*1
Cascade Car BANK, N.A., Appellant. FIRST PENNSYLVANIA Superior Pennsylvania. Court of
Argued May 1982. July
Filed 1983.
Reargument Sept. Denied 1983. Appeal
Petition for Allowance of Granted Feb. *10 Ruth, Philadelphia, for
Henry appellant. Schaeffer, Philadelphia, appellees. Leonard for SPAETH, CIRILLO, Before ROWLEY and JJ.
CIRILLO, Judge: from judgment This is an a entered on a verdict appeal $70,000 $750,000 damages punitive for and compensatory in damages against and defend- plaintiff/appellees favor in ant/appellant. appellees this suit involved are Ed- (hereinafter mund his Delahanty “Delahanty”), J. wife Mar- garet (herein- A. and Delahanty, Corporation Cascade Car “Cascade”). after Cascade is held a closely Pennsylvania corporation by formed and seven other Delahanty share- holders in April leasing conduct an auto business. (hereinafter is Appellant Pennsylvania “Bank”), First Bank bank, a state chartered which is a member of the Federal and nationally banking Reserve a chartered association. business, The Bank had appellee’s financed used car Dela- (hereinafter Sales”), Auto hanty Sales “Auto and new leas- ing business, and, in Appellees Cascade. alleged view of the trial judge, proved misrepresenta- that fraudulent tions Bank by officials had caused the destruction of their existing leasing used car business and new business.
In August appellees an in commenced action tres- pass alleging against Appellees alleged fraud the Bank. that the Bank had them fraudulently induced to enter into the auto leasing and subsequently business caused the destruction of that business and car its used business by refusing to extend further calling the loans financing, previ- extended, ously repossessing the cars inventory and commencing its competing business, own leasing automobile “LEASEIT”. The Bank liability denied to appellees and filed a for counter-claim debts on due and promissory demand guaranteed notes made and appellees.
Appellant on appeal 1) asserts the trial court erred as matter of law in finding that Bank engaged conduct; 2) fraudulent the trial court erred in awarding part compensato- lost as profits” Delahanty “anticipated both 3) damages was damages; punitive award ry stricken; 4) the and excessive must be improper on against the Bank entering judgment trial court erred follow, reduce For the we counterclaims. reasons its $70,000 to from damages compensatory the amount of $440,- $750,000 from $40,000 punitive damages and the *11 finding fraud but the lower court’s of We affirm the Bank on against the its judgment reverse partially counterclaims. appeal this background
A narration the factual of of the September investigating begins Delahanty, with at blue and white leasing of directed prospect automobile consumers, portion general of the individual collar Delahanty, automobiles. normally purchase who public of the automobile twenty-five years experience with business, Auto Sales for the six ownership past including changes leasing in the retail and noticed several years, in this marketing his interest con- spurred which business the conclu- supported extensive research cept. Delahanty’s in the and collar that there a market blue white sion was leasing the indus- tapped which had never been worker to time, leasing offered Up primarily to this had been try. markets, distinct and Professional. Com- two Commercial of cars large mercial consisted fleets leasing mainly leasing to Professional was directed corporations. available use higher the bracket who could professionals at income leasing of car as a tax deduction. luxury the a method of automo- Delahanty’s unique leasing novel market, included an on-site tapping biles the a new to from to the inventory profit choose and an immediate prior leasing practice, automobile dealer. Under business a dealer finance the lease and not realize would would until the end of the lease would profit when automobile for the Additionally, responsible sold. dealer was Delahan- monthly payments collection on lease. bank, plan supply- called for the or financial institution ty’s plan, the loan floor receive an ing purchase for the outset, assignment of the lease at the thus an producing profit immediate for the automobile dealer. Furthermore, the bank would be for the responsible collection of monthly it was in a much payments, position better considering handle its structure and access person- to credit nel.
In January pursuant to his research, exhaustive a Delahanty prepared document entitled “Financial Aspects of the Personal Leasing Industry”. Delahanty had several preliminary discussions with various Bank, officers of the including (hereinafter John Kearney “Kearney”), Vice-Pres- ident in of the charge Bank’s Installment Department, Loan (hereinafter John Plumley “Plumley”), Administrator of the Installment Loan Department, (hereinafter and Mr. Tulskie “Tulskie”), Representative Dealer of the Installment Loan Department, to see if the Bank would be interested in financing his plan through capital and operating loans. Delahanty’s relationship the Bank began with in 1971 when it provided financing for Auto Sales through capital loan and floor line plan of credit. Delahanty had previously *12 dealt with and Kearney Plumley, who was under Kearney’s supervision. When Delahanty explained his proposal, Kear- ney expressed an interest in the concept and felt that it was unique a method for leasing automobiles. a Accordingly, number of meetings followed between Delahanty and vari- ous members the Bank to discuss the venture. February an initial meeting was held at the
Bank’s offices at 30th and Market Streets. Delahanty presented the financial pamphlet to the Bank officials in Tulskie, attendance—Plumley, (hereinafter Len Becci “Bec- ci”), Supervisor Credit of the Installment Loan Department, Hennion, and Mr. Sales Manager of Auto Sales for the Installment Loan Department. All of these officials were under Kearney’s supervision and reported to him.
Later in February a meeting second was scheduled Tulskie, with Delahanty, Plumley and which was held at a restaurant in Delaware. Delahanty presented a second publication, “Marketing,” in which he elaborated on the The leasing marketing proposal. of his and implementation that impressed expressed and the belief officials were Bank certainly of the Bank would most marketing department ideas. interested in his was meeting a third In late March February/early It at and offices 30th Market Streets. held at the Bank’s and In addi- Delahanty, Plumley Becci. attended by was of the (hereinafter “Dynan”), Assistant tion, Frank Dynan Department, present. Marketing and Services was Bank’s pamphlet, “Philosophy,” a third was meeting, this At financing pitch made his secure Delahanty and presented end of corporation. At the leasing the Bank for the from Delahanty told that the Bank was meeting, Plumley and company” in not interested “backing your interested leasing itself. being “in business” Plumley Kearney met with and 1973, Delahanty In March Auto An additional capital for Sales. to obtain additional loan to $27,000 capital Auto Sales bringing was granted $50,000. Delahanty held April
A final was and meeting Pro Forma accountant, presented his Mr. a Rosenberg, and Becci, which forth Plumley set Report, Kearney, new No documents leasing final details business. Dela- meeting, agreed it was signed at this but were $50,000 loan for base personally would for a hanty sign for credit the Bank the individual capitalization, obtain from line of $300,000 for a plan lease and obtain floor financing re- Delahanty, proposal, submitted original credit. $150,000 line of credit. quired Delahanty meeting,
At this insisted that Kearney final Delahanty in the ob- spring commence business of 1973 that he wanted to start the Fall stated jected *13 he would from the new car announcements because benefit less due to the 4-6 weeks inventory and would needed starting on car felt that availability Delahanty new orders. of problems it the end Spring presented in the because was that the end of the 1973 model which meant year and to supply there be an of cars might inadequate summer begin he forced to problem that would be with prevent representations on larger inventory. Relying Kearney’s about? Look at support, you Bank’s “What are worred putting Delahanty reluctantly are it” money we behind he spring, fearing to commence business agreed if opportunity Kearney’s lose the he did not follow would In Cascade April/early May late was suggestion. a lease for in the agreement property formed and entered 17, 1973, Center. On Cascade Shopping May Drexeline its doors for business. opened 6, 1973, (hereinafter Plumley and Ed Bove
On June “Bove”), Officer of the Installment Loan De- Operations him, to and Delahanty play golf invited informed partment, time, leasing that the Bank had decided to enter the at that concern, Delahanty expressed deep itself. but business him not to the Bank Plumley worry told that “was not to hurt him.” The going anything following day, do June 7th, the master contracts the Bank Delahanty signed with financing. for the lease All of the loans extended were guaranteed and his wife. personally by Delahanty had Though April Cascade ordered 300 cars it received, only received 135. Of those cars Cascade leased a (breakdown of 42 May total between and December June—9, signed: July—13, August— number leases October—8, November—4). September—3, In and re- July/August Kearney sent a letter to Delahanty additional Delahan- questing operating capital for Cascade. loans, on all of the Auto and ty’s payments both Sales’ Cascade’s, In paid September were to date until meeting had a September/October Delahanty with Kearney Plumley presented financial statements on support his for request both businesses earlier additional working capital. refusing November after to ex- tend his financing, Plumley requested volun- Delahanty surrender all cars in tarily inventory both businesses. admitted that the loans not called Plumley were because default, were but due to fact that the Bank felt they that Cascade had not leased cars. All cars enough were *14 surrendered at the end of December 1973. Plumley sold through cars word of mouth to employees of the Bank dealers, and individual rather than public at A auction. public offering have insured would that the highest possible figure cars, would be received for the so as to mitigate amount of damages. Delahanty was never given notice of in manner which the inventory was sold or a list of the individual prices received for each car.
