Todd v. Martinez Paint & Body, Inc.

• Decision Date: 18 May 1999
• Docket Number: No. A99A0190.,A99A0190.
• Citation: Todd v. Martinez Paint & Body, Inc., 517 S.E.2d 844, 238 Ga. App. 128 (Ga. App. 1999)
• Parties: TODD v. MARTINEZ PAINT & BODY, INC. et al.
• Court: Georgia Court of Appeals

517 S.E.2d 844

238 Ga. App. 128

TODD v. MARTINEZ PAINT & BODY, INC. et al.

No. A99A0190.

Court of Appeals of Georgia.

May 18, 1999.

John P. Batson, Augusta, for appellant.

Fleming, Blanchard, Jackson & Durham, James G. Blanchard, Jr., J. David Roper, Martinez, for appellees.

ANDREWS, Judge.

William F. Todd sued Martinez Paint & Body Shop, Inc. and its president, Rubert R. Marshall, for the alleged breach of an agreement employing Todd to manage the corporation's paint and body business. In a counterclaim, Martinez Paint & Body alleged that Todd fraudulently induced it to enter into the employment agreement by misrepresenting his qualifications and business reputation. Marshall also counterclaimed alleging that Todd fraudulently altered a lease under which Marshall rented space adjacent to Martinez Paint & Body to an automotive repair business of which Todd was president. The case was tried before a jury. The jury rendered a verdict in favor of Martinez Paint & Body and Marshall on Todd's claim for breach of contract. On Martinez Paint & Body's counterclaim, the jury rendered a verdict in favor of Martinez awarding $100,000 in general damages and $135,000 in punitive damages. After the close of the evidence, the trial court directed a verdict in favor of Todd on Marshall's counterclaim. Todd appeals from the judgment entered on both verdicts in favor of Martinez Paint & Body.

1. Todd claims that his motion for a new trial should have been granted on Martinez Paint & Body's counterclaim against him alleging that he misrepresented his qualifications and business reputation and thereby fraudulently induced it to enter into an agreement employing him as manager of its paint and body business. Todd contends that a merger clause in the employment agreement precluded the fraud claim, and that there was no evidence to show that Martinez Paint & Body justifiably relied on the misrepresentations, an essential element of the fraud claim.

In alleging fraud in the inducement in its counterclaim, Martinez Paint & Body sought rescission of the employment agreement and offered to restore any benefit it had received under the agreement. So contrary to Todd's contention, Martinez Paint & Body was not prevented by the merger clause in the agreement from attempting to prove in its counterclaim that it relied on antecedent oral misrepresentations outside the written agreement. City Dodge v. Gardner, 232 Ga. 766, 769-770, 208 S.E.2d 794 (1974); Potomac Leasing Co. v. Thrasher, 181 Ga.App. 883, 886, 354 S.E.2d 210 (1987). In order to prove its claim for fraudulent inducement, Martinez Paint & Body was required to show: (1) false representations made by Todd; (2) that Todd knew the representations were false; (3) that Todd intended to deceive Martinez; (4) that Martinez justifiably relied upon the representations; and (5) damages to Martinez proximately caused by the representations. City Dodge, 232 Ga. at 769-770, n. 1,208 S.E.2d 794.

As to the element of justifiable reliance, it is not sufficient to show that false representations were knowingly made with an intent to deceive—there must also be proof that due care was exercised to discover the fraud. Charter Med. Mgmt. Co. v. Ware Manor, Inc., 159 Ga.App. 378, 380, 283 S.E.2d 330 (1981). "Misrepresentations are not actionable unless the complaining party was justified in relying thereon in the exercise of common prudence and diligence." (Citation and punctuation omitted.) Id. at 383, 283 S.E.2d 330. Moreover, a party is not justified in relying on and assuming to be true representations consisting of mere expressions of opinion, hope, expectation, puffing, and the like; rather, representations of this nature must be inquired into and examined to ascertain the truth. Id.; Wilkinson v. Walker, 143 Ga.App. 838, 839, 240 S.E.2d 210 (1977).

