Ringsby Truck Lines, Inc. v. Beardsley

• Decision Date: 04 May 1964
• Docket Number: No. 17539.,17539.
• Citation: 331 F.2d 14
• Parties: RINGSBY TRUCK LINES, INC., Appellant, v. Laurence J. BEARDSLEY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

331 F.2d 14 (1964)

RINGSBY TRUCK LINES, INC., Appellant, v. Laurence J. BEARDSLEY, Appellee.

No. 17539.

United States Court of Appeals Eighth Circuit.

May 4, 1964.

Tom B. Kretsinger and Beverly Baker Boyles, of Kretsinger, Kretsinger & Edell, Kansas City, Mo., Alvin J. Meiklejohn, Jr., of Jones, Meiklejohn, Kilroy, Kehl & Lyons, Denver, Colo., for appellant.

Carl E. Laurent, Kansas City, Mo., Richard L. White, Kansas City, Mo., for appellee.

Before VAN OOSTERHOUT, RIDGE and MEHAFFY, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

The threshold question presented by this appeal is whether the plaintiff Beardsley has stated a cause of action against the defendant Ringsby Truck Lines, Inc., (Ringsby) which satisfies the jurisdictional requirements of 28 U.S.C.A. § 1332 as amended in 1958. It is conceded that diversity of citizenship exists between the parties. Thus the issue narrows to consideration of the question of whether the $10,000 jurisdictional amount is met. Plaintiff in his complaint alleges $6,000 actual damages. In brief he claims that at the trial he proved additional actual damages but does not claim that he has established actual damages in excess of $9,000. Exemplary damages of $25,000 are claimed. Hence jurisdiction is established only if exemplary damages are recoverable on the cause of action pleaded.

Defendant filed a timely motion to strike the claim for exemplary damages and to dismiss for want of jurisdiction. Such motion was overruled. Defendant renewed the jurisdictional attack by answer and persisted in such position throughout the trial. Jurisdiction was again challenged in motion for judgment n. o. v. which motion was overruled.

The case was submitted to the jury as an action for deceit. Judgment was entered upon a jury award for $2295.96 actual damages and $1650 punitive damages. This appeal followed.

The sufficiency of the printed record has been challenged. We have elected to resort to the original record pursuant to our Rule 8(f) and have read the entire record.

Defendant in its brief states:

"One cannot deny that fraud (which only for purposes of present argument, appellant will admit) is the operative fact but it must be remembered that this fraud can form the basis of both an action in rescission as well as an action in tort. * * * While the District Court construed this to be an action in tort for deceit, appellant submits that such a construction was erroneous and that it logically follows from the evidence at the trial, as well as from the allegations of the complaint, that appellee had chosen, at the time of discovery of the fraud, to pursue the remedy of rescission."

We shall accept defendant's concession of fraud as limited which obviates the necessity for a detailed discussion of the fraud issue.

The court, after a full discussion with counsel and apparently with their acquiescence, tried this case upon the basis that Colorado law controls. At least some of the material transactions occurred in Colorado. The lease Exhibit 1, which is made a part of the lease Exhibit 2 by reference, states its provisions shall be interpreted under the laws of Colorado. No one is here challenging the court's determination that Colorado law controls.

Under Colorado law, it is established beyond dispute that no recovery of exemplary damages is allowed in an action for rescission of a fraudulently induced transaction. Hart v. Ben F. Brack Oil Co., D.Colo., 201 F.Supp. 465; Aaberg v. H. A. Harman Co., 144 Colo. 579, 358 P.2d 601; Wheeler v. Wilkin, 98 Colo. 568, 58 P.2d 1223.

Hence, if defendant is correct in its contention that this is an action for rescission, exemplary damages would not be allowable and the $10,000 jurisdictional amount is not established. Thus the vital question is whether this is a rescission action or a deceit action.

Generally the question of the presence of the jurisdictional amount is to be determined by the allegations of the complaint, provided the allegations of the complaint are made in good faith. Stewart v. Shanahan, 8 Cir., 277 F.2d 233, 236.

Where the amount in controversy is challenged in an appropriate manner, the burden is on the plaintiff to establish the jurisdictional amount and if this burden is not met, the complaint should be dismissed for want of jurisdiction. KVOS, Inc. v. Associated Press, 299 U. S. 269, 279-280, 57 S.Ct. 197, 81 L.Ed. 183; McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135; Federated Mut. Implement & Hardware Ins. Co. v. Steinheider, 8 Cir., 268 F.2d 734, 737-738.

In our present case, jurisdiction has been consistently challenged by the defendant. The motion filed before answer specifically raises the issue that exemplary damages are not allowable in the action pleaded and that without exemplary damages, the jurisdictional amount is not reached.