During the negotiations extensive Delahanty between Bank, no disclosure was made of the Bank’s intentions to enter the leasing own, business on its despite the fact that it had been investigating the since possibility 1969. In 1969, Dynan, who was then the Bank’s Installment Loan Department, began an into inquiry the auto leasing busi- ness to determine the feasibility of the Bank entering field. As early August as Dynan authored a memorandum superior, to his (herein- Charles Shanahan “Shanahan”), after Chief Administrator of the Installment Loan Department, gave comprehensive overview the automobile leasing industry the difficulties the Bank would encounter in entering the field. The memo mentioned that had Kearney advised Dynan that the inde- pendent automobile dealers would initially upset Bank’s entry into the business. It also recommended that Plumley, who had many years of experience auto financ- ing, be considered in centralizing control over the Bank’s auto leasing project. May Shanahan Dy- directed nan to ask the rest of the Installment Loan Department what they thought of the auto leasing idea. May On 1972, a second memorandum by Dynan to Shanahan con- firmed Kearney’s active involvement with Shanahan and Becci in developing the auto leasing idea. In August 1972, Shanahan and Dynan were transferred to the Marketing Department, and Kearney later became Vice-President charge of the Installment Loan Department. 10, 1973,
On April Shanahan received a letter from First National Leasing Systems (hereinafter “NLS”), offering their computer services in setting up the Bank’s leasing
business. Shanahan sent this letter to Dynan, requesting that he look into the matter 5, 1973, On immediately. May Dynan, Plumley and Bove went to California to meet with 6, 1973, NLS. On June and Bove Plumley advised Delahan- *15 ty of the Bank’s decision to enter leasing itself, auto though the official decision was allegedly 30, not made until July 1973. Dynan, Plumley and Becci decided that a committee should be formed to handle the auto leasing project. Dynan was made the project manager, and the committee included Bove, Vandergrift, Bob officer in the Installment Loan Department, George Martirosan, a computer expert the Bank. 1973, November the Bank signed agree- an ment with NLS. From September to 1973, December Bank held seminars with dealers concerning their new busi- 14, 1973, ness. On December a press release announced the formation of “LEASEIT” by the Bank. 21, On January 1974, the Bank opened its indirect auto leasing business. 1, 1974, April On the Bank opened its direct auto leasing business.
Fraud
Before considering appellant’s
contention,
first
we
note that fraud can take many forms. The courts should be
quick to
fraud,
look for
but not
quick
as
to declare it.
Bernstein,
Edelson v.
392,
382,
382 Pa.
(1955).
115 A.2d
384
Fraud consists of anything
deceive,
calculated to
whether
by single act
combination,
or
or by suppression
truth,
or
suggestion of
false,
what is
whether it be
direct
by
false
innuendo,
hood or by
by speech
silence,
or
mouth,
word of
or
gesture.
look or
Blank,
Frowen v.
493 Pa.
425 A.2d
(1981).
412
It has been said that fraud may induce a person
to assent to something which he would not otherwise have
done, or it
him
may induce
to believe that the act which he
does is something other than it actually is. Greenwood v.
Kadoich,
239 Pa.Super.
357
(1976).
A.2d 604
To be
actionable, the misrepresentation need not be in the form of
a positive assertion. Shane v. Hoffman,
Pa.Super. 176,
227
(1974).
allegations
is intended to deceive
disclosed,
deceives or
been
it to his
Baker
upon
Rangos,
to act
detriment.
another
(1974). It is
settled
“the deliberate nondisclosure
no less than does an intention-
culpable misrepresentation
a
a material
Neuman v. Corn
falsity.”
al affirmation of
450-52,
Co.,
356 Pa.
Bank &
Exchange National
Trust
Yet,
(1947).
innocent-
misrepresentation
51 A.2d
is
if it
to a
material
made
also actionable
relates
matter
ly
*16
involved;
misrepresentation
if
to the transaction
while
the
to
non-privileged
made
or involves a
failure
knowingly
is
disclose,
is not a
to the
materiality
requisite
action. Shane
(1974). A
Pa.Super. 176,
of,
an
the
that
the
by
recipient
intention
maker
will
act, (4)
to
the
thereby
justifiable
by
be induced
reliance
(5)
recipient upon
misrepresentation,
damage
the
to the
”
as
recipient
proximate
the
result.’
Co. v. Rockwell-Standard
Scaife
Corp
280, 285,
451,
446 Pa.
.,
285 A.2d
454
denied,
2459,
(1971),
920,
407 U.S.
cert.
92 S.Ct.
32 L.Ed.2d
806,
Neuman,
442,
763;
109
Pa.Super. 176, 324
(1953);
Hoffman,
A.2d 71
Shane v.
McConnel, 201 Pa.Super.
(1974);
v.
Laughlin
A.2d 532
(1963).
One of misrepre- of fraudulent is sufficient evidence there whether to 1) grant refusal judge’s justify to sentation of concluding, as matter for a non-suit and Bank’s motion required support law, evidence met standard that the 2) fact-finder, and the judge’s the case to the submission of fact, course, if fraud. Of as the trier of of finding, sitting liability, we need does not Bank’s the evidence establish of concerning issue amount presented not reach the damages awarded. trial court erred will consider whether the
Initially, we at the conclusion the Bank’s motion for a non-suit denying case, proceed. it to appellees’ allowing law on determining Pennsylvania places In what burden fraud, prove the Third Circuit Court attempting those Press recently found Beardshall v. Minuteman Appeals Cir.1981) Inc., (3rd that: International, 664 F.2d In Supreme Pennsylvania a recent decision the Court must be proved by held fraud or intent to defraud ” “ clear, convincing.’ that is Snell precise ‘evidence 281, 416 A.2d 490 Pa. Pennsylvania, omitted). cases the terminolo- (1980) (citations earlier Smelting For v. Colonial gy example, varied. Gerfin Co., 66, 73, (1953), two 374 Pa. 97 A.2d Refining & used, proof for were “clear formulations the burden *17 clear, or convincing precise ... indubitable.” formulation, it is that under Penn- Whatever evident higher fraud a standard sylvania proved by law must be preponderance than the evidence standard ... on to The Court went note: cite.4 they misread the cases [Highmont
... Plaintiffs 345, Pa. A.2d Co., v. 397 155 Corp. Music J.M. Hoffman 363, (1959); Kadoich, v. supra; Gerfin, 366 Greenwood 372, 375, 604, (1976). 357 A.2d 606 Edel Pa.Super. 239 Inc., 220 Pa.Super. Apartments, stein v. Carole House 110
298, 303, 658, 286 A.2d 661 (1971)] Those cases stand only for the that proposition the trial must judge decide as a matter of he law before submits a case to the jury plaintiffs’ whether evidence to attempting prove fraud is clear, sufficiently precise and convincing make out a to case; facie prima they do not hold that once that burden met, is the jury may apply a lesser standard proof determining Thus, which evidence is true. if the trial judge determines there is sufficient evidence from which the jury reasonably could find plaintiffs have proven fraud according this standard of proof, the “ judge may submit the case to the jury. ‘Whether the question evidence is true is a of fact ... but it whether meets the required standard justifies its submis- ’” sion the jury ... is always question a of law ... Aliquippa National Bank ex rel. Woodlawn Trust Co. 223, 231, v. 340 Pa. Harvey, 16 A.2d (1940), 414 quoted in v. Colonial Smelting Co., & Refining Gerfin 66, 68, 374 Pa. (1953); 97 A.2d 72 M.H. Davis Estate Co., Oil v. Co., 64, 68, Sure Way Pa.Super. Oil (1979). A.2d
Thus, in cases where fraud is the
claim,
basis of the
the initial
for the
inquiry
judge is whether
proof
element
every
of fraud
standard,
has met the exacting
justifying
refusal to grant a non-suit and its submission to
the fact-finder. What the standard requires was addressed
Gerfin,
What is meant by the statement that the evidence must clear, precise be and indubitable? It means that ‘credible, witnesses must be ... distinctly remember the facts to which they testify, and narrate the details exact ly’, that the evidence ‘is not only credible, found to be but of such weight and directness as to make out the facts alleged beyond doubt’; a reasonable that ‘the witnesses must found credible, to be that the facts to which they are testify distinctly remembered and the details thereof narrated exactly order, and in due and that their testimo-
111 direct, convincing as to enable clear, weighty ny is so hesitancy, conviction without to come to a clear jury the (citations in facts issue.’ precise the truth of the omitted) Edelstein, A.2d at 661. Pa.Super. 220 at 286
Accord:
that fraud can be
course, it must be remembered
Of
there is
single
the
of a
witness and
by
established
evidence
testimony
it
two
proven by
no
that
be
necessity
witness,
corroborating
witnesses, or
that of one
with
by
v.
