Hertz Corporation v. Cox, 26251.

• Decision Date: 02 September 1970
• Docket Number: No. 26251.,26251.
• Citation: 430 F.2d 1365
• Parties: The HERTZ CORPORATION, Plaintiff-Appellant, v. Donald COX and Sarah C. Crowe, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

430 F.2d 1365 (1970)

The HERTZ CORPORATION, Plaintiff-Appellant, v. Donald COX and Sarah C. Crowe, Defendants-Appellees.

No. 26251.

United States Court of Appeals, Fifth Circuit.

September 2, 1970.

COPYRIGHT MATERIAL OMITTED

M. W. Parse, Jr., Leon Jaworski, Stephen D. Susman, Houston, Tex., Donald M. Fain, Atlanta, Ga., John Murray, Morris Wolin, New York City, for plaintiff-appellant.

Wade C. Hoyt, Jr., Rome, Ga., Boehl, Stopher, Graves & Deindoerfer, A. J. Deindoerfer, Louisville, Ky., James I. Parker, Cedartown, Ga., Harold L. Murphy, Tallapoosa, Ga., for defendants-appellees.

Before WISDOM and DYER, Circuit Judges, and KRENTZMAN, District Judge.

KRENTZMAN, District Judge:

We reverse and remand for reasons set out more fully below.

In a previous consideration of this case this court considered the question of whether or not the Hertz Corporation, which engages in the business of renting automobiles, could be dismissed from the action, by way of summary judgment on the grounds that Hertz was not present either in person or through an actual agency. At that time this court stated:

"In dismissing the complaint against the Hertz Corporation it is obvious that the trial court did so on the theory that the transaction between Cox and his friends in the Bahamas was not with the Hertz Corporation either directly or through an agent of that company. This, it seems to us, overlooks the essential nature of the suit that is brought by Miss Crowe and particularly as contended for by Cox, who admittedly is a protected driver of a `Hertz Rent-A-Car\' so far as being entitled to insurance protection is concerned. The complaint is based on the assumption that every person reading and relying upon the Hertz advertising is warranted in accepting as true the statement that wherever a `Hertz\' car is rented worldwide, the person relying upon such advertising is guaranteed that the highest standard of insurance protection is offered; that in this case the defendant Hertz Corporation, whether or not acing through its agent in the usual sense nevertheless provided through its subsidiary corporation for the renting to Cox of a `Hertz\' car which did not have the insurance protection guaranteed to the public * * *

"We think it plain that the presence or absence of the Hertz Corporation in the Bahama Islands at the time this automobile was rented by Cox and his friends is irrelevant to the cause of action asserted by the injured plaintiff. Certainly it is irrelevant to the cross action filed on behalf of Cox to secure his insurance protection in the event Miss Crowe should recover against him." Crowe v. Hertz Corporation, 382 F.2d 681, 687 (5 Cir. 1967).

The facts underlying this suit are as follows: On June 6, 1965, Donald Cox, then a nineteen-year-old student from Kentucky, flew to Nassau with several friends for a vacation. Cox and company stayed at the British Colonial Hotel. There Cox met Sarah Crowe, then twenty-six, a school teacher from Georgia. The next day Cox and one of his friends, Bill Grubbs, met Aldo Bergomi, a resident of Italy. The three of them decided to rent a car from the Hertz desk at the hotel. Cox testified that they all went to the Hertz desk to inquire about renting the car. The agent at the desk, Bertram Rahming, testified that Bergomi alone came to the desk. Cox and Grubbs realized that they were too young to rent a car in their own names. They decided that Bergomi alone would sign the rental agreement, which he did. The agreement carried a paragraph relating to insurance coverage, but the policy itself was not available at the rental desk for inspection. Liability to passengers was expressly excluded from coverage in the policy, but this exclusion was not set out in the rental agreement.

Bergomi, Cox and Grubbs took turns driving Sarah Crowe and her sisters around Nassau on the afternoon of June 7. The next morning, June 8, Bergomi returned the car to Hertz. Later in the day the three boys agreed to rent another car from Hertz. It is undisputed that Bergomi this time went alone to the Hertz desk to rent a car. Later in the day Bergomi informed Cox that he had made plans for the evening and that Cox could use the rental car for a date that Cox had made with Sarah Crowe. The evidence is conflicting as to the manner in which Cox obtained possession of the car keys for his date. Cox testified that Bergomi left the keys at the Hertz desk for him to pick up. Sarah Crowe's testimony was to the same effect. Hertz employees on duty during this time testified that they had never delivered any keys to Cox. In any event, Cox got the keys, and he and Sarah Crowe began driving around Nassau in search of entertainment. Shortly after making a right turn, Cox steered the car into the wrong side of the road (in the Bahamas the "right" side of the road is the "wrong" side). A head-on-collision with another car occurred, and Sarah Crowe was seriously injured.

