Court Opinion

ID: 9635469
Source: CourtListenerOpinion
Date Created: 2023-08-22 13:51:18.675441+00
Date Added: 2024-06-11T18:09:27.597962
License: Public Domain

ADKINS, Judge,
concurring.
The majority holds that because the appellees’ fraudulent conduct arose out of a contract and because there was no evidence of their actual malice against appellant Miller Building Supply Inc. they were properly denied punitive damages. In light of the Court of Appeals’ decisions the court cites I cannot quarrel with this holding. It is clearly the law of Maryland that punitive damages are not recoverable when fraudulent conduct arises out of a contract, absent proof of actual malice. Nor do I disagree with the court’s conclusions that appellees’ fraud arose out of a contract and that there was no evidence of actual malice. *202What moves me to write separately is what I perceive to be the undesirability of the underlying rule concerning torts that arise out of contracts.
In pure tort actions punitive damages are awarded primarily to punish wrongdoers and to deter others from committing like wrongs. Embry v. Holly, 293 Md. 128, 141, 442 A.2d 966 (1982). Since the chief purpose of damages in a breach of contract action is to put the plaintiff in the same position he would have occupied had there been no breach punitive damages are not generally allowed in such actions. See H & R Block, Inc. v. Testerman, 275 Md. 36, 44, 338 A.2d 48 (1975).1 When a tort arises out of a contract we have a hybrid situation to which the Court of Appeals has developed a hybrid solution. Punitive damages may be recovered, but only if the plaintiff can prove actual malice— “the performance of an act without legal justification or excuse, but with an evil or rancorous motive influenced by hate, the purpose being to deliberately and wilfully injure the plaintiff.” Testerman, 275 Md. at 43, 338 A.2d 48. Why should recovery of punitive damages be so restricted when fraud arises out of a contract, but permitted on a showing of only implied malice2 when there is a pure fraud tort claim, not arising out of a contract?
The distinction seems to be based on notions underlying the disallowance of punitive damages in pure contract actions. It is suggested that concern for punitive damages will chill commercial transactions because “would-be contracting parties will be reluctant to enter into contracts that might ultimately result in unlimited liability.” Strausberg, *203A Roadmap Through Malice, Actual or Implied: Punitive Damages in Torts Arising Out of Contract in Maryland, 13 U. of Balt.L.Rev. 274, 293 (1984). And see General Motors Corp. v. Piskor, 281 Md. 627, 638-39, 381 A.2d 16 (1977). It is posited that the existence of contract-related punitive damages might inhibit parties to a contract from breaching the contract in order to pursue possibly more profitable and economically efficient ventures. Restatement (Second) Contracts, (1981) introductory note to Ch. 16 at 100, reporter’s note at 101.
Whatever merit these arguments may have with respect to pure contract actions, they are less than persuasive when applied to an action for fraud arising out of a contract. Why should one who lies or cheats in connection with the performance of a contract escape liability because he is motivated by greed instead of hate for the other contracting party? Even in a laissez-faire free market system, commercial cheating should not be condoned. It seems to me that there is as much societal benefit in punishing and deterring cheating that arises out of a contract as there is in a pure tort fraud case. I perceive no societal advantage in encouraging such conduct by applying a greater obstacle to punitive damages in a contract-related fraud case than in a pure fraud case. See generally, Strausberg, 13 U. of Balt.L.Rev. at 292-98. As the Court of Appeals recognized in Wedeman, 278 Md. at 532, 366 A.2d 7, “[t]hose who are tempted ... to engage deliberately in fraudulent conduct for profit are more likely to pause and consider the consequences if made aware that they may be compelled to pay more than the actual loss sustained by the plaintiff.”
I respectfully suggest that it is time for the appropriate authorities to consider the abolition of the implied malice/actual malice distinction with respect to punitive damages in contract-related tort cases, and to apply the implied malice standard in such cases.

. The concept of punitive damages may present its own problems; see ABA Special Committee on the Tort Liability System "Towards a Jurisprudence of Injury: The Continuing Creation of a System of Substantive Justice in American Tort Law” as summarized in Daily Record, December 12, 1984. Those problems are not my present concern.

. Implied malice is “conduct of an extraordinary nature characterized by a wanton or reckless disregard for the rights of others.” Wedeman v. City Chevrolet Co., 278 Md. 524, 532, 366 A.2d 7 (1976).