256 Pa.
Pittsburgh
Ihrig,
circumstances. City of
(1917).
actions Weitzman, Pa.Super. O’Callaghan test set forth (1981): 471, 473, 436 A.2d be entered where the may only
... we note that a nonsuit to but one con- unerringly facts and circumstances lead of nonsuit judgment clusion. “It is hornbook law that a it may in clear cases and before only can be entered the benefit of all plaintiff given entered the must be therefrom; arising and all reasonable inferences of fact in its favor.” conflicts in the evidence must be resolved (citations omitted) light, find
Reviewing the record in the above we elements of Delahanty’s testimony concerning brief, He testified that he fraud is clear and direct. was Bank him assured the Bank officials that the was behind no interest in percent entering and that the Bank had informed leasing Delahanty business itself. was never until competing company of the Bank’s intentions to run of the purpose represen after he had started his own. Delahanty tations and non-disclosures was to induce spring in the of 1973 rather begin leasing new business relied on Appellee represen than the fall of 1973. these 1973. The Bank May tations and commenced Cascade entered a concept competing used busi Delahanty’s lost misrepresentations, appellees ness. As a result of the *19 the Bank refused to Auto Sales Cascade when advance financing additional when it was needed the fall of 1973. It is clear that the could find these losses to be judge record, in an action fraud. The compensable made, whole, taken as a is clear and or appellee convincing clear, appellee’s and indubitable. precise Consequently, evi- up required prove dence does measure to the standard to judge properly grant fraud and the refused to a non-suit at A appellee’s prima the conclusion of case. facie case had justified been established which its submission to the fact- finder.
The next to question be resolved is whether the trial fact, as the trier of erred in judge, sitting returning finding verdict for fraud. appellees Specifically, appellant argues that the trial court’s crucial findings simply unsupported by fact are the record. The court, sitting lower without a made the jury, following findings:
1. Edmund Delahanty. developed J. after months of unique
work a and novel method of leasing automo- biles.
2. Mr. met February Delahanty with authoriz- defendant, ed representatives of Mr. Plum- namely, ley, Mr. Tulskie and Mr. for the Dynan, purpose presenting proposal his and to secure the necessary financing time, for the leasing business. At this Mr. presented a written “Phi- Delahanty report labeled losophy”, which was to all supplied persons at- tendance.
3. In April John head of Kearney, defendant’s Industrial Department, approved Loan the financial backing leasing provided business that it was in operation by May 1973.
4. The defendant insisted on May 1973 commence-
ment date even though plaintiff told them that was not the best time to start such a business. line of plan floor plaintiffs increased
5. Defendant $300,000. venture to this new business credit for agreement, upon reliance justified Acting 6. with for 300 orders immediately placed Delahanty Mr. May time of agreed open by in order to autos 1973. plaintiff that defendant advised
7. On June leasing busi- into the automobile going Bank was concept. plan plaintiffs ness. In a similar in hand plaintiff product Defendant had the work designed together plan it its that was put at the time compete plaintiff. with *20 that its would plaintiff 9. Defendant advised business damage plaintiff’s not business. 30, 1973, issued a release press
10. defendant July On leasing it into the auto stating entering was marketing under the name of “LEASEIT”. business that its maliciously knowing 11. Defendant and wilfully, called destroy competitor plaintiff’s acts would their loan, liquidated. his inventory seized 12. would have been a Corporation Plaintiff Cascade fraudu- had it not been for the
profitable business
defendant.
lent and malicious acts of
finding supported by
It
settled that any
is well
a
weight given
of record is entitled to the same
the evidence
verdict,
unless the
finding
and the
must be sustained
jury
an error of law.
court abused its discretion or committed
Cos.,
1
Insurance
Fire Co. No.
v. Continental
Eddystone
is,
(1981). That
the
Pa.Super.
ques
284
due consideration of the
School
the trial judge.
have reached the conclusion of
v. Pa. Interscholastic Ath-
City Harrisburg
District
of
Assn., 453 Pa.
(1973).
letic
Appellant’s case consisted of the testimony Kearney, Plumley Dynan. Plumley, who had been involved Delahanty’s and in financing developing auto leasing for Bank, admitted that Kearney had told him that Delahan- ty’s new, idea was different and unique. Plumley was not questioned concerning alleged his misrepresentation made at the third meeting with Delahanty. He never denied that he told Delahanty that the Bank had no interest at all in going itself, into auto leasing or that once the decision was go made to into business for itself that the Bank would not hurt Delahanty.
Kearney admitted on the stand that Delahanty’s concept for auto leasing was unique. Though Kearney approved increase this important from $150,000 account $300,000 for the floor plan, he could not remember such details as the date he first met with Delahanty, who was present at that meeting, what was discussed or long how it lasted, or when he met with Delahanty again. he Though could not recall the meeting that took place when he re- ceived the pamphlet, fourth he did remember that at some point in time he had a discussion with Delahanty about when the business should commence. He did not remember Delahanty objecting to the starting date of the spring of 1973. Though Kearney could not any recall of the meetings place took concerning $300,000 this account, he knew that he never made representation a as to the level of support the Bank offering was Delahanty. Kearney also denied being involved in the investigation of the auto leas- ing business for the Bank. He testified that he did not know anything about the Bank’s interest until early This testimony was directly contradicted by the memoranda written by Dynan August 1971 and May 1972.
Dynan agreed that Delahanty had unique idea for auto *22 leasing but he that found the February/March meeting, representative with marketing he attended as the
which Becci, he felt about Despite and ludicrous. how Plumley convey thoughts Plumley did not his meeting, Dynan the Delahanty he did not tell at Becci. testified that Dynan or auto investigating leasing that the Bank was meeting that stating that the Bank was not Plumley and did not recall for itself. He leasing in into the business going interested him working and Becci were with on Plumley admitted that and later investigation leasing Plumley of auto that the him to meet accompanied Dynan to California with NLS. that Delahanty receiving financing denied that he knew was He stated that he leasing proposal. the Bank for his from Plumley feasibility discussed or Becci the of never with profitability Dynan or the later. Delahanty’s plan about the that he did not check connections within Bank asserted in- concerning leasing financing, for information auto but relied on sources outside the Bank. While solely stead pamphlet presented he had admitting Delahanty’s received it, meeting, reading any part despite at the he denied of his subject. interest the court, of the the the
On basis evidence before in the in favor of judge testimony trial resolved the conflict sufficient appellees and determined that there was evidence appellant damages appellee that was liable for as a result fraud and The court decided the misrepresentation. finding credibility appellee, issue favor “pattern Bank officials’ of convenient and selective memo ..., their of a The record cover-up.” ries of actions smack inconsistencies and replete memory lapses is with that the Bank officials finding substantiate were not It is clear that and worthy Delahanty’s credibility belief. Rather, validity impeached. of his entire claim were not evidence, summary Delahanty’s proof as seen of the credibility considerably strengthened by were the wit nesses and exhibits offered the defense. The oral testi witness, uncorroborated, mony unsupported, of one “... of another diametrically opposed by testimony witness, weight cannot be considered evidence of such as to
117 Laughlin out a case a reasonable doubt.” beyond make McConnel, 180, 184, 921, (1963). 191 923 Pa.Super. 201 A.2d case, was instantly. Delahanty’s testimony is not the Such and the of supported by testimony exhibits witnesses contradicting Delahanty, defense. Rather than their for the often his version of the facts. As testimony supported testimony represen- the crucial about the previously, noted tations, defense, offered was not recalled at all or by vague ample and inconsistent. Since there was evi- was fraud, appellees proved dence that each element of we trial finding affirm the court’s fraud.
