Court Opinion

ID: 7918572
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:16:03.455016+00
Date Added: 2024-06-11T16:32:54.762311
License: Public Domain

BELL, Judge,
concurring and dissenting.
The majority quite properly rejects the notion, espoused, and, indeed, held by the Court of Special Appeals, “that proof of fraud, even when based on the defendant’s actual knowledge of its falsity, was not a sufficient predicate for punitive damages liability” and “that ‘additional proof of some further aggravated circumstances was needed if punitive damages were to be recovered.” 337 Md. 216, 237, 652 A.2d 1117, 1127. I also agree with the majority that proof of “actual malice” is a prerequisite for recovery of punitive damages in a fraud action; the mental aspect of the tort mandates that one who perpetrates the tort have “actual knowledge” that the state*244ment is a misrepresentation. The majority defines “actual knowledge” to exclude the situation in which the perpetrator is consciously aware (has actual knowledge) that he or she does not know whether the representation is true or false. It is with this proposition that I do not 'agree. It is my view, in other words, that the requisite mental state authorizing consideration of punitive damages is inherent in the elements of fraud or deceit, as that tort has traditionally been defined by this Court. I fully agree with the circuit court in that regard.
It has long been the law of Maryland and, thus, well settled, that a defendant, intending to mislead the plaintiff and fully aware that he or she does not know whether the representation he or she makes is true or false, commits the tort of fraud or deceit. E.g., Robertson v. Parks, 76 Md. 118, 131, 24 A. 411, 412 (1892). The rationale underlying the rule is that making a representation of a fact, with intent to deceive and actual knowledge that the speaker does not know whether it is fact or not, is as much a misrepresentation as one made with actual knowledge of falsity and that actual knowledge of the former is as reprehensible as actual knowledge of the latter. Fully recognizing the state of the law, see 337 Md. at 229-233, 652 A.2d at 1123-1125, but noting that “Maryland cases concerning fraud or deceit have typically involved the form of the tort which is characterized by the defendant’s deliberate deception of the plaintiff by means of a representation which he knows to be false,” the majority nevertheless “refines” the actual knowledge prong of the tort, to include only that situation. Id. 337 Md. at 234, 652 A.2d at 1126. And it does so, fully cognizant that, as traditionally understood, the tort countenanced no amount of negligence, however gross. See 337 Md. at 236-239, 652 A.2d at 1127-1128. There is absolutely no basis for the majority’s change of the law.
I also agree with the circuit court’s judgment, which is reflective of heretofore well established principles. Thus, in my humble opinion, just as inexorably as night follows day, the jury’s determination that punitive damages were warranted in this case follows from its earlier finding that the appellees’ conduct constituted fraud or deceit. That this is so is obvious *245from even a cursory review of what transpired in the trial court.
Although the liability phase of the trial was tried separately from the damages phase, the same jury tried both. Consequently, that jury was fully aware of the conduct, on the basis of which it assessed punitive damages. It is true that the court did not instruct the jury as to the elements of fraud or deceit. But the court did instruct the jury in terms of the conduct alleged by the plaintiffs to have been fraudulent. In that regard, the court advised the jury that if the defendant slipped the guarantees in without telling the plaintiffs or without the plaintiffs knowing that they had been slipped in, that’s fraud.1 Indeed, it was agreed that such conduct was fraud. That this is so is reflected in comments made by the trial court in the presence of all counsel:
Now, in this case the only issue for the jury is were they [the plaintiffs] put on notice of that fact [the insertion of the guarantees]. It is conceded that they should have been. So, I guess you can argue the case whichever way you wish. If you are comfortable with sort of outlining the elements of fraud, that’s fíne. But everybody concedes that if the notice wasn’t given, then there was a fraud,
and by the question that was propounded to the jury:
Are you persuaded that, when [the appellant] signed the documents that he signed on December 29 and/or 30, neither he nor [his attorney] knew that additional personal guarantees had been inserted into [the completion guarantees and loan agreements]?
Having previously determined that the defendant had engaged in conduct which constituted fraud or deceit, the jury had only to decide in the damages phase of trial, whether that conduct was sufficiently egregious as to warrant the award of punitive damages. That is precisely what the trial court *246instructed. It told the jury that notwithstanding its prior finding, punitive damages need not be awarded, but that it could award punitive damages in such an amount “as in your sound judgment and discretion you find will serve to punish [the appellee] for the conduct you have found it engaged in in this case.” Because the jury was instructed on fraud, albeit in terms of conduct, as opposed to its elements, to which the defendant did not interpose any objections, and the parties agreed that the jury’s resolution of the factual dispute in favor of the plaintiffs would constitute the conduct engaged in by the defendant as fraud or deceit, there was no reason, as the trial court asserted, to give it a further instruction on “malice.” This is consistent with the court’s holding with respect to the mental state required for fraud or deceit. As I see it, therefore, the trial court correctly concluded that the plaintiffs necessarily established that the defendant acted with the actual malice required for an award of punitive damages once they proved that the defendant acted fraudulently. I would hold that the trial court did not err in refusing to give the requested “malice” instruction. Thus, in addition to reversing the judgment of the Court of Special Appeals, I would instruct that court to affirm the judgment of the Circuit Court.
I am also troubled by footnote 13, in which the majority sets forth the statutorily imposed maximum fines for criminal offenses, commercial crimes or fraud offenses. While the majority notes that “[t]here are other pertinent considerations in fixing an amount of punitive damages” and, thus, the criminal monetary penalties cannot provide a cap for a punitive damages award, it specifically advocates that “in determining whether an award of punitive damages is proportionate to the defendant’s misconduct, a court may consider, inter alia, the legislative policy reflected in statutes setting criminal fines.” 337 Md. at 242 n. 13, 652 A.2d at 1130 n. 13. If the majority is not suggesting that the monetary penalties constitute a cap and other pertinent considerations do impact on the fixing of punitive damages, it is difficult to understand the purpose of the footnote. Referring in punitive damages instructions to these maximum monetary penalties, but telling *247the jury it is not a cap, would only confuse the jury and, very likely, would tend to usurp the jury function.

. That there was, in this case, "actual knowledge”, in the sense that the majority defines it, cannot be disputed. One party cannot slip a guarantee into loan documents, without actual knowledge that the other party does not know it.