Lithia Medford LM, Inc. v. Yovan

• Decision Date: 19 December 2012
• Docket Number: 010895L1,A128045.
• Citation: 295 P.3d 642,254 Or.App. 307
• Parties: LITHIA MEDFORD LM, INC., an Oregon corporation, dba Lithia Toyota, Lincoln, Mercury, Suzuki, Plaintiff–Respondent, v. Shawn S. YOVAN, aka Stefan Shawn Yovan, Defendant–Appellant. Shawn S. Yovan, aka Stefan Shawn Yovan, Counterclaim Plaintiff, v. Lithia Medford LM, Inc., an Oregon corporation, dba Lithia Toyota, Lincoln, Mercury, Suzuki, Counterclaim Defendant.
• Court: Oregon Court of Appeals

254 Or.App. 307

295 P.3d 642

LITHIA MEDFORD LM, INC., an Oregon corporation, dba Lithia Toyota, Lincoln, Mercury, Suzuki, Plaintiff–Respondent,

v.Shawn S. YOVAN, aka Stefan Shawn Yovan, Defendant–Appellant.

Shawn S. Yovan, aka Stefan Shawn Yovan, Counterclaim Plaintiff,

v.Lithia Medford LM, Inc., an Oregon corporation, dba Lithia Toyota, Lincoln, Mercury, Suzuki, Counterclaim Defendant.

010895L1; A128045.

Court of Appeals of Oregon, In Banc.

Submitted on Remand Aug. 15, 2011.

Resubmitted En Banc Oct. 3, 2012.

Decided Dec. 19, 2012.

G. Jefferson Campbell, Jr., and G. Jefferson Campbell, Jr., P.C., for appellant.

Matthew Sutton, for respondent.

Before HASELTON, Chief Judge, and ARMSTRONG, WOLLHEIM, SCHUMAN, ORTEGA, SERCOMBE, DUNCAN, NAKAMOTO, and HADLOCK, Judges.

NAKAMOTO, J.

Defendant and counterclaim plaintiff Shawn Yovan (defendant) prevailed on his claim under the Oregon Unlawful Debt Collection Practices Act (the Act), ORS 646.639 to 646.641, against plaintiff and counterclaim defendant Lithia Medford LM, Inc. (plaintiff). The jury awarded defendant $500 for his noneconomic damages and $100,000 in punitive damages. The trial court concluded that the punitive damage award was unconstitutional under the Due Process Clause of the Fourteenth Amendment to the United States Constitution and reduced punitive damages to $2,000. Defendant appealed, and the trial court's judgment was affirmed by an equally divided court, Lithia Motors, Inc. v. Yovan, 226 Or.App. 572, 204 P.3d 120 (2009)(Lithia Motors I), vac'd and rem'd,349 Or. 663, 249 P.3d 1281 (2011). The case is before us again, on remand from the Supreme Court, for our reconsideration in light of Hamlin v. Hampton Lumber Mills, Inc., 349 Or. 526, 246 P.3d 1121 (2011)( Hamlin II ). The sole issue on appeal is the propriety of the jury's award of punitive damages against plaintiff. We have reexamined the facts and our analysis given the considerations in Hamlin II and conclude that the jury's verdict in this small-damage case was neither grossly excessive nor unconstitutional. Accordingly, we reverse and remand with instructions to enter judgment in accordance with the jury's verdict.

FACTS

The relevant facts are those supporting the Jackson County jury's verdict on defendant's third counterclaim under the Act. In that counterclaim, defendant alleged that plaintiff and its agents and employees violated the Act by “threatening arrest or criminal prosecution of [defendant], in violation of ORS 646.639(2)(b)” and by “attempting to or threatening to enforce a right or remedy with knowledge or reason to know that the right or remedy did not exist, in violation of ORS 646.639(2)(k).” Defendant also alleged entitlement to punitive damages. This court recounts the facts consistently with the jury's verdict in favor of defendant, including resolving all factual disputes and drawing inferences in favor of the verdict, both as to liability and punitive damages. Parrott v. Carr Chevrolet Inc., 331 Or. 537, 556–57, 17 P.3d 473 (2001).

In 2000, defendant purchased a used Toyota 4Runner from plaintiff, which owned and operated a Toyota dealership in Medford, for close to $14,000. Five days later, the retail installment sales contract was purchased by a finance company, TranSouth Financial Corporation (TranSouth). Defendant then discovered a report showing that the car's actual mileage was some 25,500 more than what appeared on the odometer at purchase (98,000 miles).

After bringing the mileage discrepancy to the attention of plaintiff, which had not known of the discrepancy, defendant and plaintiff were unsuccessful in reaching a resolution regarding the reduced value of the car. Plaintiff demanded that defendant either pay the balance on the car, less $1,000, or return the car in exchange for his trade-in and deposit. Defendant demanded that plaintiff provide him with a used 4Runner of the type that he thought he had purchased in Medford, and defendant identified such a car for sale at a Lithia dealership in Colorado, but plaintiff refused to settle on that basis. Defendant decided to keep the car and told plaintiff that he would pursue his legal remedies.