Compensatory Damages
The that finding court’s of fact Cascade would have been profitable had it not for the fraudulent and business been malicious acts appellant’s of the Bank leads us to next concerning damages. contention the award of compensatory law,
Under
in an
on
Pennsylvania
action based
fraud,
loss”,
damages
the measure of
is “actual
Kaufman
Co.,
(3rd
v. Mellon National Bank & Trust
tion to be decided the fact-finder. v. Jacob Stern Hagl Sons, Inc., (E.D.Pa.1975). 396 F.Supp. & 779 This duty assessing damages province is within the of the fact-finder and should not be interfered with clearly appears unless it that the amount awarded resulted from partiality, caprice, prejudice, corruption or some other improper influence. Inc., 373,
Tonik v.
442
Apex Garages,
Pa.
118
Transp.
Pa.Super.
ern
Pennsylvania
Authority,
(1980).
estimate of the damage data, based on relevant such circumstances may probable inferential, act on as well as upon positive direct and proof. Thus, Rea at 879. not
law does demand that damages estimation of be free completely of all of speculation. elements Taylor v. Abbe, Inc., (E.D.Pa.1974) Paul O. 380 601 F.Supp. 516 rev’d (3rd Cir.1975). F.2d 145 While the trier of fact may not use sheer conjecture as a basis arriving verdict, for at a it may use a measure speculation in aiming at a verdict or an award of damages, and an greater degree even of flexibility granted regard is to testimony concerning prospective or future damages, best, which are at not always easy or certain of ascertainment and are large to a extent based on probabilities and uncertainties. v. Starlings Ski Roundtop 493 Corp., F.Supp. (M.D.Pa.1980). then, 507 So mere uncer
119 damages as to the amount of will not bar tainty recovery it is were the certain result damages where clear that Holmes, the defendant’s conduct. v. 486 Pa. 405 Pugh (1979). 897 A.2d law, under
Generally,
Pennsylvania
damages
not
mathematical
proved
certainty,
need
be
with
but only
reasonable
and evidence of
certainty,
damages may
with
Ernst,
and inferences.
probabilities
consist
E.C.
Inc. v.
Co.,
(3rd Cir.1980)
Inc.,
Koppers remand (W.D.Pa.1981). F.Supp. Although does law not command mathematical from precision finding evidence damages, sufficient facts must be introduced so that the can intelligent court arrive at an estimate conjec without Bros., Rhoades, ture. Rochez 527 F.2d Inc. cert. (3rd
den.
U.S.
96 S.Ct.
Johnston & 343 Pa. A.2d 709 It is *25 only required that the afford a proof reasonable basis from the plaintiff’s fact-finder can calculate the loss. DeVincent, 254, Feinstein 151 Myer Pa.Super. Co. v. 30 (1943); A.2d 221 Co., Air American Filter Inc. v. McNi chol, (3rd Cir.1976); 527 F.2d G.C.S., 1297 Inc. v. Foster Corp., (W.D.Pa.1975). Wheeler 437 757 F.Supp. case,
In the instant judge, sitting trial as the trier of fact, appellee $70,000. awarded compensatory damages support anticipated this award for lost profits on a business, Cascade, new the court stated:
This court finds it is not necessary that business loss damages in proved be to an absolute the case of certainty a new business. the court not Certainly, may speculate, $70,000.00 but a of years award over number is not speculation. Clearly, earnings of Mr. Delahanty in alone a business of kind prove this would be and would to more than the amount of the award. There is also venture, possibility, Taking a new of a loss. all the
120
factors and all the presented, evidence which was this $70,000.00 court finds that is consistent with overall produced evidence as to the amount of the lost wages. It is not excessive.
It is
in Pennsylvania
well settled law
that loss of
profits
upon
contract,
are recoverable
proper proof both
368
Taylor Kaufhold,
(1951);
See
v.
Pa.
Pa.
58 A.2d
general
rule of law
applicable
profits
for loss of
in both contract and tort
actions
damages
(1)
allows such
where
there is evidence to
(2)
establish them with
certainty,
reasonable
there is evi
dence to show that
they
proximate
were
consequence
and,
in the
wrong;
actions,
contract
they were
reasonably foreseeable. R.I. Lampus Co. v. Neville Ce
(1977);
ment Products
474 Pa.
Corp.,
A.2d 288
Bozzo,
Division,
Frank B.
Inc. v. Electric Weld
283 Pa.Su
per.
(1980),
denied;
A review of the cases in Pennsylvania lost involving profits shows that the them, courts are reluctant to award except when the business concerned is established and not Also, “new and untried.” this kind of damage is usually seen the context of a breach of contract. There are no cases in Pennsylvania which deal with the award of dam- ages for anticipated lost in a profits fraud case.
Though damages alleged for lost profits can be given, they cannot be recovered where they are merely speculative. What our courts have demanded of the evi dence to prove profits loss of was addressed in the recent case of Morelli, Pollock v. Pa.Super. 388, 397-98, *26 458, (1976): A.2d 463
... Evidence must
introduced
which forms a sufficient
basis for estimating with
certainty
reasonable
the amount
of the lost anticipated profits.
Drive-In,
Exton
Inc. v.
Co.,
Home
480,
436 Pa.
Indemnity
(1969),
121 36, denied, 819, 91 27 cert. 400 U.S. S.Ct. 46 L.Ed.2d (1970); Mix, 215, Show Co. 308 Pa. 162 667 Western v. A. § (1932); (1932). Restatement of 331 Contracts Whereas recovery profits for the lost of an established business are considered ascertainable to a reasonable degree certainty, Seaman, v. 188 149 A.2d Guady Pa.Super. (1959), untried, 523 a is when business new and courts profits have declared the measure of anticipated too spec to provide ulative a basis for an of damages. award Drive-In, Co., Exton Inc. Indemnity v. Home supra; Swanton, (1930). Platou v. 59 N.D. N.W. 230 725 also, Wallis, Carpenters’ See Local 1686 205 v. Okl. (1951); P.2d
237 905 Richker v. 323 Georgandis, S.W.2d 1959). 90 (Tex.Civ.App.
In applying the above principles law, established Pollock court profits found lost not could be recovered by drya cleaning business which had only been business for nine months before landlord breached the contract.
Because the untried, business was new proof anticipated profits lost adduced at trial was too weak support recovery. (written J.)
