Court Opinion

ID: 2653149
Source: CourtListenerOpinion
Date Created: 2014-02-13 01:02:09.777311+00
Date Added: 2024-06-11T12:35:39.828620
License: Public Domain

Cite as 2014 Ark. App. 101

                 ARKANSAS COURT OF APPEALS
                                      DIVISION IV
                                      No. CV-12-450

GEORGE HOBSON and MONTIE                         Opinion Delivered   February 12, 2014
HOBSON
                   APPELLANTS                    APPEAL FROM THE PULASKI
                                                 COUNTY CIRCUIT COURT,
V.                                               SIXTH DIVISION
                                                 [NO. 60CV-06-10641]

ENTERGY ARKANSAS, INC.                           HONORABLE TIMOTHY DAVIS
                     APPELLEE                    FOX, JUDGE

                                                 AFFIRMED IN PART; REVERSED
                                                 AND REMANDED IN PART

                              DAVID M. GLOVER, Judge

       This appeal arises from a suit filed by appellants George and Montie Hobson against

appellee Entergy Arkansas for actual and constructive fraud, breach of contract, and

promissory estoppel. The suit claimed that Entergy failed to honor its promise to purchase the

Hobsons’ home in connection with a job relocation.1 Prior to trial, the circuit court entered

three summary-judgment orders that are pertinent to this appeal. The first order dismissed the

Hobsons’ claims for actual and constructive fraud. The second and third orders limited the

types of damages the Hobsons could recover on their remaining claims for breach of contract

and promissory estoppel. Those two claims went to trial, and the jury awarded the Hobsons

$21,935.95. For reversal, the Hobsons argue that the circuit court erred in entering each of

       1
       We previously ordered rebriefing in this case. Hobson v. Entergy Arkansas, Inc., 2013
Ark. App. 447.
                                  Cite as 2014 Ark. App. 101

the summary-judgment orders. We affirm in part and reverse and remand in part.

                                       I. Factual Background

       In 2000, appellant George Hobson was living in Rogers, Arkansas, with his family. He

operated an electrical-contracting business, kV Electric, Inc., and his wife, appellant Montie

Hobson, worked as an accountant for St. Mary’s Hospital. Before operating his own business,

Mr. Hobson was employed at Entergy for over twenty years.

       In the summer of 2000, Jerry Tanner of Entergy approached Hobson with an offer to

return to work for Entergy in central Arkansas. Hobson told Tanner that he could not

consider the offer unless Entergy gave him his time back for seniority and vacation purposes

and bought his house in Rogers and moved him to central Arkansas. According to Hobson,

Tanner told him that this would be “no problem” but that, if he took the job, he would have

to sell his interest in kV Electric to avoid a conflict of interest. Tanner would later testify that

he was aware of Entergy’s employee-relocation policy and believed that Hobson would

qualify for the policy’s benefits. There is no evidence, however, that Tanner provided Hobson

with a copy of the relocation policy or discussed its provisions in detail.

       Entergy’s written employee-relocation policy, as effective in the year 2000, is not in

the record before us. However, other documents of record indicate that the policy applied to

Entergy employees and new hires with a Responsibility Level of 21 or higher. The 2003

relocation policy, which is in the record, includes “home sale and home purchase benefits”

under a Third Party Purchase Program. The program provides that a company called Cendant

Mobility Services Corporation will establish the appraised value of the employee’s home, then

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deliver a sales contract to the employee, who has ninety days to elect to sell the home to

Cendant.

       In July 2000, Hobson accepted the job with Entergy and began working there almost

immediately. He stayed in Little Rock at Entergy’s expense while Mrs. Hobson and the

children remained in Rogers, pending the sale of the house. As required by Entergy, Hobson

made arrangements to sell his interest in kV Electric. Mrs. Hobson quit her job to prepare the

Rogers house for sale.

       A short time later, a conflict arose as to whether Mr. Hobson qualified for the home-

buyout benefit. According to notes prepared by Cendant, Hobson had been hired at a

responsibility level of 17 and was not eligible for the home-buyout package. The notes also

reflect that the Hobsons complained to Cendant that Entergy’s purchase of their home was

part of Mr. Hobson’s agreement to accept employment with Entergy. After several email

communications, Entergy and Cendant apparently concluded that Tanner had misunderstood

the policy’s provisions and had in fact offered Hobson the home-buyout benefit. Tanner asked

Cendant to appraise the Hobsons’ house and proceed with a buyout. The house, which the

Hobsons had been trying to sell on their own for $279,000, appraised for $245,000.

