Nails v. S & R, Inc.

• Citation: 639 A.2d 660,334 Md. 398
• Decision Date: 01 September 1991
• Docket Number: No. 44,44
• Parties: Allison NAILS et al. v. S & R, INC. t/a VOB Auto Sales
• Court: Court of Appeals of Maryland

Page 398

334 Md. 398

639 A.2d 660

Allison NAILS et al. v. S & R, INC. t/a VOB Auto Sales.

No. 44 Sept. Term, 1991.

Court of Appeals of Maryland.

April 12, 1994.

Kevin G. Hessler, argued and on brief (Harvey B. Steinberg, Miller & Steinberg, on brief), Rockville, for petitioners/cross-respondent.

D. Christopher Ohly, Baltimore, argued and on brief (Thomas J. Zagami, Hazel & Thomas, P.C., Baltimore and Harry C. Storm, Abrams, West & Storm, P.C., Bethesda, on brief), for respondent/cross-petitioner.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY, McAULIFFE, ^* CHASANOW and KARWACKI, JJ., and CHARLES E. ORTH, Jr., ^** Judge of the Court of Appeals of Maryland (Retired, Specially Assigned).

ELDRIDGE, Judge.

We issued a writ of certiorari in this civil case to review the holding by the Court of Special Appeals that, when the jury returns a verdict, when the jury is polled, and when the parties and counsel are told that they are excused, the verdict is final and the court has no authority to submit an additional issue to the jury or request further deliberations on a matter even though the jury has remained in the box. An additional issue presented concerns the element of reliance in a fraud action.

I.

Allison Nails and Robert Bolton were employees of S & R, Inc., trading as VOB Auto Sales (the dealership). They served as Assistant Service Managers (ASMs), and as such, were each the leader of a team of four or five mechanics.

Nails was hired as an ASM in 1983 and, except for the period between April and September 1984, served in that position until 1987. Nails was originally hired on a commission basis. Bolton was first hired as an ASM in 1984, and he served as an ASM until July 1987. Bolton was initially paid a flat salary, but he testified at the trial in the instant case that, when he was hired, he was told that his compensation would be changed to a commission system sometime in the future. His compensation was changed to a commission basis in February 1985.

Nails and Bolton testified that the commission system was explained to them as follows: they were to be paid 5% of the gross dollar value of parts sold and services rendered by their respective teams, calculated on the basis of receipts instead of sales. Commissions were calculated on the basis of receipts so that an ASM would not receive a commission on a job until the dealership was paid; if the dealership never received its money, neither did the ASM.

Unknown to the ASMs, the dealership deducted 15% from the gross receipts before paying the 5% commission. The ASMs periodically noticed discrepancies between what they thought they should be paid and what they were actually paid. On several occasions, they asked management personnel to explain the perceived discrepancies. Management generally responded that there were outstanding bills, for which commissions were not yet due, and which the ASMs could not properly track. They were not told of the dealership's practice of deducting 15% from the gross receipts.

The ASMs contend that they first learned of the specific commission practice at a meeting with a new general manager of the dealership in 1987. Another ASM, similarly concerned about discrepancies between his anticipated commissions and his actual commissions, asked why his figures were wrong. The general manager responded that the ASM was failing to deduct 15% from the gross. This comment was apparently met with great surprise by all of the ASMs at the meeting, as this was the first time any of them had heard of this practice.

Nails and Bolton separately filed in the Circuit Court for Montgomery County complaints alleging breach of contract and fraud. The cases were consolidated and tried before a jury. The dealership moved for a directed verdict at the close of the plaintiffs' case, and, after it was denied, renewed the motion at the close of all the evidence. Each time the dealership argued that the plaintiffs had not proven all of the elements of fraud because they failed to prove reliance on the misrepresentation. ¹ The dealership also argued that, even if the plaintiffs had established fraud, they were not entitled to punitive damages because they had failed to prove that the dealership acted with actual or implied malice. ² The trial court reserved ruling on the defendant's motion for a directed verdict made at the close of the evidence, and the court proceeded to instruct the jury.