The dissent in Pollock by Spaeth, argued that the business was not “new and untried”:
While it is that appellants true operated had the busi- ..., for only ness nine months predeces- their immediate sor had operated it for a year____ Appellants over presented evidence of the monthly receipts during their predecessor’s tenure.... The business was therefore not untried”, “new as the majority suggests it was. seems majority to reach its conclusion that
business was “new and untried” comparison appellants’ business with the Drive-In, business in Exton Co., Inc. Home Indemnity 436 Pa. 319 A.2d (1969), denied, cert. U.S. S.Ct. 27 L.Ed.2d (1970). a comparison Such leads me an opposite Exton, conclusion. business had never been operation before time of the alleged breach of con tract. Thus appellants’ business operated has been twen-
122 Exton; than I
ty-three longer suggest months that that is sufficient to remove it from the of category “new Seaman, and also cites majority Guady untried”. v. 475, (1959). A.2d Pa.Super. 188 149 523 There we held testimony profits that as to lost was admissible based on operation of of periods ques- three actual the business location; tion: and one-half months at a first eight two days” at weeks and “two or three the location where the allegedly defendant-lessor breached his to duty supply water; (from an period and indefinite time sometime in trial) 1954 until the time of at a third location. The case present poles thus falls between the Exton me, For it is closer to than I Guady. Guady Exton. appellants presented would therefore hold that sufficient lost proof profits. Pa.Super. 400,
Id. 245
at
support decision, of this the court stated:
Next, Chelsea asserts that lost profits may not be used
here,
where,
as a measure of
damages
as
new business
with
record of prior
no
exists.
profitability
Decisions of
this
court
of our
Court
Supreme
suggested
have
damages for lost
of a
profits
new business are
specu-
too
Co.,
lative. Exton Drive-In v. Home Indemnity
436 Pa.
(1979),
In applying controlling principles these of law the court on to note: went it is here that arguable Dynafab
While was a newcomer herein, nevertheless, to the business unlike the plaintiffs Drive-In, in supra, Inc., Exton Pines Bowling, supra, and Pollock, supra, Dynafab was able to show that there was in product interest their significant before the contract breach occurred. The record demonstrates Dynafab that had commitments for orders from four sources. That could demonstrate a Dynafab sales record of Fiberweld Products during previous concerning the projected sales, raw material needs and of the profitability Chelsea plant at Jersey Laminating and Finishing Company. this evidence
Clearly, is not of an entirely unspeculative nature, however, we if it, believe that the jury believed it could come to a reasonable determination as to damages from resulting Thus, loss of future profits. we hold that the evidence should be submitted to the for it to jury decide its in weight damages. assessment of See Kasemer v. National Gas Distribution Corporation, 279 Pa.Super. 341 n. 421 A.2d 230 n. 1 (Spaeth, 1980). dissenting, J. 265, 266,
301 Pa.Superior Ct. at
business but held that the evidence of the alleged loss of profits should be introduced to the for jury them to deter if mine an proper. this, award was In doing the court applied propositions advocated by Judge Spaeth in a footnote of his in 1) dissent the Kasemer case3: a business majority 3. We note that in Kasemer did not even consider lost involved, profits of the damages altogether, business but denied find- ing company that the during period was not liable for the breach untried” if category could taken out of the “new and it in product interest” their or “significant could show a occurred, 2) the contract it is service before breach hear the evidence of future lost jury profits better that than the court to exclude the weight and decide its allow entirely. evidence adoption “significant of this interest”
Dynafab’s not, however, change in does the law in language Kasemer that a new business still has a heavier Pennsylvania burden profits sufficiently that lost are certain to be proving the “significant recovered. The court considered Dynafab as one of many interest” shown a business factors which if the of lost important determining profits are evidence it to to the jury is sufficient to allow be submitted for proof consideration. does not hold that of a Dynafab interest,” itself, is sufficient “significant support damages. The court concluded recovery profits lost *29 liberally alleged the courts should allow evidence of lower profits jury lost to be submitted to the and let them decide if in of the of the the light history business whether amount profits of such could be estimated with reasonable certainty recovery. so as to allow case,
In the in present only operation Cascade was for seven months the loans called and the when were cars in of both Cascade and Auto were inventory Sales surren- sought dered. to show a loss of Delahanty profits by by introducing Cascade an exhibit which contained hand- calculations, projecting operation written Cascade’s for six full had years. Delahanty prepared this table in prepara- trial, request tion for at the and with the assistance of his attorney. Delahanty concerning testified what he used as the basis for the in figures the table. The basis for his however, not, estimations and projections was established in the record. No presented supported evidence was order, Superior supersedeas of time it was bound Court’s and it compliance also was not liable for acts done in with the orders of the Utility Judge Spaeth's Public Commission. footnote in the dissent
addressing profits damages lost as a measure of was therefore dicta. assumption that the business would have a the first profit operation and that this year profit would increase annual- ly percent. at a rate of ten The ten percent (10) (10) markup standard was taken from the industry statistics for March, trial, the time of rather than the time period when the loss would have been sustained. While estimated that Delahanty’s table cars would be leased in the year operation, first resulting profit $99,000, after approximately seven months in only business 42 cars had been leased with no profit being realized. applying
Even the so-called “significant interest” Kasemer, test of we find that while the alleged evidence of profits lost properly evidence,4 was admitted into it too was speculative support an award of anticipated lost profits. Furthermore, unlike the product Kasemer, Cascade had not leased cars at a profit before the business folded.
In concluding that Cascade is a “new and untried” busi- ness damages whose measure of for lost profits is too speculative to serve as a measure of damages, compare we appellees’ Exton, business with those in Guady Pol- lock. above,
As noted Cascade was only business for approx- imately seven months. The business in Exton had never been in operation before breach of contract occurred. Guady, operated business had locations, at three
last for an period indefinite Pollock, time. In the majori- found ty the business had operated for nine only months prior to contract, the breach of while the dissent argued *30 that evidence of an predecessor immediate operating the same business for a year considered, over should be making the time of operation twenty-three months. Pollock,
Like the instant case falls between Exton and Guady. Appellees’ business operated has two months (sixteen shorter months shorter if followed) dissent than Following Dynafab Kasemer, the lead of and we find that the lower properly court profits allowed the evidence of though lost there was a question admissibility. of its It is better to allow such evidence to be submitted to the fact entirely. finder than to exclude it 126 This
that Pollock. case is then closer to Exton than to Appellees’ might might business or not have been Guady. Thus, profitable. certainty the element of reasonable need- damages profits lacking. ed to collect for lost is profits speculative loss of is too possible conjectural a of recovery. Consequently, permit form basis we cannot for the recovery anticipated profits loss of of Cascade.
However,
holding
profits
our
that
the anticipated
speculative
damages
were too
to sustain an award of
for
appellees’
damages
Cascade does not defeat
claim of
for the
business,
Delahanty’s existing
destruction of
Auto Sales.
It is
settled that
lost income
profit
well
or
is
recoverable
an action for the destruction or interruption
business,
of an
they
merely
established
whenever
are not
or
In
speculative
conjectural.
general, a court has the
power
damages up
to award
to the date of the ultimate
judgment
Co.,
of the case. Rea v.
560
Ford Motor
F.2d
554,
(3rd Cir.1977),
923,
401,
557
cert.
434
98
den.
U.S.
S.Ct.
redeemable, however,
that Auto an Sales was established business and had been
127 years for five before Cascade was operation about fraud, appellant’s result of Auto Sales and formed. As a Auto to eventually Sales was destroyed. Cascade were venture, leasing selling the retail end of the auto handle the car option buying if the lessee did not take cars testimony There was also and at the end of the lease. Delahanty’s subsequent showed presented exhibits from the demise of Auto loss of income Sales. personal returns, period through for the 1972 Delahanty’s income tax $5097.00, $4323.40, 1975, an income of a loss of an revealed $6655.61, income of respectively. income of $8876.00 period preceding income for the the fraudulent average His 1971, $14,- 1968 through from was misrepresentations, subsequent the four income from Deducting years’ 106.26. income, there was a total loss to average Delahanty
his $40,119.83 approxi in the amount of or from Auto Sales $40,000.00.5 mately power modify
Pursuant to our the order of the court 9, 1976, 142, P.L. provided by July below the Act of No.
