CRAIG & BISHOP, INC., D/B/A SONNY BISHOP CARS v. CHRISTY PILES, CHARLES WARNER, And HONORABLE ELLEN G. FRIEDMAN
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RENDERED:
NOVEMBER 18, 2005; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO.
2004-CA-001883-MR
CRAIG & BISHOP, INC., D/B/A
SONNY BISHOP CARS
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE STEPHEN K. MERSHON, JUDGE
ACTION NO. 03-CI-007221
CHRISTY PILES, CHARLES WARNER,
And HONORABLE ELLEN G. FRIEDMAN
APPELLEES
OPINION
AFFIRMING IN PART
AND
VACATING IN PART
** ** ** ** **
BEFORE:
KNOPF AND TACKETT, JUDGES; ROSENBLUM, SENIOR JUDGE. 1
ROSENBLUM, SENIOR JUDGE:
The Appellees, Charles Warner and
Christy Piles, filed this action for fraud, conversion, and
violation of the Kentucky Consumer Protection Act after they
attempted to purchase an automobile from the Appellant, Craig
and Bishop, Inc. D/B/A/ Sonny Bishop Car (hereinafter Sonny).
1
Senior Judge Paul W. Rosenblum sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
A judgment was entered following a jury verdict awarding Warner
and Piles $8,600 in compensatory damages and $50,000 in punitive
damages.
On June 30, 2003, nineteen-year-old Warner saw an
advertisement for a 1997 Mustang for sale for $4,950 at Sonny’s
and immediately called to see if it was available.
He was told
it was so he and his girlfriend, Piles, went to the dealer’s
lot.
At that time, Warner and Piles were told the Mustang had
been sold.
A sales representative, Glenn Summitt, showed the
couple a 2000 Camero with a cost of over $14,000.
Warner liked
the Camero, but concerned about the price, inquired about
financing.
The only down payment Warner could make was in the
form of his 1997 Nissan, which Summitt told him, had a trade-in
value of $1,000.
The remaining amount, $13,983.50, would have
to be financed.
It is the nature and availability of the proposed
financing that is at the center of this controversy.
Warner and
Piles testified that they told Summitt they could not afford
more than a $250 per month payment and, would pay no more than
8% interest to which Summitt responded, “I Guarantee you I can
get you in that car if you like it.”
Warner and Piles were
told, however, that Summitt was not authorized to do the
financing and that the General Manager, Pam Bishop Ferguson, was
the only one who could approve financing.
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Ferguson was called
at home and she determined that Warner had insufficient credit
and the loan would have to be in Piles’ name.
That same evening, without any financing approval,
Piles signed various documents including a “Vehicle Purchase
Agreement”, an “Affidavit of Spot Delivery Agreement”, and a
blank Retail Installment Contract.
the Nissan in blank.
Warner signed the title to
The Vehicle Purchase Agreement stated that
the sale of the vehicle was on a cash basis and that no oral
promises or representations were made that were not incorporated
into the agreement.
The “Affidavit of Spot Delivery”
acknowledged that Piles understood that she was taking
possession of the vehicle prior to obtaining financing and that
she agreed to its purchase.
It also stated:
“I understand that if the transferor is
unable to obtain credit approval on my loan
within three (3) business days, and if I am
unable to obtain financing of my own within
24 hours after notification from transferor
that loan has been denied, I will be
required to return the vehicle to the
transferor. . . .”
Warner and Piles departed the dealership with the Camero and
left behind the Nissan.
During the following two days, Ferguson’s attempts to
secure financing for the full amount owed on the Camero failed.
She informed Warner and Piles that they would either have to
make an additional $3,000 down payment or return the Camero.
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After several discussions, Sonny offered to sell the Camero for
$3,000 less than the original price so that it could be
financed.
Warner and Piles rejected the offer and were told the
Camero would have to be returned.
On July 6, 2003, Piles and Warner returned to the
dealership with the Camero but were told that the keys to the
Nissan were not at the dealership.
A heated argument ensued
ending when a sales representative offered to drive the Nissan
to Piles’ office the next day if they would leave the premises;
the following day, however, Piles was told that she would have
to pickup the Nissan herself.
Piles was unable to leave work,
so Warner went to the dealership where he was told the Nissan
had been sold.
Sales Manager Don Raley allegedly told Warner
that he could either bring him $14,000 by 5:00 p.m. or the
Camero would be repossessed.
