Case Title: Hardy v. Toler

Citation: 218 S.E.2d 342, 288 N.C. 303

Docket Number: 

State: north-carolina

Court: North Carolina Supreme Court

Date: 1975-10-07T00:00:00Z

Document:
218 S.E.2d 342 (1975)
288 N.C. 303
Eddie HARDY, Jr.
v.
Charles L. TOLER and Pamlico Motor Company, a corporation.
No. 12.

Supreme Court of North Carolina.
October 7, 1975.
*344 Atty. Gen. Rufus L. Edmisten and Asst. Atty. Gen. Donald A. Davis, Raleigh, amicus curiae, for the State.
Ward & Ward by Jerry F. Waddell and Kennedy W. Ward, New Bern, for plaintiff appellant.
Wilkinson & Vosburgh by John A. Wilkinson, Washington, for defendant appellees.
MOORE, Justice.
Plaintiff first assigns as error the holding of the Court of Appeals affirming the action of the trial court in allowing defendants' motion for a directed verdict under Rule 50(a) as to the issue of punitive damages.
This action is based upon fraudulent representations made by Toler on behalf of himself and his principal, Pamlico Motor Company, which were relied upon by the plaintiff in purchasing the automobile in question. Defendants represented to the plaintiff that the automobile was a one-owner vehicle which had been driven approximately 23,000 miles, that it had never been wrecked, and that the Chrysler warranty could and would be transferred to plaintiff. Plaintiff offered testimony tending to show that all of these representations were false. The parties stipulated that the car had had two prior owners, had been involved in a wreck, and that the Chrysler warranty would not transfer to plaintiff. Although the plaintiff's evidence and the stipulations of the parties provide ample basis for a recovery based on actionable fraud, this was not sufficient to subject the defendants to punitive damages.
In North Carolina, whether a person may recover punitive damages in an action for fraud depends upon the character of the acts alleged to constitute fraud in each case. Furthermore, it is the general rule that ordinarily punitive damages are not recoverable in an action for fraud. Davis v. Highway Commission, 271 N.C. 405, 156 S.E.2d 685 (1967); 3 Strong, N.C. Index 2d, § 11, p. 181, and cases cited therein.
In Nunn v. Smith, 270 N.C. 374, 154 S.E.2d 497 (1967), the Court quoted with approval from Swinton v. Realty Co., 236 N.C. 723, 73 S.E.2d 785 (1953), which held that plaintiffs were not entitled to punitive damages in an action for fraud merely upon a showing of misrepresentations which constituted the cause of action, without more:
Punitive damages may be awarded only where the wrong is done willfully or under circumstances of rudeness, oppression or in a manner which evidences a reckless and wanton disregard of the plaintiff's rights. Davis v. Highway Commission, supra; Nunn v. Smith, supra; Rubber Co. v. Distributors, Inc., supra; Swinton v. Realty Co., supra. The court correctly refused to submit an issue as to punitive damages. This assignment is overruled.
The trial court below refused to submit the following proposed issue to the jury:
This refusal was based on the trial court's opinion that the proposed issue was not one of fact for the jury but one of law for the judge. The Court of Appeals disagreed, holding the evidence and stipulations of the parties sufficient to raise a jury question and remanding for a new trial.
G.S. § 75-1.1, in part, provides:
G.S. § 75-16 provides:
For general comment on these sections, See 48 N.C.L.Rev. 896 (1970); 6 Wake Forest Intra.L.Rev. 1 (1969).
The issue now before us is whether the determination that certain acts or practices constitute unfair or deceptive acts or practices, in violation of G.S. § 75-1.1, is to be made by the judge or by the jury.
This issue appears to be one of first impression before this Court. Some guidance may be obtained by reference to federal decisions on appeals from the Federal Trade Commission, since the language of G.S. § 75-1.1 closely parallels that of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) (1973 Ed.), which prohibits "unfair or deceptive acts or practices in commerce." The federal courts, while according great weight to the evidentiary findings of the F.T.C., have made it clear that the ultimate determination of what constitutes unfair competition and deceptive practices rests with the courts. F.T.C. v. Colgate-Palmolive Co., 380 U.S. 374, 85 S. Ct. 1035, 13 L. Ed. 2d 904 (1965); Fed. Tr. Comm'n v. Keppel & Bro., 291 U.S. 304, 54 S. Ct. 423, 78 L. Ed. 814 (1934); Firestone Tire and Rubber Company v. F.T.C., 481 F.2d 246 (6th Cir. 1973); accord, Wisdom v. Norton, 507 F.2d 750 (2d Cir. 1974).
*346 Other states have also had occasion recently to interpret similar consumer protection statutes. In Commonwealth v. DeCotis, 316 N.E.2d 748 (Mass.1974), the court conceded that the Massachusetts statute, like our counterpart here, furnishes no definition of what constitutes an unfair act or practice made unlawful under the statute. Since the Massachusetts trial court sits in equity without a jury, the appellate court did not specifically address itself to the division of function between jury and judge in determining whether a violation had occurred. However, the reasoning of the court throws light on its thinking on the issue:
