Court Opinion

ID: 9764969
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:46:58.881746+00
Date Added: 2024-06-11T07:30:02.879364
License: Public Domain

Donald L. Corbin, Justice. Appellant, Danny Roach, appeals a judgment of the Pulaski Chancery Court awarding him $560.00 damages associated with a boat he purchased from appellee, Concord Boat Corporation. The judgment also awarded appellee $86.60 on a counterclaim for repair services and ordered the serial number and model year changed on the boat. Appellee filed a cross-appeal, arguing the proof of damages was insufficient. We reverse and remand on direct appeal and on cross-appeal. Appellant purchased what he thought was a 1991 model boat, motor and trailer from appellee on July 24, 1991. Appellant claims that during price negotiations, appellee’s vice-president, Fritz Hawkins, represented the boat to be a 1991 model boat. In June and July of 1992, appellant had the motor repaired and learned that 1991 parts would not fit the motor, although 1990 parts would fit. Appellant also learned the actual serial numbers on his boat indicated it was a 1990 model, not a 1991 model. Appellant alleged the discrepancy in serial numbers would prevent him from renewing the boat’s annual registration with the Department of Finance and Administration. Appellant tendered the boat back to appellee, but appellee refused to accept it. Appellant then filed suit in Pulaski Chancery Court alleging fraud and claiming compensatory and punitive damages; appellant also alleged mistake and requested rescission of the contract and restitution of the purchase price. The chancellor did not make separate findings of fact and conclusions of law as contemplated in ARCP Rule 52(a). However, she did enter an order finding appellant had not proven fraud, but awarding him $560.00 in damages based on the difference in the list prices of a 1990 model and 1991 model. The order further directed that the model and serial numbers and registration be changed to reflect that the boat was a 1990 model. As his sole point for reversal, appellant contends the trial court erred in finding insufficient evidence of fraud. We agree with appellant’s argument and reverse and remand.  The tort of fraud, misrepresentation, or deceit consists of five elements which must be proven by a preponderance of the evidence: (1) a false representation of material fact; (2) knowledge that the representation is false or that there is insufficient evidence upon which to make the representation; (3) intent to induce action or inaction in reliance upon the representation; (4) justifiable reliance on the representation; and (5) damage suffered as a result of the reliance. Wheeler Motor Co. v. Roth, 315 Ark. 318, 867 S.W.2d 446 (1993). This court has held many times that there may be constructive fraud, or fraud in the law, even when there is a complete absence of any moral wrong or evil intention. See e.g., Cardiac Thoracic & Vascular Surgery, P.A. Profit Sharing Trust v. Bond, 310 Ark. 798, 840 S.W.2d 188 (1992). It is also well settled that representations are construed as fraudulent when they are made by someone who, unaware of their falsity, asserts them to be true. South County, Inc. v. First Western Loan Co., 315 Ark. 722, 871 S.W.2d 325 (1994); Bond, 310 Ark. 798, 840 S.W.2d 188. Thus, to rescind a contract based on fraud, it is not necessary that actual fraud exist, it is sufficient if constructive fraud exists. Id.  Although we review chancery cases de novo, we do not reverse a chancellor’s findings unless clearly erroneous. ARCP Rule 52(a); Milligan v. General Oil Co., 293 Ark. 401, 738 S.W.2d 404 (1987). In the present case, we must conclude the trial court was clearly erroneous in finding no fraud occurred. Appellant testified he did not bargain for a 1990 model boat and that because Mr. Hawkins told him it was a 1991 model, he thought he was buying a 1991 model. Appellant received a manufacturer’s certificate of origin from appellee stating a 1991 serial number and that the boat was a 1991 year model. After learning that 1991 parts would not fit his boat, appellant discovered the actual serial number on his boat was a 1990 serial number. Once notified of that fact, Mr. Hawkins testified that he retrieved the boat from the repair shop and updated the serial number. Mr. Hawkins admitted that he represented the boat to be a 1991 model boat. He testified that the production order for appellant’s boat initially reflected the serial number to be CKL90636F990, but also reflected his handwritten note that the CKL90636F990 number was wrong and should be changed to CKL91636F991. Mr. Hawkins’s note on the production order explained that the need for the change was the result of the changeover in the model years from 1990 to 1991. Mr. Hawkins testified that one of their employees either simply made a mistake in imprinting the serial number on appellant’s boat or did not follow his handwritten note on the production order. Mr. Hawkins also testified that after learning of the discrepancy in serial numbers on the statement of origin and the boat, he wrote the Coast Guard requesting permission to change the serial number on appellant’s boat to CKL91636F991.  