On July 14, 2003, Warner and Piles
returned the Camero to the dealership.
Raley then notified them
that the Camero was considered repossessed and would be sold at
auction.
This action followed.
Warner and Piles based their claims for relief on the
Kentucky Consumer Protection Act, fraud, conversion, breach of
implied good faith, and the tort of outrage.
Sonny
counterclaimed alleging that Piles breached the purchase
agreement.
Only the first three causes of action and Sonny’s
counterclaim were ultimately submitted to the jury.
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The jury found that there was no contract between the
parties but found that Sonny’s actions were fraudulent, it
violated the Consumer Protection Act, and converted Warner’s
automobile.
Damages for the conversion of the Nissan were
awarded based on the fair market value of the automobile,
$2,000.
verdict.
Sonny does not challenge this part of the jury’s
It does challenge the findings that it violated the
Consumer Protection Act, committed fraud, and the award of
damages.
Specifically, for violation of the Consumer Protection
Act or fraud, the jury awarded $2,100 for the loss of use of the
Nissan between July 14, 2003 and January 17, 2004, and for the
“inconvenience” of Warner, $3,000 and for the “inconvenience” of
Piles, $1,500.
Warner and Piles were also awarded $50,000 in
punitive damages.
Sonny objected to any testimony concerning its promise
or guarantee of any specific interest rate, payment, or length
of the loan, and expert testimony concerning “usage of trade”.
It contends that the alleged oral statements contradict the
written terms of the Vehicle Purchase Agreement and the
Affidavit of Spot delivery and are, therefore, inadmissible.
Parol evidence is not admissible to modify or change the express
terms of an unambiguous written document.
318 S.w.2d 415, 417 (Ky. 1958).
Johnson v. Dalton,
Here, the documents are
ambiguous both as to the payment terms, cash or loan, and the
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finality of the sale; the parol evidence rule, therefore, does
not bar the admission of extrinsic evidence.
Sonny is also erroneous in its characterization of
the action as one arising out of contract.
Warner and Piles
sought damages for fraud, violation of the Consumer Protection
Act, and conversion.
There are recognized exceptions to the
parol evidence rule and extrinsic evidence is generally
admissible to prove “illegality, fraud, duress, mistake and
failure of consideration.
Id.
The law provides that even
though a misrepresentation relates to matters covered in a
written contract that by its terms excludes any oral
representations, parol evidence is admissible to show that the
contract was procured by fraudulent representations.
Troutman, 287 S.W.2d 918, 920 (Ky. 1956).
Bryant v.
Likewise, although no
Kentucky case has addressed the issue, we believe the same
reasoning is applicable to claims brought pursuant to the
Consumer Protection Act and that parol evidence is admissible to
establish that the sale was procured by misrepresentations,
deceitful practices, or unfair means.
By written request, a juror asked that Sonny Bishop be
questioned concerning any legal requirement that financing terms
be disclosed, and if so, the time for disclosure.
The court
submitted the question to Bishop who responded, “No”.
The
following day, the court, over Sonny’s objection, read a portion
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of the Truth-In-Lending Act that requires disclosure of the loan
terms prior to execution of a “retail installment contract.”
Assuming some error when the court read a portion of the Act to
the jury, it was harmless.
There was no finding that the Act
was violated and Sonny contends that it was a cash sale so that
Bishop’s response was accurate.
The circuit court denied Sonny’s motion for a directed
verdict on the issue of common law fraud and the Consumer
Protection Act.
A review of a denial of a directed verdict
requires that we apply the following standard:
All evidence which favors the prevailing
party must be taken as true and the
reviewing court is not at liberty to
determine the credibility or the weight
which should be given the evidence, these
functions reserved to the trier of fact. The
prevailing party is entitled to all
reasonable inferences which may be drawn
from the evidence.
Stringer v. Wal-Mart Stores, Inc., 151 S.W.3d 781, 787 (Ky.
2004).
Even assuming the facts as stated by Warren and Piles to
be true, their fraud claim must fail and the circuit court
erroneously submitted the issue to the jury.
To establish
fraud, the plaintiff must prove the following elements by clear
and convincing evidence: “a) material misrepresentation b) which
is false c) known to be false or made recklessly d) made with
inducement to be acted upon e) acted in reliance thereon and f)
causing injury.”