On appeal, the verdict and judgment in favor of Martinez Paint & Body must be affirmed if there is any evidence to support it, and the evidence must be construed with every inference and presumption in favor of upholding the verdict. Dept. of Transp. v. Mikell, 229 Ga.App. 54-55, 493 S.E.2d 219 (1997).

The counterclaim was based on evidence of representations made by Todd to Marshall. Marshall testified that in August or September 1991, he was in the process of building a paint and body shop and intended to hire Phil Brock to manage it for him. Marshall said Todd approached him saying he had two wreckers for sale. Marshall, who remembered Todd's name because they had gone to school together, began to question Todd about what he had been doing over the years. Todd replied that he lost everything he had in a lawsuit over a business where people had tricked him into signing some papers. Marshall asked him what else he had done, and Todd said he had worked for a company called "Go Between" for several years and that they had let him go. Marshall persisted, asking what happened after that, and Todd related that he had worked for an insurance company for several years and that they had also let him go. Marshall then asked, "[H]ow did you come by these wreckers?" Todd replied that he had gone into the paint and body business about three years ago in Martinez. Marshall asked Todd to tell him what happened in the business. Todd replied that "the first year he was in business he did fine," the second year "he did pretty good," and the third year "his business had really boomed" and "he had outgrown the place." Marshall testified that Todd told him he thereafter went into another paint and body business with a partner for about six months, but he lost all his money because the partner cheated him. Todd told Marshall he needed to sell the wreckers because he needed the money and that he was "looking for a job or something to do." Marshall told Todd he needed to check with Brock to see if he was interested in buying the wreckers and asked Todd to contact him in a few days. After contacting Brock, Marshall not only agreed to buy the wreckers, but also hired Todd to operate the wreckers.

In support of its fraudulent inducement claim, Martinez Paint & Body produced evidence that the total amount of time Todd had previously been in the paint and body business was not three years but only about nine or ten months.

After Todd had successfully operated the wreckers for about three or four weeks, Marshall testified that Todd approached him and suggested that he let him run the paint and body shop, saying "I got all this experience." Marshall did not initially agree to this suggestion, but after learning that Brock was no longer available to run the paint and body shop, Marshall testified he was getting desperate. At that point, he told Todd: "Well, if you've had three years experience and you know what you're doing.... You got any references?" Todd told Marshall to talk to Charlie Allen (Marshall's first cousin) and Bill Bailey. Marshall testified that, after talking with Allen and Bailey around November 1991, he decided "to go into business with [Todd]."

Thereafter, a corporation named Martinez Paint & Body, Inc. was created (owned 75 percent by Marshall and 25 percent by Todd's wife) for the purpose of operating a paint and body business. Marshall knew that Todd's 25 percent ownership was put in the name of Todd's wife because Todd had been sued and had been in a construction business that had some problems. Marshall testified that the name Martinez Paint & Body was selected because it had been the name of a previous paint and body shop run by Todd, and Todd said the business had a good name. On December 20, 1991, Martinez Paint & Body, Inc. entered into an agreement employing Todd as the manager of the corporation's paint and body business. On the same day, Marshall, who owned the building which was being constructed to house the business, leased space in the building to Martinez Paint & Body. The evidence also shows that Marshall and Todd agreed to joint ownership in an automotive repair business to be located in the building.

Marshall testified that around mid-February 1992, he began to have concerns about Todd's ability to manage a paint and body shop because of reports he was getting on Todd's bad reputation and his inability to run a paint and body shop. At this point, the paint and body shop had still not opened for business. Marshall testified that, as a result of his concerns, he and Todd made a new agreement superseding the prior agreement in which he gave all of his interest in the automotive repair business to Todd, and Todd gave him all of the interest in Martinez Paint & Body, Inc. Marshall said it was his belief that, if Todd retained his interest in the paint and body business, "nobody else would touch it," and that it was his intent to "lease [the...