According to Cendant, the house was overpriced and needed certain improvements.

       The Hobsons incurred expenses in making repairs and improvements to their home.

Nevertheless, Entergy and Cendant decided in December 2001 not to buy the home.

       Thereafter, the Hobsons continued to try and sell their home on the open market

while simultaneously urging Entergy executives to honor the company’s promise to buy the

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home. At one point, they pled their case to Entergy’s CEO, Wayne Leonard, who

sympathized with their situation and acknowledged Entergy’s possible legal exposure.

       In June 2003, Mr. Hobson received a letter from Entergy executive Doug Mader,

stating that “the decision has been reached to provide you home buyout benefits.” The letter

further stated that, in accordance with Entergy’s relocation policy, an appraisal would be done

on the Rogers home and “an appraised value offer will be extended to you.”

       The Hobsons believed that Entergy’s decision to provide “home buyout benefits”

meant that Entergy would at last fulfill its promise to buy their home. In August 2003, they

received a contract of sale from Cendant. The contract named the Hobsons as sellers; named

a Cendant subsidiary, Cendant Mobility Financial Corporation, as the buyer; stated an

agreement to buy the home for $245,000 “based upon your employer’s relocation policy and

an average of independent appraisals”; stated that the Hobsons would give Cendant Financial

full possession as “the new owner” within sixty days after signing the sales contract; and

provided that, after the possession date, Cendant Financial would “assume all benefits and

burdens of ownership” in the home “until sale and transfer of title to a third party.” However,

Mrs. Hobson (who has a law license) determined that some of the contract’s terms differed

significantly from an ordinary real-estate contract. Among her objections were that the

Hobsons were required to guarantee (rather than warrant to the best of their knowledge) the

lack of material defects in the physical condition of the home; that Cendant had the choice

to either pay off the Hobsons’ mortgage or continue to service it; and that Cendant was

permitted to rescind the sales contract if Mr. Hobson did not remain an employee of Entergy

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or if Entergy failed to abide by the terms of its relocation-management agreement with

Cendant.2

       Mrs. Hobson sent detailed letters to Entergy explaining that Entergy had promised to

buy their home and that the Cendant contract did not in fact constitute a purchase. Entergy

reviewed Mrs. Hobson’s correspondence but refused to alter the sales contract. As a result, the

Hobsons did not enter into a sales contract with Cendant. The house remained unsold, and

Mrs. Hobson and the children stayed in Rogers while Mr. Hobson continued to work for

Entergy in central Arkansas. At some point, Mrs. Hobson returned to work for less money

than she had previously made as an accountant. In mid-2005, Mr. Hobson submitted a letter

of resignation to Entergy. The letter stated that Entergy had refused to honor its

representations, made as part of its offer of employment, to purchase his house and relocate

his family. It also stated that Hobson would have continued working for Entergy if Entergy

had purchased his house. Upon resigning, Hobson returned to Rogers and accepted

employment at an annual salary of approximately $19,000 less than he had been making at

Entergy.

       On September 15, 2006, the Hobsons sued Entergy based on Entergy’s refusal to

purchase their home.3 They alleged that Mr. Hobson’s acceptance of employment with

Entergy was predicated on Entergy’s agreement to purchase their home and that Entergy’s

       2
       See Byme, Inc. v. Ivy, 367 Ark. 451, 241 S.W.3d 229 (2006), involving a similar
contract.
       3
         The Hobsons originally sued Entergy in 2003 but nonsuited the action in 2005. They
refiled the case on September 15, 2006.
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refusal to do so constituted a breach of contract. They further alleged that they relied to their

detriment on Entergy’s false promises and representations that it would purchase their home,

for which Entergy should be liable on theories of promissory estoppel, actual fraud, and

constructive fraud. Entergy denied the allegations.

       On July 30, 2010, Entergy filed a motion for summary judgment directed to the

Hobsons’ claims for actual and constructive fraud. Entergy argued, in pertinent part, that the

Hobsons’ fraud claims should be dismissed because the claims were based on representations

of future events rather than on misrepresentations of fact. Following a hearing, the circuit

court granted Entergy’s motion.

       Thereafter, to support their claims on the remaining counts of breach of contract and

promissory estoppel,4 the Hobsons produced the report of an economics expert, Dr. Ralph

Scott. Dr. Scott opined that the Hobsons had suffered approximately $3,000,000 in damages

as the result of relinquishing their interest in kV Electric and Mrs. Hobson’s giving up her job

to prepare the Rogers house for sale. Based on this report, Entergy filed its second motion for

summary judgment, arguing that Dr. Scott incorrectly employed a “but-for” measure of

damages. According to Entergy, the proper measure of damages for breach of contract and

promissory estoppel would have been to place the Hobsons in the same position as if

Entergy’s alleged promise had not been breached.

