Maybee v. Jacobs Motor Co., Inc.

• Decision Date: 20 July 1994
• Docket Number: Nos. 18117,18119,s. 18117
• Citation: 519 N.W.2d 341
• Parties: Johnie MAYBEE, Plaintiff and Appellee, v. JACOBS MOTOR CO., INC., a South Dakota Corporation, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 341

519 N.W.2d 341

Johnie MAYBEE, Plaintiff and Appellee, v. JACOBS MOTOR CO., INC., a South Dakota Corporation Defendant and Appellant.

Nos. 18117, 18119.

Supreme Court of South Dakota.

Argued Sept. 1, 1993.

Decided July 20, 1994.

Curt Ireland, Rapid City, for appellee.

Frank Driscoll, of Gunderson, Farrar, Aldrich & DeMersseman, Rapid City, for appellant.

HENDERSON, Justice.

PROCEDURAL HISTORY/ISSUES

After discovering that the used 1984 van she purchased from appellant Jacobs Motor Company had a 1966 engine in it, Johnie Maybee commenced this action alleging negligent misrepresentation, fraud and deceit. In a memorandum ruling issued September 9, 1991, the trial court summarily dismissed the negligence claim, but not her fraud and deceit claim.

Following a June 1992 trial, the jury returned a verdict for Maybee, awarding compensatory damages of $14,700.00 and punitive damages of $75,000.00. Jacobs Motor, denied a directed verdict during trial, moved for judgment notwithstanding the verdict and, in the alternative, a new trial. Finding the evidence to support liability but not damages, the trial court granted a new trial solely on the award of damages. Jacobs Motor filed Notice of Appeal on October 30, 1992. Maybee, thereafter, filed Notice of Review on November 4, 1992. We review the following issues:

I. Did the trial court err by submitting this case to the jury?

II. Did the trial court abuse its discretion in granting a new trial solely on the issue of damages?

Although we find that the trial court properly submitted this case to the jury, we reverse and remand due to the clearly excessive damages awarded.

FACTS

In October 1988, James Phipps traded his 1984 Chevrolet van to Jacobs Motor Company for another vehicle. The van's engine, however, had been previously replaced with a rebuilt engine using an engine block which had been manufactured in approximately 1966. This replacement engine used a canister-style oil filter, a type that has not been used on passenger vehicles since the late 1960s. Phipps maintains that he informed Jacobs Motor of the engine because he believed a rebuilt engine on a used vehicle to be a strong selling point.

During the van's ten months on the used car lot, Jacobs Motor added approximately 7,000 miles to the odometer, which included a round trip to Houston, Texas. Despite a standard policy of changing the oil and filter on trade-ins, Jacobs Motor asserts that such a service was never performed on the van. Because of this oversight, Jacobs Motor contends that the out-dated canister-style filter was never noticed by its employees.

Maybee and her husband visited Jacobs Motor Company in August of 1989. Salesman Paul Mitchell showed Maybee the van and invited her to take the van home overnight. Although Maybee had the opportunity to ask questions and have the van inspected by her own mechanic, she declined. Conversely, no employee of Jacobs Motor volunteered any information about the van's dieseling problem, oil leak problems, or the engine. However, when asked about the representations of Mitchell, Maybee testified, "He just said that it was an '84 van that was in good condition and that they had used it around the business." When Maybee purchased the van for $8,700.00, not knowing that the 1984 van had a 1966 engine, she signed a contract disclaiming all express and implied warranties.

Over a month after the purchase, Maybee's husband took the van to a mechanic because of oil leakage. The mechanic noticed the canister-style filter and, upon investigation, discovered that the engine had been manufactured in 1966 and was completely worn. Additionally, Maybee's expert testified:

It's a high compression engine. It requires a higher octane and better grade of fuel than you can buy today, unless you go to an airport and buy aviation fuel.

Maybee contended before the jury that the proper engine had been switched with a 1966 engine, the engine was worn out, it did not run efficiently because of a high compression ratio, and the 1966 engine would stall out or cut out. Ultimately, Maybee testified the vehicle was parked in the yard because it "didn't work."

At trial, all nine witnesses from the auto dealership denied any knowledge, prior to the sale to Maybee, that the van's engine had been rebuilt with the 1966 engine block. Although not all service records for the van could be located, service personnel at Jacobs Motor denied ever changing the oil in the van.

Following a week-long trial, the jury found Jacobs Motor guilty of fraud and deceit and awarded compensatory damages of $14,700.00 and punitive damages of $75,000.00. Because the compensatory damages award was almost ten times the $1,450.00 cost of replacing the engine, the trial court, refusing to rule out mathematical errors or passion or prejudice by the jury, granted a new trial on damages. Jacobs Motor appeals the issue of liability. Maybee appeals the grant of a new trial on damages.

DECISION

I. Trial court properly submitted the case to the jury.

Questions of fraud and deceit are generally questions of fact and as such are to be determined by the jury. Tucek v. Mueller, 511 N.W.2d 832 (S.D.1994); Garrett v. BankWest, Inc., 459 N.W.2d 833 (S.D.1990). An action for deceit requires proof that the misrepresentation was material to the formation of the contract and that the other party relied on the misrepresentation to her detriment. Littau v. Midwest Commodities, Inc., 316 N.W.2d 639 (S.D.1982). Such misrepresentations include true statements which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter. Restatement (Second) of Torts Sec. 229 (1977).

The credibility of the witnesses, the weight to be accorded their testimony, and the weight of the evidence is determined by the jury, and we accord the jury some deference based on its observations of the witnesses and the evidence. Mash v. Cutler, 488 N.W.2d 642, 646 (S.D.1992). As the deceit claim arose from the purported failure of Jacobs Motor to inform Maybee that the 1984 van contained an engine which was 18 years its senior, the trial court properly submitted the issue to the jury to determine the credibility of the witnesses and to determine if the omission constituted a misrepresentation. Id.

Jacobs Motor maintains that the trial court's actions are tantamount to overturning Taggart v. Ford Motor Credit Co., 462 N.W.2d 493, 499 (S.D.1990), which held, "This court has never imposed a duty to disclose information on parties to an arm's-length business transaction, absent an employment or fiduciary relationship." In Taggart, the defendants were not parties to the transaction; but in Ducheneaux v. Miller, 488 N.W.2d 902 (S.D.1992), both parties were parties to the transaction. We distinguished Taggart and applied Restatement (Second) of Torts Sec. 551(2)(e):

(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated

....

(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

(Emphasis supplied.) Thus, the jury was properly left to decide if the engine's age and condition were facts basic to the Maybee-Jacobs Motor transaction.

Finally, Jacobs Motor employs, as a defense, Maybee's signed disclaimer of all express and implied warranties as a safety net for any wrongdoing, an affirmative defense, so to speak. Although "as is" clauses place the risk upon the buyer to accept the product with all its faults, this does not grant the seller a license to mislead the buyer or conceal facts. 37 Am.Jur.2d Fraud and Deceit Sec. 158 (1968).

When a person purchases a 1984 vehicle, is the presence, within that vehicle, of an engine built for a 1966 model vehicle which requires a fuel not typically used by vehicles on the road today, a fact basic to the transaction? The jury so found and this Court finds that the evidence can support such a finding. Lytle v. Morgan, 270 N.W.2d 359, 361 (S.D.1978)....