1. Damages--punitive--fraud and undue influence--rescission
The trial court did not err by submitting to the jury the issue of punitive damages on
plaintiff's claims for fraud, undue influence, and duress even though plaintiff had elected
rescission on those claims. North Carolina public policy supports an award of punitive damages
upon a jury verdict establishing fraud and consequent entitlement, at plaintiff's election, either to
rescission or to compensatory damages.
2. Trials--punitive damages--submitted after all the substantive issues--no error
The trial court did not err in an action for fraud, unjust enrichment, and constructive trust
by placing the punitive damages issue at the conclusion of all of the substantive issues.
Although defendants contended that it was impossible to determine the issue on which the jury
based its award of punitive damages, the evidence was sufficient to sustain the jury's affirmative
findings on each of the substantive issues and to support plaintiff's entitlement to punitive
damages on each. Appeal by defendants from order entered 13 May 1997 by Judge
J. Marlene Hyatt in McDowell County Superior Court. Heard in the
Court of Appeals 21 April 1998.
C. Gary Triggs, P.A., by C. Gary Triggs and Susan Janney,
for defendants-appellants.
Hunter & Evans, P.A., by W. Hill Evans, for plaintiff-
appellee.
JOHN, Judge.
Defendants appeal the trial court's order denying their
motions to set aside a 19 March 1997 jury verdict, for new trial,
and for judgment notwithstanding the verdict (JNOV) or new trial.
We conclude the trial court did not err.
Pertinent facts and procedural history include the
following: Plaintiff Nancy Marie Mehovic and defendant Mehmet
Mehovic (Mehmet) were married 16 December 1981. In 1986,
plaintiff and Mehmet (the couple) purchased a home and 15.75
acres of land (the property) in McDowell County for approximately
$52,000.00. The couple advanced $26,000.00 at closing and paid
the balance due over a period of years thereafter. Improvements
were made to the residence during that time and a mobile home was
added to the property. Mehmet's younger brother, defendant Vezic
Mehovic (Vezic), came to live with the couple as a junior high
school student and was thereafter raised by them. On 19 May
1995, the couple executed a gift deed vesting full title to the
property in Vezic, and subsequently separated in the summer of
1995.
On 29 August 1995 in McDowell County Superior Court,plaintiff filed the instant complaint setting forth counts of
assault and battery, intentional infliction of emotional
distress, fraud, duress, and undue influence against Mehmet.
Plaintiff further asserted claims of fraud, unjust enrichment and
constructive trust against Vezic. Plaintiff alleged, inter alia,
that Mehmet had subjected her to physical and mental abuse on
several occasions, and that he had fraudulently “represented to
[her] that the property needed to be conveyed to [Vezic] in order
to protect it from [the couple's] debts,” but that it would still
belong to the couple following transfer to Vezic.
On 18 September 1995, defendants filed answer, including
motions, counterclaims and a third-party complaint against
McDowell
County resident Jake Stockton. Plaintiff filed her reply,
containing motions, 4 October 1995; the third-party defendant
filed answer 20 October 1995. Plaintiff's motions to dismiss the
third-party complaint and to dismiss defendants' first
counterclaim were allowed 17 March 1997, and defendants
voluntarily dismissed their remaining counterclaims that same
date.
Jury trial commenced 17 March 1997 in McDowell County
Superior Court. At the charge conference following presentation
of evidence, the parties agreed, inter alia, that the trial court
would instruct the jury on “Rescission of Written Instrument” in
reference to plaintiff's allegations of fraud, undue influence
and duress. It was further agreed that,
if the jury should answer Issue 4, Issue 5,
or Issue 6 in favor of the Plaintiff, findingthat there was either undue influence,
duress, or fraud, then [plaintiff's] remedy
[would be] rescission of the written
instrument.
Over defendants' objection, the jury was also subsequently
instructed, inter alia, as follows:
Issue 7 reads: what amount of punitive
damages, if any, does the jury in its
discretion award to the Plaintiff . . . ?