       The Hobsons responded that their lost income was actually “consequential damage”

       4
       The Hobsons’ counsel indicated at one of the summary-judgment hearings that these
counts were pled in the alternative.
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and was, in any event, recoverable under their theory of promissory estoppel. The circuit

court granted Entergy’s motion for summary judgment but implied that it would consider

other types of damages. Accordingly, the Hobsons gave notice that they would seek damages

for repairs and improvements to the Rogers house; for Mr. Hobson’s loss in taking a lower-

paying job after leaving Entergy in 2005; and for Mr. Hobson’s inability to participate in a

retirement-buyout package that Entergy offered in October 2003.5

       In response, Entergy filed its third motion for summary judgment, arguing again that

the Hobsons’ damages were not recoverable under their breach-of-contract or promissory-

estoppel theories. The circuit court granted Entergy’s motion in part, prohibiting Mr.

Hobson’s claim for reduced income after leaving Entergy. The court denied the motion as it

related to the Hobsons’ claim for home-improvement and repair expenses. It is not clear

whether the court ruled on Mr. Hobson’s claim for lost opportunity with regard to the

retirement buyout.

       At trial, the Hobsons sought damages of $27,285.98 for various repairs and

improvements to their home. They offered testimony that some of the repairs and

improvements were done to facilitate the sale of the home or at Cendant/Entergy’s request.

Other testimony indicated that the Hobsons benefited from some of the improvements or

would have performed them regardless of the planned move. The jury returned a verdict in

favor of the Hobsons for $21,935.98.

       5
       Accepting the buyout would have required Mr. Hobson to release all claims against
Entergy.
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       On appeal, the Hobsons challenge the summary-judgment order that dismissed their

fraud claims and the two summary-judgment orders that limited their damages.

                                      II. Standard of Review

       Summary judgment is to be granted by the trial court only when there are no genuine

issues of material fact to be litigated, and the moving party is entitled to judgment as a matter

of law. Killian v. Gibson, 2012 Ark. App. 299, ___ S.W.3d ___. In reviewing a grant of

summary judgment, we determine whether the evidentiary items presented by the moving

party in support of the motion left a material question of fact unanswered. Id. We view the

evidence in the light most favorable to the party against whom the motion was filed and

resolve all doubts and inferences against the moving party. Id. When a litigant cannot present

proof of an essential element of their claim, the party moving for summary judgment is

entitled to judgment as a matter of law. Worley v. City of Jonesboro, 2011 Ark. App. 594, 385
S.W.3d 908.

                                III. Actual and Constructive Fraud

       Actual fraud consists of the following elements: 1) the defendant made a false

representation of material fact; 2) the defendant knew that the representation was false or that

there was insufficient evidence upon which to make the representation; 3) the defendant

intended to induce action or inaction by the plaintiff in reliance upon the representation; 4)

the plaintiff justifiably relied on the representation; 5) the plaintiff suffered damage as a result

of the false representation. First Ark. Bank & Trust v. Gill Elrod Ragon Owen & Sherman, P.A.,

2013 Ark. 159, ___ S.W.3d ___. Constructive fraud, as opposed to actual fraud, does not

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include the elements of actual dishonesty or intent to deceive. Born v. Hosto & Buchan, PLLC,

2010 Ark. 292, 372 S.W.3d 324. It is defined as a breach of a legal or equitable duty which,

irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive

others. Id.

       As described in their brief, the Hobsons’ fraud claims are based on their allegations that

Jerry Tanner’s statements and Entergy’s relocation policy falsely represented that Entergy

would buy their home; that Entergy did not buy their home; that Entergy’s intent was to

induce Mr. Hobson to accept employment with the company; that Mr. Hobson justifiably

relied on the misrepresentations; and that the Hobsons suffered damages as a result. On appeal,

the Hobsons make arguments with regard to each of these allegations. Our focus, however,

will be whether the Hobsons presented proof of one essential element of their claim: that

Entergy made a misrepresentation of a material fact. Both actual and constructive fraud require

proof of this element. S. Cnty, Inc. v. First W. Loan Co., 315 Ark. 722, 871 S.W.2d 325

(1994); Rice v. Ragsdale, 104 Ark. App. 364, 292 S.W.3d 856 (2009). Further, because they

claim fraud on the premise that Entergy induced Mr. Hobson to accept employment, the

relevant statements for our purposes are those made by Jerry Tanner in seeking to hire Mr.

