GERALD
TINKER v. DE MARIA PORSCHE AUDI, INC. and CENTRAL NATIONAL BANK OF MIAMI
Court of Appeals of Florida, Third District
459 So. 2d 487; 1984 Fla. App. LEXIS 16028; 9 Fla. L. Weekly 2538
December 4, 1984
Plaintiff Gerald Tinker commenced this action against defendants De
Maria Porsche-Audi, Inc. (hereafter De Maria) and Central National Bank
of Miami (hereafter the Bank) seeking, inter alia, compensatory and
punitive damages. The case proceeded to trial on allegations of fraud
and misrepresentation in connection with the purchase of a used Jaguar
sports car. The Bank counterclaimed for the unpaid balance due on an
installment loan contract executed by plaintiff for purchase of the
automobile. The court struck the claim for punitive damages. The jury
returned a verdict on the fraud claim in favor of plaintiff and against
De Maria only, assessing damages in the amount of $8,250. On the
counterclaim, the jury awarded the Bank $4,500 representing the balance
owed under terms of the contract. Plaintiff argued that the verdicts
were inconsistent and moved that the matter be resubmitted to the jury
for the purpose of resolving the inconsistency. The request was denied.
The trial court entered a judgment for De Maria notwithstanding the
verdict, and by final judgment further awarded the Bank costs in the
amount of $1,060 and attorney's fees in the amount of $15,000.
The evidence as developed at trial shows as follows. In 1976, plaintiff
purchased for investment purposes a used 1972 Jaguar from De Maria. De
Maria, through its sales agent and sales manager, verbally represented
to plaintiff, prior to making the sale, that the automobile was in good
operating condition, was powered by its original engine, and had never
been involved in a major collision. Tinker claimed that he relied on
these representations to his detriment and that De Maria intended for
Tinker to act on these representations. Tinker had problems with the
automobile immediately after its purchase. The car operated poorly and
Tinker soon discovered that it was not powered by its original engine,
had previously been involved in a major collision, and was determined
to be a total loss by its previous owner's insurance company.
Furthermore, the title held by the owner preceding De Maria stated that
it was a "parts car." De Maria concedes that the automobile was rebuilt
but contends that it had no knowledge of this fact at the time it
purchased the car and that the car's title did not reflect that fact as
required by statute. Tinker suggests that the fact that the party from
whom De Maria purchased the automobile was not a titled owner was
sufficient notice that, at best, the true history and condition of the
vehicle could not be warranted by De Maria, which constituted willful
negligence, or worse, that De Maria knew of and concealed the true
history of the automobile, which constituted intentional
misrepresentation.
In connection with the purchase of the automobile Tinker executed a
retail installment contract and note with De Maria, the seller, on a
form contract which was provided by the Bank. The Bank provided
financing for De Maria on a floor plan basis and the installment
contract and note were assigned to the Bank pursuant to a preprinted
assignment clause contained in the contract. Tinker stated by affidavit
that he never dealt with the Bank in arranging the financing and had
had no dealings with the Bank prior to delivery of the car. When De
Maria failed to replace or successfully repair the automobile after it
became totally inoperable, Tinker ceased making payments to the Bank.
Based on an alleged close connection with De Maria in financing the
sale, the Bank was named a party defendant on all counts. Its
preprinted installment sales contract provided in bold letters on the
first page:
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD
ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO
OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT
EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
Plaintiff contends that (1) the trial court erred in striking the
breach of warranty claims on grounds that the disclaimer was
conspicuous and thus an effective bar to a fraud claim, (2) the court
erred in granting De Maria's motion for judgment notwithstanding the
verdict, (3) by terms of the contract all claims and defenses available
against the seller were also available against the Bank which renders a
judgment for the Bank on its counterclaim inconsistent with the
judgment for plaintiff on the fraud claim against the seller, (4) it
was error to strike the claim for punitive damages, and (5) it was
error to refuse to grant plaintiff's request to instruct the jury on
"negligent fraud".
