Stewart v. Potter.

• Decision Date: 03 August 1940
• Docket Number: No. 4559.,4559.
• Citation: 44 N.M. 460,104 P.2d 736
• Parties: STEWARTv.POTTER.
• Court: New Mexico Supreme Court

44 N.M. 460

104 P.2d 736

STEWART

v.POTTER.

No. 4559.

Supreme Court of New Mexico.

Aug. 3, 1940.

Appeal from District Court, Chaves County; Bryan G. Johnson, Judge.

Action by V. O. Stewart against M. M. Potter to recover damages for alleged false and fraudulent representations made in the sale of an automobile. From a judgment for plaintiff, defendant appeals.

Judgment modified and as modified affirmed.

In action for damages for alleged false and fraudulent representations made in the sale of an automobile to plaintiff by defendant's agent, evidence showed that though defendant did not talk with plaintiff during negotiations or know of any misrepresentations of agent, defendant knew of the sale of a repossessed automobile and that it was sold as a new automobile.

Lake J. Frazier, of Roswell, for appellant.

G. T. Watts and James T. Jennings, both of Roswell, for appellee.

MABRY, Justice.

Appellee Stewart recovered from appellant Potter a judgment in the sum of $200 actual and $100 exemplary damages upon suit for alleged false and fraudulent representations made in the sale to appellee of an automobile, and Potter, defendant below, appeals.

Appellee claimed he was given a used and repossessed car when he thought and was advised by the agent of appellant that he was purchasing a new one. The trial court fixed actual damages at $200 upon the theory that such was the difference in value between a new car and one which had been driven from 1500 to 1700 miles and repossessed from a former purchaser.

There is no dispute of the fact that the car actually had been driven such distance and that it had previously been sold and thereafter repossessed by appellant. The questions presented by the appeal are: (1) Was the $200 item of actual damages justified by the evidence? (2) Should the appellant, under the circumstances, have been held liable for any fraudulent acts or misrepresentations of the salesman? and (3) Did the court in any event, err in awarding punitive damages?

[1] Under the first point appellant contends that the evidence does not support the court's findings that the car in question was sold as a new car. He claims that appellee knew the car had been driven some 200 miles, and to that extent, at least, the car was not new and that no proper measure of damages was employed by witnesses in fixing the difference in price between a car that had been driven some 200 miles as appellee understood to be the case with this one, and one which had in fact been driven some 1700 miles.

We are not intrigued with such hair splitting distinctions, made to discredit evidence of this character. We find that there is substantial evidence to support the trial court's findings that the car was sold as a new and unused car, except that, as was the custom in many cases, the car was driven from the distribution place at El Paso to Roswell, the appellant's place of business.

Appellee, as purchaser, knew of this and knew that it would account for the mileage that was shown by the speedometer at the time he took the car out for demonstration. It is obvious that the parties treated this mileage as not defeating the vehicle's characterization as a new car; and, it cannot be said that the witness (appraising the depreciation and fixing the difference between a new car and one sold and then repossessed, and which, in the meantime, had been used for two months and had been driven some 1700 miles by the defaulting first owner) did or would make any distinction in fixing value between a car shipped by freight or brought on its own power a distance of some 200 miles and at all times under the control of the dealer.

The testimony shows that about $200 is the amount of depreciation a new car of like value suffers when used as this one had been, and repossessed. The fact that no deduction was made in the calculation for the miles appellee knew the car had traveled in transport from El Paso is unimportant. At most, calculations bearing upon depreciation for use and repossession as here shown are approximate only. The witness undertook to vouch for no more.

Clearly, here we have a fraud practiced upon appellee who intended to purchase a new automobile and who was told he was getting it. Appellant would now defeat recovery of compensatory damages for the sole reason that there may be some slight uncertainty as to whether the exactly correct amount of depreciation was shown by the evidence and fixed by the court. We said in the recent case of Nichols v. Anderson, 43 N.M. 296, 301, 92 P.2d 781, 784, quoting with approval language from 15 Am.Jur., par. 23, p. 414: “There is a clear distinction between the measure of proof necessary to establish the fact that the plaintiff has sustained some damage and the measure of proof necessary to enable the jury to fix the amount. Formerly the tendency was to restrict the recovery to such matters as were susceptible of having attached to them an exact pecuniary value, but it is now generally held that the uncertainty which prevents a recovery is uncertainty as to the fact of the damage, and not as to its amount; and that where it is certain that damage has resulted mere uncertainty as to the amount will not preclude the right of recovery.”