Hobson.

       At the trial level, Entergy moved for summary judgment on the ground that the

misrepresentations cited by the Hobsons were promises of future events rather than statements

of fact. It is well-established that representations that are promissory in nature, or of facts that

will exist in the future, though false, will not support an action for fraud. Anthony v. First Nat’l

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Bank of Magnolia, 244 Ark. 1015, 431 S.W.2d 267 (1968). In P.A.M. Transport, Inc. v.

Arkansas Blue Cross & Blue Shield, 315 Ark. 234, 868 S.W.2d 33 (1993), our supreme court

stated the following:

               One of the elements of deceit is that the misrepresentation alleged must
       typically be a misrepresentation of fact. In the context of negotiating a contract, a
       misrepresentation sufficient to form the basis of a deceit action may be made by one
       prospective party to another and must relate to a past event, or a present circumstance,
       but not a future event. “An assertion limited to a future event may be a promise that
       imposes liability for breach of contract or a mere prediction that does not, but it is not
       a misrepresentation as to that event.”
315 Ark. at 240, 868 S.W.2d at 36 (citations omitted). Broken promises are therefore

generally within the realm of breach-of-contract actions, and not fraud actions. See S. Cnty,

Inc., supra; Chandler v. Kirkpatrick, 270 Ark. 74, 603 S.W.2d 406 (1980); Moore v. Keith Smith

Co., 2009 Ark. App. 361.

       Based on these authorities, we agree with Entergy that Tanner’s statements were

promises of future events rather than misrepresentations of fact, or statements of a present

circumstance. Tanner made the representations regarding Entergy’s relocation policy in a

contractual setting, pertaining to something Entergy would do in the future. His alleged

misrepresentations cannot be distinguished from other statements that our courts have held

to be promises rather than misrepresentations of fact. See S. Cnty, Inc., supra (holding that a

bank’s commitment to provide financing was a promise of future conduct made in a

contractual setting and, therefore, not fraud); Chandler, supra (holding that a borrower’s failure

to pay a loan amount after promising his co-borrower he would do so was not fraud); Moore,

supra (holding that a hen breeder’s representation that he would continue to place flocks with

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a farmer alluded to the breeder’s policy and its future performance of a contract and was not

fraud).

          The Hobsons cite an exception to the “future events” rule, which is that fraud may

be based on a promise of future conduct if the promisor, at the time of making the promise,

has no intention to carry it out. See Delta Sch. of Commerce, Inc. v. Wood, 298 Ark. 195, 766
S.W.2d 424 (1989); Stine v. Sanders, 66 Ark. App. 49, 987 S.W.2d 289 (1999). However, the

exception does not apply in this instance. The Hobsons produced no evidence that would

permit an inference that Jerry Tanner lacked an honest belief about the promises he made to

Mr. Hobson. Thus, there is no genuine issue of material fact on this point, and the general

rule that promises of future conduct do not constitute fraud is not abrogated. See generally

Anthony v. First Nat’l Bank of Magnolia, supra.

          The Hobsons also argue that Entergy had a duty to disclose that its relocation policy

would not involve the outright purchase of their home. Fraud-based liability for

nondisclosure, as opposed to an affirmative misrepresentation, arises in special circumstances

where there is a duty to communicate a concealed material fact or where one party knows

another is relying on misinformation to his detriment. Worley v. City of Jonesboro, 2011 Ark.

App. 594, 385 S.W.3d 908. Such liability may occur where the parties have a relation of trust

and confidence or where there is inequality of condition and knowledge, or where there are

other attendant circumstances. Holiday Inn Franchising, Inc. v. Hotel Assocs., Inc., 2011 Ark.

App. 147, 382 S.W.3d 6.

          To prevail in a case of fraudulent nondisclosure, the plaintiff must prove that the

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defendant concealed a material fact known to it. Downum v. Downum, 101 Ark. App. 243, 274
S.W.3d 349 (2008). The Hobsons, however, produced nothing to show that Tanner

concealed any material fact known to him with regard to Entergy’s relocation. The only

inferences supported by the proof are that Tanner told Hobson what he thought to be true

and correct.

       Based on the foregoing, we affirm the circuit court’s grant of summary judgment on

the Hobsons’ fraud claims.

                                   IV. Breach of Contract

       The Hobsons argue that the circuit court erred in its second and third summary-

judgment orders that involved their claim of consequential damages for breach of contract.6

The damage claims at issue are the Hobsons’ lost earnings from relinquishing kV Electric;

Mrs. Hobson’s lost wages from giving up her employment at St. Mary’s; Mr. Hobson’s lost

opportunity to participate in a retirement/severance package offered by Entergy; Mr.

