Title: Patel v. Patel

State: alabama

Issuer: Alabama Supreme Court

Document:

708 So. 2d 159 (1998)
Chiman S. PATEL
v.
Bharat M. PATEL and Daksha B. Patel.
1961121.

Supreme Court of Alabama.
January 9, 1998.
D. Michael Barrett and C. Robert Poore III of Barrett & Poore, P.C., Birmingham, for appellant.
Candice J. Shockley of Holliman, Shockley & Kelly, Pelham, for appellees.
*160 COOK, Justice.
Chiman Patel appeals a judgment in favor of his nephew, Bharat Patel, and Bharat's wife, Daksha Patel, for $85,908 in compensatory damages and $225,000 in punitive damages on their claim that Chiman fraudulently misrepresented the profitability of a motel they purchased from him in 1993. We affirm.
Bharat and Daksha Patel immigrated from India. After living a while in Atlanta, they returned to India for a time. Upon returning to America, they moved to Birmingham and worked for Bharat's uncle, Chiman Patel. They worked for him for approximately 3 years in an unrelated business before seeking his advice regarding purchasing a business of their own. Chiman Patel offered to sell them the Town Motel in Birmingham. He told them that he would sell the motel to them for $450,000 and the testimony at trial indicated that he also told them they could expect to earn $70,000 to $75,000 in profit per year from operating the motel. The plaintiffs said the uncle told them that the purchase price was discounted for them "because they were relatives," and they alleged that because of their culture they did not question Patel's representations to them.
The plaintiffs bought the motel from the uncle for $450,000. The purchase price was financed by loans secured by a first mortgage and also by a second mortgage held by the uncle. The uncle later foreclosed on the second mortgage, after the plaintiffs were unable to make their payments. Despite the representations made to Bharat and Daksha, the evidence at trial indicated that both before the sale to them and after he had taken back the motel through foreclosure of the second mortgage, Chiman Patel offered it for sale for $300,000. In addition thereto, the plaintiffs contend that the uncle did not inform them that the short-term rentals that made up much of the motel's income were illegal. Without the illegal income derived from the short-term rentals, the plaintiffs were unable to make all the mortgage payments on the motel.[1]
Bharat and Daksha Patel sued the uncle, alleging fraud and breach of contract. The court directed a verdict on the breach of contract claim. The fraud claim was submitted to the jury, which awarded $85,908 in compensatory damages and $450,000 in punitive damages. Following a Hammond/Green Oil[2] hearing, the punitive damages award was reduced to $225,000. The trial court's order requiring a remittitur of the punitive award stated:
C.R. at 174-80. This Court on May 9, 1997, issued the "new guidelines" referred to in the trial judge's order. See BMW of North America, Inc. v. Gore, 701 So. 2d 507 (Ala. 1997). We agree with the trial judge that there was sufficient evidence of fraud for the issue to be submitted to the jury.
On appeal, the defendant contends that, even with the remittitur, the punitive damages award is excessive. We will, therefore, review the propriety of the remitted punitive damages award pursuant to the guidelines set out in our May 9, 1997, BMW v. Gore opinion.
First, in reviewing the propriety of the $225,000 punitive damages award, we look to the (1) degree of reprehensibility involved in this case, (2) the ratio of the punitive damages award to the compensatory damages award and (3) the imposition of criminal or civil penalties for similar conduct. See BMW v. Gore, supra, 701 So. 2d  at 509. See also, Hillcrest Center, Inc. v. Rone, [Ms. 1940535, Aug. 1, 1997], ___ So.2d ___ (Ala. 1997). Based on our review of the evidence, we find Chiman Patel's representations to *163 Bharat and Daksha Patel, which resulted in their purchasing the Town Motel, significantly reprehensible. The plaintiffs were relatives of Chiman Patel; they relied on their family relationship, as well as the elder Patel's expertise in the field, to guide them in the purchase of a business. He took advantage of their trust and, instead of giving them honest guidance, relieved himself of the financial drain of operating an unprofitable motel. Chiman Patel was experienced in real estate dealings, and he knew what he was doing when he offered this "special deal" to his unsuspecting relatives. His actions warrant the imposition of punitive damages. There are no comparable civil or criminal penalties for similar conduct, but, given the facts of this case, we do not find the ratio of punitive damages to compensatory damages, approximately 2.6:1, to be out of line.
Additionally, applying the factors set forth in Hammond and Green Oil, we consider the effect of the punitive award on the financial status of the defendant. As the trial court indicated, it would be difficult to make a good estimate of the value of Chiman Patel's assets, because of his many business interests and his penchant for dealing in cash. Nevertheless, we find that the punitive award constitutes approximately 7.5% of the defendant's net worth.[4] The payment of this award will certainly sting, but, in our opinion, it will not cripple the defendant financially. In addition, as remitted, the award clearly removes any profit recognized by the defendant as a result of his actions. Finally, the plaintiffs' costs of litigating this case, which ended with a three-day trial, taken by themselves, certainly would not support a $450,000 punitive damages award, nor would they, considered alone, support the remitted award of $225,000. However, considering the guideposts of BMW v. Gore, supra, as well as the Hammond/Green Oil factors, we conclude that the judgment of the trial court is due to be affirmed.
AFFIRMED.
HOOPER, C.J., and ALMON, SHORES, HOUSTON, KENNEDY, and BUTTS, JJ., concur.
MADDOX and SEE, JJ., concur in the result.
[1]  The plaintiffs made the payments on the first mortgage, but were unable to make payments on the second mortgage.
[2]  Hammond v. City of Gadsden, 493 So. 2d 1374 (Ala.1986); Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala.1989).
[3]  The plaintiffs filed the $225,000 remittitur. C.R. at 190.
[4]  Although the testimony indicated that the defendant's net worth was difficult to ascertain, there was evidence that in 1994 he had represented it to be a little over $3,000,000.