An even more recent case, PMP Associates, Inc. v. Globe Newspapers, Co., 321 N.E.2d 915 (Mass.1975), indicates again that the court reserves for itself the ultimate determination as a matter of law of what constitutes an unfair trade practice.
Although neither the federal nor Massachusetts decisions are directly in point because of the posture of the cases, one an appeal from an administrative ruling, another from a judge sitting in equity, their reasoning is persuasive and supported by logic. The traditional function of the jury has been a fact-finding one but the determination as to liability under those facts should be found by the court as a matter of law.
Proof of fraud would necessarily constitute a violation of the prohibition against unfair and deceptive acts; however, the converse is not always true. D.D.D. Corporation v. F.T.C., 125 F.2d 679 (7th Cir. 1942). In Garland v. Penegar, 235 N.C. 517, 70 S.E.2d 486 (1952), Chief Justice Devin, speaking for the Court in an automobile fraud case, said:
Courts in other jurisdictions have decided cases involving similar factual situations under new statutes similar to G.S. § 75-1.1. See Slaney v. Westwood Auto, Inc., 322 N.E.2d 768 (Mass.1975); In re Brandywine Volkswagen, Ltd. v. Dept. of Community Affairs, 312 A.2d 632 (Del.1973); Danforth v. Independence Dodge, Inc., 494 S.W.2d 362 (Mo.App.1973).
Ordinarily it would be for the jury to determine the facts, and based on the jury's finding, the court would then determine *347 as a matter of law whether the defendant engaged in unfair or deceptive acts or practices in the conduct of trade or commerce. However, in the present case, the parties have stipulated as follows:
Based on these stipulated facts, we hold as a matter of law that the false representations made by defendants to plaintiff constituted unfair or deceptive acts or practices in commerce contrary to the provisions of G.S. § 75-1.1, and treble damages should have been awarded as provided by G.S. § 75-16 in the amount of $1,800.
For the reasons stated, the case is remanded to the Court of Appeals with direction that it be remanded to the Superior Court of Craven County for entry of judgment in favor of plaintiff against the defendants Charles L. Toler and Pamlico Motor Company, a corporation, in the amount of $1,800. As so modified, the decision of the Court of Appeals is affirmed.
Modified and affirmed.
HUSKINS, Justice (concurring in result).
We have said that punitive damages are damages, other than compensatory or nominal damages, awarded against a person "`to punish him for his outrageous conduct.'... In some cases, in actions to recover damages for fraud, where punitive damages are asked, it is suggested that a line of demarcation be drawn between aggravated fraud and simple fraud, with punitive damages allowable in the one case and refused in the other. In a note in 165 A.L.R. 616, it is said: `All that can be said is that to constitute aggravated fraud there must be some additional element of asocial behavior which goes beyond the facts necessary to create a case of simple fraud.'" Swinton v. *348 Realty Co., 236 N.C. 723, 73 S.E.2d 785 (1953).
In the case before us defendants represented that the car involved was a one-owner car, had been driven only 23,000 miles, had never been wrecked, and that the warranty could be transferred to plaintiff. Plaintiff purchased the vehicle upon those representations. The truth of the matter was that the car was a second-owner vehicle, had been wrecked, had been driven 80,000 miles when plaintiff bought it, and the warranty could not be transferred. When plaintiff discovered the truth and sought to rescind the contract, Toler denied that the car had been wrecked and said plaintiff must have wrecked it himself. In the face of all that, both defendants stipulated at the trial that they knew at the time of the sale that the vehicle had been sold on two previous occasions and had been involved in a wreck prior to the sale to plaintiff. And uncontradicted evidence shows that defendants knew the car had over 80,000 miles on it while telling plaintiff the mileage was only 23,000. In my view such conduct is "outrageous conduct" and contains an additional element of asocial behavior which goes beyond simple fraud and constitutes aggravated fraud. Nothing else appearing, the facts in evidence here are sufficient to warrant the allowance of punitive damages.
I concur in the result reached in this case, however, because G.S. § 75-16 is itself punitive in nature and provides for the recovery of damages in treble the amount fixed by the verdict. Having sought and recovered treble damages, plaintiff's right to punitive damages is thereby excluded. For these reasons I concur in the result reached by the majority.
Justices LAKE and EXUM, join in this concurring opinion.