Hobson’s reduced income after leaving Entergy in 2005; and certain costs incurred regarding

an offer the Hobsons made on a home in Cabot, Arkansas.

       The purpose of damages in a contract action is to place the injured party in the same

position he would have been in had the contract been performed. Howard W. Brill, Law of

       6
         The Hobsons’ brief makes a cursory mention of their promissory-estoppel claim with
regard to one of their elements of damage but otherwise makes no semblance of an argument
that the court erred in dismissing that claim. Their argument on appeal focuses on the
concept of consequential damages and the accompanying “tacit-agreement” rule that applies
in a breach-of-contract case. We therefore analyze the Hobsons’ argument on this point
solely in terms of their contract cause of action.
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Damages § 17:1 (5th ed. 2004); Acker Constr., LLC v. Tran, 2012 Ark. App. 214, 396 S.W.3d
279. The law makes a distinction between the general damages suffered in a breach-of-

contract case and consequential damages. General damages are those that necessarily flow from

the breach. Brill, supra § 4:2. Consequential damages refer to damages that are only indirectly

caused by the breach—instead of flowing directly from the breach, they result from some of

the consequences of the breach. Id.; Acker, supra.

       With regard to consequential damages, Arkansas follows the “tacit agreement” rule.

This rule provides that, in order to recover consequential damages, the plaintiff must prove

more than the defendant’s mere knowledge that a breach of the contract will entail special

damages to the plaintiff; it must also appear that the defendant at least tacitly agreed to assume

responsibility for such damages. See Deck House, Inc. v. Link, 98 Ark. App. 17, 249 S.W.3d
817 (2007).

       In light of these standards, we conclude that the circuit court correctly ruled that three

of the Hobsons’ damage claims must fail as a matter of law. Their claim for lost earnings from

the relinquishment of kV Electric was neither a direct nor an indirect consequence of

Entergy’s alleged breach of the alleged contract to buy the house. That is to say, the breach

of the contract, if any, did not cause the loss of the business. Further, while there is evidence

that Entergy knew that the Hobsons were giving up their business, a plaintiff seeking

consequential damages must prove more than mere knowledge by the defendant that a breach

will entail special damages. Deck House, supra. There must be some evidence that the

defendant tacitly agreed to assume responsibility for such damages. Id. We see no proof from

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which any inference may be drawn of a tacit agreement by Entergy to be responsible for the

loss of business income in the event of a breach.

       As for Mrs. Hobson’s lost income from leaving her job, such damages are, at most, an

indirect result of the alleged breach. However, the Hobsons have not made a convincing

argument that Entergy committed to be bound for anything more than ordinary, direct

damages in the event of a breach. See Stift’s Jewelers v. Oliver, 284 Ark. 29, 678 S.W.2d 372

(1984); Morrow v. First Nat’l Bank of Hot Springs, 261 Ark. 568, 550 S.W.2d 429 (1977). As

a result, Mrs. Hobson’s lost income does not meet the definition of consequential damages,

and no genuine issue of material fact remains on this point. Similarly, the Hobsons have not

convinced us that Entergy arguably agreed, even tacitly, to be responsible for Mr. Hobson’s

special damages incurred in losing the opportunity to participate in Entergy’s 2003 retirement

buyout.

       Finally, we turn to Mr. Hobson’s claim that his reduction in income upon leaving

Entergy’s employment in 2005 was the result of Entergy’s breaching its promise to buy the

Hobsons’ home. We agree with the Hobsons that a fact question remains on this point.

According to Mr. Hobson’s resignation letter, Entergy’s failure to buy the house was the

precise reason for his leaving to find another job. It is therefore arguable that these damages

flowed directly, rather than indirectly, from the breach, in which case the tacit-agreement rule

does not apply. Acker Constr., LLC, supra. Accordingly, we reverse and remand the summary

judgment on this aspect of damages. See generally Durham v. Smith, 2010 Ark. App. 329, 374

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S.W.3d 799.7

      Affirmed in part; reversed and remanded in part.

      HARRISON and WYNNE, JJ., agree.

      Gill A. Rogers, for appellants.

      Quattlebaum, Grooms, Tull & Burrow PLLC, by: Charles L. Sclumberger, for appellee.

      7
        We do not address the Hobsons’ argument that they were entitled to damages for
certain costs associated with an offer made on a central Arkansas home. That claim was not
pressed below nor did the circuit court rule on the matter.
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