Opinion ID: 1680637
Heading Depth: 1
Heading Rank: 2

Heading: Robert L. Washington v. Ford Motor Credit Company, Inc.

Text: Plaintiff brought suit against FMCC under Code 1975, § 6-5-102, which reads: Suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case. [Emphasis added.] The trial court granted defendant's motion for a directed verdict at the close of plaintiff's case, apparently on the grounds that no relationship existed between the parties which would require disclosure. For the reasons discussed herein, we reverse. Code 1975, § 6-5-102, is a codification of the common law. Metropolitan Life Insurance Co. v. James, 238 Ala. 337, 191 So. 352 (1939). It embodies one of several judicially created exceptions to the ancient rule that no action will lie for tacit nondisclosure. The common law rule expressed the spirit of the caveat emptor doctrine, and has become riddled with exceptions as that doctrine has proved increasingly unsuited to modern commercial conditions. See, generally, Prosser, Torts (4th Ed. 1971), Chap. 18, § 106. See Mudd v. Lanier, 247 Ala. 363, 24 So.2d 550 (1945), for a local expression of this general rule. [1] One such exception is that which places an affirmative duty of disclosure upon those occupying a confidential or fiduciary position vis-a-vis the plaintiff. Additionally, Prosser notes that ... there has been a rather amorphous tendency on the part of most courts to find a duty of disclosure in cases where defendant has special knowledge or means of knowledge not open to the plaintiff and is aware that the plaintiff is acting under a misapprehension as to facts which would be of importance to him and would probably affect his decision. [Prosser, supra, p. 697] Our own statute recognizes that situations other than those involving fiduciary relationships may give rise to a duty to disclose by providing that the obligation to communicate may arise ... from the particular circumstances of the case. Our case law has construed such circumstances to exist where parties were not dealing at arm's length, Williams v. Bedenbaugh, 215 Ala. 200, 110 So. 286 (1926), and where plaintiff entered into a contract with an insolvent after communicating with defendant, who knew of such insolvency, but did not reveal it, Chapman v. Rivers Construction Company, 284 Ala. 633, 227 So.2d 403 (1969). A duty to speak depends upon the relation of the parties, the value of the particular fact, the relative knowledge of the parties, and other circumstances. Hall Motor Co. v. Furman, 285 Ala. 499, 234 So.2d 37 (1970). He who joins in the consummation of a transaction, known to have been negotiated by fraud, becomes a party to the fraud. Williams v. Bedenbaugh, supra . The U. S. Court of Appeals for the Fifth Circuit, applying Alabama law in discussing this issue, has remarked: ... [T]he types of relationships wherein a duty to disclose has been found indicate that the Alabama courts give little attention to the designation of the relationship, such as vendor-vendee, etc., but instead look to the relative bargaining positions of the parties. [Citations omitted.] Where one party has some particular knowledge or expertise not shared by the plaintiff a duty to disclose has been recognized. Cf. Collier v. Brown, 285 Ala. 40, 228 So.2d 800 (1969). First Virginia Bankshares v. Benson, 559 F.2d 1307 (5th Cir. 1977). Thus, each case must be individually examined to determine whether a duty of disclosure exists; a rigid approach is impossible, and, indeed, the words of the statute itself counsel flexibility. In the instant case, there is evidence which indicates that (1) FMCC required insurance on automobiles which it financed and was aware that the insurance on many, if not all, installment sales contracts which it purchased from Jim Short Ford was written by Norman Smoake, (2) the manager of FMCC knew that Smoake was under investigation by the Department of Insurance and was provided with evidence that Smoake was not only grossly overcharging clients but, in some cases, actually writing no insurance on them at all; (3) while not directly participating in plaintiff's sales and insurance transaction, FMCC made it possible by financing the purchase, providing the forms, and approving the transaction by telephone before its completion. We hold that this evidence is sufficient to create a jury question as to the existence of a duty to disclose on FMCC's part. If we accept FMCC's contention that no such duty exists as a matter of law, we accept the proposition that a finance company could knowingly issue loans for the purchase of non-existent insurance. Surely this is the type of situation which Code 1975, § 6-5-102, was intended to prevent. For this reason, we hold that the trial court erred in directing a verdict in favor of FMCC. The judgment in favor of FMCC appealed by plaintiff Washington is reversed and remanded. The judgment in favor of plaintiff Washington appealed by Jim Short Ford Sales, Inc., et al. is affirmed. CASE NO. 78-645 AFFIRMED. CASE NO. 78-664 REVERSED AND REMANDED. TORBERT, C. J., and MADDOX, JONES and BEATTY, JJ., concur.