Court Opinion

ID: 9667634
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:51:09.476291+00
Date Added: 2024-06-11T18:13:12.598274
License: Public Domain

Jack Holt, Jr., Chief Justice. The central issue in this case is whether the appellants, Interstate Freeway Services, Inc. (IFS), and Wayne E. Stowe, fraudulently induced the appellee, John Houser, to accept employment to open and manage their new restaurant, John’s Diner, and the corresponding measure of compensatory and punitive damages. The underlying facts show that Houser had managed a restaurant for IFS from 1971 to 1980, at which time he voluntarily terminated his employment. Houser continued to work in the restaurant business, and, sometime in September or October of 1989, he responded to a newspaper advertisement in which Stowe had advertised for a shift manager at his Union 76 Truck Stop restaurant. However, the job had already been filled, and Houser then began working as an assistant chef at the Marlsgate Plantation near Scott, Arkansas, on October 16, 1989. The next day Stowe contacted Houser with an offer to open and manage a new restaurant, bearing his name, John’s Diner, which offer included a salary of $500.00 per week, paid vacation, hospitalization and related insurance for both Houser and his wife, and ten percent of the restaurant’s gross profits. Houser accepted Stowe’s offer, gave notice to Marlsgate Plantation, and, due to Stowe’s expressed desire to open for business as quickly as possible, began the very next day to hire employees, to clean the restaurant facility, and to order food and supplies. On October 31, 1989, John’s Diner opened under Houser’s management; apparently, business was good and patronage increased daily. On November 3, 1989, however, Houser, as well as his entire staff, was fired by Bill Landers, an agent of IFS, because of attitude and not following company policy (allegedly permitting the restaurant employees to drink coffee and tea without paying for their beverages). On November 6, 1989, Stowe installed Landers as manager and a new staff was employed to continue operating the business. The restaurant was subsequently renamed the Diner, accomplished simply by removing Houser’s first name from the sign. Houser filed a complaint in the Pulaski County Circuit Court on November 28, 1989; Stowe and IFS filed a motion to dismiss, and Houser filed an amended complaint. Stowe and IFS responded with a second motion to dismiss, which was granted in part and denied in part; the trial court left Houser’s claim of fraud against Stowe and IFS intact. After a jury trial on April 9, 1991, Houser was awarded a judgment jointly and severally against Stowe and IFS in the amount of $27,872.00 for compensatory damages and $2,787.00 for punitive damages, as well as $ 104.21 for statutory costs. From this award, Stowe and IFS appeal and assert three points of error, none of which has merit, and the judgment of the trial court is affirmed as modified. I. PROOF OF FRAUD The appellants initially contend that the trial court erred in denying their motion for directed verdict and motion for judgment notwithstanding the jury’s verdict or for new trial and instructing the jury on fraud due to Houser’s failure to prove essential elements of his claim for fraud.  Fraud is never presumed, but must be affirmatively proved, and the burden of proving fraud is upon the party who alleges it and relies on it. Rees v. Craighead Inv. Co., Inc., 251 Ark. 336, 472 S.W.2d 92 (1971).  In Morris v. Valley Forge Ins. Co., 305 Ark. 25, 805 S.W.2d 948 (1991)(citing Brookside Village Mobile Homes v. Meyers, 301 Ark. 139, 782 S.W.2d 365 (1990)), we noted that proof of fraud requires a showing of five elements: 1) a false representation of a material fact; 2) knowledge or belief on the part of the person making the representation that the representation is false; 3) an intent to induce the other party to act or refrain from acting in reliance on the misrepresentation; 4) a justifiable reliance by the other party; and 5) resulting damages. Further, circumstantial evidence can serve as a basis for the jury to infer fraud as it can serve as a basis to infer any other fact. Moore Ford Co. v. Smith, 270 Ark. 340, 604 S.W.2d 943 (1980). Houser contended at trial that, although Stowe had offered him the position of manager of the new restaurant and to have full responsibility to do what he wanted to do without outside interference, Stowe had exercised deceit in that he had really only wanted him to clean the restaurant facility and do the initial hard work of opening the restaurant with the hidden intent of installing his own workers at the restaurant after the initial start-up work had been completed. With regard to his actual authority as manager of the restaurant, Houser testified in essence as follows: Mr. Stowe said he was going to open a restaurant and asked if I would be interested in running it. I told him I had just gone to work. When he quoted me the salary of $500.00 a week, plus hospitalization, plus life insurance, ten percent of the profits and vacation, five days a week, off Saturday and Sunday, eight hours a day, I took the job. This was better deal than what I had at Marlsgate or had ever had in the restaurant business. Even though I had been satisfied at Marlsgate, I quit there to go to work for Mr. Stowe because he offered me $250.00 more per week for the same hours. My position was going to be manager. My authority at the diner was that I was going to manage it. I was to have full responsibility to do what I wanted to do without outside interference. I did get outside interference from Bill Landers. He was there every day like he owned the place. Stowe also testified, in response to the question whether Houser was going to run the restaurant, that Houser was going to “[m]anage it, right.” Stowe also stated that he “. . . had Bill Landers, my general manager, down there to keep an eye on everything,” and Landers “. . . came back every night and reported to me.” In response to Houser’s claim, Stowe asserted that he had complied with every facet of his employment offer to Houser in that he paid Houser for the two weeks that he worked, as well as two weeks severance pay, and installed him as manager of the new restaurant. Houser was not employed long enough to receive paid vacation or insurance benefits, which were part of the promised package. The jury was properly instructed by the trial court that “[f]raud may not be presumed. It must be proven. However, you may review all of the circumstances of a transaction including the conduct of the parties, and you may infer fraud from facts which have been proven. In other words, fraud may be proven by circumstantial evidence, where the circumstances are so clear and well connected as to clearly show fraud.”  