BIG THREE MOTORS, INC. v. SMITH

BRADLEY, Judge.

This is an appeal from a jury verdict of $10,000 for the plaintiff against Big Three Motors in an action for breach of warranty of title and false representation.

The controversy in this case revolves around the ownership and possession of a brown and white 1968 Buick Special automobile. In February 1973 Diamond Motors sold the Buick to Henry Alexander and retained a lien against the vehicle in favor of the Pearl Finance Company. The lien was recorded with the Probate Court of Mobile County. Alexander filed for bankruptcy subsequent to his purchase of the Buick and sold the vehicle to J. C. Mason while in bankruptcy. Mason was aware that Alexander was in straight bankruptcy, but testified that he thought that meant the car was clear of any claims. Mason was a used car salesman at Big Three Motors although he testified that he purchased the Buick for himself after the owners of Big Three Motors refused to buy the vehicle. He also testified that he was allowed by Big Three Motors to buy and sell automobiles of his own on the Big Three Motors lot based on his long-term relationship with the company. In these type transactions, Mason would split the profit with Big Three Motors.

On August 23, 1974 the plaintiff, Geraldine Smith, and a friend, James Bradley, went to the used automobile lot of Big Three Motors looking for an automobile to buy. J. C. Mason approached them upon their entry onto the lot and asked if they were looking for a car and they replied that they were. After determining their price range to be about $250, Mason showed them a 1968 Buick. Smith test drove the Buick and decided to buy it.

Mason then escorted Smith to the office at Big Three Motors and a secretary employed by Big Three Motors prepared a bill of sale and other documents necessary for Smith to obtain an automobile tag. At this time the plaintiff gave Mason $256.25 as cash payment for the Buick, and he handed it over to the secretary who, in turn, placed it in the cash drawer. This cash payment was deposited in Big Three Motors' bank account. The plaintiff was provided with a receipt for her cash payment, a bill of sale, and a purchase order, all of which were signed by the secretary for Big Three Motors. The bill of sale and purchase order were on Big Three Motors' stationery and at no time was the plaintiff informed that the automobile she was buying was not owned by Big Three Motors. The bill of sale accepted by the plaintiff contains the following statement:

The plaintiff made some repairs to the vehicle and retained it for nine months until Pearl Finance repossessed the vehicle to enforce their lien. After the plaintiff determined what had happened to the vehicle, she contacted Fred Roan, Sr., president of Big Three Motors, and complained. The plaintiff, Mason, and Roan had several discussions aimed at settling the matter. However, these efforts were unsuccessful.

The plaintiff filed suit on July 31, 1974 against Big Three Motors and several other parties who have since been dismissed from this suit. The complaint sought compensatory and punitive damages from Big Three Motors for breach of warranty of title and false representation. Big Three Motors filed a third party complaint against J. C. Mason on March 25, 1976, with leave of court.

The defendant, Big Three Motors, filed two separate motions for directed verdict during the trial. The first sought a directed verdict against the third party defendant, J. C. Mason. The trial court denied this motion, and the defendant does not contest this ruling on appeal. Big Three Motors filed a second motion for directed verdict at the conclusion of the plaintiff's case on each count of the complaint and on plaintiff's claim for punitive damages. This motion was also denied. The defendant, Big Three Motors, refiled the motions for directed verdict at the conclusion of all testimony and again the motions were denied.

The trial court instructed the jury on breach of contract and warranty of title and three separate aspects of legal fraud: willful misrepresentation, reckless misrepresentation, and mistaken misrepresentation. The jury rendered a verdict against the defendant, Big Three Motors, in favor of the plaintiff for $10,000, and in favor of J. C. Mason on the third party complaint. Thereafter Big Three Motors filed a motion for a judgment notwithstanding the verdict or, in the alternative, for a new trial. The trial court denied this motion and this appeal followed.

The only issue presented to this court by the defendant is whether there was a scintilla of evidence to take the case to the jury on the issue of punitive damages.

