This appeal, here by permission of the Appellate Division on a certified question, calls upon us to decide whether punitive damages may be allowed in a fraud and deceit action.
The complaint alleges that the plaintiff was induced to enter into a contract with the defendant Comet Press and pay it $1,380 by means of a number of false and fraudulent representations made by the individual defendants who are officers of Comet. The representations, as well as the respects in which they are false, are set forth at some length. The complaint also alleges that the misrepresentations were made "in the regular course of [defendants'] business, and as the basis of their business knowing that plaintiff would, as others similarly situated had in the past, act upon said representations". Consequently, the plaintiff seeks, in addition to compensatory damages of $1,380, punitive damages in the amount of $75,000.
The defendants moved to strike certain allegations of the complaint as irrelevant and prejudicial (Rules Civ. Prac., rule 103). The court at Special Term denied the motions in their
It was the conclusion of the Appellate Division that, if the plaintiff is able to prove (what in effect she alleges) that the defendants were engaged in carrying on "a virtually larcenous scheme to trap generally the unwary", a jury would be justified in granting punitive damages. We agree with that view.
Punitive or exemplary damages have been allowed in cases where the wrong complained of is morally culpable, or is actuated by evil and reprehensible motives, not only to punish the defendant but to deter him, as well as others who might otherwise be so prompted, from indulging in similar conduct in the future. (See, e.g., Toomey v. Farley, 2 N.Y.2d 71, 83; Krug v. Pitass, 162 N.Y. 154, 161; Hamilton v. Third Ave. R. R. Co., 53 N.Y. 25, 28; Oehlhof v. Solomon, 73 App. Div. 329, 333-334.)
Although they have been refused in the "ordinary" fraud and deceit case (Oehlhof v. Solomon, 73 App. Div. 329, 334, supra), we are persuaded that, on the basis of analogy, reason and principle, there may be a recovery of exemplary damages in fraud and deceit actions where the fraud, aimed at the public generally, is gross and involves high moral culpability. And this court has — in line with what appears to be the weight of authority (see, e.g., Bell v. Preferred Life Soc., 320 U.S. 238; Day v. Woodworth, 13 How. [54 U. S.] 363, 371; Greene v. Keithley, 86 F.2d 238, 241; Laughlin v. Hopkinson, 292 Ill. 80; Whitehead v. Allen, 63 N.M. 63; Saberton v. Greenwald, 146 Ohio St. 414; Craig v. Spitzer Motors, 109 Ohio App. 376; Ann., 165 A. L. R. 614) — sanctioned an award of such damages in a fraud and deceit case where the defendant's conduct evinced a high degree of moral turpitude and demonstrated such wanton dishonesty as to imply a criminal indifference to civil obligations. (See Kujek v. Goldman, 150 N.Y. 176, supra; see, also, Hamilton v. Third Ave. R. R. Co., 53 N.Y. 25, 28, supra.) In the Kujek case (150 N.Y. 176, supra), the plaintiff married Katy Moritz — a domestic employed in the family of the defendant, by whom she had become pregnant — in reliance upon the defendant's fraudulent representation that Katy was "a virtuous and respectable woman". After noting that the plaintiff had sustained actual damages, the court went on to hold that "as the wrong involved not only malice but moral turpitude also, in accordance with the analogies of the law upon the subject, the jury had the right to make the damages exemplary" (p. 179).
It may be difficult to formulate an all-inclusive rule or principle as to what is an appropriate case for the recovery of punitive damages, but it is our conclusion that the allegations of the complaint before us, if proved, would justify such an award. The pleading charges that defrauding the general public into entering publishing contracts, such as the one involved in the present case, was the very basis of the defendants' business. What is asserted is not an isolated transaction incident to an otherwise legitimate business, but a gross and wanton fraud upon the public. It follows, therefore, that the courts below were thoroughly justified in refusing to strike the allegations which pertain to punitive damages.
The orders of the Appellate Division should be affirmed, with costs, and the question certified as to each order answered in the affirmative.
In our view the rules for the allowance of punitive or exemplary damages should not be extended to the facts of this case. The very circumstance that plaintiff asks for compensatory damages of $1,380 and punitive
The rule is firmly established in this State that punitive or exemplary damages are not allowed in fraud cases (Lane v. Wilcox, 55 Barb. 615; Oehlhof v. Solomon, 73 App. Div. 329; Toho Bussan Kaisha, Ltd., v. American President Lines, 265 F.2d 418, 421 [C. A., 2d]; 1 Clark, New York Law of Damages, pp. 108-109). Those cases consider the subject carefully and at length, stating the particular instances where punitive damages are granted and others in which they are denied.
The case of Kujek v. Goldman (150 N.Y. 176), cited in the majority opinion, is not an exception to the denial of punitive damages in the ordinary fraud case. The best proof that they are not allowed is that damages of that nature are almost never demanded in instituting actions based on fraud. It is true that the majority opinion, following language adopted by the Appellate Division, aimed to distinguish the present appeal from the usual fraud case by purporting to limit punitive damages to what is alleged to have been "a virtually larcenous scheme to trap generally the unwary in which event punitive damages may be recoverable on the theory of wanton
The reasons against extending the coverage of punitive or exemplary damages are manifold, and many of them are patent under the facts of this case. McCormick on Damages (1935 ed., p. 276) says that it is probable that, in the framing of a model code of damages today, for use in a country without previous legal tradition, "the doctrine of exemplary damages would find no place." His reasons are the double jeopardy involved in subjecting a defendant to both criminal prosecution and to punishment in the form of civil punitive damages for the same act, in violation of the spirit, if not the letter, of the constitutional prohibitions against punishing a man twice for the same offense, and the limitation of exemplary damages "only by the caprice of jurors, subject to a review by the judges only in a rare case where the judge can find impropriety of motive or gross disproportion, and that this want of a guiding measure leads to excess and injustice." Other reasons against extending the coverage of punitive damages in tort cases are stated in a learned article (44 Harv. L. Rev., pp. 1173-1209). Among these objections are the difficulty of apportioning punitive damages where, as in this case, there are several defendants possibly guilty of moral turpitude in varying degrees, and also that in the prosecution of such actions the proper admonition of a defendant need not involve the payment of money in as large an amount as can be obtained by a plaintiff by inflaming the passions of the jury. The motivation of plaintiffs in prosecuting
For these reasons we consider that the law of punitive damage should be kept within its present boundaries, and not extended to cases to which it does not presently relate. The limitation on the extension of such coverage to fraud cases, suggested by the Appellate Division and adopted by the majority of this court, will, in practice, be difficult if not impossible to apply. In the ordinary case it is enough to try one lawsuit instead of a multiplicity of actions in order to determine to what extent a defendant is defrauding other members of the public besides the plaintiff.
For these reasons we vote to reverse the order appealed from, to grant the motions to strike out the allegations of the complaint asking for punitive or exemplary damages and to answer the question certified in the negative.
Orders affirmed, etc.