it is the general rule that ordinarily punitive damages are not recoverable in an action for fraud. Davis v. Highway Commission, 271 N.C. 405, 156 S.E.2d 685 (1967); 3 Strong, N.C. Index 2d, § 11, p. 181, and cases cited therein.

In Nunn v. Smith, 270 N.C. 374, 154 S.E.2d 497 (1967), the Court quoted with approval from Swinton v. Realty Co., 236 N.C. 723, 73 S.E.2d 785 (1953), which held that plaintiffs were not entitled to punitive damages in an action for fraud merely upon a showing of misrepresentations which constituted the cause of action, without more:

". . . "Punitive damages' are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct.' . . .

* * *

* * *

"We are inclined to the view that the facts in evidence here are not sufficient to warrant the allowance of punitive damages. There was no evidence of insult, indignity, malice, oppression or bad motive other than the same false representations for which they have received the amount demanded."

Accord, Davis v. Highway Commission, supra; Van Leuven v. Motor Lines, 261 N.C. 539, 135 S.E.2d 640 (1964); Rubber Co. v. Distributors, Inc., 253 N.C. 459, 117 S.E.2d 479 (1960); Binder v. Acceptance Corp., 222 N.C. 512, 23 S.E.2d 894 (1943).

Punitive damages may be awarded only where the wrong is done willfully or under circumstances of rudeness, oppression or in a manner which evidences a reckless and wanton disregard of the plaintiff's rights. Davis v. Highway Commission, supra; Nunn v. Smith, supra; Rubber Co. v. Distributors, Inc., supra; Swinton v. Realty Co., supra. The court correctly refused to submit an issue as to punitive damages. This assignment is overruled.

The trial court below refused to submit the following proposed issue to the jury:

'Did the false representations of the defendant to the plaintiff in connection with the sale of said vehicle, as alleged in the complaint, constitute unfair or deceptive acts or practices in the conduct of trade or commerce?'

This refusal was based on the trial court's opinion that the proposed issue was not one of fact for the jury but one of law for the judge. The Court of Appeals disagreed, holding the evidence and stipulations of the parties sufficient to raise a jury question and remanding for a new trial.

G.S. § 75--1.1, in part, provides:

'Methods of competition, acts and practices regulated; legislative policy.--(a) Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

'(b) The purpose of this section is to declare, and to provide civil legal means to maintain, ethical standards of dealings between persons engaged in business, and between persons engaged in business and the consuming public within this State, to the end that good faith and fair dealings between buyers and sellers at all levels of commerce be had in this State.'

G.S. § 75--16 provides:

'Civil action by person injured; treble damages.--If any person shall be injured or the business of any person, firm or corporation shall be broken up, destroyed or injured by reason of any act or thing done by any other person, firm or corporation in violation of the provisions of this Chapter, such person, firm or corporation so injured shall have a right of action on account of such injury done, and if damages are assessed by a jury in such case judgment shall be rendered in favor of the plaintiff and against the defendant for treble the amount fixed by the verdict.'

For general comment on these sections, See 48 N.C.L.Rev. 896 (1970); 6 Wake Forest Intra.L.Rev. 1 (1969).

The issue now before us is whether the determination that certain acts or practices constitute unfair or deceptive acts or practices, in violation of G.S. § 75--1.1, is to be made by the judge or by the jury.

This issue appears to be one of first impression before this Court. Some guidance may be obtained by reference to federal decisions on appeals from the Federal Trade Commission, since the language of G.S. § 75--1.1 closely parallels that of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) (1973 Ed.), which prohibits 'unfair or deceptive acts or practices in commerce.' The federal courts, while according great weight to the evidentiary findings of the F.T.C., have made it clear that the ultimate determination of what constitutes unfair competition and deceptive practices rests with the courts. F.T.C. v. Colgate-Palmolive Co., 380 U.S. 374, 85 S.Ct. 1035, 13 L.Ed.2d 904 (1965); Fed. Tr. Comm'n v. Keppel & Bro., 291 U.S. 304, 54 S.Ct. 423, 78 L.Ed. 814 (1934); Firestone Tire and Rubber Company v. F.T.C., 481 F.2d 246 (6th Cir. 1973); Accord, Wisdom v. Norton, 507 F.2d 750 (2d Cir. 1974).

Other states have also had occasion recently to interpret similar consumer protection statutes. In Commonwealth v. DeCotis, 316 N.E.2d 748 (Mass.1974), the court conceded that the Massachusetts statute, like our counterpart here, furnishes no definition of what constitutes an unfair act or practice made unlawful under the statute. Since the Massachusetts trial court sits in equity without a jury, the appellate court did not specifically address itself to the division of function between jury and judge in determining whether a violation had occurred. However, the reasoning of the court throws light on its thinking on the issue:

'The defendants next contend that they engaged in no deception or unfair act and practice. In light of the Facts found by the judge and by us such an argument can succeed only if As a matter of law their conduct was not an unfair or deceptive act or practice within the meaning of those words . . .. The existence of unfair acts and practices must be determined from the circumstances of each case. . . . What we can determine is that the collection of resale charges by the defendants was an unfair act or practice.' Id. at 753--54. (Emphasis added.)

An even more recent case, PMP Associates, Inc. v. Globe Newspapers, Co., 321 N.E.2d 915 (Mass.1975), indicates again that the court reserves for itself the ultimate determination as a matter of law of what constitutes an unfair trade practice.

Although neither the federal nor Massachusetts decisions are directly in point because of the posture of the cases, one an appeal from an administrative ruling, another from a judge sitting in equity, their reasoning is persuasive and supported by logic. The traditional function of the jury has been a fact-finding one but the determination as to liability under those facts should be found by the court as a matter of law.

Proof of fraud would necessarily constitute a violation of the prohibition against unfair and deceptive acts; however, the converse is not always true. D.D.D. Corporation v. F.T.C., 125 F.2d 679 (7th Cir. 1942). In Garland v. Penegar, 235 N.C. 517, 70 S.E.2d 486 (1952), Chief Justice Devin, speaking for the Court in an automobile fraud case, said:

'Plaintiff alleged and offered evidence tending to show that the defendant, an automobile dealer, falsely and fraudulently represented that the automobile then being sold him was a 'new demonstrator,' that it had been driven only 1,000 miles as the speedometer apparently indicated, and that the automobile was in perfect condition. Plaintiff testified that instead of being as represented the automobile was not a new one but had been previously sold to another person who drove it 8,000 miles and then turned it back to the defendant. Plaintiff also testified the automobile was not in good condition, and that he had incurred trouble and expense in...