*1 agency McClellan, d/b/a McClellan Don BROWN, BROWN RAILROAD d/b/a Michael COMPANY
CONSTRUCTION 632 S.W.2d 82-44 of Arkansas Court Supreme 3,May delivered Opinion [Rehearing denied 1982.] June C. Firm, H. Strother The Strother Lane by: Judith *2 Strother, for appellant. Osterloh, for appellee.
Henry J. George or two the For a year Smith, Rose Justice. business, ob- Brown, in a construction engaged the defendant through insurance his various types tained Brown On agency. April McClellan’s $1,856 coverage for workers’ compensation McClellan paid failed to obtain but McClellan on Brown’s employees, that he to Brown he though represented necessary policies, was of the omission Brown done so. As a result had 17,120 legal to an ured inj employee, plus to pay compelled $ costs. fees and
Brown, claim for and punitive this actual asserting willful and that McClellan’s “acts were alleged damages, even failed to pay premium in that defendant wanton liability he had been Brown. McClellan’s paid” by though regard is not With questioned. for Brown’s actual sitting trial judge, claim of to the who had Brown call witnesses a allowed jury, without of their in- handling been dissatisfied with McClellan’s witnesses to call and allowed McClellan coverage surance conclusion At the their satisfaction with his services. express findings: the court made these testimony orally of the willful, wanton, This finds that there was Court defendant. conduct on the part and malicious what Court that it to the frankly, appears And gambled. to have have done was defendant well may he accepted matter is that when The truth the plain- hundred and dollars fifty-six eighteen tiffs, coverage money provide cashed the and did in fact of a guilty he was money, and did not return the crime. Theft property. McClellan referring to the possibility
(Thecourt, have taken may meant that McClellan apparently gambled, in the hope risk Brown uninsured by leaving a deliberate occur.) would injury to his compensable employees that no Counsel for the declares in his brief: appellee “The action, case instant is not a is a it tort action and has been.” We are at a loss to understand how it always can be called a tort points action. Prosser out how difficult it is to Torts, frame a complete definition a tort. Prosser on 1§ ed., (4th 1971). general, the law of torts provides redress for various injuries; the law of contracts is to purpose see promises performed. Atkins Pickle Co. v. Burrough-Uerling-Brasuell, S.W.2d We have followed Prosser’s view that a breach of contract is not if treated a tort it consists failure merely to act (nonfeasance) distinguished from an affirmatively act wrongful Morrow (misfeasance). v. First Nat. Bank of *3 Ark. Hot In our Springs, (1977). S.W.2d 429 the case opinion present plainly action for breach of contract, there no being duty McClellan’s to part except his to perform promise obtain insurance coverage for Brown. damages
Punitive
are not
recoverable
ordinarily
Grace,
breach of contract. Snow v.
(1869).
to that
adhering
principle we have said: “To
a claim
support
for punitive damages there would
to
have
be a willful or
malicious act in connection
awith
contract. A bare allega-
tion of fraud which results in a
loss would
monetary
not
justify punitive damages and that is
what
essentially
the
Partain,
in this
complaint alleges
case.” Curtis v.
272 Ark.
Granted that McClellan acted in intentionally not obtaining workers’ compensation coverage and in telling so, he Brown that had done the issue is still whether his holding intent of our was so within action willful bar) case at as to in the indicated being (malice Curtis any Since damages. of punitive the imposition justify “willful,” we must to as act be referred may intentional than the wrongdoer’s other consider circumstances always did, whether to determine order intention to do what damages appropriate. punitive underlying basic principles excellent discussion of
An is contained damages imposition Justice Co., Towns Bus West opinion Mattyasovszky Schaefer’s noting After first 61 Ill. 509 (1975). N.E.2d the offender “to punish are awarded offenses,” court examined other discourage such awards: justification reasons objectives of these The underlying strength substantially deterrence varies punishment Where, defendant has to case. for example, case misconduct, only benefited which a judgment has lost would for what he compensates Apart his wrongful gain. the defendant to keep permit cases, in which punitive the situations from such a broad spectrum become issue cover is also a crime intentional tort which from the ranges *4 as today we characterize to what omitted], [citation conduct, that wanton” a characterization “willful and negligence. into simple shades imperceptibly damages of punitive The of an award objectives criminal law the same which motivate are the as those — a criminal case Yet in deterrence. punishment imposition rise to the conduct which gives the That is not so defined. clearly must be punishment conduct the when the is whether question negligence as either defendant can be characterized that is The fine willful and wanton conduct. to case goes criminal the in a upon defendant imposed the taken from the But a civil case the exaction State. defendant, damages, exemplary under label maximum a windfall becomes the plaintiff. by way fine imposed minimum amounts of the fixed and deterrence in a criminal case are punishment case, however, statute. In the civil is left at by jury take from the defendant and deliver to the large to it sees such amount as fit. Here we do not have a situation mentioned by typical Schaefer, in which the retains a wrongdoer wrongful gain To compensatory damages. after the payment contrary, only damages must McClellan pay compensatory $15,000 some more than the mis- possible gain conduct, he has also surrendered his license as an insurance Hence in the case at also agent. damages bar compensatory inflict punishment.