In Winn-Dixie Montgomery, Inc. v. Henderson, Ala., 371 So.2d 899 (1979), which appears to be the latest pronouncement on the subject of punitive damages in a fraud case, the Alabama Supreme Court said:

This same rule was followed in Proctor Agency, Inc. v. Anderson, Ala., 358 So.2d 164 (1978). However, in International Resorts, Inc. v. Lambert, Ala., 350 So.2d 391 (1977), the court had this to say:

The court also held that the evidence supported a finding that misrepresentations had been made, whether they were with an intent to deceive or were made heedlessly and without any regard to the consequences, and the court upheld the award of punitive damages.

The Lambert case implies that the "intent to deceive" rule is not the only one; however, we feel compelled to follow the rule enunciated in the Henderson case because it is, to the best of our knowledge, the latest decision on the subject. See Berry v. City of Huntsville, 288 Ala. 731, 259 So.2d 276 (1972).

Applying the Henderson rule to the case at bar, we conclude that neither Mason, nor through him, Big Three Motors had actual knowledge that someone else had a lien on the vehicle sold to plaintiff and that they could not give good title. Mason testified that he knew the seller of the vehicle was in bankruptcy but that he thought this meant that the title to the vehicle was free and clear of any claims.

The basis of the fraud charge in the instant case arose out of the absence of title in either Big Three Motors or Mason, not the failure of the title as between Big Three Motors and its agent, Mason. As we view the situation, whether title was represented to be in Big Three Motors or in Mason had nothing to do with plaintiff's loss.

Based on the evidence we cannot say that Big Three Motors or its agent, Mason, had the requisite knowledge of the falsity of the representations made to the plaintiff concerning the title of the vehicle purchased from Big Three Motors to support an award of punitive damages.

Absent evidence to support an award of punitive damages, the trial court erred in refusing the motion for a directed verdict as to such damages. The judgment of the trial court is reversed and the cause remanded.

REVERSED AND REMANDED.

WRIGHT, P. J., concurs.

HOLMES, J., dissents.

HOLMES, Judge (dissenting).

I respectfully dissent.

The question, as pointed out by the plaintiff, is whether Big Three Motors represented to plaintiff that it was the owner of the automobile in question and that it had a right to sell the vehicle. Put another way, the issue is not whether Big Three knew there was a prior encumbrance on the vehicle, but whether Big Three knew it was not the owner of the vehicle when it represented that it was the owner.

Without addressing the propriety of the majority's implied conclusion that it is no longer the law in Alabama that representations made recklessly without regard for the truth if made heedlessly without any regard to the consequences, will support an award of punitive damages, I would find that Big Three knew it was not the owner and thus intentionally deceived the plaintiff in warranting title.

This is so because to me the evidence is clear that Big Three's agent allowed plaintiff to believe Big Three was the owner when in fact the agent was the owner. Indeed, Big Three's defense at trial had at its very core the claim that Mason, the agent, was the owner. Nevertheless, it warranted to plaintiff that it had clear title to the vehicle.

Viewed another way, Mason's admitted failure to disclose his ownership amounted to the suppression of a material fact which he, as agent, or Big Three, as principal, had a duty to disclose. Under § 6-5-102, Code of Ala.1975, such suppression constitutes fraud.

In the very recent case of Neil Huffman Volkswagen Corporation v. Ridolphi, 378 So.2d 700 (Ala., 1979), the Supreme Court of Alabama upheld a jury award of punitive damages totaling over $27,000 when liability was predicated upon this statute. There, the salesman failed to disclose the fact that the used automobile plaintiff was contemplating purchasing had been wrecked despite the plaintiff's express inquiries as to the condition of the car. Certainly, the information suppressed here, namely the true ownership of the vehicle, as known by the agent and principal, was just as vital as the information suppressed in Neil Huffman. Put another way, Big Three, the principal, clearly knew it was not the owner.

In closing, I could do no better than to set out the eloquent language of Mr. Justice Faulkner in Neil Huffman, supra:

I would only add to the penultimate quoted sentence, "or be owned by someone other than the dealer."

I would affirm the verdict of the jury and the resulting judgment.