We will summarize the facts relevant to the jurisdiction issue. Defendant operates its interstate trucking business with tractors and trailers leased by it from its drivers. The drivers were required to provide the tractors and trailers they operated but were not required to purchase or lease them from the defendant. Plaintiff purchased a tractor from outsiders and leased a trailer from Interstate Express Car Corp. Such company's stock was owned by Mr. Ringsby as well as that of the defendant, and for purposes of this appeal we may treat the lease as having been made by the defendant. The lease of the trailer to the plaintiff, Exhibit 2, is in writing and provides that plaintiff shall pay as rent therefor 15% of the gross revenue earned which sum is to be deducted from sums due the plaintiff under Exhibit 1. Plaintiff, by written lease Exhibit 1, leased the tractor and the trailer (the same trailer covered by Exhibit 2) to the defendant. The lease provided in detail for the amount to be paid to plaintiff and the manner of payment. No controversy exists with respect to the validity or terms of either of the leases just described.

The dispute between the parties relates to an agreement giving the plaintiff a right to purchase the trailer covered by Exhibit 2. It is agreed that plaintiff is entitled to an option to purchase the leased trailer at its appraised value and that rental payments made on the trailer are to be credited upon the purchase price. The agreement with respect to the option is oral. Plaintiff's claim is that he was induced to enter into the lease of the trailer, Exhibit 2, by fraudulent representations with respect to the appraised value of the trailer.

Paragraph 4 of the complaint states defendant induced plaintiff to lease the trailer from the defendant by fraudulent representations that plaintiff would have an option to purchase the trailer for $9,500 with rentals paid credited upon the purchase price. The elements of fraud are pleaded and the case was submitted to the jury on the basis of a represented option price of $10,200.¹

It is not entirely clear from the complaint whether plaintiff is pleading a cause of action in deceit or rescission as the complaint contains allegations pointing both ways. Paragraph 6 states by way of conclusion that the plaintiff exercised the option to purchase the trailer for the agreed price less rentals paid and that the defendant refused to sell. No payment or tender is alleged. Moreover, plaintiff is not seeking any relief by way of specific performance or otherwise to enforce the option. On the contrary, as hereinafter set out, plaintiff had voluntarily surrendered the subject matter of the option when plaintiff had rescinded and terminated the lease to which the option was an appendix some fourteen months before commencing this action.

Paragraph 7 of the complaint reads:

"That Plaintiff, thereupon returned the semi-trailer to Defendant and demanded the return of the amount of money already paid to Defendant by Plaintiff for the purchase of the semi-trailer, which Defendant failed and refused to repay."

Paragraph 9 asserts that the plaintiff by reliance upon the fraudulent representations has sustained $6,000 in damages. Paragraph 10 asserts a claim for $25,000 exemplary damages.

Upon the basis of the complaint as a whole, we believe the action to be one for rescission. 37 C.J.S. Fraud § 65 states:

"One who has been injured by fraud may elect to accept the situation created by the fraud and seek to recover his damages or he may elect to repudiate the transaction and seek to be placed in statu quo. As a general rule, however, the defrauded party cannot both rescind and maintain an action for deceit. If he elects to rescind the contract he may recover what he has parted with under it but cannot recover damages for the fraud. The latter rule as applied to a perfected rescission of the contract is based not alone on the principle that the party has elected his remedy, but also on the fact that he has sustained no damage. The election must be promptly made, and when the election is once made it is final and conclusive."

The laws generally, including those of Colorado and Missouri, are in accord with the foregoing rule. Brown v. Alkire, 10 Cir., 295 F.2d 411; Aaberg v. H. A. Harman Co., supra; Wheeler v. Wilkin, supra; Tisdel v. Central Savings Bank & Trust Co., 90 Colo. 114, 6 P.2d 912, 917-918; Burton v. Auffenberg, Mo.App., 357 S.W.2d 218, 222; Dowd v. Lake Sites, 365 Mo. 83, 276 S.W.2d 108, 112; Nickerson v. Whalen, Mo.App., 253 S.W.2d 502, 507; Brown v. South Joplin Lead & Zinc Mining Co., 231 Mo. 166, 132 S.W. 693.

The Colorado court in Tisdel v. Central Savings Bank & Trust Co., supra, pp. 917-918 of 6 P.2d, states:

"When one is induced through false and fraudulent representations to enter into an agreement, upon discovery thereof, he has an election to either rescind, in which event he must tender back that which he has received, or he may affirm the agreement, and maintain his action in damages for deceit, but his election must be promptly made, and, when once

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