Padgett v. Hughes

• Decision Date: 04 November 1988
• Citation: 535 So.2d 140
• Parties: Hixon PADGETT v. Raymond L. HUGHES and Mary K. Hughes. 87-524.
• Court: Alabama Supreme Court

Page 140

535 So.2d 140

Hixon PADGETT v. Raymond L. HUGHES and Mary K. Hughes.

87-524.

Supreme Court of Alabama.

Nov. 4, 1988.

Charles A. McGee, Fort Payne, for appellant.

David C. Wear of Wear & Wear, Fort Payne, for appellees.

TORBERT, Chief Justice.

Hixon Padgett appeals from a judgment in favor of the defendants, appellees herein, Raymond L. Hughes and Mary K. Hughes, entered notwithstanding a jury verdict against them. The trial court ruled that if the JNOV was reversed, the Hugheses would be entitled to a new trial. See Ala R.Civ.P. 50(c)(1).

Herman Gilreath owned and operated a restaurant in Henagar, Alabama. In February 1983, Gilreath bought the restaurant from Mr. and Mrs. Hughes and executed a purchase money mortgage to them to secure the balance of the purchase price. Beginning in late 1983, and continuing through May 1986, no fewer than ten tax liens were filed on the restaurant property by the federal, state, and municipal governments.

In June 1985, Hixon Padgett, not knowing of the liens, approached Gilreath with the idea of purchasing the restaurant. Gilreath expressed an interest in selling, and he and Padgett then met with Mr. and Mrs. Hughes to discuss the possibility of Padgett's assuming Gilreath's mortgage. Mr. and Mrs. Hughes consented. Mr. Hughes then advised Padgett that the title to the property was clear, but Padgett nonetheless requested that his own lawyer perform a title search.

On June 19, 1985, prior to obtaining the results of the title search, Padgett tendered a $2,500 down payment to Gilreath upon executing an option to purchase, and went into possession of the restaurant. By July 1, 1985, Padgett had learned of the tax liens. On that date, however, during a meeting with his lawyer and with Mr. and Mrs. Hughes, Padgett executed an agreement whereby he assumed Gilreath's mortgage. The Gilreath mortgage to Mr. and Mrs. Hughes contained provisions that would permit foreclosure in the event that taxes assessed against the property went unpaid or liens attached to it went unsatisfied.

By the time he entered the assumption agreement, Padgett had already tendered a down payment to Gilreath and had begun making improvements. He continued to keep the mortgage payments current. Padgett testified that at the meeting where the mortgage assumption agreement was executed, Mr. Hughes stated that he would foreclose the mortgage so that Padgett could receive clear, unencumbered title when the liens were satisfied. Mr. Hughes equivocated at trial when asked if he ever intended to foreclose. Mr. Hughes did testify, however, that it had been only in the days immediately prior to trial that he had discussed foreclosure with his attorney. Hughes also testified that he "did not know where [he stood] in relation to foreclosing or paying off these liens." Hughes testified that, because it was current, he had no idea whether he could foreclose on the mortgage, or whether he could get unencumbered title to Padgett.

Padgett's lawsuit asserted claims against Mr. and Mrs. Hughes and Herman Gilreath. Gilreath was served with process, but failed to answer; Padgett obtained a default judgment against him. The sole issue submitted to the jury was whether Mr. and Mrs. Hughes had perpetrated a promissory fraud on Padgett. The jury returned a verdict against Mr. and Mrs. Hughes, each of whom timely moved for JNOV, or, in the alternative, new trial. The trial court granted each JNOV motion on the grounds that Padgett had failed to prove an intent not to perform the promise of foreclosure when that promise was made and that Padgett's reliance on any of the misrepresentations made to him by Mr. and Mrs. Hughes was unreasonable. Padgett appeals from that judgment.

We note at the outset that the standard of review in this case is a narrow one. We recounted this standard in King Mines Resort, Inc. v. Malachi Mining & Minerals, Inc., 518 So.2d 714, 715 (Ala.1987):

"The standard of judicial review for testing a motion for directed verdict is identical to that for testing a motion for J.N.O.V. Evidence sufficient to take the case to a jury as against a motion for directed verdict is likewise sufficient to withstand a motion for J.N.O.V. Citing 5A Moore's Federal Practice § 50.07, this Court in Hanson v. Couch, 360 So.2d 942, 944 (Ala.1978), stated:

" 'A motion for judgment notwithstanding the verdict tests the sufficiency of the evidence in the same way as does the motion for directed verdict at the close of all the evidence [Rule 50, A.R.Civ.P.]. Committee Comments. Granting the motion for judgment notwithstanding the verdict says, without weighing the credibility of the evidence, there can be but one reasonable conclusion from the evidence as to the proper judgment.' "

(Quoting Casey v. Jones, 410 So.2d 5, 7 (Ala.1981)). The sufficiency-of-the-evidence standard applicable to this case is the scintilla rule; this action was filed prior to the effective date of the substantial evidence rule. One of the questions thus presented is whether there was a scintilla of evidence of promissory fraud for that claim to go to the jury. Russellville Production Credit Ass'n v. Frost, 484 So.2d 1084, 1085 (Ala.1986). Thus, if there is a scintilla of evidence in support of Padgett's claim, the issue was for the jury's resolution.

The elements of fraud are (1) a false representation (2) of a material existing fact (3) reasonably relied upon by the plaintiff (4) who suffered damage as a proximate consequence of the misrepresentation. To prevail on a promissory fraud claim such as that at issue here, that is, one based upon a promise to act or not to act in the future, two additional elements must be satisfied: (5) proof that at the time of the misrepresentation, the defendant had the intention not to perform the act promised, and (6) proof that the defendant had an intent to deceive. See Russellville Production Credit Ass'n v. Frost, 484 So.2d at 1085-87. Furthermore, "[t]he failure to perform a promised act is not in itself evidence of intent to deceive at the time a promise is made. If it were, the mere breach of a contract would be tantamount to fraud." Id. at 1086 (citation omitted).

The JNOV was entered on the basis that Padgett had failed to produce a scintilla of evidence tending to prove that Mr. or Mrs. Hughes, at the time the promise was made, intended not to perform their promise, and on the basis that Padgett's reliance on the misrepresentation was unreasonable. ¹ Clearly, the misrepresentation made the subject of this lawsuit was that foreclosure would be initiated in an effort to remove the tax liens from the property. We must analyze the judgment separately as to each defendant.

We have examined the record and find no evidence that Mrs. Hughes ever promised to foreclose on the property. At the most, the evidence indicates that she was present when Mr. Hughes made that promise and scolded Padgett on a few occasions when the mortgage payments were...