The foregoing proves constructive fraud by a preponderance of the evidence, and the chancellor’s finding to the contrary is clearly erroneous. In deferring to the chancellor’s superior position to judge the credibility of the witnesses and the evidence, we can only assume the chancellor did not find any intentional wrongdoing on appellee’s part and therefore did not find fraud existed. However, we cannot overlook the undisputed evidence that Mr. Hawkins represented the boat to be a 1991 model. Appellant’s boat simply could not have been a 1991 model as 1991 parts would not fit it. Moreover, the serial numbers on the boat did not indicate it was a 1991 model until appellee retrieved the boat from the repair shop and changed them. The year model of the boat was misrepresented to appellant which amounts to a material misrepresentation upon which appellant justifiably relied to his detriment. See Wheeler Motor Co., 315 Ark. 318, 867 S.W.2d 446. In the absence of intentional wrongdoing, this amounts to constructive fraud, which was proved by a preponderance of the evidence. Accordingly, the chancellor’s finding that fraud had not been proven is reversed and remanded. On cross-appeal, appellee contends appellant did not offer sufficient proof of damages. Appellant offered evidence that the manufacturer’s list price of a 1990 model boat was $13,200.00, and the manufacturer’s list price of a 1991 model boat was $13,760.00. Based on that evidence, the chancellor awarded appellant $560.00 in damages. Appellee cites Ark. Code Ann. § 4-2-714 (Repl. 1991) and contends the proper measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the boat accepted and the value of the boat if it had been as warranted. Appellee admits there was evidence of the value of the boat as it was warranted at the time and place of acceptance. However, appellee argues there was no evidence of the value of the boat that appellee actually accepted at the time and place of acceptance. In other words, appellee contends there was no evidence of the value of a 1990 model boat on the date of purchase, July 24, 1991; the only evidence concerning a 1990 model boat was the manufacturer’s list price for a new 1990 boat in 1990, not a new 1990 boat in 1991. Because appellant did not present specific proof of his damages, appellee contends the damages must be reversed.  We agree that the party claiming damages has the burden of proving those damages beyond speculation. Minerva Enterprises, Inc. v. Howlett, 308 Ark. 291, 824 S.W.2d 377 (1992). However, we do not agree that the Code’s remedy for breach of warranty as stated in section 4-2-714 is the only appropriate measure of damages for appellant as a buyer of goods. When both fraud and breach of contract are pled, the Code provides and this court has held, that a buyer may pursue but not recover both revocation of acceptance under the Code, sometimes referred to as common law equitable rescission with restitution, and damages for breach of warranty. Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 864 S.W.2d 817 (1993); Ark. Code Ann. §§ 4-2-711, -714 (Repl. 1991). Appellant was entitled to present evidence to support a recovery under both remedies and then elect between them. Id. In Walt Bennett Ford, 314 Ark. at 601-03, 864 S.W.2d at 826-28, we established guidelines for determining the appropriate affirmance or disaffirmance remedy, depending upon the fa6ts of each particular case. Because appellant offered evidence of both disaffirmance and affirmance remedies, we cannot conclude his proof of damages was insufficient. Therefore, we reverse and remand on cross-appeal.  Because appellant included a request for rescission in his complaint and presented evidence to support that claim, the equity court had jurisdiction of the fraud claim pursuant to the clean-up doctrine. Liles v. Liles, 289 Ark. 159, 711 S.W.2d 447 (1986). That does not mean, however, that the equity court must completely disregard equitable remedies in favor of legal remedies when acting pursuant to the clean-up doctrine. Smith v. Eastgate Properties, Inc., 312 Ark. 355, 849 S.W.2d 504 (1993). Although the usual practice is to conclude a case with only one trial, this court has remanded cases to equity courts for further proceedings, including the hearing of additional evidence, when justice demands. Wasp Oil, Inc. v. Arkansas Oil & Gas, Inc., 280 Ark. 420, 658 S.W.2d 397 (1983). Justice demands that we remand a case to equity for further proceedings when a party has suffered some damage, but the trial court’s award of damages was not supported by findings of fact or other explanation apparent to us on appeal. See id. Here, appellant proved constructive fraud by a preponderance of the evidence and is therefore entitled to a remedy. Due to the lack of explanation by the chancellor, we are unable to determine why she disregarded the available equitable remedies and awarded damages. Justice therefore demands that appellant’s case be reversed and remanded for the chancellor to make the requisite findings, and to receive additional evidence if necessary, to award appellant a proper remedy. Finally, we observe that because equity courts generally do not enforce penalties, when one proceeds in equity where he or she had an adequate remedy at law, he or she is held to have waived any right to punitive damages. Stolz v. Franklin, 258 Ark. 999, 531 S.W.2d 1 (1975). Thus, the chancellor did not err in refusing to award punitive damages. The judgment is reversed and remanded on both direct appeal and cross-appeal for findings and conclusions consistent with this opinion. Holt, C.J., and Dudley and Newbern, JJ., dissent.