United Parcel Service Co. v. Rickert, 996
-7-
S.W.2d 464, 468 (Ky. 1999).
The statement must be as to an
existing or past fact.
Actionable misrepresentation must
relate to a past or present material fact
which is likely to affect the conduct of a
reasonable man and be an inducement of the
contract. A mere statement of opinion or
prediction may not be the basis of an
action. The representation must be short of
a warranty but sufficient to deceive and to
create in the mind a distinct representation
of a fact.
McHargue v. Fayette Coal & Feed Company, 283 S.W.2d 170, 172
(Ky. 1955).
In Rivermont Inn v. Bass Hotels, Inc., & Resorts Inc.,
113 S.W.3d 636 (Ky.App. 2003), Rivermont entered into
negotiations with Holiday Inn to purchase a franchiser license
to operate an existing hotel as a Holiday Inn.
Three days prior
to the closing of the hotel property, Rivermont contacted the
vice president for franchise administration for Holiday and was
assured that the licensing would be forthcoming and to close on
the property.
For reasons not relevant to this discussion, the
franchise license was not approved and Rivermont filed an action
for fraud.
The circuit court found, and this court agreed, that
summary judgment in favor of Holiday was warranted because the
statement as to the success of obtaining the license was a
“prediction, and not a statement of present or past material
fact.” Id. at 640.
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The alleged promise made by Summitt as to the loan and
interest rate is not a statement as to a past or existing fact.
Warner and Piles knew that Summitt did not have authority to
approve the final financing, that the issue of financing was
unsettled at the time the documents were signed, and when they
took possession of the Camero.
Under the circumstances, it is
impossible for a reasonable jury to conclude other than that
Summitt’s statement was as to a future fact.
A statement that a
dealer can obtain financing for a buyer is nothing more than a
statement as to what will happen in the future.
The statement
can not serve as the basis for actionable common law fraud; the
trial court erred, therefore, when it denied Sonny’s motion for
a directed verdict on the fraud claim.
Our holding that the issue of fraud was erroneously
submitted to the jury does not necessarily require that the
jury’s damage award be vacated.
The wording of the instructions
submitted permitted the jury to award damages for inconvenience
and loss of use if it found the Sonny’s acts were fraudulent or
if it violated the Consumer Protection Act.
Punitive damages
were permitted on the finding that Sonny’s acts were fraudulent,
or it violated the Act, or it converted the Nissan.
There is no
issue raised on appeal concerning the form of the instructions.
The jury found in favor of Warner and Piles on all three claims;
thus, the damages awarded will stand if the claims other than
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that for fraud are supported by the evidence and if the damages
are otherwise legally permissible.
Sonny contends that Warner and Piles were not
“consumers” and thus do not fall within the class intended to be
protected by the Consumer Protection Act.
It relies on
Skilcraft Sheetmetal Inc., v. Kentucky Machinery, 836 S.W.2d 907
(Ky.App. 1992), where this court held that a seller cannot be
liable to a third party when there is no privity of contract.
However, the facts of this case are not comparable.
Although
the jury found that there was no enforceable contract between
the parties and there was no actual purchase of the vehicle, the
parties negotiated the purchase of the vehicle as buyers and
seller.
To deny Warner and Piles a remedy simply because the
jury found that there was no enforceable contract would
frustrate the Act’s purpose to afford the consuming public
protection against unscrupulous business practices.
See
Stafford v. Cross County Bank, 262 F.Supp.2d 776, 793 (W.D.Ky.
2003).
Warner and Piles, who negotiated with Sonny, signed
purchase and sale documents, and left the Nissan as a down
payment on the Camero were consumers.
A consumer can maintain a private action if the
individual “purchases or leases goods or services primarily for
personal, family, or household purposes and thereby suffers any
ascertainable loss of money or property . . . .” KRS 367.220(1).
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The elements required for a private cause of action under the
Act have not been specifically delineated in a single Kentucky
case.
However, it is the purpose of the Act to provide the
consumer with broader protection than is available under the
traditional common law remedies.
Skilcraft, supra.
KRS
367.170(1) provides that “[u]unfair, false, misleading, or
deceptive acts or practices in the conduct of any trade or
commerce are hereby declared unlawful.”
“Unfair” is further
defined in subsection (2) as “unconscionable”.
Although the
remaining terms are left largely undefined, Kentucky courts have
applied an objective standard and defined the acts or conduct
prohibited as the terms are generally understood and perceived
by the public.