De Maria contends that judgment in its favor notwithstanding the jury
verdict was correct because fraud in the inducement cannot be asserted
in the face of a conspicuous limitation of liability contained in the
sales contract, relying on Faulk v. Weller K-F Cars, Inc., 70 So.2d 578
(Fla. 1954).
The Bank responds that the verdicts for it, both on plaintiff's claim
and on its counterclaim, were supported by the evidence and law.
Further, it contends that the verdicts against De Maria on the fraud
claim but for the Bank on its counterclaim were not inconsistent.
II
Tinker does not challenge the verdict for the Bank on his fraud claim
and concedes that the verdict reflects the jury's finding that the Bank
was not so closely related with De Maria as to be responsible for its
fraudulent acts. Nonetheless, he contends that the jury overlooked his
fraud defense to the Bank's counterclaim. We agree.
Whether the jury's finding of fraud by De Maria is, as contended by
Tinker, an absolute defense to the Bank's counterclaim for the balance
owed on the contract, depends on the legal efficacy of the "Notice"
provision which was included. Appellant expressed some uncertainty at
trial as to how the provision operates.
The Notice is required by federal law in all consumer credit contracts
made in connection with purchase money loans, such as installment sales
contracts where the consumer executes the sales agreement together with
a promissory note, both of which are, through a preprinted assignment
clause, assigned to a bank which is closely affiliated with the seller.
See 16 C.F.R. § 433.2 (1983). The effect of the federal rule is to
defeat the holder in due course status of the assignee institutional
lender, thus removing the lender's insulation from claims and defenses
which could be asserted against the seller by the consumer.
Prior to the passage of the rule, consumers were caught in a "no-win"
situation when the seller failed to remedy the defect either because of
its unwillingness or its disappearance from the market. The
institutional lenders then took advantage of protections under the
holder in due course doctrine when the consumer sought to assert seller
misconduct as a defense to the creditor's suit for payment on the note.
The rule is expressly designed to compel creditors to either absorb
seller misconduct costs or seek reimbursement of those costs from
sellers.
Although we have found no cases directly on the point, it is clear that
not only does the Notice clause entitle the buyer to withhold the
balance of the purchase price owed to the creditor when the seller's
contractual duties are not fulfilled, but it gives the buyer a complete
defense should the creditor sue for payment. The trial court
correctly interpreted the law and accordingly gave a proper
instruction:
If you find that the bank has proven
[its counterclaim by the] weight of the evidence, then you must
consider the. . . defenses offered by Mr. Tinker. If Mr. Tinker proves
[fraud by the seller] then you must find in favor of Mr. Tinker and
against the bank on its [counter] claim.
The jury was directed to find for the plaintiff on the Bank's
counterclaim if it found that the plaintiff had proved misconduct on
the part of the seller, and its failure to follow that instruction
constituted error which should have been corrected by the trial court
on Tinker's timely motion alleging inconsistency of the verdicts. That
error is correctable by this court without a remand. We hold that the
fraud found to have been perpetrated by De Maria constituted a complete
defense to the Bank's counterclaim for the balance owed on the
installment sales contract, which disposes of appellant's contention
that the verdicts were inconsistent.
III
It was error for the trial court to strike the demand for punitive
damages. Punitive damages are recoverable where the tortious act
complained of is fraud. The court's jury instruction encompassed all
the elements which would
support a punitive damages award. It was therefore inconsistent to have
stricken the claim for punitive damages. The jury's subsequent finding
of fraud on the part of De Maria makes it especially appropriate for it
to now consider an award of punitive damages.
We reverse the judgment entered for De Maria notwithstanding the
verdict and reinstate the jury award on Tinker's claim against De
Maria, reverse the order striking the claim for punitive damages as
against De Maria, affirm the judgment for the Bank on Tinker's fraud
claim, and reverse the judgment for the Bank on its counterclaim. The
award of costs and attorney's fees in favor of the Bank is also
reversed.
Affirmed in part, reversed in part, and remanded for a new trial on
punitive damages.