There remains the deterrent effect of the trial court’s Moore, award Inc. v. punitive damages. Ray Dodge, 1036, 1045, we quoted 479 S.W.2d observation a New York one who acts out of opinion, or hate in to be anger likely assault or libel not committing deterred the fear of by punitive damages. Similarly, insurance agent who risks the loss of ten or times his fifty well, possible gain, and loss of his is not apt livelihood be deterred the fear of punitive damages. In Ray we sustained Dodge an award damages against used-car dealer who had turned back an odometer to make the reading mileage appear vehicle’s however, out, smaller than it was. We really pointed in an of that kind compensatory damages occasional lawsuit would not deter other used-car dealers from victimizing thousands of other case In the purchasers. present deterrent effect of punitive would be On negligible. side, the minus if such tes- permitted were afield, here, timony might with range far as it did witnesses called being whether McClellan testify treated them well or unrelated transactions. badly earlier
We find little cases persuasive Georgia force in two *5 somewhat first case the having similar fact situations. In the did not even men- damages, merely court discuss punitive that the tioning passing jury awarded compensatory Castellaw, Ga. App. Patterson v. damages. and punitive (1969). In the second case the court said S.E.2d can be punitive damages (in Georgia) upon awarded of “that entire want of care which would raise the proof of a conscious indifference to consequences.” presumption Lee, Ins. 158 Ga. S.E.2d Speir App. Agency recklessness, That mere describes which is language a ground not for the exaction of
Arkansas.
The award of and set aside cause of action dismissed.
Purtle, J., participating.
Hays, dissents. J., Justice, dissenting. Hays, believe trial Steele I court was correct in entirely awarding punitive damages. First, the and pleadings proof were sufficient support and, second, cause of action in tort under the circumstances case, of this punitive damages are to a cause of appropriate contract, action for breach of I that ordinarily punitive agree cases, are not recoverable in breach of contract but the rule is hot absolute and there are exceptions.
elements that make this case exceptional found fact that the breach of contract was inten- accompanied tionally acts by dishonest for personal his own appellant gain.
Actions brought by insured breach of duty owing him by an insurance be agent may laid in or in 172b, tort. C. Insurance p. By complaint 863. amended J.S. alleged Brown “willful and wanton” conduct on McClel- part lan’s prayed The trial court damages. found McClellan expressly had acted wantonly willfully, in twice insur- maliciously Brown’s misappropriating ance premium while to him that he payments representing Thus, was covered. elements of a cause of action sounding tort both and contract were pleaded at trial. The proved trial court also found McClellan’s in placing actions premium Brown’s in his account payment personal own while that he had representing paid company
54 McClel- discounts opinion theft. The majority amounted to of on his breach focusing only dishonesty, lan’s intentional fact, as if exactly treats majority McClellan contract. In merely negligent. he had been is to allow an majority opinion The effect a upon fraud deception agent by practicing carrier, gambling that to act as an insurance his principal, has the rarely an individual agent will occur. Since no loss carrier, the likelihood that reserves of an insurance financial be compensated, of a “insured” will not event loss the be demands such practices increased. Public policy greatly penalized. that appellee’s the sake of
Assuming, argument, contract, of solely recovery of on cause action is based lie breaching party’s still where the punitive damages will Partain, Ark. is willful malicious. Curtis v. conduct 400, 272 contract Also, breach where S.W.2d 671 the case as regard that enable the court includes elements tort, analogous, or closely within the field falling damages may by way punishment. be awarded the acts on at 439. “Thus where Corbin Contracts § also amount to a cause breach of contract constituting tort, there bemay recovery exemplary action allegations Damages proper proof.” 25 120at § C.J.S. 1128. rule,
As a for breach of general . . . This are limited to the loss sustained. pecuniary obtain, however, in those exceptional rule does not amounts to an independent, cases where the breach tort, bemay willful in which event exemplary damages malice, under wanton- allegations recovered proper Am. at ness or oppression. Damages § Jur. 337. distinguish majority opinion