§ § 2; $40,000.00 appellee 42 award Pa.C.S.A. we the destruction of compensatory damages Delahanty for Auto and the loss of income to consequent Delahanty. Sales $70,000.00 This means that the lower court’s award of for $40,000.00.7 compensatory damages must be reduced to clearly Delahanty’s personal only 5. The record income established for Therefore, recovery period through 1975. of future profits necessarily period. was to this limited provides: 6. Section 706 affirm, vacate, modify, appellate may An court set aside or re- review, any brought may verse order before it for remand the order, entry appropriate require matter and direct the of such or proceedings may just such further be had as under the circumstances. 2; July Act of P.L. No. Pa.C.S.A. § § testimony relating profits 7. and exhibits to Cascade’s lost indi- $30,000. possible greatly cated a However, award in an amount in excess of woefully inadequate. the calculations were This Court judge profits cannot ascertain how the trial could have calculated lost $30,000. only to be record, It would seem that because of the state of the only speculating. important he could been It is to note have Torres, presented Pa.Super. Springs that the evidence in Merion Damages Punitive *32 court, fact, trier sitting
The lower as of concluded that an the punitive damages appropriate award of was under facts Appellant grounds reject- of this case. advances several for First, ing they the court’s award. contend there is no “outrageous” of conduct the Bank’s by employees evidence punitive damages against to the award of the Bank. support Second, argue that the they punitive damage award was to the of grossly disproportionate compensatory award dam- and the trial court erred in a ratio of ages applying almost 11 to 1. law, note that under
Initially,
Pennsylvania
we
right
punitive damages
the
to
is a “mere incident to a cause
270, 276,
648,
Roth,
of action.” Hilbert v.
395 Pa.
149 A.2d
(1959).
punitive damages
652
Awards of
cannot be made
no actual damages
See,
where
have been suffered.
Weider
(M.D.Pa.1965).
Hoffman,
F.Supp.
see,
v.
238
437
But
35,
Pa.Super.
Rhoads v.
306
The in purpose punitive damages of tort actions was indicated the Third Circuit in Appeals Chuy Court v. Club, 1265, 595 F.2d Philadelphia Eagles Football 1277 (3rd Cir.1979), Choi, 1221, Medvecz v. 569 F.2d quoting 1227 (3rd Cir.1977): ..., in tort actions question generally, is whether
there has sufficiently aggravated contrary been conduct interests, plaintiffs’ involving to the bad motive or reck- indifference, special less to justify puni- sanction damages. tive That sanction serves dual function of penalizing past conduct an constituting aggravated viola- interests, tion of anothers and of deterring such behavior in the future. also, Maker, Inc.,
See
Thomas v.
414
American Cystoscope
F.Supp.
(E.D.Pa.1976).
263
(1982)
and,
quite
accordingly,
129
two-fold,
Thus, the purpose
punitive damages
is
punish
wrongdoer
and to deter both him and others
engaging
from
future.
similar conduct
Chambers
(1963);
411
v.
Pa.
Liscio, (1966); 209 224 Pa.Super. A.2d 793 Restatement § 908, (a). of Torts Comment
It is well settled Pennsylvania law decision whether punitive damages to award amount be awarded are within the discretion of the fact Rabada, finder. See Focht v. Pa.Super. 217 268 A.2d § (1970); 908(2) Torts, (1939); Restatement of also See Towns, King Ga.App. 895, (1961); S.E.2d *33 Ltd., 450, v. Leimgruber Associates, 456, 73 Claridge N.J. 652, (1977). 375 A.2d 655 Although are punitive damages law, not a favorite of the Desmond, Cochetti v. 572 F.2d (3rd Cir.1978), 102 will if they only appeal be reduced on reviewing court determines that are they excessive under of facts case. individual International Electronics Co., 213, Co. v. N.S.T. Metal Products 370 Pa. A.2d 88 40 (1952).
In considering appellant’s first
questioning
contention
appellees’ right to punitive damages, we note that Pennsyl-
adopted
vania had
the rule for punitive damages as set
§
forth in
908 of the Restatement of Torts and the com-
ments
344,
thereunder.
411
at
Chambers
Pa.
Punitive are defined by Section as damages nominal, other than or compensatory “awarded against person a to him punish outrageous for conduct.” Thus, exemplary damages are when proper the act which creates actual damages also insult or imports outrage, is committed with a oppress view to or is done in contempt plaintiffs’ rights. Korus, of 261 Pa.Super. Golomb v. (1977);
396 430 Rundle, A.2d Motley See U.S. ex rel. v. 340 130 (E.D.Pa.1977). 807
F.Supp. damages Punitive may given act indifference, as, when the is done with reckless as well Erie, bad motive. Bacica v. Board Ed. Sch. Dist. (W.D.Pa.1978). 451 F.Supp. Thus, a court not may punitive damages award merely because a tort has been committed. Additional wilful, evidence must demonstrate malicious, wanton, reckless or oppressive conduct. Pitts burgh Outdoor Adv. Co. v. Virginia Apts., Inc., Manor 350, 353, (1970); 436 Pa. 260 A.2d Hughes Pa. 554; at 37 A.2d at also See Franklin Music Co. v. Cos., Inc., American Broadcasting (3rd 616 F.2d Cir.1979). Though this rule seems to require plaintiff to burden, meet an additional it is difficult picture a fact pattern which would support finding of intentional fraud proof without providing “outrageous conduct” support punitive an award of damages.
We note that other jurisdictions, while agreeing with the
standard,
above
have found that fraudulent misrepresenta-
tion
itself
is sufficient to
an
uphold
award of punitive
damages because of the state of mind rendering it fraudu-
lent.
Airlines,
Nader v. Allegheny
Inc.,
As part of the first issue dealing appellees’ with right to punitive damages, appellant also maintains that even as- suming a proper fraud, finding of the trial court erred in for imposing liability punitive damages upon vicarious the Bank. Pennsylvania has the rule for
Though punitive adhered to § Torts, enunciated in 908 of damages the Restatement of it § adopted the standard of of the has not Restatement which limits an employers liability punitive of Torts8 for damages imposed for the torts employee. reject of his rule, Circuit, the Third ing this C.I.T. Skeels Universal (3rd Cir.1964), Corp., Credit F.2d stated: Many jurisdictions permit punitive damages ... will not corporation, a or against any principal, other miscon- for a agent duct servant or unless the situation is one in it can fairly said principal be that the has sanc- the tioned misconduct or have should known that the (citations was an wrongdoer unsuitable employee, omit- ted) But Pennsylvania is less in permitting restrictive a punitive against award a for corporation an employee’s tort. The leading case of Lake Shore & So. Michigan Ry. 519, 544, 545, 553, v. Rosenzweig, 113 Pa. 6 A. and applies states rule “corporation the that a is for liable exemplary damages servant, for the act of its done within scope of the his authority, under circumstances which give right would such plaintiff against to the as the [a] But, rule, servant”---- recognizing the harshness of this Supreme the Court of Pennsylvania has warned that “too great caution cannot permitting be exercised in the recov- ery punitive damages for the or act of willful reckless master”____ not servant authorized or approved by the The sum of the matter seems to that the be conduct of the agent who complained inflicts of must injury provides: Section 909 of the Restatement of Torts damages properly against Punitive can be awarded a master or if, if, principal agent only other because of an act an but (a) act, principal doing authorized the manner of the or (b) agent principal employing was unfit and the was reckless in him, or (c) agent employed managerial capacity acting was in a and was scope employment, in the or (d) employer manager employer or a approved of the ratified or *35 the act. clearly outrageous rather the vicarious justify imposi- tion of exemplary damages upon principal. Cham- bers v. 411 Pa. 192 A.2d Montgomery, 851-52; at Id. See also at 1278. Chuy
In the more recent case of Hannigan
Dept.
v. S. Klein’s
Store,
1 D
3rd
& C
Per
244 Pa.Super.
Curiam
aff'd
(1976),
upheld
In the instant sitting lower as trier of fact, that appellee found was entitled to punitive damages. decision, In support of this the court held: As the punitive damages, ... punitive damages are solely outrageous awarded for misconduct. This court has found the defendant’s action absolutely unconsciona- ble and outrageous. This is a defendant who course of business builds tremendous up information their concerning customers and their customers’ need for cash, and the manner in which their operate customers their businesses. This defendant took that information provided to it in confidence in a justifiable reliance that the information is used for the information and purpose for which it is requested then used that information to enrich itself. Mr. Kearney admitted that he turned the proposal of automobile business clients over to the bank’s marketing division ... The information which defendant possessed was used to its support own business which competed plaintiff. with At the same time the defendant acted to put plaintiff out of business. No finer case could be made for outrage than the facts produced this plaintiff against First Pennsylvania Bank.
