Leisure American Resorts, Inc. v. Knutilla

• Decision Date: 07 April 1989
• Citation: 547 So.2d 424
• Parties: LEISURE AMERICAN RESORTS, INC., and Alpine Bay Resorts, Inc. v. Jeffrey D. KNUTILLA and Janie S. Knutilla. 87-670.
• Court: Alabama Supreme Court

Page 424

547 So.2d 424

LEISURE AMERICAN RESORTS, INC., and Alpine Bay Resorts, Inc. v. Jeffrey D. KNUTILLA and Janie S. Knutilla.

87-670.

Supreme Court of Alabama.

April 7, 1989.

Rehearing Denied June 16, 1989.

Charles Cleveland of Cleveland & Cleveland, Birmingham, for appellants.

Don F. Wiginton of Wiginton & Samsil, Birmingham, for appellees.

ON REHEARING EX MERO MOTU

PER CURIAM.

On rehearing ex mero motu, the original opinion in this case is withdrawn, and the following opinion is substituted therefor:

This is an appeal by Alpine Bay Resorts, Inc., and Leisure American Resorts, Inc., from a judgment based on a jury verdict rendered against them in the amount of $25,000 for fraud and breach of contract. These claims arose out of an alleged agreement between the plaintiffs, Jeffrey and Janie Knutilla, and the defendants, by which the defendants were to repurchase the Knutillas' condominium timeshare unit for $1,776.46. The defendants filed motions for new trial and JNOV. Upon denial of these motions, they appealed to this Court.

The record indicates a rather complicated series of facts, set forth in summary form here. Defendant Alpine Bay is a wholly-owned subsidiary of defendant Leisure American Resorts, Inc. Plaintiffs, Jeffrey and Janie Knutilla, purchased a condominium timeshare unit from Alpine Bay on August 4, 1983. On August 30, 1984, Mr. Knutilla contacted Alpine Bay to discuss the possibility of Alpine Bay's repurchasing the timeshare unit. Mr. Knutilla talked with Brenda Johnson, at Alpine Bay, who instructed him to send her a letter containing his request, which she said she would forward to the appropriate person.

In early September 1984, Mr. Knutilla received a letter from Alan Marlow, who described himself as "executive director" of Alpine Bay Resorts, in which Mr. Marlow offered to repurchase the Knutillas' timeshare unit and to reimburse them for the down payment and monthly payments made by them. On September 19, 1984, Sheryl Nelson, an employee of Alpine Bay, also sent the Knutillas a letter stating that Alpine Bay would repurchase the timeshare unit for $839.68, upon return receipt of a proposed warranty deed that she had enclosed. After discovering a mathematical error, Ms. Nelson sent the Knutillas a second letter on September 27, 1984, confirming the corrected amount to be $1,716.46. ¹

The Knutillas executed and returned the deed to Alpine Bay on the same day they received the letter of correction from Ms. Nelson. On November 7, 1984, Ms. Nelson wrote Richard Stafford, a vice-president for both Alpine Bay and Leisure American, enclosing the deed and stating that a check for $1,716.46 was due Mr. Knutilla "per Alan Marlow." Also on November 7, 1984, Ms. Nelson sent the Knutillas a letter in which she stated that she had requested a check for them in the amount of $1,716.46 from Alpine Bay's Florence office. Sometime in early November, Mr. Stafford informed Mr. Knutilla that before making a decision concerning the repurchase of the timeshare unit, he would have to review the Knutillas' file. Finally, on December 6, 1984, Mr. Stafford sent the Knutillas a letter stating that he would be unable to accept the deed in exchange for a refund of payments, as had been agreed by Mr. Marlow and Ms. Nelson. Mr. Stafford made subsequent offers to the Knutillas, which were not accepted. The Knutillas made no further mortgage payments after September 1984, and on April 22, 1985, Alpine Bay foreclosed on the mortgage. ²

Appellants present two primary issues: 1) Whether the trial court erred in denying the defendants' motions for JNOV on the fraud count, and 2) whether the trial court erred in denying the defendants' motions for JNOV on the breach of contract count.

Because we find the evidence insufficient to sustain either of the claims against Leisure American, that portion of the judgment relating to Leisure American is reversed and a judgment is rendered in its favor. However, we affirm the judgment in its entirety as it relates to Alpine Bay.