You will answer this issue only if you have
answered Issue 1 or Issue 2 and Issue 3 in
favor of the Plaintiff or if you have
answered Issue 4 or Issue 5 or Issue 6 in
favor of Plaintiff. If you have answered any
one of those issues in favor of the
Plaintiff, then you will consider Issue
Number 7.
The jury answered the issues submitted in the following
manner:
Issue One: Did the defendant, Mehmet . .
.
assault the plaintiff . . . ?
Answer: YES
Issue Two: Did the defendant, Mehmet . .
.
commit a battery upon the plaintiff
. . . ?
Answer: NO
Issue Three: What amount is the plaintif
f .
. . entitled to recover for
personal injury?
Answer: $1.00
Issue Four: Was the plaintiff . . .
induced to execute the deed
dated May 19, 1995, from
Mehmet . . . and [plaintiff]
to Vezic . . . , a single man,
by the fraudulent
representations of the
defendant, Mehmet . . . ?
Answer: YES
Issue Five: Was the plaintiff . . .induc
ed to execute the deed
dated May 19, 1995, from
Mehmet . . . and [plaintiff]
to Vezic . . . , a single man,
by the undue influence of the
defendant, Mehmet . . . ?
Answer: YES
Issue Six: Was the plaintiff . . .
induced to execute the deed
dated May 19, 1995, from
Mehmet . . . and [plaintiff]
to Vezic . . . , a single man,
under duress exerted by Mehmet
. . . ?
Answer: YES
Issue Seven: What amount of punitive
damages, if any, does the jury
in its discretion award to the
plaintiff . . . ?
Answer: $24,500.00
Judgment was entered 19 March 1997 ordering rescission of
the gift deed to Vezic, and ordering Mehmet to pay plaintiff
$1.00 in compensatory damages and $24,500.00 in punitive damages.
Defendants filed motions that same date to set aside the verdict,
for new trial, and for JNOV or new trial. The trial court denied
these motions 13 May 1997, and defendants thereafter filed timely
notice of appeal.
[1]/A HREF>Defendants contend the trial court erroneously denied
their motions attacking the jury verdict. According to
defendants, punitive damages were recoverable by plaintiff only
as to the assault count, and not as to those counts upon which
plaintiff had foregone an award of compensatory damages and
elected the remedy of rescission, i.e., fraud, undue influence
and duress. In light of plaintiff's election of rescission withregard to those claims, defendants continue, the trial court
erred in submitting a punitive damages issue thereon. Defendants
note they objected to the trial court's listing of the punitive
damages issue following all the substantive issues rather than
immediately following the assault charge.
It is well-established that a party alleging fraud must
elect either the remedy of rescission or that of damages, but may
not seek both, as these remedies are inconsistent. See Parker v.
White, 235 N.C. 680, 688, 71 S.E.2d 122, 128 (1952). One who
elects rescission “may recover back what he has parted with under
[the contract], but cannot recover damages for the fraud.” Id.
The purpose of the “election of remedies” doctrine “is not to
prevent recourse to any remedy, but to prevent double redress for
a single wrong.” Smith v. Gulf Oil Corp., 239 N.C. 360, 368, 79
S.E.2d 880, 885 (1954).
Pointing to plaintiff's election of the remedy of rescission
and forbearance of compensatory damages in reference to her
fraud, undue influence and duress claims, defendants assert the
principle that punitive damages “cannot be awarded in the absence
of compensatory damages.” Lynch v. N.C. Dept. of Justice, 93
N.C. App. 57, 60, 376 S.E.2d 247, 249 (1989)(citing Worthy v.