Evidence was introduced relating to certain advertisements purchased by Hertz which appeared in Time Magazine. These advertisements asserted that Hertz Rent-A-Car rates included "proper insurance", "wherever in the world" a person may be going. Both Sarah Crowe and Cox testified that they had read these advertisements, believed them, and assumed that proper insurance would include insurance on passengers riding in Hertz automobiles. Apparently the last advertisement in which Hertz represented that their rates included proper insurance appeared in 1959, sometime before the events occurred which gave rise to this litigation.

Sarah Crowe filed this suit in the Northern District of Georgia against Cox, a resident of Kentucky, and the Hertz Corporation. Crowe alleged that Cox negligently drove the car on the wrong side of the road and that Hertz had fraudulently represented that insurance was provided to cover passengers in her position. Fraud was alleged on the ground that Hertz had represented that the driver was covered by $100,000 liability insurance and that no exclusion for passengers appeared in the rental agreement. Cox answered, denying his negligence, and cross-complaining against Hertz on the same theory of fraud asserted by Crowe. Cox and Crowe subsequently supplemented their complaints against Hertz, alleging that Hertz fraudulently advertised in the United States that its rental fee included "proper insurance", that they had relied upon these advertisements, and that Hertz had failed to warn them that it did not provide a standard liability insurance policy covering passengers in the Bahamas. Crowe asserted that, as a third party beneficiary of the Bergomi-Hertz rental contract, she could sue Hertz for breach of any warranty expressed or implied in the contract.

Hertz moved for summary judgment solely on the basis that it was not doing business in the Bahamas since the Hertz rental company in the Bahamas was not its agent. The district court granted Hertz's motion. This court reversed without determining whether relief could be granted against Hertz as a proper party:

"Because of the determination by the trial court that the Hertz Corporation was not present in the Bahamas through its agent, the court did not consider whether the complaint alleged a state of facts upon which relief could be granted either to Miss Crowe or to the cross-complainant Cox. We, therefore, do not pass on these questions." Crowe v. Hertz Corporation, supra, 382 F.2d at 688.

After remand, the parties agreed during the pretrial that the only ground on which Hertz could be held as a proper party was its advertising representations. Hertz moved for a severance of the negligence and fraud phases of the case, which motion was denied. At the close of plaintiffs' evidence, Hertz moved for a directed verdict. This motion, too, was denied. In so doing the district judge said:

"This suit is not in contract, the way I see it, and I quite agree that the evidence does not show any reliance, even by Mr. Cox, on any alleged provision of the contract, and it is not a suit for a breach of any warranty.

On the other hand, there has been some inference of fraud all the way through. The only kind of fraud that is possibly involved is what is called constructive fraud.

It is not incumbent upon a plaintiff to show this was reckless, willful, fraudulent, in the sense of actual fraud, but it is just purely a question of whether there was representation made and whether it was relied on, whether they had a right to rely on it, and whether it was to their detriment."

Crowe, Cox and Hertz requested special interrogatories on scienter. The court denied each request on the ground that willfulness, recklessness, and knowledge on the part of Hertz were not a part of the case. On the basis of the jury's answers to special interrogatories, the court entered judgment for $205,000.00 in favor of Crowe against Cox, for $205,000.00 in favor of Cox against Hertz and for $205,000.00 in favor of Crowe against Hertz. The judgment provided that the payment of $205,000.00 by Hertz to Crowe would satisfy all judgments.

Appellant, Hertz Corporation, raises six points on this appeal: (1) The terms "insurance" and "proper insurance" as used in Hertz advertisements mean, as a matter of law, only the insurance required by the laws and customs of the Bahamas, the place where the vehicle was rented and driven and where the accident occurred; (2) assuming that Bahama law does not determine the meaning of "insurance" or "proper insurance", and that such words constitute representations, the representations were true even when tested by the laws of the United States; (3) Hertz representations as to insurance did not constitute actionable fraud which must be predicated on a misrepresentation of an existing material fact upon which the plaintiff actually relies and has a right to rely; (4) assuming that Cox and Crowe actually relied upon Hertz advertisements as meaning that unlimited passenger coverage would be provided...