Factual questions as to whether Stowe actually intended to defraud Houser and whether Houser justifiably relied on Stowe’s representations are issues within the province of the jury to decide. It is obvious that these representations were made and that Houser relied on them; based on the trial court’s instruction, the jury found fraud, and we agree. Given Houser’s concededly good reputation in his profession, acknowledged by both Stowe and Landers, the terms of Stowe’s employment offer as manager, Landers’s apparent oversight of the restaurant start-up, the short duration of Houser’s employment, and the reasons and circumstances of Houser’s termination, we cannot say that Houser did not satisfy his burden of proving fraud on behalf of IFC and Stowe. II. COMPENSATORY DAMAGE Next, the appellants argue that the trial court erred in denying their motion for directed verdict, motion for new trial, and motion for order of remittitur and by instructing the jury on Houser’s claim for damages as his measure of damage was clearly contrary to the law of the State of Arkansas. The trial court instructed the jury with modified AMI 2201 as follows: If you decide for the plaintiff on the question of liability against any party he is suing, you must then fix the amount of money which will reasonably and fairly compensate him for any of the following two elements of damage sustained: First, the value of the plaintiffs loss of income; and Second, the value of the plaintiffs benefits lost. Whether any of these two elements of damage has been proved by the evidence is for you to determine. The jury awarded Houser $27,872.00, apparently on the basis that Houser testified that, as of the time of trial, he would have made $39,000.00 from his salary of $500.00 per week. Using this figure as a base amount, the jury deducted $2,000.00 that he had been paid from Stowe and IFS for wages and severance pay and $11,475.00 that he had earned from another job and added $2,347.00 for the cost of insurance in determining the amount of its award. Essentially, Stowe and IFS argue that, under the two recognized theories of recovery for fraud cases, since Houser was offered a job based on a weekly salary and he was paid for his two weeks of work plus two weeks severance pay, then his damages should be reduced to a nominal amount of $1.00.  Two measures of general damages are generally applied in actions for fraud in recognition of the underlying elements of both tort and contract in those actions. The first measure is the benefit of the bargain measure, in which the injured party is entitled to the difference between the value of the property, business, or chattel as represented and its actual value at the time of the purchase. In essence, the injured party would receive his expectation. The second measure is the out-of-pocket measure, in which the injured party is to be made whole by being restored to the position he was in prior to the injury; this measure provides for the difference between the purchase price and the actual value of the goods received. H. Brill, Arkansas Law of Damages, § 35-37 (1990).  It has been recognized that these two theories of recovery are difficult to apply where the fraudulently induced contract is one for personal services, such as employment. See generally Annotated, Employment — Fraud — Damages, 24 A.L.R.3d 1388 (1969). In fraudulent inducement of employment cases, under the benefit of the bargain measure the defrauded employee receives the benefits he would have realized under the contract had the representations been true. Under the out-of-pocket measure, the focus is on compensating the injured party for the pecuniary loss sustained as a result of the fraud. Id. Further, the difficulty in application of these theories is increased by the fact that this is an employment-at-will case, in that there is no set length of employment. We note with approval the approach taken in the case of Berger v. Security Pacific Inf. Systems, 795 P.2d 1380 (Colo. App. 1990), where an at-will employee who established that her employer had fraudulently concealed that the project for which she had been hired to manage might be terminated was entitled to lost wages from the time of the project’s termination; although the employee’s employment was terminable at will, the jury could reasonably infer from the evidence that her employment would have continued for a reasonable time had the project been as successful as represented by the employer. In this case, Houser had previously worked for Stowe and IFS as a manager for eight years, and Stowe had been pleased with his work. All parties agree that John’s Diner did good business for a new restaurant during the four days that it was open while Houser was employed as manager. The jury, therefore, could infer that Houser would have continued work for a reasonable time when calculating his damages; however, the jury included in its award the time period after the restaurant closed to the time of trial, and we find this time period to be too speculative for inclusion in the damages award.  Accordingly, we find that a remittitur in the amount of damages from $27,872.00 to $14,347.00, to encompass only the period during which the restaurant remained open, is reasonable in these circumstances. III. PUNITIVE DAMAGES Finally, the appellants claim that the trial court erred in denying their motion for directed verdict and motion for judgment notwithstanding the verdict, for new trial, and for remittitur and instructing the jury as to Houser’s claim for punitive damages since he failed to meet his burden of proving that their conduct was reckless, malicious, or intentional.  In Ray Dodge, Inc. v. Moore, 251 Ark. 1036, 479 S.W.2d 518 (1972), we noted that compensation of a plaintiff is not the purpose of punitive damages but the penalty which the law fixes for conduct which is malicious, wanton, in violation of a relationship of trust or confidence, or which is done with deliberate intent to injure another. There is no fixed standard for measurement of punitive damages, and their amount lies largely within the discretion of the jury on due consideration of the attendant circumstances.  In this case, the jury’s award of $2,787.00 was not excessive in light of the appellants’ premeditated motivation behind the appellants’ actions, the degree of calculation involved, and the extent of the appellants’ disregard of Houser’s rights and expectations. IV. MOTION FOR COSTS AND FEES FOR SUPPLEMENTARY ABSTRACT Houser has filed a motion for costs and fees for his supplemental abstract in the amount of $1,045.00; however, the majority of the material included in his supplemental abstract has already been included in Stowe’s and IFS’s abstract and is, therefore, wholly unnecessary and repetitive.  We find that an award of $ 100.00 for costs and fees for those parts of Houser’s supplemental abstract not included in Stowe’s and IFS’s abstract is an appropriate award in this case. Affirmed as modified. Dudley and Brown, JJ., dissent. Corbin, J., not participating.