Smith v. General Motors Corporation, 979 S.W.2d
127, 131, (Ky.App. 1998).
While fraud can support an action, it
is clear from the language used that fraud is not the only act
or conduct that the legislature deemed unlawful.
The Act
prohibits any act or conduct that is unfair, deceptive, or
misleading.
Although Kentucky courts have not written on the
issue, other jurisdictions have distinguished a cause of action
under its Consumer Protection Acts from common law fraud. In
Duran v. Leslie Oldsmobile, 229 Ill.App.3d 1032, 171 Ill.Dec.
835, 594 N.E.2d. 1355, (Ill. 1992), the court considered whether
a car dealer’s statement as to a future interest rate on a car
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loan was actionable.
It concluded affirmatively, holding that
to establish a claim for fraud under the its Consumer Fraud Act,
the plaintiff must allege: “(1) a statement by the seller; (2)
of an existing or future material fact; (3) that was untrue,
without regard to the defendant’s knowledge or lack thereof of
such untruth; (4) made for the purpose or inducing reliance; (5)
on which the victim relied; and (6) which resulted in damage to
the victim.”
Id. at 229 Ill.App.3d at 1041, 171 Ill.Dec. at
842, 594 N.E.2d at 1362.
In Munters Corp. v. Swissco-Young
Industries, Inc., 100 S.W.3d 292 (Tex. 2002), the Texas court
held that statements as to future events or conduct are
actionable under that state’s Deceptive Trade Practices Act.
The court held that when examining the basis for such a claim,
the courts must distinguish between mere “puffing” which is a
general statement of opinion and not actionable, and a specific
misrepresentation as to a future event or condition that is
actionable.
We agree with our sister states that
misrepresentations under Consumer Protection Acts may be either
to a past, present, or future fact.
Were we to construe the
protection given the equivalent of that provided by common law,
the legislature’s clear intent to provide broader protection to
consumers would be negated.
Deceitful practices and
misrepresentations of future or existing facts are actionable if
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done for the purpose of inducing the reasonable consumer to
purchase the seller’s goods or services for household use and,
as a result, the consumer suffers damage.
Warner and Piles were a young couple with obvious
minimal financial resources who went to the dealership to look
at a car advertised for a price of $4,950 and drove from the lot
in a car valued at $14,000.
It is clear from the testimony of
Warner and Piles that the single significant factor in the
decision to purchase the Camero was the statement by Summit that
they could obtain the desired financing.
Otherwise, it was
simply beyond their financial ability to pay for the car.
There
is no doubt that the terms of the financing was a material
factor in the decision to purchase the Camero, that Sonny’s
employees knew that that Warner and Piles could not purchase the
Camero with payments that exceeded $250 per month, and that the
documents were signed with the assurance that the desired
financing would be obtained.
Although we believe the statement as to financing
would be a sufficient misrepresentation to support a claim under
the Act, it alone would not support a damage award.
Once it was
determined that financing could not be obtained, if Sonny would
have merely returned the Nissan and Warner and Piles the Camero,
there would have been no damage caused by the misrepresentation
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and no claim under the Act.
KRS 367.220(1).
However, the
actual scenario was quite different.
In accordance with the terms of the “Affidavit of Spot
Delivery”, after it was apparent that financing was not possible
at the desired rate, Warner and Piles sought to return the
Camero to Sonny and retrieve the Nissan; their attempts were,
however, frustrated by Sonny’s failure to disclose the Nissan’s
sale.
Despite the fact that the Nissan had been sold, Sonny
lied about the Nissan’s location, attempted to “bully” Warner
and Piles into purchasing the Camero, and ultimately threatened
them with a repossession of the Camero.
There is sufficient evidence that Warner and Piles
suffered damage as a result of Sonny’s action when it lied about
the sale of the Nissan and its conversion.
In addition to the
value of the Nissan, Warner was deprived of its use and Piles
testified that because of Sonny’s attempts to avoid the return
of a car of which it no longer had possession, she was forced to
miss work.
Although the actual damages are slight, there was
sufficient evidence to find that both Warner and Piles sustained
a loss as a result of Sonny’s violations of the Act.
The final issues raised concern the damages awarded.
On the conversion claim, the jury awarded
$2,100 for loss of
use of the Nissan and $3,000 to Warner and $1,500 to Piles for
“inconvenience”.