After giving the instructions, the court sent the jury to deliberate, providing the jury with two special verdict sheets, one for each plaintiff, containing eighteen questions per sheet. The verdict sheets were virtually identical to those proposed by the dealership. In addition to questions concerning each element of the contract and fraud counts, the verdict sheets included the following three questions bearing on the issue of punitive damages: (1) "Did the fraud arise out of a contractual relationship?" (2) "[D]o you find that defendant acted with actual malice?" and (3) "Do you find that defendant acted with implied malice?"

The special verdict sheets did not include a question concerning whether the fraud induced the plaintiffs to enter into their employment contracts. The plaintiffs' attorneys noticed the omission and, before the jury had been provided with the verdict sheets, brought it to the attention of the court. The plaintiffs' counsel explained to the court why the omission was significant, arguing that the omission effectively foreclosed part of their case. The court responded: "Right or wrong, I am not changing this. It is going in like it is. You can object to it all you want. I am sorry. To me, it doesn't make a bit of difference. If they come up with an award of punitive damages and answer no implied malice and no actual malice, you are not getting punitive damages, even if they award them." The defense attorney was silent throughout this exchange.

The court gave the jury the verdict sheets as planned. After deliberating at length, the jurors announced that they had reached their verdicts and returned to the box. The foreperson handed the verdict sheets to the clerk, who read them aloud. The jury answered the questions identically for both plaintiffs. It found, in answer to the questions on the special verdict sheets, that the defendant had knowingly misrepresented a past or present fact, with intent to defraud the plaintiffs. It further found that the plaintiffs justifiably relied on the defendant's misrepresentation and suffered damages as a result. The jury awarded Nails compensatory damages of $11,394.52 and awarded Bolton compensatory damages of $7,686.73. The jury found for the plaintiffs on their contract claims as well, awarding damages in the same amounts.

As to the punitive damages questions, the jury found that the fraud arose out of a contractual relationship. In response to the question whether the defendants acted with actual malice, the jury said "no." In answer to the question whether the defendants acted with implied malice, however, the jury answered "yes." With respect to the final part of the verdict sheets under the tort counts, the jury awarded punitive damages in the amounts of $100,000.00 for Nails and $100,000.00 for Bolton.

After the clerk read the verdict sheets aloud, the clerk then asked: "Ladies and gentlemen, your verdict as it will be recorded, is that the verdict of all twelve of you ladies and gentlemen?" The jurors responded affirmatively. The court then said: "Madame Clerk, will you please file the verdict sheets. Counsel and the parties, I will excuse you." The plaintiffs' attorney immediately asked if counsel could approach the bench. The jury remained in the box. During the ensuing bench conference, the plaintiffs' counsel said that the verdicts rendered were exactly the reason why he had believed that it was necessary to include an additional question on fraud inducing the contract. The court replied, "I see what you are saying." The plaintiffs' counsel then proposed to submit a supplemental verdict sheet, asking whether the fraud induced each plaintiff to enter into his or her employment contract. The plaintiffs' lawyer pointed out that the court had instructed the jury that it could award punitive damages if it found that the fraud arose out of the contract and the defendants acted with actual malice, or if the fraud induced the plaintiffs to enter into the contract and the defendants acted with implied malice. Therefore, the plaintiffs' attorney contended, the verdict as returned was an implicit finding that the fraud had induced the contract; submitting an additional question would clarify that implicit finding. Defense counsel objected to the jury being asked to return to the jury room to deliberate on the additional question.

The court decided to have the jury answer a supplemental verdict sheet. The jury found that both plaintiffs had been induced by fraud to enter into their employment contracts with the dealership. The court then excused the jury.

The dealership moved for judgment notwithstanding the verdict or for a new trial on all counts. At the hearing on this motion, the dealership argued that, because Bolton began his employment with the dealership on a salary basis, he could not have been induced to accept employment with the dealership by the misrepresentation as to its commission policy. Therefore, the dealership argued, any misrepresentation could not have induced Bolton to enter the contract but "arose out of the contract" within the meaning of H & R Block, Inc. v. Testerman, 275 Md. 36, 44-46, 338 A.2d 48, 53 (1975), and Wedeman v. City Chevrolet Co., 278 Md. 524, 528-530, 366 A.2d 7, 10-11 (1976). Consequently, the dealership contended, the jury's finding that the dealership had not acted with actual malice precluded Bolton from receiving punitive damages. The court agreed, holding that, as a matter of law, Bolton had to prove actual malice in order to recover...