Knight, 210 N.C. 498, 499, 187 S.E. 771, 772 (1936)); see also
Jones v. Gwynne, 312 N.C. 393, 405, 323 S.E.2d 9, 16
(1984)(“[b]efore punitive damages may be awarded to the
plaintiff, the jury must find that the defendant committed an
actionable legal wrong . . . and it must award the plaintiff
either compensatory or nominal damages”)(citations omitted). Cases supporting this proposition rely upon the seminal case
of Worthy v. Knight, wherein our Supreme Court stated:
[p]unitive damages may not be awarded unless
otherwise a cause of action exists and at
least nominal damages are recoverable by the
plaintiff.
Worthy, 210 N.C. at 499, 187 S.E. at 772. However, our Supreme
Court subsequently interpreted Worthy as holding that nominal
damages must be recoverable in order to justify an award of
punitive damages, but that there is no requirement that nominal
damages “actually be recovered.” Hawkins v. Hawkins, 331 N.C.
743, 745, 417 S.E.2d 447, 449 (1992)(emphasis added). Thus,
"[o]nce a cause of action is established, plaintiff is entitled
to recover, as a matter of law, nominal damages, which in turn
support an award of punitive damages." Hawkins v. Hawkins, 101
N.C. App. 529, 532, 400 S.E.2d 472, 474 (1991), aff'd, 331 N.C.
743, 417 S.E.2d 447 (1992).
Therefore,
the failure of the plaintiff to actually
receive an award of either nominal or
compensatory damages is immaterial [to the
entitlement of punitive damages]. The
question . . . [is] one of whether [the]
plaintiff . . . has established her cause of
action[.]
Id. However, “[e]ven where sufficient facts are alleged to make
out an identifiable tort . . . the tortious conduct must be
accompanied by or partake of some element of aggravation before
punitive damages will be allowed.” Newton v. Standard Fire Ins.
Co., 291 N.C. 105, 112, 229 S.E.2d 297, 301 (1976)(citations
omitted). Such aggravated conduct
may be established by allegations sufficientto allege a tort where that tort, by its very
nature, encompasses any of the elements of
aggravation. Such a tort is fraud, since
fraud is, itself, one of the elements of
aggravation which will permit punitive
damages to be awarded.
Id.
North Carolina public policy does not support awarding
punitive damages “to compensate the plaintiff for nonquantifiable
compensatory damages.” Id. at 113, 229 S.E.2d at 302 (citation
omitted)(emphasis added). Rather, punitive damages have been
“consistently allowed . . . solely on the basis of [our] policy
to punish intentional wrongdoing and to deter others from similar
behavior.” Id. (citations omitted)(emphasis added).
We note that
[i]n North Carolina, actionable fraud by its
very nature involves intentional wrongdoing .
. . [and] [t]he punishment of such
intentional wrongdoing is well within North
Carolina's policy underlying its concept of
punitive damages.
Id. (citations omitted).
While our courts have not specifically addressed the
propriety of awarding punitive damages based upon the remedy of
rescission, the modern trend contemplates
no logical reason for permitting punitive
damages for the tort of fraud and deceit in a
law action, and foreclosing such damages for
fraud and deceit in an equitable action.
Black v. Gardner, 320 N.W.2d 153, 161 (S.D. 1982); see also
Village of Peck v. Denison, 450 P.2d 310, 314-15 (Idaho
1969)(“[t]he absence of a showing of actual damages need not bar
an award of punitive damages, for such a showing is not a
talismanic necessity. The reason for such a requirement is thatit first insures that some legally protected interest has been
invaded. . . . There is no reason why an award of equitable
relief may not fulfill this same function, for in either case it
is necessary first to show an invasion of some legally protected
interest.”); Kennedy v. Thomsen, 320 N.W.2d 657, 659 (Iowa Ct.