In testing the sufficiency of the evidence in support of both the contract claim and the fraud claim against Alpine Bay, we emphasize that the only two defendants against whom the plaintiffs asserted claims were Leisure American and Alpine Bay; no individuals were named as defendants. Thus, because we reverse the judgment against Leisure American, the beginning point of our analysis focuses on the conduct, particularly the intent, of Alpine Bay, a corporate entity, as made known through the conduct of its agents, and not the intent of the individual agents themselves, who are not defendants.

I. The Fraud Claim

The fraud claim against Alpine Bay may properly be analyzed as either an ordinary fraud case or a promissory fraud case. Because, however, the trial court's charge to the jury was limited to the promissory fraud issue, we will confine our discussion here to that issue.

It is axiomatic that a corporate employee's individual defense of lack of intent does not of itself end the inquiry with respect to the corporation's requisite intent to defraud. The corporation is acting as a legal entity and, if an individual corporate agent's conduct, though not fraudulent of itself, combines with the conduct of other corporate agents so as to amount to corporate fraud, the corporation may not escape liability simply by pointing to one innocent link in the chain. (See the discussion of Bolton Ford, infra.)

The elements of the tort of promissory fraud are: 1) a false representation; 2) of a material fact; 3) that is relied upon by the plaintiff; 4) such that he is damaged as a proximate result thereof; 5) the representation must have been made with a present intent to deceive; and 6) when the representation was made, the defendant intended not to perform in accordance with it. Selby v. Quartrol Corp., 514 So.2d 1294 (Ala.1987); and Coastal Concrete Co. v. Patterson, 503 So.2d 824 (Ala.1987).

Three other applicable basic principles simplify the analysis. Generally speaking, the existence and scope of an agency relationship is a question for the jury. Lawler Mobile Homes, Inc. v. Tarver, 492 So.2d 297 (Ala.1986); Shelby v. Zayre Corp., 474 So.2d 1069 (Ala.1985); Adler v. Miller, 218 Ala. 674, 120 So. 153 (1928). Moreover, a principal in liable for the acts of his agent if the acts done are within the scope of the agent's employment. Cordes v. Wooten, 476 So.2d 89 (Ala.1985); Ray E. Loper Lumber Co v. Windham, 291 Ala. 428, 282 So.2d 256 (1973); Sayers v. Boyles, 280 Ala. 153, 190 So.2d 707 (1966); and Regional Agric. Credit Corp. v. Hendley, 251 Ala. 261, 37 So.2d 97 (1948). And it is old learning that the misrepresentations of material facts made by an agent, which are made within the scope of the agent's authority, are imputable to the principal. Bolton Ford of Mobile, Inc. v. Little, 344 So.2d 1208 (Ala.1977); Logan v. Chastang, 207 Ala. 52, 91 So. 867 (1921). See, also, Cook v. Cook, 28 Ala. 660 (1856). Based on these principles, we hold that, even in the context of promissory fraud, the verdict in this case is sustainable.

Alpine Bay mistakenly sets forth the promissory fraud issue as whether there is sufficient evidence to support the finding that Mr. Marlow or Ms. Nelson, acting for Alpine Bay, intended to deceive the Knutillas and intended not to perform the repurchase agreement at the time it was made. The correct question is whether Alpine Bay had the requisite intent to defraud the plaintiffs. Drawing on the legal principles recounted above, we find that the facts of this case are that Alpine Bay (through Mr. Marlow and Ms. Nelson) promised to repurchase the timeshare unit from the plaintiffs; and the jury could reasonably infer from the evidence that, at the time of this promise, Alpine Bay knew (as Mr. Stafford's testimony demonstrates ³) that it would not perform this agreement if the plaintiffs did not satisfy an undisclosed criterion: a declaration by Alpine Bay that the plaintiffs qualified as a "hardship case." Moreover, Alpine Bay's Brenda Johnson assured the plaintiffs that she would forward their request to the "appropriate person."

This issue was resolved by a unanimous Court in Bolton Ford of Mobile, Inc. v. Little, supra. In that case, a salesman who did not know that a car to be sold to the plaintiff had been previously wrecked represented to the plaintiff that it had not been wrecked. The plaintiff bought the car and later discovered that, in fact, it had been previously wrecked. This Court upheld a verdict, including punitive damages, on an intentional fraud count against the dealer. The Bolton Ford Court stated, "The evidence shows that several other agents of...