Plaintiff's manager insisted on obtaining defendant's car and attempted to intimidate defendant into giving it up. Plaintiff's manager became aggressive and threatened defendant with criminal prosecution for “Grand Theft Auto” if he did not return the car. Next, plaintiff's managers lied to the collection manager of plaintiff's parent company when they told him to have defendant's car repossessed for nonpayment, even though they knew that plaintiff had assigned the installment contract for defendant's purchase of the car to TranSouth and that plaintiff had no legal right to seek repossession of the 4Runner. When the repossession agent tried to take away the car, defendant informed the agent that his first payment was not yet due and the installment contract was not even held by plaintiff. Nevertheless, plaintiff's repossession agent told defendant that he would call the police and that defendant was obstructing justice. After that encounter, defendant placed the car in storage for three months.

Thereafter, plaintiff repurchased the installment contract from TranSouth, and the dealership again offered to lower the purchase price by $1,000, via the amount to be financed, plus offered to provide a $500 cash payment as incentive for an agreement. When defendant rejected the dealership's offer, plaintiff brought an action against defendantfor rescission of the sales contract based on mutual mistake.

After repurchasing the retail installment contract from TranSouth, plaintiff misrepresented to defendant and his attorney that defendant no longer had a valid purchase contract. First, plaintiff faxed a page from the sales contract to defendant's counsel that included the following provision:

“In consideration of Seller agreeing to deliver the vehicle, Buyer agrees that if Seller is unable to assign the retail installment contract/lease agreement to any one of the financial institutions with whom Seller regularly does business pursuant to terms of assignment acceptable to Seller, Seller may elect to rescind the retail installment contract/lease agreement. In the event Seller elects to rescind the retail installment contract/lease agreement, I will return the vehicle immediately upon their request.”

Plaintiff then sent a letter to defendant's counsel indicating, falsely, that TranSouth had rescinded the retail installment contract. Plaintiff told defendant that it was willing to enter into a new retail installment contract and then, as noted above, offered to reduce the purchase price of the car by $1,000 and, if defendant agreed to settle the matter by January 25, 2001, offered defendant an additional $500 to compensate him for “his perceived inconvenience.” In fact, TranSouth had not rescinded the contract; plaintiff had repurchased the still-valid contract that plaintiff later sought to rescind in this case.

The jury heard evidence that plaintiff was acting selfishly and maliciously to further its own economic interests as it tried to intimidate or deceive defendant into relinquishing the car. The retail installment contract that plaintiff sold to TranSouth in this case and in other car sales was on a nonrecourse basis, meaning that, if the customer defaulted on loan payments, TranSouth could not go beyond the collateral to recover the balance owed. But, if there had been a misrepresentation as to the collateral for the loan, TranSouth could require plaintiff to repurchase the contract and thereby bear the risk of nonpayment on the under-secured loan. The credit application that plaintiff submitted to TranSouth showed that defendant earned more than he actually did, listed accessories that the car did not in fact have, and stated a lower mileage figure than the 125,000 miles the car apparently actually had, due to an odometer rollback. TranSouth's branch manager testified that plaintiff repurchased the contract because of the problem with the actual value of the collateral. The jury could have concluded that plaintiff, having been caught after misrepresenting the value of the 4Runner, intimidated defendant to get it back so that it could recover the full amount it had paid for the car from the seller in Idaho, rather than having to risk a loss on the car as a result of the sale to defendant.

The jury also understood that defendant had limited financial resources and limited ability to obtain financing to buy a car. Approximately a year before defendant purchased the car from plaintiff, he had graduated from the Oregon Institute of Technology and obtained a new job in Yreka, California. Defendant's job required him to commute approximately 100 miles to work daily, and so he had to spend $350 a month on gas for his car. He was married with four children, and his annual income from his job in California was approximately $34,000. He purchased the Toyota 4Runner because he wanted a second car that would provide reliable transportation for his family while he was away at work. Around the time when defendant was purchasing the 4Runner, he and his wife were not making installment payments on their house. Some time after the incidents with plaintiff, defendant lost his job and later lost the residence through a foreclosure.

Moreover, plaintiff knew that defendant was financially vulnerable. Plaintiff's practice was to have the salesperson fill out the customer credit application and to obtain a credit report on the customer. Plaintiff knew the amount of money defendant earned because defendant had disclosed that information to plaintiff for the credit application and had provided a pay stub. Plaintiff then submitted the credit application to TranSouth to seek financing for defendant's car purchase. TranSouth is a “non-prime lender.” The financing defendant obtained was, in the words of TranSouth's branch manager, a “sub,...