App. 1982)(plaintiff's rescission claim sufficient to support
punitive damages where “there was ample evidence [plaintiff] had
sustained actual damage,” the crucial question for justifying
punitive damages award being “whether actual damages were
sustained rather than whether such damages are reduced to a money
judgment”); Mid-State Homes, Inc. v. Johnson, 311 So.2d 312, 318
(Ala. 1975)(exemplary damages are “appropriate in cases . . .
where restitution would have little or no deterrent effect, for
wrongdoers would run no risk of liability to their victims beyond
that of returning what they wrongfully obtained. . . . To allow
[punitive damages] when a contract is affirmed, and not when
there is a rescission, is illogical when the purposes of punitive
damages are [for punishment and prevention]”). We concur with
the thrust of current thought and hold North Carolina public
policy supports an award of punitive damages upon a jury verdict
establishing fraud and consequent entitlement, at the plaintiff's
election, either to rescission or compensatory damages.
Turning to the case sub judice, we note preliminarily that
appellate review of an allegedly erroneous jury instruction
involves examination of the contested instruction in context, and
“if the charge when considered as a whole
presents the law of the case to the jury in
such manner as to leave no reasonable cause
to believe that the jury was misled ormisinformed [,]”
then the charge “'will not be held prejudicial.'” Blow v.
Shaughnessy, 88 N.C. App. 484, 491, 364 S.E.2d 444, 448
(1988)(quoting Strong's N.C. Index 3d, Appeal and Error, § 50).
Having determined punitive damages may properly be awarded upon a
jury verdict sustaining a claim for rescission, we further hold
the trial court did not err in submitting to the jury the issue
of punitive damages on plaintiff's claims of fraud, undue
influence and duress.
[2]Defendants also complain that the trial court's
placement of the punitive damages issue at the conclusion of all
the substantive issues was misleading and rendered “it impossible
to determine upon which [issue] the jury ultimately based” its
award of such damages. We do not agree.
The number, form, and phraseology of issues
is in the court's discretion; and there is
no abuse of discretion where the issues are
“sufficiently comprehensive to resolve all
factual controversies and to enable the court
to render judgment fully determining the
cause.”
Pinner v. Southern Bell, 60 N.C. App. 257, 263, 298 S.E.2d 749,
753, disc. review denied, 308 N.C. 387, 302 S.E.2d 253
(1983)(quoting Chalmers v. Womack, 269 N.C. 433, 435-36, 152
S.E.2d 505, 507 (1967)). Considering the trial court's charge in
its entirety and not in detached fragments, see McPherson v.
Haire, 262 N.C. 71, 75, 136 S.E.2d 224, 226-27 (1964), we
conclude there was no abuse of discretion in the court's listing
of the issues.
After instructing on Issues One (assault) and Two (battery),the trial court directed the jury to answer Issue Three (personal
injury compensation for the assault and/or battery claims) only
if it had answered either Issue One or Two, or both,
affirmatively. Then, after charging on Issues Four (fraud), Five
(undue influence) and Six (duress), the trial court instructed
that Issue Seven (punitive damages) was only to be considered and
answered if the jury had “answered Issue One or Two and Issue
Three in favor of the plaintiff or . . . answered Issue Four or
Issue Five or Issue Six in favor of the plaintiff.”
Contrary to defendants' assertions, the foregoing format was
not inherently or erroneously misleading because evidence offered
by the plaintiff and admitted by the court was sufficient to
sustain the jury's affirmative findings on each of the
substantive issues and to support plaintiff's entitlement to
punitive damages on each. See Trimed, Inc. v. Sherwood Medical
Co., 977 F.2d 885, 894 (4th Cir. 1992)(claim of error in punitive
damages award rejected although jury failed to “specify whether
the award was for both . . . counts . . . or only one,” where
verdicts on both counts upheld on appeal); see also Walker v.
L.B. Price Mercantile Co., 203 N.C. 511, 512, 166 S.E. 391, 392
(1932)(failure of jury to distinguish between compensatory and
punitive damages in verdict did not deprive plaintiff from
recovering amount awarded).
In short, defendants' arguments in support of its post-trial
motions being unfounded, the trial court did not err in denying
those motions.
No error. Chief Judge EAGLES and Judge TIMMONS-GOODSON concur.
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