In light of the applicable principles of law govern the award of punitive damages, we find that there
133 finding a support the record to was sufficient evidence a and involved “outrageous,” conduct was appellant’s actions the Bank officials occurred The bad motive. scope their during employment the course of was within further the done with the intent to their duties and was of We, therefore, imposi- conclude that the Bank’s interests. damages upon for liability punitive tion of vicarious proper. Bank was damages punitive
A further to the award of objection punitive Appellant the amount. contends that concerns $750,000 compensa- to the damages disproportionate was 11 1 $70,000, and the ratio of almost damages of tory was exces- punitive used to calculate the award which was sive. law, punitive the amount of Pennsylvania
Under
to the award
damages
relationship
must bear a reasonable
Babcock,
See,
damages.
v.
compensatory
e.g. Hughes
554;
Randal, 288 Pa.
Punitive
are considered
large
so
as to indicate that the fact finder
they
when
are
or
Bowater
by passion
prejudice,
was influenced
Smith v.
Co.,
(E.D.Pa.1972);
399
F.Supp.
Thompson
339
v.
S.S.
(1982),
Heberling,
Pa.Super.
In Rhoads v.
306
The law
establishes no fixed ratio
and
compensatory
punitive damages by
between
which to
Any
determine excessiveness.
fixed ratio would run coun
ter to the
which is to
the
object
punitive damages,
punish
defendant and set an
to deter him and
from
example
others
Thus,
this
of conduct in the future.
the fact finder
type
given
assessing
should be
broad discretion
the amount
objective.
which would be sufficient to attain the above
When the amount of the award is so
as to
clearly excessive
discretion,
constitute an error of
and abuse of
a new
law
trial will be ordered.
Co. v. Rockwell-Standard
Scaife
In the amount of as well punitive all, shall deciding they given as whether be at the trier itself, properly merely fact can consider not the act but all the circumstances the of the including wrong- motives doers, the parties, provoca- the relations between and the provocation tion or want of for the act. 263; Chambers, at Cystoscope
See Thomas v. American Focht, 908(2) supra; supra. Section Restatement also states: their allow- damages permissible, are punitive
Where of the trier of discretion are within the ance and amount of fact can the trier assessing damages, In such fact. acts, of the defendant’s consider the character properly plaintiff of the harm to the and extent the nature or intended to cause and wealth caused the defendant defendant. of the should be
Thus, damages ratio as to any mathematical of the defendant’s misconduct on the seriousness based that a wealth of the defendant so consider the should imposed. can punishment suitable Foot- Philadelphia Eagles
In recent case of Chuy an award of Club, the Third Circuit affirmed supra, ball $10,000 damages for tort damages compensatory In to reduce the $60,590 damage refusing award. punitive six times the although it was more than recovery, punitive approved any ratio damages, largest compensatory law, the court stated: applying Pennsylvania decision of this case and of the unusual circumstances ... view inferences to which plaintiff the benefit of all giving entitled, to conclude that the we are unable he is now award of reducing jury’s court erred not district *38 damages. punitive at 1279.
Id. case, court, in calculating punitive the trial present In the defendant, stating: of the considered the wealth damages, $750,000. the dollar amount only ... We are left with six anything defendant that above argument The of the $70,000 damages, actual would the amount of the times against particular hold this excessive and shouldn’t be in a defendant with millions of dollars defendant. This is A punitive equity. and has substantial net assets who $5,000.00 of or against this defendant damages award $10,000.00 purpose of a meaningless. be even would the defendant for damage penalize award is to punitive defendant, conduct, not for the but outrageous only its the nature Clearly, light defendants. of for all similar $750,000.00 is not excessive. of this defendant relationship there is a between proportionate Since compensato the decrease in exemplary damages, actual $40,000, $70,000 from to necessitates a reduc damages ry below, damages. computing damages In punitive tion (11) approximately the court awarded eleven times the damages. of this ratio to compensatory Applying amount award, must compensatory punitive damages the diminished $750,000 $440,000, recovery reduced from to for a total $480,000. determining punitive the amount of the damages, into not only lower court took account Bank’s wealth also, officials, outrageous conduct of the Bank’s but motive, relationship parties their between the and the and extent of the harm to appellees’ nature businesses. record, thorough
After a review of the we find that the not by clearly ratio used lower court was so excessive a or a require damages as reduction new trial on issue.
Counterclaims counterclaims,
Addressing the we find that is not Cascade $55,460.01, on liable count the amount of for the deficiency outstanding between the due on the balance floor plan agreement Pennsyl- and the amount recovered First Bank repossessed vania from the sale of the collateral.
Pennsylvania requires party secured who disposes of collateral after default do so in a reasonable (E.D.Pa.1977). Nellis, Rep. manner. In re UCC Furthermore, notice shall be sent to the debtor apprising him of the time or place any public private sale of repossessed 1, 1979, Act collateral. of Nov. P.L. § 1; No. 86 13 Pa.C.S.A. 9504.10 Right party dispose § 9504. after secured collateral *39 default; disposition effect of (a) Disposition application proceeds.—A of collateral and of se- sell, party may dispose any cured after default lease or otherwise of following any or all of the collateral in its then condition or commercially preparation processing. Any reasonable or sale of subject goods (relating sales). proceeds is to Division 2 to The of disposition applied following shall be the order to: (1) expenses retaking, holding, preparing the reasonable of for sale, and, selling and the provided like to the for extent in the law, agreement prohibited by attorneys’ and not the reasonable fees legal expenses by party. and incurred the secured (2) by security the satisfaction of indebtedness secured inter- the made; disposition which est under the is and (3) any by the satisfaction of indebtedness secured subordinate security interest in the if collateral written of notification demand completed. is received proceeds therefor before distribution of the is requested by party, If the secured the a holder of subordinate security seasonably proof interest must furnish reasonable of his interest, so, party comply and unless he does the secured not need with his demand. (b) Rights parties surplus deficiency.—If of in case of or the indebtedness, security party interest an the secures secured must any surplus, the debtor agreed, account to for and unless otherwise any deficiency. underlying the debtor is liable for the But if accounts, was a rights, paper, transaction sale of contract or chattel surplus any any the is entitled deficiency debtor to or is liable for only security agreement provides. if the so (c) disposition.—Disposition of may Manner of the collateral be by public private proceedings may by way or and be of one or made disposition may more contracts. Sale or other as a unit or in be parcels any place every at any aspect and time and and but on terms method, manner, time, disposition including place of the the and commercially perish- terms must reasonable. Unless collateral is speedily type able or to threatens decline in value is of a or market, customarily recognized sold on a reasonable notification of place any public the time of sale or notification of reasonable any private disposition the time after which sale or other intended debtor, by party is to be shall be made sent secured to except goods any person in the case of to consumer other who has a security duly financing in the interest collateral and who has filed statement indexed in the of the name debtor in this Commonwealth by party security or who is known secured have a interest may party buy any the collateral. The public secured at sale and if type customarily recognized the collateral is of a sold in a market or type subject widely is of a price is the of distributed standard quotations may buy private he at sale. (d) Rights purchaser of disposed value of for collateral.—When default, disposed party disposi- collateral is a secured after purchaser rights tion transfers to a value for all of the of the debtor therein, discharges security interest it is under which made and any security purchaser interest or lien subordinate thereto. rights though takes free all such and interests even the secured party comply requirements chapter any fails with the or of this
judicial proceedings: sale, (1) public purchaser case knowledge in the of a if the no has any buy in the defects sale and if he does not collusion with sale; party, person conducting the secured other bidders or the or *40 It is that First Bank in a Pennsylvania proceeded obvious 9504, flagrant- fashion inconsistent completely with Section mandate, ly disregarding legislative again ignor- our while to fair ing right liquidation inventory. Cascade’s a of its employees The Bank’s themselves testified that there was Cascade, no notice of sale sent to no notice of sale was rather notice made of published, “by but was word mouth.” sold to Bank Additionally, employees cars were without the bids, and Bank employees solicitation of made their own as to determination what was fair market value of the automobiles. This is purchased unpalatable an affront to the notion fairness in financing of commercial and shocks this conscience. Court’s remedy available to Cascade from 13 flows Pa.C.S.A.