We said also in that case that though “the basis for a rational estimate” might be scanty, and damages for breach of contract under certain circumstances “may not be computed with exactness” an award would nevertheless be made. In that case, which involved a wilful breach of contract, but not fraud, we further observed, employing language used in an earlier case, Gonzales v. Rivera, 37 N.M. 562, 25 P.2d 802, 803: “*** We deem this such a case of wrongdoing that sound policy requires that the risk of estimating the damages too high or too low should be thrown upon appellants.”

The Nichols case involved the question of fixing damages, if any, resulting from a former employee of a laundry and dry-cleaning establishment quitting his employment, and, contrary to contract, engaging in business in competition with his former employer and soliciting from such employer's customers. The Gonzales case had to do with fixing damages for breach of contract by one who had sold his business agreeing not to engage in a competing business.

If for simple, though wilful, breach of contract unattended by the more vicious element of deceit and misrepresentation, we decline to quibble over the question of whether the exact damages suffered have been clearly established, we should experience no misgiving in sustaining the findings of a trial court under circumstances like those here presented, where wilful fraud and deceit are established.

We will not permit such slight uncertainty, if any, as to the amount of damage in a case of this character to disturb the findings and judgment of the trial court.

[2] The rule is universal that: “If false representations of material facts are made in the sale or purchase of a motor vehicle, the innocent party may be entitled to rescind the sale or to recover damages on the theory of fraud and deceit.” Vol. 11-12, Huddy Cyclopedia of Automobile Law, page 320, Sec. 234.

Appellant contends that appellee is entitled to recover only the difference between the actual value of the property obtained in the transaction and the amount or value of the consideration paid. This is in line with the rule that in such cases the purchaser is entitled to recover only the amount of loss actually suffered by the fraud or misrepresentation. This is known as the “out of pocket” rule, as distinguished from the “benefit of bargain” rule more generally adhered to. Appellee relies upon the latter rule and the lower court likewise properly adopted it in computing damages.

[3][4] There are two clearly conflicting lines of decisions upon this question as is shown by a rather full annotation to be found in 124 A.L.R. 37; but it is clear, as the note writer there observes, that the great weight of authority sustains the general rule that the defrauded purchaser may recover the difference between the real and the represented value of the property, regardless of the fact that the actual loss suffered might have been less. We see no reason to depart from the majority rule. It appears to us to be founded upon the better reason, particularly as it relates to cases of fraud and deceit. It was stated in the case of McDonald v. McNeil, 1918, 92 Vt. 356, 104 A. 337, 339, which follows the majority rule: “Courts holding to the other rule say that a plaintiff should not be allowed to speculate out of the defendant's wrongs; to that we reply, Nor should a defendant be allowed to gamble on it.”

The cases supporting this view are fortified with an abundance of persuasive logic. We need not collect or further refer to cases supporting this view. We follow the “benefit of bargain” rule with no misgivings as to its appropriateness here or to the soundness of the reason which supports it generally.

[5][6] In the assignment and point which charges that the court erred in holding the appellant responsible for the acts of his salesman upon any account, we likewise find no merit. Ordinarily the principal is liable for the acts of his agent when acting within the scope of the agent's authority. There need be no citation of authority upon this point. The agent here had full authority to sell the car and therefore to make representations as to its quality and condition. There seems to be no doubt of this. This being true, the principal is bound by the agent's representations. 2 Berry on Automobiles, 1412, 1413. Even as to the representation that the second-hand car sold was a new one. Anticich v. Motor Car Inn Garage, 124 Miss. 822, 87 So. 279.

[7][8] We have in addition to the representation made by the salesman, the acts of an office employee of appellant who made out the statement of account showing appellee charged with a new car and the new car price. True, appellant is not...