We agree with Sonny that the $2,100 award for
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loss of use and the $4,500 award for “inconvenience” are
impermissible duplications of damages.
The inconvenience caused
by Sonny’s unlawful actions arose from the loss of use of the
car.
The damage award for inconvenience is vacated.
Finally, punitive damages were awarded in the amount
of $50,000.
The Consumer Protection Act, KRS 367.220(1)
provides:
Nothing in this subsection shall be
construed to limit a person’s right to seek
punitive damages where appropriate.
This provision does not expand the right to claim punitive
damages but does not limit the right to punitive damages where
one previously existed.
Ford Motor Company v. Mayes, 575 S.W.2d
480, 487 (Ky.App. 1978).
In Hensley v. Paul Miller Ford Inc.,
508 S.W.2d 759 (Ky. 1974), the plaintiff sought compensatory and
punitive damages against a car dealer for trover and conversion
after it sold the plaintiff’s automobile without obtaining legal
title and in disregard of the understanding that it would not be
sold until the plaintiff obtained financing for the purchase of
the dealer’s automobile.
The court held that although the
dealer did not intend to harm the plaintiff, punitive damages
were warranted if the defendant’s gross negligence or his
recklessness caused injury.
Id. at 762; See also Motors Ins.
Corp. v. Singleton, 677 S.W.2d 309 (Ky.App. 1984).
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The jury in this case was instructed that punitive
damages could be awarded if Sonny acted “intentionally, with
fraud, oppression or with reckless indifference to their
rights.”
We find no error in the instruction. In 1988, KRS
411.184 was enacted and provides that punitive damages can be
awarded if the defendant acted with oppression, fraud, or
malice.
In Farmland Mutual Ins. Co. v. Johnson, 36 S.W.3d 368,
382 (Ky. 2000), the court rejected the argument that the statute
requires that an instruction precisely mirror its language and
upheld an instruction permitting punitive damages upon a finding
that the insurance company acted knowingly or recklessly.
As in
Farmland Mutual Ins. Co., we find no reversible error in the
inclusion of the term “reckless indifference”.
We have no difficulty agreeing with jury that Warner
and Piles are entitled to punitive damages.
It was reasonable
for the jury to conclude that the entire transaction between the
parties was fraught with deception from the moment Warner and
Piles were lured into the potential purchase of an automobile
priced almost three times that in which they were originally
interested.
The award, however, was more than twelve times the
amount of the permissible compensatory damages, an amount Sonny
contends was excessive.
Disproportion of the punitive damage
award to the compensatory award is not necessarily a factor to
be considered.
Hensley, supra, at 763.
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The purpose of such an
award is, as its name implies, to punish the civil wrongdoer and
to act as a deterrent to the same conduct in the future.
“A
reasonable ratio in one instance may frustrate this purpose if a
plaintiff’s compensatory damages are particularly small.”
Phelps v. Louisville Water Company, 103 S.W.3d 46, 55 (Ky.
2003).
Nevertheless, the award must bear some relationship to
the injury and its cause.
Hensley, supra.
In reviewing a
punitive damage award, the court must also examine the civil or
criminal penalties imposed for comparable misconduct.
supra, at 55.
Phelps,
Finally, the appellate court, in its final
analysis, must always defer to the trial court.
Id. at 54.
In reviewing the evidence as whole, with some
hesitation, we affirm the amount of punitive damages awarded.
The compensatory damages were relatively small, yet the business
dealings between car dealers and the public are of sufficient
public interest that unlawful and tortuous acts must be
deterred.
Although the harm caused was small, it was caused by
Sonny’s deliberate and deceitful acts.
Finally, in Hensley, the
court affirmed a finding of the trial court that the $20,000
punitive damages award was excessive where only $2,103.85 was
awarded for compensatory damages. However, the court pointed out
that its decision was based on a finding that the trial court
did not abuse its discretion rather than upon its own finding
that the verdict was excessive.
Id. at 764.
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We are also bound
to defer to the trial court’s discretion and, in this case,
affirm its finding that the punitive damage award was not
excessive.
The judgment is affirmed in all respects except that
the jury’s verdict as to fraud and the awards for
“inconvenience” to Warner and Piles are vacated.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEES:
Fred E. Fischer
Joseph Michael Kelly
Louisville, Kentucky
Ellen G. Friedman
Louisville, Kentucky
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