§ 9507,11which allows the debtor to from the se recover case, (2) (e) purchaser good any acts in faith. other if Right subrogation person secured party.—A liable to guaranty, party a indorse-
person who is liable to a secured
under
ment,
agreement
a
repurchase
or the like and who receives transfer
subrogated
rights
party
to his
collateral from the secured
or is
of
has thereafter the
transfer of collateral is not a sale or
rights
party.
a
and duties of the secured
Such
disposition of the collateral
under this division.
P.L.
No.
effective Jan.
1980.
§
Nov.
comply
Liability
party
with
11.
of secured
for failure
§ 9507.
chapter
(a)
party
it is
that the secured
is not
General rule.—If
established
chapter dispo-
proceeding
provisions of this
in accordance with the
appropriate
may
restrained on
terms and
sition
be ordered or
any
disposition
the debtor or
conditions.
person
If the
has occurred
security
been
right
to notification or whose
interest has
entitled
prior
disposition
party
to the
has a
made known to the secured
to recover from the secured
comply
any
by
party
caused
a failure to
loss
provisions
chapter.
is
with the
of this
If the collateral
right
any
goods, the
a
to recover in
event an
consumer
amount not less than the credit service
debtor has
charge plus
of the
10%
plus
principal
price
differential
10%
amount of the debt or
time
price.
the cash
(b)
commercially
Disposition in
reasonable manner.—The fact
price
by
a
could have been obtained
a sale at a different
that better
time or in a
different method from that selected
the secured
was not
party is not of itself sufficient to establish that the sale
commercially
party
reasonable manner.
If the secured
made in
any recognized
collateral in the usual manner in
either sells the
price
at the
in such market at
therefor or if he sells
current
market
cured
loss caused
party any
by the secured
failure
party’s
§
comply
provisions
with the
Business Administration v.
Depart-
Small
Chatlin’s
Store,
(2nd Cir.1980),
court,
ment
F.Supp.
law,
applying Pennsylvania
held that once the issue of
raised,
commercial
is
reasonableness
the creditor must re-
*41
the presumption
but
that the value of
equals
the collateral
the indebtedness secured.
Id. at 112. This
was
same
position adopted in
Consumer Discount Co. v.
Beneficial
649,
291
Savoy,
Pa.Super.
(1981),
Since the record is without a scintilla of as evidence to the fair market sold, value of the automobiles First Pennsylvania Bank has not presumption rebutted the that the value of the equal collateral is to the due on the balance floor plan agreement. Therefore, against we find First Pennsylvania Bank on 1. Count 6,
With respect to counts 3 and
in
each
the amount
$45,682.80,
of
we find that
the judgment by confession
entered in Common Pleas
Court Delaware County oper
ates as res judicata,
barring
now
examination
this Court
judgment
of that
or
other
any
arising
claims
out of the
the time of
conformity
his sale or if he has otherwise sold in
with
practices among
reasonable
type
commercial
dealers
in the
property
commercially
sold he has sold in a
reasonable manner.
principles
preceding
respect
stated in the two
sentences with
apply may
appropriate
types
sales also
as
disposition.
to other
disposition
approved
any judicial
A
proceeding
has been
by any
or
bona
representative
fide creditors’ committee or
conclusively
commercially
creditors shall
able,
be deemed to be
reason-
any
approval
but this sentence does not
indicate that
such
any
any disposi-
must be obtained in
case nor does it
that
indicate
approved
commercially
tion not so
is not
reasonable.
1979,
1,
255,
86,
1,
Nov.
P.L.
No.
effective Jan.
§
same transaction or nucleus of events.
Pa.R.Civ.P.
1020(d)(1),
Piechoski,
Pa.C.S.A. Devlin v.
374 Pa.
%
(1953);
Pa.
With respect $26,- to count the amount of 072.12, capital Cascade, made advance we must find in favor of First Bank Pennsylvania as the only proffered defense to this claim is upon proposition based Pennsylvania First Bank is not a holder due course of the note which evidences the indebtedness.
Assuming arguendo that First Pennsylvania Bank is not a holder in due course because did they not take the notes in *42 § good faith, 13 Pa.C.S.A. apposite.12 becomes § pertinent part, 3306 states that one who takes an instru ment and course, is not a holder in due takes said instru ment subject to all valid claims and defenses thereunder. failure, however, of the plaintiffs assert real any defense against the instrument itself is fatal to their case. Therefore, we must find in favor of First Pennsylvania Bank on Count 2. Rights
§12. 3306. of one not holder in due course rights Unless he any has the of a holder person in due course subject takes the instrument to: (1) part any all valid person; claims to it on the of (2) any party all defenses of which would be available in an contract; simple action on a (3) consideration, the defenses of want or nonperform- failure of any precedent, nondelivery, ance of delivery condition or for a (section special purpose (relating consideration)); (4) person through the defense that he or a whom he holds the theft, acquired by instrument it payment or that or satisfaction to such holder would be inconsistent with the terms of a restrictive any person indorsement. The claim of third to the instrument is not otherwise any party available as a defense to liable thereon person unless the third party. defends the action for such 1979, 1, 255, 86, 1, 1, Nov. P.L. No. § effective Jan. 4, $81,532.13, repre As to count in the amount of senting personal guarantee Delahantys of the for the (count plan arrangement, default of Cascade on the floor $55,460.01 $26,072.12 advance), and count 2 of for capital $26,072.12. in Pennsylvania we find favor of First Bank for First, reach this reduced amount for since We two reasons. alleged Cascade itself is not liable for the then deficiency, neither can the Delahantys guarantors. be liable as Sec ond, since Cascade is defunct and the Delahantys now guaranteed payment obligations, of Cascade’s the Delahan are on tys personal guarantee 17, liable their dated May $26,072.12, in the amount of for the same reasons in course, stated above count 2. This recovery, foreclos es any subsequent attempt by First Bank to Pennsylvania against recover Cascade for count as a may only debt satisfied once.
Lastly, we find favor of First Pennsylvania Bank on count in the amount $45,682.80, on the Delahantys’ personal guarantee dated February guaran teed their promissory note dated March 1973. First Pennsylvania Bank having confessed judgment on the above-mentioned note triggers the Delahantys’ as liability guarantors. Again, the Delahantys’ failure to assert any real defense to this instrument makes them liable in the $45,682.80. amount of While we may not disturb the con fessed judgment Common Pleas Court Delaware Coun ty, we believe the recovery the instant case forecloses any subsequent attempt First Pennsylvania Bank to execute on the Delaware County judgment.
We now remand to the trial court to enter judgment for *43 the Delahantys in the $480,000.00, amount of and for First Pennsylvania Bank against Cascade in $26,- the amount of 072.12, and for First Pennsylvania Bank against the Dela- in hantys $45,682.80 the amount of $26,072.12 on coun- 4 terclaims and 5. We no longer retain jurisdiction in this matter.
Judgment affirmed in part and reversed in part.
142
SPAETH, J., files a concurring and dissenting opinion: I concur in the majority’s decision except as to the puni- damages, tive I think excessive, are even as reduced by majority.
An appellate court may reduce the amount
punitive
if
damages
it finds them excessive. Purcell v. Westing-
Co.,
167,
house
411
Broadcasting
(1963).
Pa.
Pa.Super. 344,
(1978),
Korvette, 329 F.Supp.
(E.D.Pa.1971).
A consideration
of proportionality persuades me that here the punitive dam-
ages awarded
are
majority
I
excessive.
have found
no case with
so
nearly
high a multiplier as eleven times
compensatory damages. See, e.g. Purcell v. Westinghouse
Co., supra (punitive
$50,000
damages
$30,000
reduced to
in defamation suit where
$10,-
compensatory damages were
000);
R.R.,
Richette v. Pennsylvania
410 Pa.
187 A.2d
(1963)(punitive
damages
$15,000
$5,000
reduced to
interference with contract suit where compensatory dam-
ages
$10,000);
were
G.M.A.C.,
Voltz v.
332 Pa.
2 A.2d
(1938)
(punitive damages
$2,500
in replevin action
$1,000
appeal
reduced on
where actual damages were
$859); Thompson
Swank,
317 Pa.
(1934)
I should requested by plaintiff-appellee amount 000—the below.