The cases cited v. First Nat. able from the case under review. Morrow 568, 550 no Hot Springs, Bank S.W.2d 429 or In Curtis acts were wrongful alleged proven. intentional Partain, may lie this court said supra, action, a breach of contract but there the waived them one punitive damages by seeking against only of four co-defendants in the involved same scheme and was no because there claim of willful malicious conduct. *7 Other cases recognize punitive damages are appropriate where, here, as an agent maliciously duty breaches a Coates, based on principal contract. Brown v. DC App. 102 300, 36, F. 253 ALR (1958). 2d 943 See 2d also ALR In Brown a real estate broker 952. acted fraudulently conveying his client’s house himself without the applying value of the equity purchase toward client’s of a second house represented he would do. The court said:
. . . it has been shown that one trained and [0]nce experienced holds himself out to public worthy to be others, trusted for hire to services perform and confidence, these so invited do their trust and place that trust is intentionally consciously disregarded, and exploited for unwarranted gain, community pro- tection, victim, as well as warrants the imposi- tion of punitive (At 950.) damages.
And at 949: certain,
We believe the better view narrowly circumstances, defined where a breach with, tort, merges and assumes the character of a willful inadvertent, calculated rather than flagrant, and disregard obligations of trust punitive damages may be assessed.
In Speir Lee, Insurance Agency, Inc. v. 281.S.E.2d 279 (1981), the Court of Appeals Georgia award upheld in an action for breach of contract brought the insured against agent upon proof the agent had issued a binder insuring the plaintiff’s 15, automobile with American Reserve for from July $500 5,1979. 11, 1978, to July On American August Reserve notified the agent binder had expired “pending receipt of additional information” failed agent. agent to obtain additional and also failed to coverage refund September payment, $500
unused portion collision in an automobile was involved the award of the trial court’s Upholding without coverage. the court said: ex- To authorize the imposition evidence of wilful there must be emplary wantonness, malice, fraud, misconduct, or oppression, would raise of care which or that entire want conse- indifference to of a conscious presumption v. 119 Ga. O’Bryan, R. Co. Southern quences. in this the circumstances Under (1903). S.E. 1000 to impose punitive trial court was authorized case the Castellaw, See Patterson damages against Speir. 712(1), 168 App. Ga. S.W.2d *8 Castellaw, in Patterson v. 168 838 Similarly, S.E.2d for held an in action deceit the same court an (1969), broker was liable for compensatory punitive insurance a an insurance premium to damages plaintiff by accepting was covered him to his automobile causing believe found in it not. The broker was theft when fact was against broker, second to a also have willfully misrepresented to secure that coverage, for the acting attempting which was a binder the automobile placed placement false and made to induce knowingly his firm. through own in Proctor Inc. Agency, Court of Alabama Supreme Anderson, set aside an award of So. 164 v. 358 who, agent an insurance when against punitive damages if he covered the costs of his insured was for asked by hernia under his surgery inguinal policy corrective an Marine, ahead and St. Paul Fire & told insured to go with denied Paul a Coverage have the was St. operation. Court which the jury Supreme awarded disallowed, mis- agent’s there was no evidence the saying injure committed with an intention to was representation But, recognizes and defraud. significantly, opinion where, here, misrepre- will lie agent damages or deceive coverage injure sents with intention to insured.
37 sum, I believe the majority errs con- opinion that an cluding agent who is guilty intentionally dis- honest acts against for his principal own gain cannot be punished by punitive if the suit is basically contract; breach of in necessarily concluding, though issue, without discussion of the that the trial court lacked discretionary power to treat the pleadings and proof contract; sounding and, tort rather effect, than in the fact disregarding are intended punish wrongdoer rather than to compensate an injured Moore, party. Ray v. Dodge Ark. 479 S.W.2d (1972); Holmes v. Hollingsworth, 234 Ark. 352 S.W.2d Troutt, (1961); v. Dunaway S.W.2d 613 I would affirm the judgment.
SOUTHERN STEEL AND WIRE COMPANY WOOTEN, Director, of Finance Department Jim and Administration et al 81-261 S.W.2d
Supreme Court of Arkansas *9 delivered Opinion May